Brazil’s Growth Conundrum

SANTIAGO – Brazil needs to grow more. That is what the country’s president, Dilma Rousseff, keeps telling Brazilians. With the economy nearly stagnant in 2011 and the first half of 2012, faster growth is a political necessity for her. But her admonition also reflects a broader national preoccupation with economic might, befitting a vast country with continent-size aspirations.

That outlook sets Brazil apart in a region where politicians – from Argentina and Chile to Ecuador and Venezuela – often seem more concerned with handing out slices of natural-resource wealth than with creating new sources of prosperity.

To be sure, Brazil’s economic growth over the last decade owed much to the commodity boom that has also benefitted its South American neighbors. In 2010, growth reached an impressive 7.5% clip, as highly expansionary fiscal and monetary policies, implemented in response to the global financial crisis, lifted the economy out of harm’s way.

Today, similar policies are again doing the trick, with GDP growth picking up in the second half of 2012 and expected to reach more than 4% in 2013. But can Brazil move beyond these stop-and-go cycles and ensure steady growth?