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Brazil's Economic Outlook
Brazil entered the 1990s with much less confidence about its economic
future than it once had. The economic stagnation and uncertainty
of the 1980s had exacted a high toll, and per capita income in 1990
was no higher than it was in 1980. Inflation, at monthly rates,
was over 30 percent, unprecedented even by Brazilian standards.
It is reasonable therefore to ask what has been learned from the
experience of the 1980s and what are the prospects for an economic
future brighter than the recent past.
As an object lesson, the economic experience of the 1980s made
a contribution. Government is much less likely to be seen as a solution,
and many more Brazilians see the public sector as the problem. The
rather tiresome debate between the monetarists and the structuralists
that dominated discussions of inflation in the1970s has been superseded
by a recognition that money supply growth does indeed have a close
relation to inflation, but that the underlying problem is the fiscal
deficit that drives the money supply process. Although the monetization
of deficits may be postponed, as was sometimes done in the 1980s,
the inflationary consequences of public-sector financial imbalance
cannot be avoided indefinitely. A part of the economic disorder
of the 1980s was the consequence of populist attempts to ignore
this point.
The external shocks of the 1980s have also shown Brazilians that
their country cannot be isolated from the rest of the world. By
the early 1990s, Brazil was on the path to becoming more open to
trade than it had been for several decades. Despite the loss of
Brazilian access to world capital markets in the early 1980s, external
capital was beginning to return to Brazil by the early 1990s. In
contrast to the massive capital flows of the 1970s, much of which
financed public borrowing, capital flows in the 1990s focused more
on the private sector.
Brazilians also learned that price stabilization is not easy and
that "magic" solutions centered on price freezes do not
work without the more difficult fiscal adjustments that emerge from
a political consensus. That consensus had not been developed by
the early 1990s, even though political leaders and economists recognized
that fiscal adjustment was essential for macroeconomic stability.
The failure of successive stabilization plans that ignored the underlying
fiscal disequilibrium also imposed long-term costs, because the
credibility of government economic policies was undermined. The
fall of the Collor de Mello government in 1992 under charges of
massive corruption and the economically unrealistic provisions of
the 1988 constitution have made the task of regaining government
credibility even more difficult.
For Brazil to return to the kind of economic growth that many of
its people once regarded as their birthright, a number of changes
must occur. First, the public-sector deficit must be reduced substantially.
This can be done in a number of ways without imposing heavy costs
on Brazilian society. Privatization of economically inefficient
state enterprises is one way, and in the first half of the 1990s
some progress was made in this area. The complex system of tax and
credit subsidies that was developed in preceding decades offers
many opportunities for efficiency-improving reform, which would
also contribute substantially to reduction of the fiscal deficit.
Second, Brazil's recent moves toward becoming a more open economy
offer the prospect of increasing economic efficiency and ensuring
that new resources flow into activities in which Brazil has a strong
international competitive position. Decades of protectionism in
a number of key sectors have imposed high costs on Brazilian consumers.
Greater openness to world markets, either through regional trade
initiatives or through unilateral reductions in trade restrictions,
will make a noticeable contribution to Brazilian economic welfare.
Finally, Brazil could become an economically prosperous country
if it can seriously address the enormous inequities in income distribution.
Serious efforts to help Brazil's least privileged must focus on
the provision of basic services and, above all, on education. Without
substantial efforts to address the income distribution problem,
the strains on the political system that have their economic counterpart
in fiscal disequilibrium may make the country much harder to govern
and may reduce the prospects for a successful and sustainable price
stabilization.
* * *
A highly regarded analysis of the Brazilian economy's formulation
from the early colonial period to the breakdown of the coffee economy
in the 1930s is in Celso Furtado's The Economic Growth of Brazil
. A succession of external shocks, failed stabilization plans, and
significant changes in trade policy in the 1980s and early 1990s
provided the raw material for literature on recent Brazilian economic
problems. A classical treatment of the 1980s is Werner Baer's The
Brazilian Economy--Its Growth and Development , the fourth edition
of which was published in 1995. Some of the difficulties in the
transition from a primary product economy to an important industrial
power are examined in Edmar L. Bacha and Herbert S. Klein's Social
Change in Brazil, 1945-1985 . A parallel treatment of some of these
problems in Brazilian economic development is given in Luiz Carlos
Bresser Pereira's Development and Crisis in Brazil, 1930-1983 .
