Brazil needs to reverse course to revive economy

Mark Weisbrot – AlJazeera America, 8/7/2015

Luíz Inácio “Lula” da Silva won the presidency of Brazil on his fourth attempt, in an overwhelming victory in October 2002. His Workers’ Party (PT) ushered in a new era for the country’s previously disenfranchised majority, with the economy from 2004 to 2010 more than doubling its rate of growth of the previous 23 years. Poverty declined by 55 percent and extreme poverty by 65 percent from 2003 to 2012. Unemployment hit record lows, the real (inflation adjusted) minimum wage doubled, and the gains from growth were more equally distributed than in previous decades.

A large majority of Brazilians are still vastly better off today than they were before the PT came to power. But the economy slowed sharply from 2011 to 2014, with GDP growth returning to the rates of the pre-PT era. Job creation in the formal sector — regular employment covered by taxes and legal benefits, as opposed to the underground economy — fell from an average of 1.46 million jobs annually for 2004 through 2010 to just 829,000 for 2011 to 2014 and just 152,000 in 2014. Economic growth was about zero last year and will turn negative this year.

Approval ratings for Lula’s successor, Dilma Rousseff, have plummeted, and most of the news about Brazil is woefully pessimistic — corruption scandals, including one involving the state-run oil company, Petrobras; Standard and Poor’s lowering its outlook for the country’s bond rating after downgrading it to one notch above junk; the real falling about 35 percent against the U.S. dollar over the past year.

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