Brazil: a role model for development?

Armando Barrientos & Ed Amann – The Guardian, 4/17/2014

Brazil isn’t getting the best press at the moment, with ongoing problems with the construction of the World Cup stadiums and protests about public services. Recently economic growth in the country has slowed, with some commentators arguing the recent government response sounds “the death knell for Brazil’s economic strategy“.

It’s remarkable how far and fast Brazil has fallen from grace. Only a couple of years ago, the IMF and others were lauding the country for its resilience to the global financial crisis and its sound economic management.

We need to get this into perspective, because behind the hyperbole, there’s much for other developing countries to learn from Brazil’s recent experiences. Countries such as Zambia, which has seen positive growth rates that haven’t translated into poverty reduction, or Nigeria, which has seen inequality dramatically widen over the past 20 years.

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What’s holding back Brazil?

Otaviano Canuto – Project Syndicate, 2/21/2014

One often hears that Brazil’s economy is stuck in the “middle-income trap.” Since the debt crisis of the 1980’s, Brazil has failed to revive the structural transformation and per capita income growth that had characterized the previous three decades. But, with the right mix of policies, it could finally change its fortunes.

The prevailing explanation for Brazil’s failure to achieve high-income status lumps the country together with other middle-income economies, all of which transferred unskilled workers from labor-intensive occupations to more modern manufacturing or service industries. While these new jobs did not require significant upgrading of skills, they employed higher levels of embedded technology, imported from wealthier countries and adapted to local conditions. Together with urbanization, this boosted total factor productivity (TFP), leading to GDP growth far beyond what could be explained by the expansion of labor, capital, and other physical factors of production, thereby lifting the economy to the middle-income bracket.

Progressing to the next stage of economic development is more difficult, reflected in the fact that only 13 of 101 middle-income economies in 1960 reached high-income status by 2008. According to the dominant view, success hinges on an economy’s ability to continue raising TFP by moving up the manufacturing, service, or agriculture value chain toward higher-value-added activities that require more sophisticated technologies, higher-quality human capital, and intangible assets like design and organizational capabilities.

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The mirage behind Brazil’s economic miracle

Megan McArdle – Bloomberg, 1/23/2014

Joe Nocera discusses Brazil’s approach to economic development in his most recent New York Times column:

“What I saw was no illusion. Though its starting point was quite extreme, Brazil is a country that has seen income inequality drop over the last decade.Unemployment is at near record lows. And the growth of the middle class is quite stunning. By most estimates, upward of 40 million people have been pulled out of poverty in the last decade; extreme poverty, says the government, has been reduced by 89 percent. Per capita income has continued to grow even as G.D.P. growth has slowed.

“Nevertheless, the economists I spoke to were uniformly bearish about the short-term future of the Brazilian economy. They pointed, for starters, to that slowdown in G.D.P., which they didn’t expect to pick up anytime soon. Despite the country’s enormous economic gains since the beginning of this century, there has been very little accompanying productivity gains. Indeed, several economists told me that the main reason unemployment was so low was that the economy was terribly inefficient. …

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Bolsa-Familia: template for poverty reduction or recipe for dependency?

Camila Nobrega – The Guardian, 11/05/2013

Ten years ago, Brazil was just one of many countries struggling against extreme poverty. Today, it has become a worldwide reference – an example of how to fight poverty.

Thanks to a programme that no Brazilian politician now dares to go against: Bolsa-Família.

Evoking admiration and criticism, the programme is now 10 years old. Brazil still struggles to create real alternatives of income generation and decent employment for all citizens. But Bolsa-Família is one of the largest existing instruments of income transfer, benefiting 13.8 million families (almost 50 million people.) It means that approximately one in four Brazilians receives the benefit – the total population is about 198 million people. Considering the scope of the programme, it has a major impact on the Brazilian economy and on people’s lives.