Brazil has been aiming at growth – not development Brazil has been aiming at growth – not development

Up until very recently, Brazil believed it had devised an economic model that assembled high growth and social inclusion – but it hasn’t. It is wrong to assume that the set of policies Brazil has put in place in the past few years to boost its economy and upgrade its social data are pillars of a development model.

What does exist in Brazil, stretching back beyond President Luiz Inácio Lula da Silva´s years in office (2003-2010), is a cyclical attempt to promote growth that constitutes a “pattern”. It is based on the appetite of Brazil´s domestic market for higher consumption levels. The pattern has indeed been accompanied in the past 10 years by income distribution mechanisms that lifted the lives of millions. They are however targeted at poverty alleviation – not increasing productivity – and therefore are not engines for sustained development over time.

Brazilian politicians have always been criticized for lacking the political will for change

Economic “models” and “patterns” are quite different things. The former are strategic and dynamic in nature. They include a plan, a well-structured vision of the future. The latter are tactical and recurrent – they react – to changes in the global economy. Models are about development. Patterns are about growth.

At policy-making quarters, many still feel it is possible for Brazil to keep expanding its economy at impressive rates by fostering domestic consumption. Brazil has already applied such mechanisms in the past.

Although the economy does respond positively to one or another stimulus, there are many constraints for such a growth pattern to become a development model. Brazil features low levels of savings and investment, outdated labor and tax legislation and infrastructure bottlenecks. At the same time it lags behind its competitors in education, science and technology.

Brazil has to choose a development model and adopt it wholeheartedly. Interest payments, pensions and public sector wages keep Brazil from pursuing a development road paved by science, technology, innovation, start-up capital and entrepreneurial spirit. The country has a hard time putting together a priority list and sacrificing for it. But Brazil presents clear conditions to have the old economy build new competencies.

This would necessarily involve the many sectors in which Brazil has comparative advantages – agribusiness, mining, deep-water oil and biofuels. These should be the bases for a new economic platform to generate surpluses and service the construction of new competitive advantages in nanotechnology, bioengineering, biotechnology, fine chemicals, new materials and robotics. These are the areas that may drive Brazil to the forefront of emerging markets.

The current reinterpretation of import substitution policies in Brazil is a good example of the difference between a development model and a growth pattern. Nearly all experiences in industrial development around the world have resorted to some sort of import substitution. This is almost a necessary stopover to local capacity building.

Import substitution however cannot be seen as an ever-lasting rule. It is only to be applied at an infant-industry level so as to enable a particular sector of the economy to compete internationally.

Building a development model requires at least three ingredients. Political will, capital availability and a good diagnosis of what the world is today.

Brazilian politicians have always been criticized for lacking the political will for change. But it is hard to think of someone like President Dilma Rousseff as deprived of the will to build a shortcut to development and thus propel Brazil towards much higher socioeconomic status. President Rousseff is growingly aware of the importance of innovation and of how crucial it is to reposition Brazil competitively in the realm of the so-called knowledge economy.

Nonetheless, contemporary Brazil continues to confuse the growth pattern brought about by specific incentives for consumption and industry protection with a model that allows for productivity gains and sustained economic development. Embarking on a serious effort to enact much-needed structural reforms would be the best stimulus the Brazilian government could offer to all those willing to help the country develop its potential to the fullest.


Fonte:  Business News Americas



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