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Economics

Brazil’s Way Out

Sep 5, 2016 Otaviano Canuto

Now that impeached Brazilian President Dilma Rousseff is out of office, the newly empowered administration of President Michel Temer must clean up the mess she left behind. Can Temer’s government save Brazil’s crumbling economy?

WASHINGTON, DC – Now that impeached Brazilian President Dilma Rousseff is out of office, it is up to the newly empowered administration of President Michel Temer to clean up Brazil’s macroeconomic mess. Can Temer’s government save Brazil’s crumbling economy?

The situation is certainly dire. In fact, Brazil has lately been experiencing the most powerful economic contraction in its recent history. Its per capita GDP will be more than 10% smaller this year than it was in 2013. And unemployment has soared to more than 11%, up four percentage points from January 2015.

Brazil has no easy route to recovery for a simple reason: the current rout derives from the intensification in recent years of long-standing economic vulnerabilities – in particular, fiscal profligacy and anemic productivity growth.

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0 Comments on this paragraph, 7 Comments on this article

eusebio manuel Sep 11, 2016

The conclusion of the new President Michel fear has absolutely no legitimacy only new elections can restore political trust in Brazil
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silvio starosta Sep 7, 2016

Very light, very elegant opinion.
The thing is not describe what to do now on economic matter.
first of all , lets say that all the process was a violation.
lets say that Temer and the judges are more corrupt then Dilma, and let point very fair that the inspiration was dark forces.
My question is: which is the philosophy of the world bank on democracy, something like your ????
Bad thing Dr.
why you don't write with a book of law in your hands.??

aracataca.es
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Jose araujo Sep 6, 2016

"it is up to the newly empowered administration of President Michel Temer to clean up Brazil’s macroeconomic mess. Can Temer’s government save Brazil’s crumbling economy?"

Yes Brazil problem is fiscal profligacy and the social programs...

This is why Brazil is in troubles, people like MR. Canuto
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Danny Leipziger Sep 6, 2016

Canuto is on the right track here. In addition to reform areas mentioned, I would add fostering greater competition (meaning lowering implicit and explicit import restrictions) to improve the quality and productivity of domestic output. Without this, Brazil will not be able to export higher value added products, will not keep its innovators, and will not move forward on productivity. A second area pf concern is access to credit. Hopefully BNDES under new management will invest more wisely and banks will provide credit to new producers. Credit markets cannot operate with spreads of 15-18%. Fixing Brazil requires reforms of the public sector and reforms to unleash a more competitive private sector.
- Jose araujo Sep 6, 2016
  
  Brazil's problems its the oligarchies, the small minded elites.
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Romeu Temporal Sep 5, 2016

Brazilian political conundrum is the key to unfold our growth prospects.
Any structural reforms desperately needed will pass Congress. Unpredictability is back. http://rmeutemporal.blogspot.com.br/
- Jose araujo Sep 6, 2016
  
  The structural reforms Brazil’s needs are the end of the previleges, rentiers and oligrachs, which Mr Temer is a representative.
  
  With such abject levels of poverty in Brazil, the low level of living conditions, education, security and health systems, it’s absurd talking of structural economic reforms without talking about a social reform, and nor Mr. Temer nor Mr. Canuto can neither understand that nor lead the way, because they are one of the main causes of the system being like what it is.
  
  The Brazilian elites don’t even believe in the democratic system and institutions, how do you expect them to lead the way into a market economy?
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