Political Situation and Economic Trends in Brazil
The election of President Luiz Inacio Lula da Silva in the 2002 elections in Brazil has been described as a "milestone," a starting point for secured democratic rule in the nation (Amann 14). Such democratic steps have been important in the establishment of economic norms and practices for the country; the more socialist models of state-run industry have been rejected, and significant international debt has been incurred to address the social ills facing the country. In the wake of other Latin American economic crises, the Brazilian economic situation becomes even more important; additionally, the size and growth of the Brazilian market has come to bear significantly on the world's economy. This paper will address the current political situation and economic trends in Brazil through the lens of the allocation of resources in both the public and private sectors. Additionally, the roles of government regulation (or a lack thereof) in each sector will be examined from an economic perspective. In conclusion, the overall performance of the Brazilian economy will be analyzed, especially in relation to other large economies in both the developing world and the established G-7 nations like the United States. Both historical and mo
Early in his administration, despite public sentiment that defaulting on the public debt was the best option, similar to the actions taken by Argentina in 2001, Lula remained steadfast in his insistence on paying the debt. An almost-immediate recession following his declaration to honor the loans made the decision highly unpopular, especially when compared with Argentina's subsequent recovery after defaulting. Critics called him "a tool of international capitalism" for his insistence on honoring the IMF debts (Mitchell 162). In hindsight, however, Argentina's recovery has stalled, whereas Brazil is beginning to reap the fruits of its austere economic policy of recent years. An upturn in worldwide interest rates, though, especially in the United States, could make Argentina's still-large international obligations and repayment burden "unbearable" (Economist 2004). Specifically, Lula has appropriated $1.5 billion so far for a hunger alleviation program similar to social programs in the U.S. (Mitchell 162). Zero Hunger aims to "provide every Brazilian three meals a day through distribution of surplus food and transfer payments of up to $30 a month per family" (ibid.). While debt reduction reduces the amount of funds available for such governmental programs, Lula's belief in the necessity of social stability and security prompts him to prioritize such programs and find funds to establish such social welfare networks. Additionally, he has focused significant government attention to ways to increase Brazil's overall revenues, thereby decreasing the debt burden as a percentage of GDP (Mitchell 163). An active international schedule peddling Brazilian products and investments has taken Lula to China, Africa, and Europe, seeking to increase the nation's revenue and lessen the debt repayments' burden on the economy (ibid.). Such a paradox-the sacrifice of immediate benefits for longer-term economic success and stability-has been a significant part of the Brazilian restructuring. Immediate policies instituted by the Lula administration have been difficult to implement politically, due to their necessary spending cuts and fiscal responsibility. Although Lula himself is a leftist, his economic policies have been decidedly conservative in nature. The privatization movement has not been a complete removal of government regulation in the nation's economy; instead, the model implemented by Lula has been one of significant government involvement in financial transactions and economic indicators like inflation and interest rates. With democracy and a freer society come demands for freer, more open markets, and Brazil's economy has gradually answered these demands by privatizing its industries and implementing fiscally responsible debt-reduction policies. The first of these political issues, that of privatization, was first introduced and implemented in 1991, with the privatization of the country's steel industry (Flynn 416). The steel industry was, like the oil industry, "a touchstone of nationalist identity" (ibid.). Despite this, Brazilian leaders during the 1990s saw the economic wisdom in selling state-run
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Approximate Word count = 2113
Approximate Pages = 8 (250 words per page double spaced)
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