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A Reality Check for Brazil

Jaime Daremblum

Ever since the global financial crisis erupted in 2008, Brazilian officials have been bragging about their country’s resilience and castigating the failures of Western policymakers. “People ask me about the crisis, and I answer, ‘Go ask Bush.’ It is his crisis, not mine,” then Brazilian President Lula da Silva said shortly after the collapse of Lehman Brothers. Six months later, Lula infamously declared that the crisis “was fostered and boosted by the irrational behavior of people who were white and blue-eyed, who before the crisis they looked like they knew everything about economics, but now have demonstrated they know nothing about economics.” Several weeks ago, Lula’s successor, Dilma Rousseff, pointed to renewed global financial turmoil and boasted, “this is the second time that a crisis affects the world, and it is the second time that Brazil doesn’t shake.”

Her cockiness is understandable. The resource-rich Brazilian economy, Latin America’s biggest, grew by 7.5 percent in 2010, its fastest annual rate of expansion since 1986. The country has received massive amounts of foreign direct investment, especially from China; it has discovered vast new oil deposits; and its commodities have been booming. Thanks to Lula and his predecessor, Fernando Henrique Cardoso, Brazil enjoys stable, market-oriented economic policies. Its poverty rate has fallen tremendously: Nearly 30 million Brazilians, according to a new Council on Foreign Relations report, entered the lower middle class between 2003 and 2009. The anti-poverty gains were partly attributable to Bolsa Família, Brazil’s hugely successful cash-transfer program, which is now being emulated around the world.

Yet despite its white-hot growth and undeniable progress on poverty reduction, Brazil is still a developing country with a host of developing-country problems. Leaving aside its current inflation woes and economic slowdown, Brazil suffers from excessively high taxes, burdensome regulations, rampant corruption, shoddy infrastructure and a chronically weak education system. In the Wall Street Journal/Heritage Foundation Index of Economic Freedom, it ranks 113th out of 179 economies, below the likes of Gabon and Nigeria. In the World Bank’s Ease of Doing Business Index, Brazil ranks 127th out of 183 economies, right behind Mozambique, and it places even lower (152nd) in “ease of paying taxes” subcategory. As for graft and transparency, President Rousseff, who took office in January, has already lost several government ministers to corruption scandals.

Amid all the scandals, Brazil is busily preparing for the 2014 FIFA World Cup and the 2016 Summer Olympics, both of which will be held in Rio de Janeiro. Writing in Americas Quarterly, economist Andrew Zimbalist notes that the obstacles to finishing the necessary construction “include labor shortages, bureaucratic encumbrances, political corruption, legal entrapments, insufficient funds, incompetence, and inadequate infrastructure.” The former soccer superstar Pelé, Brazil’s most famous athlete of all time, “has warned that the country is at risk of embarrassing itself before the world.”

Beyond its infrastructure concerns, the South American giant is plagued by alarming levels of violent crime. For all the attention paid to drug-related killings in Mexico, Brazil has a significantly higher overall murder rate. For that matter, the Brazilian homicide rate is approximately twice the Nicaraguan rate and roughly five times that of the U.S. Brazil’s security problems made global headlines last month, when a prominent criminal judge, Patrícia Acioli, was shot dead in the city of Niterói, close to Rio. “She was best known for convicting members of vigilante gangs and corrupt police officers,” the BBC reported.

The level of violence among young Brazilians (aged 15 to 24) is particularly alarming: According to a Brazilian justice ministry report published in February, the country’s youth homicide rate nearly doubled between 1998 and 2008. As the author of the report, sociologist Julio Jacobo Weiselfisz, told the Associated Press, “The murder rate among youths has reached epidemic proportions.” Indeed, it is among the highest in the world.

In the short term, violent crime will greatly complicate planning for the World Cup and the Olympics in Rio (where the murder rate has declined substantially but is still quite high). Over the long term, the biggest threat to Brazilian competitiveness is a poor education system. On the OECD’s latest Program for International Student Assessment (PISA) test, administered in 2009, Brazil ranked 53rd out of 65 countries and school systems in reading and science, and 57th in mathematics. Its scores in each of those three categories improved from the previous PISA test, in 2006. Yet as The Economist noted, “the recent progress merely upgrades Brazil’s schools from disastrous to very bad.” Brazil fashions itself a Latin American regional superpower, but on the reading portion of the 2009 PISA test it scored below Chile, Uruguay, Mexico, Trinidad and Tobago and Colombia. On the math and science portions, Brazil scored below all of those countries save Colombia.

To be sure, Brazilians can take justifiable pride in their country’s recent economic achievements. The days of hyperinflation in the late 1980s and early 1990s are now a distant memory. But government officials must not become unduly arrogant or complacent. Brazil is still a long way from becoming a wealthy, advanced country, let alone a global superpower

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