Not Just Another BRIC in the Wall

24/03/2011 Barcelona

Not Just Another BRIC in the Wall

"It is an article of faith in Brazil that we will have growth of 4 or 5 percent every year, but the size of the working population won't change over the next 40 years while the number of people over 60 will have trebled, so all the growth will have to come from increased productivity," Fabio Giambiagi told the Brazil Business Summit this morning. The summit was organized by IESE's Center for Emerging Markets and the Barcelona Chamber of Commerce.

Giambiagi, of Brazil's National Bank for Development, said that Brazil was entering what should be its best decade since the 1960s, marked not just by growth but by the opportunity to showcase itself through hosting the Fifa World Cup in 2014 and the Olympic Games two years later.

"Compared to Mexico, Brazil has not suffered so much from Chinese competition, and furthermore it benefits from China's hunger for raw materials," he said. "Brazil could be in top ten oil producers but with its potential for hydro and solar power it also has many options to develop renewable energy sources."

However, the country lags behind in education, with only 39 percent of the working population having completed secondary education, compared to 85 percent in Germany and 89 percent in the United States. Furthermore, the country has burdened itself with an over-generous social security regime, as result of which the average middle-class worker retires in their early fifties.

Earlier, John Bowler, head of the Economist Intelligence Unit's Country Risk Service, said that that Brazil's resilience in the face of the recent global crisis marked a big change on a decade ago. He said that Brazil has always prided itself on having the most diversified economy in Latin America but that it might see its dependence on commodities become entrenched, particularly in relation to China. "Brazil is vulnerable to any crisis that might arise in China, especially in regard to commodity prices," he said.

He added that without reforms to state, Brazil's growth potential is not as high as it might be, and it remains to be seen if President Dilma Rousseff will have the courage to tackle the reforms, especially in regard to slimming down the state, that her predecessor shied away from.

In a later session on Brazil as a regional power which addressed social and political issues, Timothy Power, director of the Centre for Latin American Studies at Oxford University, said that Brazilian democracy is 26 years old and in is good shape. There is a high rate of participation among the 136 million voters. At a presidential level, there are two major parties that form coalitions. There is a general consensus between the main players on macro-economic issues and social policy, he said. The lives of some 30 million Brazilians improved considerably under the eight years of the Lula government.

Colin Lewis of the London School of Economics spoke about trends in growth and inequality. "Growth alone will not reduce inequality," he said. "It requires effective state social intervention." He added that smoother rates of growth were needed to provide economic stability and for the government to address social issues. Poverty rates have fallen consistently since 2003, he said, adding that this doesn't necessarily amount to greater equality. Some 54 percent of the poorest people do not have a bank account.