Friday, June 7, 2013

"The Economist" Offers Negative Analyses of Brazil's Economy

Source: "The Economist," June 8, 2013
Items in Folha and Estadão provide coverage of several articles in the British magazine The Economist, which are critical of the way that Dilma's administration is handling (or mishandling) Brazil's economy.

One of the articles in The Economist is entitled "Brazil’s disappointing economy: Stuck in the mud," and the other is called "Brazil’s mediocre economy: A fall from grace."

There's also an audio interview with an Economist correspondent stationed in São Paulo, which elaborates on themes developed in the articles.

The first article cites sluggish economic growth, rising inflation, inadequate investment, and a decline in consumer and investor confidence as key problems. It lays most of the blame for these problems on the current administration, whose policies, it claims, have only exacerbated the problems.

The second article goes even further, accusing Dilma of abandoning policies that were initiated when Fernando Henrique Cardoso was Finance Minister. These policies were effective in finally bringing an end to years of hyperinflation in Brazil. The article asserts that Dilma has chosen to "squander an inheritance" by instituting a form of "Chinese state capitalism." 

Specifically, Dilma is criticized for excessive government spending, getting the Central Bank to cut interest rates, and introducing a number of tax breaks, the costs of which were not offset by spending cuts.

Guido Mantega, the current Finance Minister, comes under particularly harsh criticism. The Economist notes that in an article in December, 2012, it called for Dilma to fire Mr. Mantega. The article continues:

"It was widely reported in Brazil that our impertinence had the effect of making the finance minister unsackable. Now we will try a new tack. We urge the president to hang on to him at all costs: he is such a success."

At first glance, it might seem presumptuous for The Economist to assume that its recommendation for Mr. Mantega's dismissal would have had any effect at all on his political future. But it's obvious from the items in Folha and Estadão that the Brazilian press does pay attention to what The Economist has to say. 

The audio interview is interesting because the correspondent discusses Brazilians' over-riding fear of any signs of a return of inflation, a fear which is totally understandable. She also mentions that in spite of troublesome economic signs, Dilma's popularity remains very high (the correspondent puts it at about 80%), and that short of an economic disaster, her chances for re-election are very good. 

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