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Will Brazil punch its weight in 2026?

November 10th, 2009
Brazil is stronger than before it went into recession, says Guido Mantega

Brazil is stronger than before it went into recession, says Guido Mantega

Brazil has often been derided as the eternal country of the future. But now, it seems, that future has a date: 2026.

At present, Brazil is the fifth-largest country in the world and has the fifth-largest population as well.

But in 17 years’ time, it will also be the fifth-largest economy in the world, says its finance minister, Guido Mantega.

“These figures are from the Economist Intelligence Unit,” he told an audience of businessmen and journalists in London.

As he spoke, a slide showing a series of league tables outlined exactly how Brazil is expected to achieve this.

According to these projections, it will leapfrog the UK, France and Italy as early as 2011, before reaching the number five slot in 2026 with a gross domestic product of $5.721tn in purchasing power parity terms.

“If we took the World Bank figures, we would already be in fifth place in 2014,” he said.

“We were more modest and took statistics that put us there in 2026, when China will already be the number one world economy.”

Brief recession

You might think Brazil is still taking an intolerably long time to get there, bearing in mind that it has consistently punched below its weight for decades.

But as last week’s Financial Times-hosted Investing in Brazil Summit demonstrated, the country’s main movers and shakers are in buoyant mood, elated at how strongly it emerged from recession.

While many countries, including the UK, are still feeling the impact of the global financial crisis, Brazil had just two quarters of contraction before bouncing back with 1.9% growth in the April-to-June period.

As far as Brazil’s President Luiz Inacio Lula da Silva is concerned, the outcome is a vindication of his time in office, which now has little more than a year left to run.

“From the first moment of my government, we worked to prove that it was possible to combine economic growth with redistribution of wealth,” he said in the event’s keynote speech.

Lula cited the success of his Bolsa Familia welfare programme, which has lifted more than 11 million families out of poverty in Brazil.

He said that governments practising such policies were often accused of being populist or of creating a dependency culture.

“Some people said in Brazil, ‘Why are you investing in the poor? You could build bridges, roads or viaducts,'” he added.

“I’d like to build bridges, viaducts and roads. But the bridge can wait a month, the road can wait two months. Any investment can wait. People who are hungry can’t wait.”

Common wealth

As it happens, Brazil has not had to choose between infrastructure and the well-being of its people: it has made progress on both.

Research in Brazil’s six biggest cities shows that the percentage of the population considered middle-class has risen from 42.4% to 52.9% in the past six years.

Those figures, produced by the Getulio Vargas Foundation and the government’s IBGE statistics office, include all households earning between 1,115 reais ($619) and 4,807 reais, or $2,671 a month.

Not much by developed-world standards, perhaps, but enough to give a lot more purchasing power to a lot more people – and, according to Lula, all part of “a silent revolution” that is helping Brazilian society to recover its self-esteem.

At the same time, since 2007, Brazil has been pursuing what it calls the Programme for the Acceleration of Growth (PAC).

This is an ambitious $290bn scheme to overhaul the country’s infrastructure, including more than 100 projects.

In the words of Lula’s chief of staff, Dilma Rousseff, it is designed to overcome “years of stagnation”.

The most glamorous of these is a high-speed train linking Rio de Janeiro and Sao Paulo, but others involve power stations, airports, housing, sewage systems and public transport.

Ms Rousseff called on international investors and big firms to pick up on these “opportunities that have never before arisen in Brazil and are rarely found worldwide”.

War of the technocrats

Lula and his left-wing Workers’ Party (PT) are justified in claiming much of the credit for this “transformation” of Brazil, as he describes it.

However, the process really began under his predecessor, Fernando Henrique Cardoso, who won the presidency in the 1990s on the back of his success as finance minister in taming Brazil’s runaway inflation.

Now, interestingly, the PT and Mr Cardoso’s PDSB look set for a battle royal at the next presidential election in October 2010.

Ms Rousseff clearly hopes that her role at the helm of the PAC infrastructure scheme will secure her the right to contest the election as the PT candidate.

But she struggles to shake off her reputation as a rigid technocrat, with little of Lula’s charm.

Her only moment of passion at the London summit was when she responded angrily to a questioner who based his point on experience of living in Brazil 10 years ago.

“You can’t compare today with that period of stagnation,” she snapped.

Fortunately for Dilma, her likely adversary from the PSDB, Jose Serra, offers a similar kind of charisma-free competence.

However, he arguably has a stronger political track record, as a former health minister and current governor of Sao Paulo state.

Whoever inherits Brazil’s current healthy economy and whatever happens on the way to 2026, Lula is adamant that his country’s days of being considered second-rate are over.

As he told his London audience: “We got tired of being the country of the future. We got tired of so many promises in the 20th Century and now we don’t want to miss a single opportunity in the 21st Century.”

By Robert Plummer

http://news.bbc.co.uk


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