SÃO PAULO – Brazil has changed dramatically over the past 15 years. It has set its economy on the right course, reduced poverty, lessened inequality, and consolidated its democracy. The ghosts of the past – authoritarianism, political persecution, and censorship – have been left behind, as Brazilian democracy passed important tests suchas the impeachment of a president and the rise to the presidency of a former trade union leader.
Brazil has now passed another test: having a woman at the height of executive power. The challenges facing President-Elect Dilma Rousseff are huge, but so are her advantages. The basis for continued rapid economic development has been established, and there is nothing to suggest the possibility of significant change in inflation targets, in the autonomy of the central bank, or in the floating exchange rate.
Rousseff owes her victory to outgoing President Luiz Inácio Lula da Silva and the success of his administration. She knows that Brazil’s progress under Lula was supported by stable economic growth, higher social transfers to poor households through programs such as Bolsa Familia, and democracy.
But will this same formula still work for Brazil in the future? There are warning signs that more must be done, because economic stability doesn’t automatically produce dynamism. Nor is democracy synonymous with strong institutions, and social protection cannot substitute for an efficient labor market.