There is no doubt that Brazil has a new international stature due to the past 16 years. The middle class has grown by 33 million citizens, and for the first time the country is lending money to the IMF, rather than borrowing. While problems persist that could threaten this new-found position--the trade deficit, a poorly designed tax structure, still, enormous amounts of poverty--Brazil does have several advantages, as compared to other emerging economies. It is "less authoritarian than Russia, less chaotic than India, and less scary than China," Roett declared. Furthermore, the lack of religious tensions and the flexibility afforded by a democratic system that values conciliação also help provide stability amidst all the change.
The New Brazil is perhaps best seen in the new classes of consumers and politicians that are arising in the country. According to Roett, the change that has gotten the most attention has been the rise of the C Class – the new middle class in Brazil. These people, finally being pulled out of poverty, and their consumption are driving the economic expansion within the country. While they may not yet be buying in bulk, they are slowly beginning to spend more and more on household and other consumer items. This has several positive effects. First, it means a more stable future for economic growth, because it does not depend (as much) on the cyclical nature of international trade. Furthermore, as the political and economic clout of the C Class rises, they will be able to pressure the government into making improvements in governance, infrastructure, and – most importantly – education.
This rise on the middle class has also been accompanied by a new political class. A new breed of younger politicians is beginning to rise to power, a group that is optimistic but not obsessed with ideas of grandeza. As the gerontocracy left over from the military dies off, people who did not begin their career in politics and who appeal to these new, middle-class voters – perhaps best typified by Marina Silva – are more and more taking office. Roett said he hopes this new generation will be able to tackle the challenges that Brazil will be confronting.
Among these challenges, the pre-salt oil findings stand out. Since more oil deposits are being found regularly, it seems likely that Brazil will become a major oil exporter in the near future. However, this can be a blessing or a curse, and it remains to be seen whether Brazil "will become a Norway or a Nigeria," Roett said. The recent capitalization of Petrobras was the largest share offering ever (US $67 billion), and went off without a hitch.
Another major state-connected economic player is also beginning to come under scrutiny. The BNDES, the National Development Bank, which is behind much of the public investment under Lula, is thought far too large and powerful by many. These among other worries, such as a horrendous education system that overinvests in higher education at the expense of basic education and stubbornly high inequality, will need to be substantively and effectively addressed in order to maintain the New Brazil, Roett concluded.
By J.C. Hodges
Paulo Sotero, Brazil Institute