Economy

2018 election series, Economy, National Politics, Society

Part 3 – 2018 Election Series: International Conditions, Economic Voting and the Context of the 2018 Brazilian Presidential Election


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This article is part of Brazil Talk’s 2018 Elections Series  and is intended to give our readers a deeper understanding of the Brazilian political system, its complex electoral process and gather diverse perspectives and opinions on what the world should expect from Brazil in the upcoming months and the future of the country at the beginning of 2019. 

By Daniela Campello

[5 min read]

One can hardly understand politics and policymaking in Brazil without considering the boom-bust cycles that are typical of South American economies. Brazil, like most of its neighbors, is a low-savings-commodity-exporting (LSCE) country. As such, its economic performance is highly determined by the behavior of two factors that are beyond government control: the prices of commodities that affect the country’s terms of trade, and U.S. interest rates that largely determine international inflows of capital.

Thus, the most favorable international scenario for Brazil occurs when commodity prices are high and U.S. interest rates are low. In these periods, abundant dollar inflows from trade and finance contribute to faster economic growth with relatively low inflation and boost fiscal expenditures. The worst scenario occurs when the opposite happens – when low commodity prices coincide with the high US interest rates.

(more…)

Blog, Economy, National Politics

The Brazilian Fiscal Crisis: The Lost Credibility


By Tatiana Acar

[7 min read]

 

Assessing how credibility affects both the economy and individuals in a tangible way is a complex issue in the economic debate. We can conceive the delicate concept of confidence through the image of a horse being trained to jump obstacles. In order to gain his trust, the athlete needs to show commitment and respect. With sufficient warning, the horse tends to follow his commands, and both will have a durable relationship. However, unexpectedly forcing it to jump will make the horse suspicious. If surprised, he can harm the athlete and destroy all the environment around him. Worse, once the trust is betrayed, it is hard to recover it. Brazil’s current crisis scenario could be linked to this metaphor since the fiscal misconduct seen in the last years has undermined the population’s confidence and generated great disarray among consumers, businesses, and investors. Output growth has fallen more than 7% in two years[1], causing unemployment more than doubling[2]. Recovering the lost development will consume a large part of Brazil’s next presidential term, which has been predicted by some analysts already[3]. But why has the country reached this stage? What is the relationship between credibility and the level of employment and income?

Credibility is built when people notice, over time, that the government has not only committed to the policy it communicated, but it has also managed to achieve its goals[4]. When a government spends continuously and increasingly, uncertainty about the country’s fiscal solvency tends to be higher. Thus, the effect of fiscal stimulus on the economy and individuals might become counterproductive by pushing up long-term interest rates, inflationary expectations and undermining longer-term growth prospects. This puts the government into a dangerous vicious circle, as the fall in the output causes a drop on tax revenues, further increasing the fiscal imbalance.

(more…)

Blog, Economy, Education, National Politics, Society

Saving the Lost Generation


by Isabela Messias, MIA candidate 2017 at SIPA

Brazil has been going through a lot lately: an impeachment process, a corruption scandal and an economic crisis that has plunged Brazilian GDP by 3.8 percent in 2015. Worldwide, a number of newspapers and TV channels have been discussing the crisis and its negative consequences for the country. Media outlets have mentioned the possible effects the crisis may have on Brazilian democracy, on the future economy, on investments, and on many other areas and sectors. (more…)

Blog, Economy, National Politics, Society, Uncategorized

Brazilians Have A Civic Role In Keeping the “Bolsa Familia” Program


By Marina Lafer, MPA Candidate at SIPA, Columbia University

In 2004, belonging to a social and economic environment in which people were constantly raising doubts over the efficacy of Lula’s policies as Brazil’s President, I remember myself having a bad – unsupported – impression over Bolsa Familia, a program that aims to provide small cash transfers[1] to extremely poor families, conditioned to keep their children in school and take them to preventive health check-ups[2]. At the time of its creation, I was only fourteen years old and had the conception that it was not addressing the poverty issue. Additionally, I believed that the amount of money spent on the program was too great and by compromising that investment with one policy, the Government left many public problems unattended. (more…)

Economy, Society

Brazil Talk in 90 Seconds – The Pension System



Brazil Talk in 90 Seconds is a series of videos, one every week, with news analysis from Brazil. This week we talk about the reform of the pension system. On Wednesday, government officials met with members of Congress and union leaders to discuss seven proposals to pension reform. This is a very urgent and controversial topic because Brazil’s pension deficit increases by 50% every year. Yet, any reform that scales back benefits will be extremely unpopular, particularly in an election year and during economic crises. Moreover, the government does not have the support of President Rousseff’s own party – Partido dos Trabalhadores – and other parties on the left, which will make a reform less likely to be approved by Congress.