By Jonathan Power
It was Charles de Gaulle, France’s Second World War statesman, who said, “Brazil has a great future, and always will”. Under the benign presidency of the ex car metal worker, Luis “Lula” Inacio da Silva, the adage seemed to be banished. But now under his successor, Dilma Rousseff, the tag has stuck once again. Brazil is back to its old ways, albeit with a difference.
An economy going down hill, incompetent economic mismanagement and massive corruption are frightening investors away. Brazil is now suffering its biggest recession since the 1930’s Great Depression. The difference is that this time the safety net of financial support built for the very poor by Lula remains intact.
Brazil, Latin America’s largest economy, is having it especially bad but most of the other countries are doing not so well. The 2004-2013 decade was exceptional. Inflation which for the region was 1,200% came down to single digits and a strengthening of the tax base as economies grew facilitated a well-financed expansion of social spending.
Countries built up large foreign exchange reserves. This allowed them to have extraordinary access to external financing. There was an investment boom as economies grew at more than 5% a year, and some, like Brazil, Peru, Panama, Uruguay and Paraguay, exceeded 6%.
Even the great recession of 2009, triggered by the collapse of major US banks, only caused a brief slowdown thanks to the resilience of their economies.Read More »

