Brazil can regain its economic might

Brazil may have pulled off the Olympics, but its economy is still in doldrums. And the political chaos is adding to the economic misery. The country is grappling with the worst recession in more than a century as the economy shrinks sharply. Brazil’s GDP has fallen by 5.4 % year-on-year. The Organization for Economic Cooperation and Development (OECD) slashed the country’s economic growth forecast due to the political crisis and raging corruption.
On Thursday, Brazil’s suspended president Dilma Rousseff will face impeachment trial for irregularities in the government budget. It is most likely that she will be removed from office by the senators’ unanimous vote. The growing concern is that her replacement Michel Temer — who doesn’t have a great following and holds a shady record — could remain the president until the next elections in 2018. If he takes a lopsided view of development, the situation in the country might worsen. Temer is seen as a pro-business man who could adopt austerity measures that might be poor-unfriendly. Economic growth shouldn’t come at the cost of alienating the already marginalized group. This could be disastrous for the economy in the long run.
Brazil’s economic woes have roots in corruption. Probe into graft in the state oil firm Petrobras has implicated many top shots. The Carwash investigation — in which more than 16 construction companies have been charged and more than 200 people indicted — has hampered the new infrastructure in the Latin America’s biggest economy. Not just this, the scandal has also caused 675,000 construction job losses in the country. The overall jobless rate has climbed to 11 percent — which equals to 11 million unemployed — due to the continued economic distress.
As a result of the prolonged recession, the banks too have been hit hard as many companies and consumers are paying debt late. The banks have been forced to charge more from customers to help cover bad loans. This has driven the gap between bank-service fees and the nation’s inflation rate to the highest in more than four years.
The Olympics may have done some good to the economy, but it will hardly do any good to improve the government budget deficit which is touching 10 percent of economic output.
Despite the turmoil that Brazil is facing, no one can ignore the fact that being Latin America’s biggest economy it has huge potential. No wonder, Spanish banking giant Santander is formulating a plan with Credit Suisse to buy’s Citi’s assets in Brazil. Goldman Sachs is keen to invest $184 million in Metrofit, a Brazilian storage company. Shell too is eyeing expansion in the country.
Brazil has in it to turn the tide. It can check the economic uncertainty. For this, the engines of growth have to chug on. But it has to be an inclusive growth where the poorest are not left by the side and public health is not downplayed Brazil has to chalk out a long-term policy that looks at sustainability. It is a monumental task, but visionary leaders and fiscal policymakers can make it happen. Poverty alleviation with a thrust on education and job generation along with sustainable production will help the country regain its
economic might.