BRAZIL GLOBALLY

For several decades, Brazilians have heard (and often believed) that Brazil was “the country of the future” – and always would be. This is now a thing of the past. Judging by international opinion, represented by some of the world’s most influential publications, this future has already arrived. In the last few months of the year, Brazil was front page of The Economist, had a 10-page spread in the Financial Times and is a constant topic of discussion in prominent newspapers such as The New York Times and El País. In addition to this international press attention, President Lula has received the Woodrow Wilson Public Service award, in New York, for “services provided to democracy”. And in London, he received another prestigious award, from Chatham House, for his “contribution to international relations”.

Lula also ranked 33rd out of 67 people selected by Forbes as the world’s most influential individuals. So, what does all this mean in terms of real power and influence in the world? This is precisely the question that a book recently launched in the US tries to answer – a question exposed ever since publication of Brazil as an economic superpower?* by the Brookings Institution, a liberal think tank from Washington. The book, launched at the World Bank’s headquarters in Washington, featured the contributions of specialists from various institutions to discuss Brazil’s role in the global economy today and in the future. The book contains a series of studies on various topics: Brazil’s leading role in agribusiness and renewable energy, changes and trends in current commercial policies, the growing presence of large Brazilian companies abroad and the impact of social policies aimed at achieving better income distribution. In the book, the answer to the title’s question and Brazil’s current status are left up in the air.

“It all depends on your definition of a superpower”, says Leonardo Martinez-Diaz, director of the Center of Economic Development of the Brookings Institute and co-editor. He believes Brazil is on the right path. “In terms of its influence on the global economy and on the emerging centers of economic decision-taking, Brazil is indeed on the right path to consolidating itself as a superpower”, he says. However, according to MartinezDíaz, continued growth in Brazil’s influence on these two spheres will depend on the private sector’s ability to capitalize on new opportunities and on the government’s capacity to continue pursuing Brazil’s increased global economic integration. As examples of well-exploited opportunities, Martinez cites Petrobras’ development of deepwater offshore oil exploration technology, Odebrecht’s expansion of its international businesses and some recent trends in the bank sector – with Itaú Unibanco’s continued strengthening of its global strategy and Banco do Brasil’s blossoming into a regional player.

The book also discusses the possible paths for Brazil to strengthen its process of global economic integration. In the opinion of some analysts, while the strategy of prioritizing agreements with developing countries, strengthening South-South relations, may make political sense, it is questionable from an economic standpoint. In his text, the economist Mauricio Moreira Mesquita (director of the Inter-American Development Bank’s – IDB research department) says that, due to this strategy, Brazil ends up paying a higher cost than other countries (such as China and India) to gain a foothold in the biggest markets of the Northern Hemisphere. Mesquita advises Brazil to reduce and rationalize its tariff protection system. According to him, the nominal import tariff rates imposed by Brazil are much higher than those adopted by other emerging markets such as China an d Mexico.

The book recalls that Brazil’s potential had already surfaced in the past (e.g. in the period known as the “economic miracle” of the 1970s), but that Brazil didn’t become a global power. However, according to Martinez-Díaz, this time around the current mood of optimism is justified by the fact that there are stronger foundations supporting this progress. “A stable democracy and its recent track record of low inflation and conservative macroeconomic management have ensured that Brazil is now more integrated into the global economy than at any other time in the past 40 years”, he says. Another new piece of data is the sustained increase in income levels of the poorest strands of Brazil’s population. This persistent decline in inequality has occurred in both periods of growth and no growth. “This feature reflects a combination of macroeconomic policies that have led to stability, and growth with social policies of income transfer, such as the Family Allowance program – which bring enormous benefits at relatively low costs”, according to Bruno Saraiva, chief economist of the IDB’s Southern Cone Department. The per capita income of the poorest 10% of the Brazilian population posted a CAGR of 57% in the period 2001-2006, versus 6.7% for the richest 10%. This optimism is supported by other factors, despite the fact that Brazil’s ‘superpower’ status still seems a long way off.

