Brazil’s Economic Growth, Not Development

A nation abundant in natural resources, Brazil experienced rapid economic growth fueled majorly by high-price commodity sales after the turn of the 21st century. Much of the trade during that period was with raw-material hungry China, one of Brazil’s biggest trade partners. For the past couple of years, though, China’s consumption of and demand for raw materials has slumped; simultaneously, Brazilian economy has lost growth momentum. This can easily be traced back to the economic policies adopted by Brazil, or rather the lack thereof. Economic growth, however rapid, based on commodity sales, especially raw materials, is generally unsustainable (Ruchir, 2012).

Brazil’s rapid economic growth had some profound significance for the nation: it changed some unfavorable historical trends in Brazil for the better. By attaining high levels of economic growth, inflation – which has always tempered with Brazil’s economy – was kept in check at and around a mild 5%. Various welfare programs had an impact on a large portion of the poverty-ridden population, and helped Brazil better its GINI coefficient. Brazil’s GNI per capita was set on an increasing trajectory between the years 2003-2013, and rose to a highest amount in 2013. Also, Brazil’s huge foreign indebtedness was significantly reduced, and Brazil rose as a creditor in the international scene. This further consolidated Brazil’s spot on the higher-middle income categorization by the World Bank.

However, wealth is concentrated within the top strata of citizens in Brazil while a huge percentage of people live below or hover above the poverty line. Brazil hasn’t been able to tackle the social problems that haunt the nation – a big shortcoming of the ‘Real Plan’ economy. Due to a lack of effective frameworks, many policies implemented to tackle social disparity were ineffectual and slow-coming. Various welfare programs including Bolsa Familia, which is a monthly cash incentive for poor families to send their children to school and to get them vaccinated, are costly and seem wrongly placed because of its slow effects (O’Neil, 2012). Even though the motive is for social inclusion and equality, the government’s focus is wrongly placed on welfare programs that yield slow-paced results instead of on systemic reforms that lead to general social/economic development. Bolsa Familia, having helped 14 million people lead slightly better lives and lowering the GINI coefficient by 15% to 0.527, has had slow-growing impact on human development in Brazil (Deborah and Economico, 2013). However, more robust policies – for education, health, and poverty – and vigorous implementation would have correlated better with the rate of growth that Brazil experienced for over a decade.

Brazil attempted, over the same time period as the high economic growth, to devote resources to infrastructure projects, education, research and development, but it was an ineffective attempt because of the lack of an effective framework (Lemos, 2012). An example of ineffectual policy is Brazil’s “Science Without Borders” program with a budget of $1.65bn. It allows Brazilians to study STEM subjects in the USA or other nations but has two colossal drawbacks: one, the economically able citizens are generally the recipients; two, Brazil doesn’t recognize degrees obtained abroad without formal validation from Brazil’s Education Ministry (Lemos, 2012). These conditions disallow educated Brazilians with graduate/doctorate level degrees from returning back home to help their nation advance.

Despite Brazil’s rapid economic growth over a fruitful decade-long period, Brazil has done little to rise to the status of a developed nation. Despite efforts (which are weak and therefore seemingly futile), Brazil hasn’t uprooted problems that persist: neither social problems, nor economic. Brazil should, in my opinion, look towards ways to attain sustainable economic growth by shifting from exporting raw materials, and focusing more import substitution industralization. For this, the first step would be social development – through human capital development and infrastructural development.

  1. “Bearish on Brazil.” By Sharma, Ruchir, and Responses: “How Busted is Brazil? Growth After the Commodities Boom.” Debate by Shannon K. O’Neil; Richard Lapper; Larry Rohter; Ronaldo Lemos; and Ruchir Sharma. Foreign Affairs. July/August 2012.
  2. Haynes, Brad. “Brazil Protesters Keep Pressure on President Rousseff.” Reuters. August 16, 2015. Accessed November 1, 2015.
  3. Romero, Simon. “As a Boom Fades, Brazilians Wonder How It All Went Wrong.” The New York Times. September 10, 2015. Accessed November 1, 2015.
  4. Anderson, Ken. “Brazil Struggles to Reconcile Rapid Economic Growth with the Demands of a Growing Middle Class.” International Relations Online – Blog. August 23, 2013. Accessed November 1, 2015.
  5. Wetzel, Deborah, and Valor Econômico. “Bolsa Família: Brazil’s Quiet Revolution.” Bolsa Família: Brazil’s Quiet Revolution. November 4, 2013. Accessed November 1, 2015.

http://www.economist.com/blogs/graphicdetail/2015/10/economic-backgrounder

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One thought on “Brazil’s Economic Growth, Not Development

  1. Abhishek, I completely agree with you on all the points you made. It is no secret that Brazil has witnessed some economic growth because of the countries reliance on the commodity market and I agree that ineffective government policies have done nothing to make Brazil more developed.

    I would like to add that Brazil’s lack of investment in crucial areas like infrastructure and education has, in effect, stunted economic growth. In an article titled “Bearish on Brazil”, Ruchir Sharma explains that “[the] failure to build roads and ports has made even simple tasks, such as moving around the country, a nightmare” (Foreign Affairs). This underinvestment prevented many government policies from being as effective as they should have been. He goes on to explain that such underinvestment has stunted Brazil’s economy. Brazil allocated most of its funds to create a welfare state rather than on infrastructure and more effective education programs. So rather than encouraging growth and productivity, Brazil’s policy has been more focussed on taking care of its people. As a result, Brazil has failed to develop at a higher rate.

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