Brazil's Experience With Market Reforms

Motion · Aug 15, 2010

The Fernando Henrique Cardoso government that preceded Lula's fixed many of the problems that had retarded Brazil's capitalist economy for many years. Most importantly, the Cardoso government stabilized the currency, reformed the banks, placed strict controls on spending by state and local governments, cut back on government bureaucracy and began the process of social security reform.

These reforms had stabilized the economy but they had not brought about the rapid economic growth everyone expected. Many on the left, including the left of the Workers Party, interpreted this as a failure of "neoliberalism" and wanted to renationalize industries and increase government spending.

The most important decision Lula made as president was to resist these pressures and to continue with Cardoso's economic model even though it had not yet born the fruit of rapid economic growth. He was strongly criticized for this; one of the most common criticisms was that his government was nothing more than "Fernando Henrique's third term." He managed to weather these criticisms and get re-elected despite the corruption scandals and the lackluster economic growth.

And then the economy took off and all was forgiven. Lula's approval ratings skyrocketed. Not only was the economy growing, but income was being redistributed and all the social indicators were improving. Average income was up 3.2% 2006 to 2007 and the GINI index of inequality had declined to .534 from .588 in 1997.

Making Capitalism Work: The Brazilian Model
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I think Brazil has become a better model for economic growth than what you get from people like Hugo Chavez and Evo Morales. Hopefully other countries in Latin America will try to apply some Brazil style policies to their countries.

Motion · Aug 15, 2010

The country's growth is still a work in progress. Brazil will be electing a new president in October. I hope this new president will make changes where Lula didn't. Brazil's taxes are still an issue for investors.

Long-term investors are shying away from Brazil because of its high taxes and state involvement in some sectors, which changed little with Lula. Pension reform awaits. That's worrisome because spending on state salaries doubled from 2003 to 2009, rather than flowing into the better roads and schools Brazilians need.

http://money.cnn.com/2010/08/05/news/international/Brazil_growth_slows.fortune/
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Brazil's Experience With Market Reforms

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Brazil's Experience With Market Reforms

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