Opinion Sur
Brazil has accomplished spectacular growth and has known how to use the exports’ ‘tailwind’ with a productive integration of underprivileged sectors, a decrease in social inequity, and an industrial dynamism that it now needs, first to defend, and then to deepen in order to seize the competitive advantages that its technology, natural resources and demographic profile have in store for Brazil in the twenty-first century. In a multi-polar world, in which American hegemony is easing and the privilege of wealthy western countries is being disputed by emerging countries, Brazil has an exceptional geopolitical location. We know comparative advantages of nations are neither static nor permanent, but that they change with historic context, with technologic evolution and with the demographic profile. In short, the geopolitics variable is in fact variable. Another way to express this thesis is to say that every country has a ‘window of opportunity’ in a precise historical time, which it will or will not know how to take, and that such opportunities do not last for an indeterminate amount of time. Or even more concisely: when a country reaches the moment of great national development, the imperative imposed on it is the ancient Roman sentence: Carpe Diem.
At its time, the United States managed to seize the comparative advantages the historical period that went from the late XIX century until the late XX had in store [[Regarding this, see Tyler Cowen, The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better. New York: Penguin, 2012. Also see Andrew J. Bacevich’s compilation, The Short American Century: A Postmortem. Cambridge: Harvard University Press, 2012.]]. In the XXI century the time has come for other people in other continents. In Latin America, which has managed to deal with the financial crisis of wealthy western countries pretty well, [[See my last book on the subject: Juan E. Corradi, South of the Crisis. A Latin American Perspective on the Late Capitalist World. London and Dehli: Anthem Press, 2010.]] Brazil holds a very special place. In 1941, the Australian writer Stefan Zweig claimed that Brazil –where he took shelter- was the country of the future. [[See my last book on the subject: Juan E. Corradi, South of the Crisis. A Latin American Perspective on the Late Capitalist World. London and Dehli: Anthem Press, 2010.]] Europeans ridiculed him so that General De Gaulle ended up saying: ‘Brazil is the country of the future-and it will always be.’ But yesterday’s future has become the present.
To begin with, what economists call ‘factor endowments’, which used to favor temperate regions and disfavor tropical zones, are currently favoring Brazil. Indeed, natural resources are more valuable in some historic periods than others. For instance, USA’s factor endowment has reached its limit while Brazil’s is swiftly increasing in value. The topographic obstacles, the slave estate, and Portugal’s repressive policy kept Brazil underdeveloped for several centuries. But some of those yesterday obstacles are now gone and some have become development factors. Thus, agricultural productivity was limited by the tropical climate for centuries. Today, thanks to technologic knowledge and interventions Brazil has become an agricultural power. Grains and seeds that grow in the tropic have been developed, and Brazilian scientists of Embrapa (Brazilian Agricultural and Livestock Research Company) have made the Cerrado – the vast savannah that used to be miserable and is now the world’s barn- fertile. Brazilian agricultural exports are growing a 670% faster than US’. Another example of a factor: in past centuries, sailable rivers that flow into the sea favored the domestic economic development of countries such as United States and Argentina. In Brazil, the hydrographic system did not favor transport, but now enables the generation of electric energy. If we also take the tropic’s solar energy and the submarine platform’s capacity to extract oil into consideration, there is no doubt that Brazil’s energy potential is huge in an industrialized world that cannot count on abundant cheap energy as it used to. And in addition, Brazil has demonstrated its capacity to produce bio-fuels in which- in contrast with United States’- energy inputs employed in its production are far below the energy the products contain. Brazil is self-sufficient regarding energy without having to exclusively depend on the oil it is about to extract in outstanding amounts. More like Norway than Venezuela, Brazil can escape from a strong dependency on hydrocarbons, which will keep it from falling into the energy wealth trap [[See Terry Karl’s classic, The Paradox of Plenty. Oil booms and Petro-states, Berkeley: University of California Press, 1997.]] (known as the ‘Dutch disease’).