As the tenth largest global economy, Brazil is currently the driving force behind the economic recovery in Latin America. Between 2008 and 2009, it received investment grade rating from the world’s three largest rating agencies. In the political arena, Brazil is a prominent member of groups such as G-8 and G-20, and is a staunch advocate of emerging markets’ greater influence in the IMF and World Bank. Brazil has also been pulling its weight in the group of the so-called BRICs, the name of the quartet formed by Brazil, Russia, India and China – seen as the main promises of the next few decades (by the year 2050, these countries are expected to potentially become the largest global economies). When the BRICs group was created, Brazil’s inclusion was frowned upon by many observers. The doubts weren’t so much to do with Brazil’s potential, but rather the accuracy of the concept. “The term BRIC grouped together countries with enormous differences”, argues James Ferrer, founder and director of the Center for Latin-American Studies of George Washington University.

However, Saraiva, from the IDB,likes the term. “BRICs led the world to reassess the role of developing countries on the international scene”, he says. One way or another, today Brazil is a leading member of this group. Analysts highlight the superiority of the Brazilian democracy, seen as an advantage for the country. Also, China and Brazil are going in opposite directions in terms of inequality – which is rising in China and falling in Brazil. Other analyses stress that, since Brazil has already undergone the industrialization and urbanization processes currently driving growth in China and India, a direct comparison of GDP growth rates (which are much more explosive in China’s case) are an unfair evaluation criterio n. There is also a consensus that the new international status quo, in the economic and political spheres, is extremely favorable for Brazil. Growth of the middle class in countries such as China and India should remain supportive of rising demand for agricultural products and other Brazilian commodities, according to the Brookings Institution.

The debate on climate changes should also boost the bio-fuels and hydro energy industries, sectors in which Brazil is already a major player. Today, 46% of the energy consumed in Brazil comes from renewable sources, versus a global average of 13% and 6% in OECD countries. “Brazil always wanted to be a leader, but this desire was always more a case of talk rather than action. Today, with the policies that it has been adopting, it is now starting to truly fulfill this promise”, says Ferrer. “Now, Brazil needs to positively use its leadership to influence other nations.”

Many countries, especially from Latin America, see Brazil’s growth as an opportunity, due to the size of its market. In 2008, Brazilian exports to Latin America represented 20% of total exports, versus 10% a decade ago (1998). However, other countries see Brazil as a competitor, with Ferrer saying that Brazil’s leadership in Latin America is sparking envy in certain neighboring countries – especially those with different political and development visions. This is the case of Hugo Chávez’s Venezuela, which is also looking to expand its influence on the continent. Analysts highlight the importance of Brazil’s leadership triggering a change in the US government’s stance vis-à-vis Latin America’s geopolitical structure. In an article published in the September edition of the Economia Brasileira magazine, the diplomat Sebastião do Rego Barros says the opposition between Brazil’s growing importance and the arrival of Hugo Chavez’s bolivarianismo is preventing the White House from applying any simplistic views to Brazil.

Brazil currently boasts not just greater capacity of economic and political leadership but, mainly, institutional stability – an essential component of the new, less interventionist, US strategy for Latin America. “Brazil now has a great opportunity to establish itself as a power – and this is a good thing for the US as it brings stability to South America”, says Republican Devin Nunes, one of the co-chairme n of Brazil Caucus, a congressional group created several years ago by the Brazilian Embassy in Washington, currently comprising over 30 congressmen. Becoming a superpower is something that will depend, among other things, on how Brazil will handle the obstacles still in its path, such as its infrastructure deficit, social inequality and pending institutional reforms. “Brazil will have to face up to these challenges while, at the same time, preserving its macroeconomic stability, pursuing responsible and pragmatic management that doesn’t create an environment of unnecessary risks”, says Saraiva. “These questions are crucial in terms of Brazil achieving its full potential.” It is thus up to Brazil itself to determine the magnitude and importance that it plans to have in the future.