Brazil's economic response to the external debt crisis of the early
1980s is the subject of various studies, several of them parts of
larger studies on a number of developing nations. One is Eliana
A. Cardoso and Albert Fishlow's The Macroeconomics of the Brazilian
External Debt . Donald V. Coes's Macroeconomic Crises, Policies,
and Growth in Brazil, 1964-90 provides a detailed macroeconomic
history of post-1964 policies and their consequences. An earlier
treatment on Brazil's experience is James Dinsmoor's Brazil: Responses
to the Debt Crisis . A former minister of finance, Marcílio
Marques Moreira, provides an insider's view of the external debt
problem in The Brazilian Quandary .
William G. Tyler's Manufactured Export Expansion and Industrialization
in Brazil and Werner Baer's Industrialization and Economic Development
in Brazil examine a number of the causes and consequences of import-substitution
industrialization. A World Bank-sponsored study by Coes, Liberalizing
Foreign Trade: Brazil, e xamines Brazil's trade policies between
1964 and the early 1980s. Changes in Brazil's capital markets in
this period are the subject of John H. Welch's Capital Markets in
the Development Process . Samuel A. Morley examines Brazilian labor
markets and income distribution in Labor Markets and Inequitable
Growth: The Case of Authoritarian Capitalism in Brazil . Thomas
J. Trebat studies the role of state enterprises in Brazil's State-Owned
Enterprises .
Among the useful sources on the Brazilian economy and its development
that are available only in Portuguese are A ordem do progesso ,
edited by Marcelo de Paira Abreu. Numerous works in Portuguese discuss
Brazilian inflation and the various attempts to deal with it. Ignácio
Rangel's A inflação brasileira is a classic work.
Contemporary treatments of stabilization attempts include Plano
Cruzado by Fernando de Holanda and Mario Henrique Simonsen, the
latter a former finance minister.
Data on the Brazilian economy are available from a number of sources,
including various Brazilian economic journals, many of high quality.
Revista Brasileira de Economia , edited by the Fundação
Getúlio Vargas in Rio de Janeiro, is Brazil's oldest and
perhaps most conservative economic journal. Estudos Econômicos
, edited by the Economic School of the University of São
Paulo, is an eclectic journal. Pesquisa e Planejamento Econômico
, which emphasizes academic articles dealing with current problems
of the Brazilian economy, is published by the National Research
Institute (Instituto Nacional de Pesquisa--INPES) and the Applied
Economic Research Institute (Instituto de Pesquisa Econômica
Aplicada--IPEA), a semi-independent research organization of the
Ministry of Planning, based in Rio de Janeiro. Revista de Economia
Política is a critical but widely respected economic journal
edited by the Center for Political Economy of São Paulo.
An interesting economic journalism magazine is the monthly Conjuntura
Econômica , published by the Fundação Getúlio
Vargas. It presents short articles on trends in the Brazilian economy
and has a rich statistical compendium.
A long view is provided in Estatísticas históricas
do Brasil: Séries econômicas, demográficas e
sociais, 1550 a 1988 , published by the Brazilian Institute of Geography
and Statistics (Fundação Instituto Brasileiro de Geografia
e Estatística--IBGE). The IBGE yearbook, Anuário estatístico
do Brasil , provides a wealth of data on all aspects of the economy,
albeit with a lag of several years. The Boletim do Banco Central
is a valuable source of macroeconomic and financial data. A rich
source of studies on the Brazilian economy is in a series of publications
by INPES-IPEA called Perspectivas da economia brasileira . Dealing
with virtually all aspects of the Brazilian economy, the volumes,
issued at two- to three-year intervals, not only review recent events
but also perform projections for the near future. Among the sources
available in English are the periodic studies published by the British
Economist Intelligence Unit and the statistical series by the IMF
published for all member countries. The World Bank provides a number
of summary statistics in its annual World Development Report and
is also the source of a wealth of more detailed statistical information,
both published and unpublished, on contemporary Brazil. (For further
information and complete citations, see Bibliography.)
Data as of April 1997
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