Economic woes pushing Brazil to turning point: academic

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Growing debt, sluggish growth, low investment, and overexposure of the social welfare system are bound to push Brazil to new political realities as its government’s policies grow increasingly untenable.

This is according to Brazilian academic, columnist and political scientist Fernando Schuler. He was speaking at Associacao Brasileira De Proteina Animal’s (or the Association for Brazilian Animal Protein – ABPA’s) International Animal Protein Trade Show (SIAVS) in Sao Paulo, Brazil on Tuesday.

His remarks come ahead of Brazil’s next general election, set to be held on October 4. President Lula da Silva recently launched a campaign for a fourth term, but a poll by Nexus/BTG Pactual showed that Flavio Bolsonaro, the son of former Brazilian president Jair Bolsonaro, was catching up to him in popularity.

A shift to the right in Brazil’s executive in this election would serve as a setback for progressive and centrist forces in the world and the region, after Javier Milei’s election as president of Argentina marked a shift in that country’s approach, punctuated by its exit from Brics mere months after being invited to join the bloc at the Johannesburg Brics Summit in 2023.

The results have serious implications for South Africa’s international trade and geopolitical agenda, as Brazil is South Africa’s most politically aligned founding Brics partner and President da Silva and President Cyril Ramaphosa enjoy a publicly brotherly rapport.

In the October election, da Silva’s Workers Party will vie for power with the Liberal Party’s Bolsonaro and Social Democratic Party’s Ronaldo Caiado.

Schuler said different sectors of Brazilian society had different diagnoses for the problems facing the country, but the economic fundamentals of Brazil, including inflation and public debt, paint a picture that the incumbent government cannot ignore.

“In three years, debt has grown by 10.3%, but GDP has not grown to the same levels. Inflation is also becoming a huge problem. To buy a Treasury bond at 18.3% is a great idea, if you can afford to do it. But Brazil as a country and as an investment cannot sustain this,” he said.

He said one of the positive aspects of policy for Brazil was the independence of the Banco Central do Brasil, which he said maintained discipline in its management and formation of monetary policy.

“We have a strong and independent central bank. And thank God for that. Imagine if the president could call the central bank and pressure our central bank to make particular monetary policy decisions.”

He said the great problem for Brazil was that the country has consistently failed to implement policies that are more conducive to higher levels of growth and would prefer to implement policies that paper over the cracks of a heavily indebted fiscus and a financially stressed society.

“The great problem of Brazil is productivity, which this sector [of animal protein and meat production] can address. The growth in this sector is stable, and in services, it is horizontal. That is a paradox.

“Brazil is an agribusiness force on the world stage, but we are banking on an industry that is doing well, but in doing well, that business is an exception.”

He said Brazil’s average income was less than half of that of Uruguay, underscoring the severe gaps in value creation through industries and the labour market on the part of Brazil’s government.

“Even with rates of growth that are similar to those of China, it will take Brazil’s average incomes about 13 years to catch up to the average incomes of Uruguay. We are an ageing nation, which is good, but you must increase prosperity as you age.”

He said Brazilian domestic taxes combined with a lack of adequate catalytic investment were detrimental to the economy and people of Brazil regardless of whether US President Donald Trump imposes tariffs on the nation’s exports.

He also said that if Brazil is to grow, it must take more people out of its family benefit system and raise the age of eligibility, while people of working age seek and secure work. He added that organised crime in the region had reached a cross-border, high-level sophistication and engaged in economic activity.