Brazil's mediocre economy: A fall from grace
Editorial The Economist, June 6, 2013
Almost exactly 20 years ago, in May 1993, Fernando Henrique Cardoso was
named as Brazil's 13th finance
minister in as many years, a seemingly hopeless job in a country trapped in
hyperinflation, debt and an anachronistic economic statism. Mr Cardoso's Real
Plan swiftly tamed inflation and took him to the presidency. There he laid the
foundations for a new Brazil, of
stability and liberal economic reform. This success was reinforced by his
successor, Luiz Inácio Lula da Silva, a left-wing former union leader, whose government
saw 30m Brazilians get out of poverty.
The trouble is that in Lula's second term (2007-10) and especially
under his chosen successor, Dilma Rousseff, the formula behind Brazil's success has been slowly
abandoned. The policy secret was simple: inflation targeting by a Central Bank
operating with de facto independence; transparent public accounts; a rigorous
fiscal target, which brought down the public debt; and a much more open
attitude to foreign trade and private investment.
But the global recession of 2008-09 prompted Lula and Ms Rousseff to shrug at decadent liberal
economics and ape Chinese state capitalism. The finance ministry wrote vast
cheques to boost lending by state banks. The government gave up on market
reform, and spent remorselessly. When overheating turned to stagnation (the
economy grew by a paltry 0.9% last year), Ms Rousseff publicly chivvied the Central Bank to slash interest
rates. When inflation neared the top of its target range (6.5%), she said she
cared more about growth. She unleashed a bewildering and ever-shifting barrage
of tax breaks (and tariff rises) for favoured industries but failed to balance
these with spending cuts. And instead of a clear fiscal target, there are some
worryingly Argentine accounting fudges (see article).
The upshot is that investors have become confused about Brazil's economic policies. This
uncertainty has contributed to a mediocre performance: since 2011 growth has
been lower and inflation higher than in most Latin American countries.
Fortunately, Brazil still
has some big strengths, including its farming and energy industries, more
science and innovation than you might think and a huge, albeit less fizzy,
domestic market. And whatever Ms Rousseff's
mistakes, they are small compared with those of, say, Argentina's Cristina
Fernández. But in any event, the going for Brazil
is getting harder. A consumption and credit boom has run out of steam, the
trade account has moved into deficit as Chinese demand for Brazilian iron ore
slows and the imminent end of cheap money in the rich world is prompting a
slide in the real. Though that will help Brazilian manufacturers, it will push
up inflation.
Stay, Mr Mantega, stay
So incipient signs of a return to clearer policy in the past few weeks
are welcome. To curb inflation, Alexandre Tombini, the Central Bank governor,
has pushed up the benchmark interest rate (though more increases will be needed
to restore lost credibility). Guido Mantega, the finance minister, has said he
will no longer use fiscal policy to stimulate the economy; on June 4th he
lifted a tax on capital inflows. But more change is needed if Brazil is to return to the path set by
the Real Plan. Above all, Ms Rousseff's
team need to curb spending and get the state out of the business of micromanaging
investment decisions.
In December, when we last urged Brazil's
government to stop meddling and let animal spirits roar, we called for Ms Rousseff to sack Mr Mantega. It was
widely reported in Brazil that our
impertinence had the effect of making the finance minister unsackable. Now we
will try a new tack. We urge the president to hang on to him at all costs: he
is such a success.
Nenhum comentário:
Postar um comentário