BrazilWorks introduces our Economic Recovery Dashboard to report the monthly and quarterly trends among a select group of leading and lagging indicators. Indicators such as industrial activity, construction input production and retail sales measure activity in key economic activities that reflect increasing consumer demand for Brazilian made products. We expect such indicators to spell the first stages of economic recovery. As you can see from the IBOVESPA (São Paulo Stock Market Exchange), market traders have bet on Brazil's recovery throughout 2016, but this is not enough. Also, the industrial productivity and capital goods imports indicators are strong measures of the degree to which Brazilian industry is investing in international competitiveness, a factor that will determine the depth of national economic recovery and its sustainability over time. These need to increase over time and throughout the recovery.
The leading indicators also includes the Central Bank's aggregate index of economic activity that should move in accordance with the other leading variables, it should demonstrate the validity of the leading and lagging indicators over time. Let's watch this index closely.
The lagging indicators, including average wages and formal employment, are key to understanding the depth of the recovery and whether it is accompanied by a structural transformation that leads to greater formal employment and productivity, or whether it spells greater employment precariousness and a hollowing out of the economy's capacity to generate demand-similar to the effects in the USA where productivity increases while wages flatten.
For October 2016 it appears that there are signs of recovery, but distant and elusive. The IBOVESPA leading indicator shows investor optimism, probably due to the impeachment of former President Dilma Rousseff from April to August of 2016, but this could be tenuous if there are additional economic or political setbacks. The more churning leading indicators, industrial activity, retail sales, and construction input production also demonstrate a positive, albeit tenuous direction. However, the more transformative indicators of industrial productivity and capital goods imports remain in the red, an alert that the economy is not yet prepared for a sustainable and deep economic recovery.
Brazilian policymakers are still shaken or celebrating from the impeachment process, the municipal elections, and the Lava Jato corruption investigations. However, Temer's government and congressional coalition seem committed to restoring fiscal stability at any cost; and at this moment it would seem plausible to expect the Brazilian Congress to comply with measures to cut the budget deficit. This outcome coupled with falling inflation measures (including Petrobras' recent decision to cut transportation fuel prices) could lead to a reduction in interest rates that would contribute to economic recovery (but be matched by falling government expenditures that have a recessionary effect). The objective is to lower the real structural interest rates over time and keep them within a competitive band so that Brazilians can invest in their economy rather than depending on government or foreign direct investment. We need to monitor progress in this area. If the Brazilian private sector gets back to investing (and move away from dependence on financing government debt) in the national economy, then expect productivity and the capital goods market to increase.
The question is, what can President Temer do, with Congressional support, to ease private sector investment in productivity increasing activities in the short to medium terms?
Join us at the Brazil Initiative-Elliott School of International Affairs.
Nobody can blame the chorus of media reports slamming Rio de Janeiro as the host of the 2016 Summer Olympic Games. Everybody who knows Brazil and loves Rio saw it coming. Rio de Janeiro is more than a mega-metropolis of six and half million residents crammed between divine escarpments and the polluted Guanabara Bay. Heaven and hell, Brazil’s hallmark city transcends the sum of its parts. As Tom Jobim sang in his classic hit Wave,
“Let me tell what eyes just can’t see, things that only the heart understands.
What is fundamental is love.”
People who live Rio love it, even if they have to step over dead bodies washed up on Copacabana beach or pay the cascading costs of kick back corruption that pervades Brazil’s infrastructure construction. To love Rio is to get beyond the obvious pockmarks and wicked stench that punctuate life in the Cidade Maravilhosa, but without looking away. The front page does not surprise those that love Rio.
Simon Romero of the New York Times knows Brazil well, but could not resist the temptation to seize the moment to pitch anger and anxiety as the best frame for Rio and the Summer Olympics. He quotes Ana Caroline Joia de Souza who sells sweets on the streets of Rio,
“Just thinking of the Olympics leaves me revolted… Our politicians want to trick the world into thinking things are great here. Well, let the foreigners see for themselves the filth we live in, the money our leaders steal.”
