Brazil’s Ongoing Quandary



Argentina lost the Copa America on kicks from the mark when Lionel Messi missed his shot. But at that point, Brazil was already long gone.  Even futbol is bad.  The Olympic Games are at the doorstep and the state of Rio declared an economic calamity and does not have funds to pay for hospitals or public security.

Brazil is falling further into the hole just as Rio’s new signature bike path collapsed into the ocean killing two. Mosquitoes and Zika are around and athletes are finding multiple reasons to withdraw from the Games slated for August.   The Rio state and city governments are actually pumping failure and collapse at the Olympics if the national government does not bail them out.

The legal (not political) evidence presented against Dilma Rousseff weakens by the day and, while unlikely, it is possible that Senate will vote to restore her mandate.   Although the economic team put together by the interim President is respected, it so far has shown little progress because the major structural reforms need Congressional approval and/or constitutional reform.  As a result the economy continues to stagnate, jobs are not being created, investments are not made and the foreign community is pretty much paralyzed as they wait to see where Brazil is headed.  Fitch, Moody and S&P all have knocked Brazil further into junk territory and as a result external financing is more difficult and more expensive.  Interim President Temer’s popularity ratings are no better than Dilma’s an as Fellini entitled his film: “E la nave va”


All in all, pretty much everything is in the negative column and things don’t seem to be getting any better.  Making things appear even worse is the fact that both the left and the right continue to throw mud in all directions so the press reports make things seem more dire than they actually are.


But while the overall situation is negative and pessimistic, there are a few saving graces.  The Olympics is an event made for television and for athletes and the Games, strictu sensu, will come off in a successful fashion.  Athletes prepare for years and the drama of competing and winning is always compelling.  NBC has not invested billions for nothing.  Moreover, Rio has done hundreds of big events and, most recently the World Cup, without major catastrophes.  So barring, God forbid, a terrorist act, everything will be fine.  Brazil’s primary sector continues to be productive and successfully exporting.  Agricultural commodities such as coffee, orange juice, meat and cellulose pulp are all up this year on the international market.  With the reduction of imports due to the weakened Real, Brazil has had several months of record surpluses this year.    The foreign reserves are holding up at over 300 billion along with FDI (foreign direct investment) which the Central Bank expects to top 50 billion this year in spite of the “catastophre”.


Indeed, Brazil needs much in the way of corrective action.  But, essentially, there are two fundamental tasks to start: the first is to define the role and the extent of state participation in the economy.  Except for recalcitrant and ideological sectors of the left, the general consensus is that the state is not an effective or productive investor.  The market drive is to privatization but whole entrenched areas resist for both material and ideological reasons. Historically, the state has always conceded social benefits beyond its capacity to deliver.  The 1988 Constitution continued the tradition and today needs deep reform as it defends the idea of “acquired rights” but ignores that the economic system must be able to produce wealth to sustain these “conquests”. Brazil’s ranking in terms of bureaucracy and ease of doing business has worsened instead of improving.  So the challenge is to reform the system but it can hardly be done from within.  Civil society needs to mobilize outside of traditional state controlled channels to achieve this reform.


Second, the way Brazil’s politicians are elected needs drastic remodeling.  Election to Congress needs to be changed to a district system of voting with stricter rules for party formation.  Brazil’s 32 parties in Congress only promote individual opportunism and open the gates to corruption.  These parties are currently nothing more than loose aggregates for gaining state benefits and directing state investment to special interests. The PT has lost its ideological edge and purity.  The PSDB is compromised and though the Rede seemed to offer a chance for reform, Marina Silva does not appear to have the charisma or leadership skills.  The remaining parties fail to offer anything better.


Moving toward liberal democracy should not be that difficult, but Brazil lacks a tradition, leadership, education and perhaps a sufficient density of will to change.  Brazil’s elites have never valued popular education and they only pay lip service to the “will of the people.”  So the real possibilities of change are modest.   Elite accommodation prevails as long as civil society accepts the crumbs and cannot articulate a coherent vision to move forward.  The socially sanctioned hunt for the corrupt may continue and lead to the arrest of hundreds but without better institutions and politics, very little will change in the near future.  If Brazil cannot find its way out of the current state of cynicism, perplexity and despair, the country will face further irrelevance and marginalization.  That would be bad for Brazilians and the world.





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