Wednesday 11 December 2019

Can the land of the samba be the leader of tomorrow?

HEROES WILL ONLY GET YOU SO FAR: Brazil’s Julio Cesar and David Luiz hold up the shirt of injured teammate Neymar before the World Cup semi-final in which they were thrashed 7-1 by Germany. Photo: Mike Egerton/PA
HEROES WILL ONLY GET YOU SO FAR: Brazil’s Julio Cesar and David Luiz hold up the shirt of injured teammate Neymar before the World Cup semi-final in which they were thrashed 7-1 by Germany. Photo: Mike Egerton/PA
Dan O'Brien

Dan O'Brien

'Order and progress." Look closely at the Brazilian flag and you will see these words (in Portuguese, naturally) emblazoned across the centre of the World Cup host's national banner.

Unfortunately for the country's soccer squad and its supporters, Brazil failed to progress to tonight's final after a disorderly and shambolic capitulation to Germany last Tuesday. Much worse still for citizens of that country, they have enjoyed far too little order and progress in the two centuries since securing independence from their European colonisers.

But in Brazil and further afield over the past decade and more, there has been a sense (Tuesday's debacle notwithstanding) that the world's fifth most populous country has finally turned a corner. With the focus of much of the planet on Rio de Janeiro for tonight's World Cup final, hopes are high that the largely successful hosting of one of the great global sporting events marks another milestone in Brazil's recent progress.

But has the South American giant really got itself on to the path of sustainable progress?

There are plenty of reasons to believe that it has, and even more reasons to believe that it has the potential to be a prosperous place, which is as good for its citizens as it is for those who visit it (this columnist is something of a travel addict and, having had the good fortune to have spent a decent amount of time in the country, it is a truly remarkable place).

Among the cornerstone changes in recent decades has been political. In stark contrast to the US in the northern half of the hemisphere, Brazil's roughly-similar time period since independence has been blighted by disorder and repression.

But since the 80s democracy has strengthened and transfers of power have become smoother - it is now 25 years since the military returned to barracks and an elected president took power.

Another factor in Brazil's progress in the 21st century has been better economic policy-making. Monetary, fiscal and exchange-rate management have improved, thus helping to keep the broader environment stable. Flirtations with default and periods of hyperinflation seem to be things of the past.

Rising international prices for natural resources, with which Brazil is richly endowed, have also spurred growth, but there has been more to the current extended period of boom than merely high commodity prices. From a very low base admittedly, some world-beating companies have begun to emerge, from Embraer in aircraft manufacturing to Marfrig in food production, whose takeover of Northern Ireland's Moy Park in 2008 is the reason the latter's logo has appeared so frequently on the pitch-side advertising hoarding during the World Cup.

These positive factors have contributed to strong economic growth for more than a decade. As the chart shows, Brazil has enjoyed a sustained and notable increase in per capita GDP over the past 10 years or so, following three decades of stagnation when it was perhaps the classic case of a country stuck in what economists have called the "middle income trap".

Nothing has quite cemented Brazil's arrival on the global scene more than its inclusion among the BRICs - a term coined by investment bankers more than a decade ago to highlight the opportunities in populous economies with high growth potential: Brazil, Russia, India and China.

The near obsession with the BRICs among governments around the world (Ireland's included), has resulted in a greater focus on the commercial gains of closer ties with South America's regional superpower. The traffic of trade missions and ministerial visits to Brasilia and the major cities has increased greatly as countries look more closely at opportunities in the vast country.

But for all the talk and the great potential, there are lots of reasons to fear the current period, despite its clear gains, may be another false dawn for a country that has had more than its fair share of them.

Brazil still suffers from the perennial Latin American weakness of low savings rates. With low savings comes low investment. In the private sector this has hindered the emergence of a competitive corporate sector, despite a handful of successes, including the aforementioned Embraer and Marfrig.

And this has been made all the worse by the capacity of entrenched interests to restrict competition, both from below, in the form of indigenous companies, and from without, in the form of imports and foreign companies competing for a slice of the Brazilian market.

Underinvestment is also a feature of government. Although Brazilians on average generate 50pc more economic output than the Chinese each year as the charts show, the different quality of the infrastructure is noticeable as soon as you land on the ground in the respective countries' main cities. From its airports to highways, Brazil feels poorer than China even though it isn't.

The failure of the federal and state governments to deliver often basic infrastructure is not just about lack of money. A weak and often corrupt system of administration has a severe delivery deficit - witness the failure to meet many of the deadlines on the building of ancillary infrastructure for the World Cup

Weighing even more heavily on the country's efforts to advance is its education system, which is both a symptom and a cause of Brazil's lack of meritocracy. Very limited social mobility is reflected in income inequality which is among the highest in the world. As is often the case in developing economies where small and pampered elites dominate, the focus is on protecting privileges.

All of this stifles innovation and curiosity. Brazilians, for instance, filed just 451 international patent applications in 2008, compared to 53,521 in the US in the same year. More anecdotally, over the 10-odd weeks I have spent in the country, which included lots of time in departure lounges and on flights where reading is a pretty normal thing to do, I never once saw anyone with a book. Extensive street protests and rioting in the lead up to the World Cup illustrated the degree of instability in Brazilian society, cynicism about politics and frustration with the way those at the top pull up the ladder to prevent those at the bottom from clambering to a better life.

It also reflects a propensity to violence. Although not dissimilar to much of Latin America, one of the less pleasant aspects of being in the country is the need to keep an eye over your shoulder. While much of the crime is of a petty nature - favela kids opportunistically grabbing a phone and the like - the sheer prevalence of armed security guards reflects the level of danger, and the economic cost of insecurity.

The land of samba has had a good 21st century so far, but it still has a long way to go. "Brazil is tomorrow's country - it always has been" is a very old quip that underscores the long and repeated failure of an extraordinary nation to live up to its potential. This time, hopefully, will be different.

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