Most Brazilians share Ana Caroline’s anger, but not all for the same reasons.
Brazil is mired in a deep recession and an even deeper political crisis that has left the country bleeding out from the sharp blades of corruption, pervasive inequality, and the breach between swelling expectations and the global downturn. Step into any boteco (neighborhood bar) in Rio and you can listen to the rage, you can hear the eco of Ana Caroline’s words, and if you pay attention, you can feel the beat of a collective soul searching. What Romero probably understands, but many of those reporting from Rio for the first time do not, is that Cariocas are playing the media for their own purposes, whether it is throwing mud at the Mayor, scapegoating by presidential impeachment, or clamoring for an end to corruption. Brazilians are learning to play off the international limelight to advance their own political or policy aspirations and the international media is more than willing to turn up the loudspeaker.
It is loud, but it does not explain why Cariocas are passionately in love with their city. The tactical alliance between novice column inch contributors and Brazilians seizing the moment is momentary and incomplete. It distracts from the bigger question; why do people, Brazilians and foreigners alike flock to Rio?
Romero should have asked Ana Caroline where she was born because most street vendors in Rio come from the Northeast where grinding poverty pushes many to seek opportunity elsewhere. More to the point, those that come to Rio are not eager to leave anytime soon. The more interesting stories will be after the Olympics have come and gone. There at the boteco will be dozens, maybe hundreds of North Americans, Germans, Nigerians, even Argentines making plans to make the move to Rio, or at least promising to come back real soon. Why?
They feel something special in Rio, a powerful force that does not blind, but balances against the stench of Rio’s port, the brick by brick poverty of the never ending favela of Maré, and the shots fired between military police and drug gangs just steps away from the glitz of Copacabana. Something that only the heart understands and cannot be read in between the lines. Everybody loves Rio, it's a global social movement, and the Olympic Games are simply foreplay.
Brazil Initiative Study Abroad
Elliott School of International Affairs
George Washington University
I’m in Brasilia with my Study Abroad group of Masters students from the Elliott School of International Affairs. We spent a week in Rio de Janeiro studying energy and equality as well as other pending development issues. We are now in Brasilia finishing up this course and focusing on the political economy of Brazilian economic and social development as well as the ongoing political crisis.
While we understand that Brazil made great progress in equitable growth during the first decade of the 21st century, but the current crisis raises questions about the sustainability of this model. Can Brazil grow and redistribute income in the future?
Around the world, the global economic downturn has threatened those who have struggled to leave extreme poverty behind, including millions of Brazilians. The steep economic decline in Brazil and the political paralysis of Brasilia also threatens to push millions of Brazilians back into poverty and shrink the opportunities of young workers, entrepreneurs, and those who deliver essential public services. There is no question that the Lava Jato (Car Wash) corruption scandal represents a watershed moment in Brazilian history, but it also reflects the wasted opportunities during the last decade’s economic boom and the difficult challenges ahead as Brazil attempts to move ahead with political reforms that increasing accountability and decrease governmental and corporate malfeasance.
My students have come to understand the tremendous potential of Brazil and discussed what it might take to pull the nation out of the complex economic and political crisis. What we need now is more learning, more exchanges between our students and faculty with Brazilian counterparts, and a collective effort to understand how the global political economy poses obstacles and opportunities for young professionals everywhere.
I am taking a group of graduate students from the Elliott School of International Affairs at George Washington University to Rio de Janeiro and Brasilia, beginning June 5th through the 18th.
The trip is sponsored by the Brazil Initiative at the Elliott School. Thanks to José Brito for making all this happen!
We have a busy schedule, but would appreciate meeting up with colleagues to talk about the "crisis" and Brazilian economic and social development.
We will be in Rio de Janeiro from June 5-12, and Brasilia from the 12-18.
Please contact Dr. Mark Langevin at firstname.lastname@example.org for more information.