May 22, 2020
Brazil’s Delusional Self-Predictions
In 2013, former presidents and ex-ministers spoke about their visions for the country in 2020 — Ultimately, these don’t quite coincide with this year’s chaotic state of affairs
Reality hasn’t been generous with Brazil lately. In fact, one could argue that Brazil hasn’t been generous with itself for many years or decades. Putting things into perspective, the country may very well be achieving its all-time low in the year 2020. This is by no means an overstatement. In historical terms, never before has Brazil faced a sanitary, an economic and a political crises all at the same time. But you never know — there is nothing so bad that it couldn’t be worse. Brazilians are losing confidence and hope as well. The consequences of the COVID-19 pandemic are yet unpredictable, and chances are that it could be generating some long-lasting damage in the country’s economy, society and democracy throughout the first years of the upcoming decade starting in 2021.
In the year 2013, way before this current mess, projections made by past political leaders and renowned economists now seem to largely diverge from the situation we’re witnessing today. Not only these points of view provide interesting elements for reflecting on what went wrong along the way, but also offer a basis for checking if predictions were accurate or not at all. The documentary ‘O Brasil deu certo. E agora?’, which translates to ‘Brazil has succeeded. What now?’, was an initiative by former minister of finance Maison da Nóbrega and was produced and directed by journalist Louise Sottomaior. The 70’ film features three ex-presidents of Brazil, 12 ex-ministers, seven ex-heads of the Central Bank, as well as bank owners and finance specialists, who tell the bumpy Brazilian economic history alongside with speculations about the future of the country.
For starters, there is this highly subjective and vague remark by Delfim Netto, Brazil’s former minister of finance (1967–1974) and ex-minister of planning (1979–1985), which seems questionable at this point, to say the least: “In 2020, Brazil is going to be a bit better than it is today”. It sounds equally mistaken if compared to another famous quote of his related to the country’s miraculous economic development of the 1970’s and disastrous ability to distribute the newly generated wealth among all the population. He allegedly intended to “make the cake rise before dividing it into slices”. Brazil’s cake in fact got bigger, but inequality remains one of the biggest challenges in the 21st century. After achieving monetary stability and pursuing increased fiscal austerity in the 1990’s, consistent efforts to tackle poverty and extreme poverty took place in the 2000’s in Brazil. However, this trend encountered significant obstacles in the decade thereafter and progress has stalled. According to the World Bank, the country has reached its lowest disparity rate (measured by the Gini coefficient) in 2015, but indicators have consistently worsened in recent years.
Luiz Carlos Bresser Pereira, former minister of finance (1987), expected Brazil to be “better than today; more democratic, more developed, and more social”. On his turn, Sérgio Amaral, former minister of development (2001–2002), thought “it is going to be a better Brazil; more humane, more participative, and more synchronized with the global trends”. Considering the contemporary scenario of Jair Bolsonaro’s administration, it’s really hard to believe that Brazil followed these pathways. Facing 1) intense political and ideological polarization; 2) notable deterioration of decades-long mechanisms enshrined in the 1988 Constitution that enable and encourage civil society’s active participation in decision making processes; 3) daily attacks on journalists and on media in general; 4) deliberate clash against the legislative and judicial branches of government; 5) science denialism in times of pandemic; and 6) distancing from the traditional globalist approach in favor of blind and obscure nationalistic values, the country is certainly less democratic, less social, less humane, less participative and less in tune with the international community when comparing 2013 with 2020. The economic development matter will be explored further on in multiple ways.
“It is going to be more productive” — this was what Henrique Meirelles, ex-president of BankBoston, former head of the Central Bank (2003–2011) and former minister of finance (2016–2018), noted about Brazil’s future outlook. He was wrong as well. After 10 years of a spectacular rise between 2003 and 2013, the productivity rate in Brazil has been steadily declining for the past seven years, as shown by the graph below.
Economic growth has been a frightening topic — a sort of taboo in Brasília — for the past seven years as well. It’s worth noting that in late 2019, Brazil was on the verge of finally overcoming the long-lasting impacts of the worst economic recession of its history so far. Figuratively speaking, it was more like a depression as it took place between 2014 and 2016, with significant drops in the GDP (-3.5% in 2015 and -3,3% in 2016), but its negative effects in unemployment rates, consumption and investment ended up prevailing all the way until just recently. Gustavo Franco, former head of the Central Bank (1997–1999), predicted that “in 2020, we’re going to be greater, better, and probably growing more”. Likewise, Armínio Fraga, his successor in the same entity (1999–2003), observed that “Brazil will continue to grow more rapidly than rich countries”. Both were incorrect as it will probably take Brazil 15+ years to return to the same level of 2011, when the country reached its best result GDP-wise: US$2.616 trillion.
