South America’s troubled powerhouse

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Brazil’s recent global economic success story started in 1985, when – inching its way towards national democracy – it became the subject of inflation-decreasing and land-redistribution programmes. This meant a variety of consumer goods started to become available to more and more groups of people, and this was seen as remarkable progress in what was once one of the most unequal societies in the world.

PEW Center research suggests that, in South America, the commodity price super-cycle that occurred in the late 1990s and continued well into the 2000s helped boost middle- and upper-middle income populations. Argentina and Chile, for example, went from being predominantly low-income countries around 2001, to being majority middle-income nations just 10 years later. Brazil followed the same trajectory, its middle-income population rising from 18% to 28%. 

Brazil’s advancement was internationally noted: significant progress was made in eradicating racial disparities, and job creation was accelerating swiftly as the country benefited from excellent terms of trade.

According to Latin American historians, Brazil – after more than a decade of prosperity marked by record exports – started aspiring to be a world leader again, around the time of President Inácio Lula da Silva’s second term. This aspiration coincided with a surge in global interest in the so-called BRIC (Brazil, Russia, India and China) countries – both externally, from analysts and investors, and from within the countries themselves.

The BRIC economies started meeting officially in 2009, in an attempt to broaden the diversity of voices shaping global policies; they even set up a multilateral development bank to support projects in emerging economies. In recent years, however – and perhaps partly because of the continuing fallout from the global financial crisis – Brazil has been registering very sluggish economic growth as a result of industrial commodity values falling sharply around the world. 

Current state of play

Political uncertainty surrounding the Petrobras investigation – a corruption probe at Brazil’s state-owned oil company – has prevented the country from recovering from the recent recession, and it is looking increasingly unlikely that the economic gains of the late 1990s and 2000s will be replicated.

According to a 2016 World Bank Diagnosis report, some of the factors affecting the country’s economic climate are a lack of infrastructure, protectionist measures – which mean Brazil is relatively closed to external competition – and a segmented financial market charging very high interest rates. Brazil still suffers from the lack of an effective transport network, for example, which – given the country’s size and large number of mega-cities – can rack up unnecessary expenses quite rapidly. This is perhaps best reflected in the public’s attitude toward avoiding fares on public transport; our Global Foresight monitor consistently finds a high proportion ( 45–50%) deem fare dodging justifiable.

In terms of the national mood, it seems Brazilians – while pessimistic at the moment – have a more optimistic outlook for future generations. 

PEW Center’s 2015 research, which looked at how different nationalities viewed their country’s economy, showed that Brazil’s outlook wasn’t very positive. This is consistent with the data revealed by Global Foresight; our Brazil data suggested a significant surge – jumping 13% from 2014 to 2015 – in respondents who said they believed Brazil’s economic situation would get worse from year to year. 

At the household level, it’s a similar picture; although the majority of those surveyed still thought their individual situation would 

improve, the number was declining, while the number of people who predicted it would get worse went up. However, in the same PEW Center data set, Brazilians were among the most hopeful when it came to the question of whether their children would be better off than they are currently. More than six in 10 respondents answered yes – a noticeable contrast to those in the majority of developed markets, where respondents did not have such a positive outlook.

What next?

While recent developments do not paint a particularly reassuring picture, it’s not all doom and gloom – Rio is the first South American city to host the summer Olympics and, despite the current problems, the Games will go ahead. The only times they have been cancelled were during World War I and II; they were held in 1968 when, 10 days before the Games were due to be held in Mexico City, the Mexican army and police opened fire on a crowd of protesters, leaving many wounded and dead. 

While Brazil is undergoing a period of political and economic upheaval, the Games always offer the host nation a chance to catch the eye of global businesses – the 1992 Barcelona event is frequently cited as contributing to the Spanish city’s revival. In fact, in 2008, economists Andrew Rose and Mark Spiegel published a study showing that hosting a mega-event – such as the Olympics – often has positive effects on a country’s level of trade and exports. 

That aside, however, one thing remains a constant from our survey responses – we consistently find that Brazil is one of the ‘happiest’ countries in which we do research. More than half of Brazilian respondents across a four-year period rated their life an eight or above on a consistent basis. In 2015, 89% of Brazilian survey respondents said they were very happy or quite happy. 

What are we to take from all this? It remains to be seen how quickly Brazil’s political turmoil will be resolved, but it is still the most influential country on the continent, as well as being one of the biggest democracies globally, and vastly rich in resources and cultural contributions. 

Georgiana Murariu is a senior analyst with Trajectory