Tim Ridout – The German Marshall Fund of the United States, 2/18/2014
In January, Brazilian President Dilma Rousseff attended the World Economic Forum in Davos for the first time in her three-year presidency. The foreign and trade policy platform of her Workers’ Party (PT) has been premised on a declining West, a transformed international order favoring emerging economies, and skepticism of free trade and open markets. But Rousseff is feeling intense pressure from her people to deliver better government services and economic prospects, as evidenced by massive street protests last June.
Rousseff’s visit to Davos came as the EU and Mercosur prepare toexchange proposals in newly revived free trade negotiations. She is also heading to Brussels on February 24 for a summit with EU leaders, where they are expected to discuss the negotiations and to sign a bilateral air travel pact that will increase passenger volumes between Brazil and Europe.
After a spate of economic growth that peaked in 2010 at 7.5 percent, Brazil’s economy slowed to 2.7 percent in 2011 and 1 percent in 2012. The growth rate for 2013 is expected to be about 2.5 percent. These disappointing numbers can be attributed partly to the drop in global commodity prices, but also to Brazil’s protectionist policies, poor infrastructure, unwieldy bureaucratic red tape, and its statist approach to investment. The Brazilian economy has not proven nimble enough to adjust to changing global realities, especially as investment flows back to the United States. Rousseff may have had little choice but to reassure business leaders at Davos that Brazil is committed to fiscal responsibility, openness to investment, combating inflation, and maintaining a floating currency.