Miriam Leitao at PostGlobal

Miriam Leitao

Rio de Janeiro, Brazil

Miriam Leitao is a reporter and columnist for O Globo and Radio CBN in Brazil. She is also a commentator on Globo TV Network and runs her own blog, www.miriamleitao.com, hosted at Globo online at www.oglobo.com.br. She was awarded Columbia University’s Maria Moors Cabot Prize in 2005. Close.

Miriam Leitao

Rio de Janeiro, Brazil

Miriam Leitao is a reporter and columnist for O Globo and Radio CBN in Brazil. more »

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Brazil's Hard-Fought Economic Dreams

The Current Discussion:The global economy is quaking. Are we heading toward a global recession? Who's to blame?

During the American inflationary surge in the late 1970s, the Fed raised interest rates to sky-high levels. Latin America was its first victim. Her external debt snowballed and the region entered into a deep recession. The 1980s are known as the “lost decade” in our economic history.

Things are different now. The largest countries in South America are accelerating their growth rate while the U.S. is falling into a recession. Argentina and Venezuela are struggling with an old Latin American enemy: high inflation. In Brazil, however, the inflation rate is right on the Central Bank’s target, the external indicators are better than ever, and we are on the eve of being rated as an investment-grade country. For the first time in decades, our private and public external debt is lower than our international reserves, which means Brazil has a negative external debt. Consumption is growing, fueled by rising incomes and the first expansion of credit in our recent history. Truck sales have increased by 40% last year; auto sales, by 36%; growth of durable goods sales has averaged 20%. Brazilians drink more Coke than the Chinese; the country is the third market for Coca-Cola, only behind the U.S. and Mexico.

Brazil is a late arrival to the party of global exuberance. Over the last five years, global GDP growth averaged 5%; in Brazil, it was only 3.8%. The country’s economic activity has just begun accelerating. What will happen now? How much of the Brazilian economy will be affected by American recession?

Some economists believe in “decoupling”: that the most dynamic emerging economies can maintain their growth rate despite the recession in the world’s largest economy. The extraordinary reduction in Brazil’s external vulnerability gives us some chance of escaping an American downturn. Brazilian international trade is highly diversified. The U.S. buys only 20% of our exports, compared with 70% of Canadian and Mexican exports. We are less “U.S. addicted”. However, the U.S. is still the Big One. It has a weak currency and a huge external deficit; its proportion of global GDP has been falling, but is still at 25%. And globalization has increased the risk of an American recession becoming a global one.

China and India have their problems too. The Chinese inflation rate is increasing and China is running into severe environmental constraints such as acid rain, desertification, and air pollution. India has a huge civil service sector, a nominal budget deficit and power shortages. Brazil has also its own shortcomings and it would nice if this time we could have more time to cope with them before another American crisis hits us. It will be very sad if Brazil is doomed to lose a few more years because of a crisis that is 100% made in the USA.

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