In short: template countries were highly endowed with resources for their development in the XIX and XX centuries; Brazil is endowed for a great development in the XXI. We can continue this review of factors with a note on the vast Brazilian aquifer reserve. In a near future, water will be as or more important than oil in the planet’s economic development [[See “The Miracle of the Cerrado,” The Economist, August 26, 2010.]]. In this article I will only present an illustrative piece of information. From 2007 to 2010, China and Brazil combined contributed to the global economic development in a 43.4%. Brazil’s water abundance (which allows it to have a flourishing agriculture) and China’s progressively more imperious need to feed its population, guarantee an immense network of commercial ties and other synergies between the two mega-countries.
Second, Brazil’s demographic composition favors its development since the productive population group (population between 15 and 64 years of age –around 130 million people) on its own increases potential economic development annually in a 2.5%, with a 2.7% average income growth a year for Brazilians. This demographic advantage will be valid for twenty years, before the population grows old and the weight of dependent sectors increases. It is a similar situation to the American postwar ‘baby boom’: a demographic advantage. Let us bear in mind that the Nobel Prize of economics was given in 1985 to Franco Modigliani for having proven that the population distribution according to age determines an economy’s degree of resilience. Brazil’s age average [[The average is the value of the central position variable in a set of organized data.]] is 28.9 years (36 years in the US, 35.2 years for China, 38.5 years for Russia). Only India, with a statistic average of 25.9 years of age has the same demographic/economic potential as Brazil. As leaders and rulers well know, Brazil has twenty years of opportunity to modernize economy, improve the quality of education, and transform itself into a wealthy country, meaning into a country where the demographic ‘prize’ is seized with the productive inclusion of 130 million people. Thanks to Presidents Lula and Rouseff’s policy 40 million people who were left behind have already been incorporated to the productive current, with an unprecedented social mobility rate. Like it is repeatedly pointed out by the current President Dilma Rouseff, the aim is to transform Brazil into a ‘society of middle classes’.
Third and last, Brazilian economy is diversified enough as to achieve a sustained and balanced development, especially if it carries out the structural reforms that are utterly necessary, which are the following: greater labor flexibility, better infrastructure, and simplification of bureaucratic processes that are currently withholding the swift development of new companies at competitive costs in the global market. The model’s Achilles’ heel is the well-known ‘custo Brazil’ (the cost of doing business in the country) and the challenge is its industries’ productivity and competitiveness.
Facing this task, Brazil meets external obstacles when wealthy and indebted countries, such as United States, try to exit their economic paralysis by taking advantage of a monumental monetary emission and currency devaluation, destined to cheapen the cost of their exports. To do so they count with the exorbitant privilege of issuing the reference currency (the dollar). We must state that, conversely to the false arguments circulating in the United States, the great ‘currency manipulator’ is not mainly China but the United States of America. [[Regarding this, see Barry Eichengreen, Exorbitant Privilege. The Rise and Fall of the Dollar and the Future of the International Monetary System. New York: Oxford University Press, 2011.]] This currency exchange trick has the goal of achieving a dumping of its surpluses in prosper markets like Brazil’s, a policy that threatens integrated industrial development. As a defensive measure, Brazil has introduced exchange controls, protection fees, and public sector’s interventions in order not to fall once again into the underdevelopment trap, which is specialization in primary products and a partial industrialization, of assembling products with imported patents and technology inputs that are not its own. It is not about going back to the old development model with imports substitution, nor to a closed economy. Brazil is a competitive open economy, but it has to defend itself from the ‘finance wizards’ in the central countries, from speculative capital, and from devaluation masked by currency emission that central countries use to save their indebted growth model. In the US and Europe, late capitalism has transformed into ‘debtism’. This is Guido Mantega’s perspective, Brazil’s Minister of Finances, in a recent interview in the Brazilian issue of Valor Económico (Economic Value). The recent fall in the growth rate, along with the interest rate reduction, gives Brazil a break to adjust its model and aid its industry. But these defensive measures are just a shield from deeper reforms that are coming in Brazil, and that, if successful, they will make the country regain the rhythm of high growth with moderate inflation and international competitiveness. Such is President Rousseff’s thesis (Financial Times interview, October 2nd 2012). Structural reforms will do nothing but potentiate the positive grounds and the geopolitical window we have mentioned earlier. Under such conditions, the next twenty years will witness a progressively greater rise of this nation-continent, which will go from the eighth place to one of global economy’s first ranks.
