Francisco A. Laguna & Jennie Linder Cunningham
In our final week of examinations of socialist-inspired economies in Latin America, we turn to Brazil, which found itself the center of attention as the site of this year’s World Cup as well as the host of the 2016 Summer Olympics. Many regard Brazil’s bids for both the World Cup and the Olympics as controversial, considering the basic needs problems confronting the nation: poverty; severe environmental pollution; and infrastructural shortcomings, among others. Although similar criticisms were leveled against both China and Russia, in addition to serious human rights concerns, neither country was in any way impeded by the international community in holding the events as planned. However, continuing protests in Brazil highlight the country’s economic reality, including notable income inequality and a somewhat volatile economic situation dependent upon agriculture and natural resource exploitation.
Of the Latin American economies we have analyzed, Brazil’s GDP tops out the list, with 2012 levels of US$ 2.253 trillion, in comparison with Argentina at 474.9 billion, or with other emerging economies like Russia (2.015 billion). As with elsewhere in the developing world, Brazil has struggled with proper resource distribution and usage as its economy expanded rapidly over the past decade or so, as well as with developing a sustainable plan for continued economic growth, beyond that of a dependence on natural resources and agricultural exports. Indeed, growth projections for 2014 fall far below those of the previous few years, with a possible contraction in the fourth quarter, the first trade deficit since 2000, and a 14% decrease in value of the real against the dollar.
President Dilma Rousseff, up for reelection this fall, has presided over the latter part of this transitional period in Brazil’s economy, but has come under constant criticism for her implementation of policies and general leadership — not unexpected particularly in a country of Brazil’s size and diversity, nor for the successor (hand-picked) to the wildly popular, charismatic and influential President Luiz Ignácio Lula da Silva. Additionally, since assuming office in January 2011, economic growth slowed significantly, to under 2%, although overall GDP topped out in 2011 at just under US$ 2.5 trillion. However, this mirrors a global pattern, as it occurred at the time the rest of the rapidly expanding emerging economies slowed as well.
Under Lula, a politician with roots in union movements and a member of the Workers Party, the Brazilian economy began its most significant period of growth, with the administration following policies influenced by labor and unions, populist and socialist ideology — but pragmatic as well, concluding agreements with the International Monetary Fund (loans to which Brazil was able to pay back early, by 2005). Lula’s Workers Party, in power since 2003, included a number of devoted socialists, many of whom moderated their views, at least in public, as they began to serve in higher levels of the administration.
Influenced partially by Workers Party ideology, the administration pursued several policies that could be categorized as redistributionist in nature. One such measure, the Bolsa Familia Program, has been lauded as successful and a model for similar measures in other places, and exists with the backing of the World Bank; it is an initiative to provide poor families with children with cash, providing that they keep their children in school and take them to regular health checkups. Bolsa Familia reaches more than 46 million people (11 million families), a major portion of the country’s low income population, estimated at 30-40% in 2008 (22.6% at national poverty level in 2008). Poverty levels in 2012 (national line) were estimated at just 15.9% by the World Bank, a marked improvement. Life expectancy is now 74, up from 68 in 1994 and 70 in 2000, with elderly poverty significantly alleviated due to generous public pension programs.
Brazilian social programs are not wildly socialist or overly idealistic, and while the political system does have issues with corruption, many of these programs have roots in socialist ideology — but, in practice, are generally pragmatic and aimed at addressing the realities of the severe poverty and income inequality still plaguing the nation. If improvements continue, and Brazil conquers its emerging economic “growing pains” such as exchange rate adjustments, the nation may prove that a pragmatic redistributionist mindset and policy enactment will prove successful over the medium to long term.
TransLegal works routinely with clients doing business in Brazil and advises on such issues as obtaining government approvals for imported products, including foods, food and animal feed ingredients and transgenic products, cosmetics and pharmaceuticals. Call us with your questions concerning doing business in Brazil.