In terms of global affairs and international influence in 2020, another couple of projections made in 2013 can also be interpreted as huge misconceptions. João Batista de Abreu, former minister of planning (1988–1990), had the wishful thinking that “we’ll be one of the most influential countries in the world”. Similarly, Fernando Collor de Mello, former President of Brazil (1990–1992), had then noted that “we’re going to be talking about a very strong Brazil”. Since 2019, however, Brazilian diplomacy has been putting a highly ideological foreign policy into practice and has been threatening other countries that Brazil will be stepping back in several multilateral agreements and international forums. Suddenly, cooperation and collaboration are words that automatically apply to just a small set of preferred partners (USA and Israel to the detriment of China and Argentina). Furthermore, President Jair Bolsonaro’s aggressive and authoritarian speeches as well as the country’s disastrous response to the new Coronavirus pandemic are notably helping deteriorate the country’s image even more. In 2020, there is no doubt that Brazil is a true pariah of the international community.
Now talking about the size of the country’s economy in comparison to others, José Sarney, former President of Brazil (1985–1990), had the opinion that “we shouldn’t be so ambitious by willing to reach fourth or third place. Let us stay in the fifth position, but gradually improving this condition”. Gustavo Loyola, former head of the Central Bank (1992–1993; 1995–1997), affirmed the following: “I would say it’s a kind of determinism… This future of being among the world’s largest economies”. Ozires Silva, former president of Embraer (1969–1986) — then state-owned and government-controlled aircraft enterprise –, former president of Petrobras (1986–1988) — Brazil’s now semi-public petroleum corporation –, and former minister of infrastructure (1990–1991), had then pointed out that “we have all the attributes to surpass, say, even the Chinese”. Brazil was the seventh economy in 2013. Unsurprisingly, Brazil is now the world’s ninth largest economy, having lost two positions to India and Italy. Canada, Russia and South Korea are right behind, which increases the possibility of having Brazil taken out of the top 10 ranking anytime soon.
Again, looking into economic prospects, Luiz Carlos Mendonça de Barros, former head of BNDES, Brazil’s National Development Bank (1995–1998), stated that “our GDP per capita will be at around US$18 thousand, which puts us at the bottom level of the richest nations. It is going to be the world’s fifth economy”. Not only Brazil’s GDP per capita has decreased from US$13.2 thousand in 2011 to just US$9 thousand in 2018 (it will certainly get worse in 2020), but the country might also end up being a unique case of nation which will become old prior to getting rich. Despite its continental dimensions, population size and abundant resources, Brazil is still a middle-income developing nation. It is not part of the OECD (yet). As we know, the logic of demographic transitions is totally independent from economic performance throughout the time. Thus, even if Brazil doesn’t manage to reach the imaginary lower upper class of countries in the next few decades, its population will still get older anyway — with the impacts that this entails in any pension system.
Back in 2013, Mendonça de Barros also indicated that “we’re going to have a very low debt/GDP ratio in a highly indebted world. Brazil’s rating will be A or AA”. Once again contradicting the experts, Brazil’s ratings are the following in 2020: BB- (Standard & Poor’s); Ba2 (Moody’s); and BB- with a negative outlook (Fitch). When it comes to debt as a percent of GDP, i.e. the country’s ability to make future payments — which affect borrowing costs and government bond yields –, Brazil went from 51.54% in 2013 to 75.79% in 2019. According to world renowned financial institutions, Brazil’s debt in 2020 could get as high as 84% (Barclays) and 91% (Goldman Sachs).
At least in the short term, equally unrealistic ideas such as the ones contained in the quotes “Brazil is destined for greatness”, by Ernane Galvêas, former head of the Central Bank (1968–1974; 1979–1980) and former minister of finance (1980–1985), and “Brazil is — let me be bold here — condemned to be rich”, by Mailson da Nóbrega, former minister of finance (1988–1990), contrast with more reasonable, balanced and thoughtful points of view. Ernane Galvêas himself introduces an interesting caveat: “I don’t think it’s going to change much; I’m even a little shy to say that”. Ronaldo Costa Couto, former minister of home affairs (1985–1987) and former chief of staff of the executive branch of government (1987–1989), also observed the following: “I see Brazil with prestige to reach a new level… if sanity is in place”. In many ways, the year 2020 already seems like a period to be forgotten. It is fair to say that Brazil’s fate belongs to Brazilians. May patience, wisdom and maturity be with us in times like these so that we can dream of a brighter year of 2027.
