Brazil breaks out<\/p>\n
Jeffrey D. Sachs
\nProfessor of Economics
\nColumbia University
\nProject Syndicate<\/p>\n
The biggest hidden story in international development these
\ndays may be Brazil's economic takeoff. Two years ago, Brazil's
\neconomy was left for dead, and the election of Worker Party
\ncandidate Luiz Inacio \"Lula\" da Silva as President was widely
\nexpected to trigger financial collapse.<\/p>\n
Instead, Lula has governed with remarkable prudence, and
\nBrazil is poised for rapid growth. But something more fundamental
\nis at play: Brazil may finally be overcoming some of the deepest
\nobstacles to its economic development, obstacles that held the
\ncountry back for decades. If so, it could mark not only Brazil's
\neconomic ascendancy but also the recovery of other parts of South
\nAmerica.<\/p>\n
In January 2002, American right-wingers were terrified of a
\nleftist revolution in Brazil. Foreign investors were panicking
\nover the prospect that Brazil would fail to roll over its foreign
\ndebts.<\/p>\n
The IMF, for a change, did a good job, providing interim
\nfinancing and throwing its political backing behind Lula after
\nthe elections. In turn, Lula adopted orthodox macroeconomic
\npolicies and moved to get the budget deficit under control,
\nbreaking the panic. Market projections for Brazil's growth are
\naround 4 percent for 2004.<\/p>\n
But something deeper is at play than the usual waves of
\neuphoria and panic in international financial markets. Much of
\nthe credit for Brazil's turnaround belongs not to Lula but to his
\npredecessor, Fernando Henrique Cardoso (FHC), who was Brazil's
\nPresident from 1992 to 2000.<\/p>\n
I credit FHC, as he is widely known, with making four key
\ncontributions.<\/p>\n
o First, under his leadership, Brazil firmly embraced human
\nrights, not only in the sense of democratic elections, but in
\nterms of economic justice for African-Brazilians and indigenous
\nBrazilians, people who had long been discriminated against. Like
\nmost of Latin America, Brazil was born in the crucible of
\nconquest and slavery.<\/p>\n
Even during the 20th century, neither the indigenous
\npopulations nor the African-Brazilian slave descendants had much
\nchance in the economic and social order. That is changing fast.
\nPublic education is becoming universally available, including for
\ngroups that faced harsh discrimination in the past. Remarkably,
\nindigenous groups also won a hard-fought struggle for land rights
\nin their traditional Amazon homelands.<\/p>\n
o Second, Brazil is finally embracing the global knowledge
\neconomy. For most of the 20th century, Brazilian elites thought
\nthat they could get by on natural resources - cattle ranches,
\ncoffee plantations, fruit juices, and soybean farms. Now they
\nknow that universal secondary education and extensive university-
\nlevel training is also needed. Under FHC's reforms, enrolment
\nrates in secondary education soared, from 15 percent in 1990 to
\n71 percent in 2000. Equally important, Brazilian universities are
\nseeing an increase in quality and attendance as well.<\/p>\n
Most of Latin America, including Brazil, ignored public
\ninvestments in R&D for decades, while East Asian countries
\ninvested heavily. FHC appointed a series of outstanding Ministers
\nof Science and Technology, and the government finally began
\nspending more on research and development. Brazil is becoming
\nknown not only for orange juice, but for aircraft exports like
\nthe Embraer jets that now compete with American and European
\nproducers for the regional commuter market.<\/p>\n
o Third, Brazil is coming out of its economic shell, competing
\nin world markets rather than protecting national markets. For
\ndecades, due to rampant protectionism, the ratio of Brazil's
\nexports to GNP was one of the lowest in the world. That is
\nfinally changing. The export\/GNP ratio has risen from 8 percent
\nin 1990 to 13 percent in 2001, a sign that Brazil is beginning to
\nseek out world markets. Lula is traveling widely to promote
\nBrazilian exports, another sure sign that Brazil's political
\neconomic orientation has become far more international.<\/p>\n
o Fourth, Brazil is focusing on the health and productivity of
\nits people. Under FHC, Brazil pioneered an effective response to
\nthe AIDS epidemic by guaranteeing access to antiretroviral
\nmedicines and to widespread counseling and viral testing. The
\nhero of this effort, Dr. Paulo Teixera, is now at the World
\nHealth Organization helping to lead the global effort against
\nAIDS.<\/p>\n
Brazil has also dramatically improved child health, with
\nmortality rates of young children falling sharply, from 60 per
\nthousand in 1990 to 36 per thousand in 2001. Brazil's total
\nfertility rate (average number of births per woman) has come down
\nsharply as well, from 2.7 in 1990 to 2.2 in 2001.<\/p>\n
With more children surviving to adulthood, poor families are
\nchoosing to have fewer children, and to invest more in their
\nhealth and education. Population growth pressures are falling,
\nproviding a powerful long-term boost to Brazil's economic
\ndevelopment.<\/p>\n
Brazil's economic turnaround may have powerfully positive
\neffects on its neighbors, especially the struggling countries of
\nthe Andean region. This is the most likely scenario, but it is
\ntoo early to declare victory.<\/p>\n
Brazil still faces huge challenges. Lula will have to build on
\nthe work of FHC. Macroeconomic stability must be consolidated,
\nwith budget deficits brought decisively under control. The
\npolitical consensus in favor of universal education, outward-
\noriented trade, health for all, and a science-and-technology
\noriented economy must be strengthened.<\/p>\n
Brazil must also pay more attention to environmental
\nmanagement, especially in the fragile yet critical Amazon region,
\nif it wants long-term, sustainable economic development.<\/p>\n
For Brazil to play a bigger role as regional economic leader,
\ngreater cooperation with its neighbors in suitable infrastructure
\nprojects and expanded markets will be needed. Great challenges,
\nindeed, but Brazil seems to be in the mood to meet them.<\/p>",
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