Nake Kamrany & Danny Jacobs – Huffington Post, 01/12/2012
Brazil has joined China and India among middle income countries to forge ahead towards closing the income gap between the North-South disparities and take advantage of the shift in the distribution of economic growth in favor of middle income countries. With annual per capita income growth rate three times faster than the United States over the last decade, foreign investment up 26% in the past five years and promising expansionary projects entering construction stages, prospects are bullish for Brazil.
Although the per capita income of developed countries dwarfs that of Brazil ($10,800), its recent 7.5% economic growth rate coupled with its stable democratic political climate have created optimism that the nation is poised to complete its meteoric rise to the First World. The future is bright: playing host to the 2014 World Cup and 2016 Olympics promises substantial financial gain. Oil discoveries, ironically paired with Brazil’s top-ranked dedication to renewable energy, ensure Brazil’s economy will maintain its swagger for decades to come. But how does the Brazilian economy continue to expand while many of its neighbors wallow in volatility and stagnation? The answer is sound macroeconomic policy. While Brazil’s economy hurtles toward economic convergence with the Western world, other underdeveloped countries would do well to examine the economic strategy that fostered its ascent. Brazil’s current status is the culmination of several stages in its economic succession.
Brazil’s first step toward economic success was independence in 1822, which annulled the country’s prohibition of foreign trade and industrialization as enforced by Portugal. However, Brazil’s history of cash crop economics rendered it helpless in the early 20th century, as the demand for its burgeoning luxury exports like coffee was eradicated by the onset of the Great Depression. To maintain some semblance of an economy, Brazil diversified into other industries like clothing, textiles, and beverages. While these fledgling industries provided necessary infrastructure and jobs, stagnation persisted. Brazil needed widespread diversification and prudent macroeconomic strategy to revitalize its hamstrung economy. As the left-wing president and Communist sympathizer Joao Goulart began trying on economic policies like so many party hats, stagnation continued and the country began to call for a coup by the newly-popular Armed Forces.