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Fiscal Crises, Educational Delay, and Low Investment in Technology Are Some of the Factors That Explain Why Brazil Does Not Grow Like Other Emerging Countries, According to Analysis by CNN.
For at least four decades, the Brazilian economy has experienced a cycle of stagnation, marked by brief periods of growth that are quickly interrupted, the so-called “chicken flights”. The analysis of specialists consulted by CNN reveals that the fact that Brazil does not grow sustainably is the result of a combination of structural problems that have dragged on for years, placing the country behind not only powers like China and India but also its Latin American neighbors.
Whether causes or consequences, various factors make up the formula that inhibits the jump of the Brazilian GDP. Among the main ones, the educational delay, lack of domestic savings, decline in productivity, and precarious investment in technology stand out. Although there is no single solution, there is a consensus among economists that the country needs deep and structural changes to find the path to solid development again.
The Fiscal Imbalance and High Interest Rates
One of the most persistent problems that prevent Brazil’s growth is the chronic fiscal imbalance. As pointed out by CNN, fiscal crises are recurrent in the country’s history. “The problem with Brazil is that fiscal crises are recurrent. How do you reduce this?” questioned Sílvia Mattos, an economist at FGV Ibre. Growing debt and excessive government spending over the last decades have limited the economy’s expansion potential, and the problem persists to this day.
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For Henrique Meirelles, former president of the Central Bank, the solution lies in structural reforms. “How can this be addressed? By implementing reforms, whether administrative, tax, or social security; all of this needs to be done to stabilize this process,” he described. This lack of control in public accounts leads to timid domestic savings, which is one of the main sources for productive investment. Consequently, to control inflation and attract capital, the country coexists with extremely high interest rates, which, in turn, stifles growth.
The Historical Roots of Stagnation
To understand why Brazil does not grow, it is necessary to look back in time. The period of industrialization, from 1930 to 1980, peaked with the “economic miracle” (1968-1973), when the country grew above 10% a year. However, according to specialists consulted by CNN, this growth was driven by aggressive debt. Márcio Holland, coordinator at FGV, refers to the legacy of the 1970s as “cursed legacy”, as the country went into debt in an adverse global scenario.
This legacy resulted in the “lost decade” of the 1980s, with Brazil plunged into hyperinflation and external debt. Furthermore, the Brazilian industrialization strategy focused on an assembly model, with low added value. “In Brazil, lobbies convinced the public debate that industry means assembly plants. It’s about assembling cars, refrigerators, and televisions,” highlighted Marcos Lisboa, former president of Insper. Meanwhile, countries like South Korea, Taiwan, and China made substantial investments in new technologies, innovation, and skilled labor, creating a significant competitive advantage.
Education: High Spending, Low Results
One of Brazil’s cruelest paradoxes lies in education. The country invests a significant share of its GDP in the area, about 5.5% in 2021, a level higher than nations like Canada (4.7%) and South Korea (4.9%). However, the results are drastically worse. In the PISA ranking, which measures student performance, Brazil falls behind all these countries, highlighting a severe inefficiency in the use of resources.
According to economists interviewed by CNN, the debate on education in Brazil focuses excessively on funding, rather than on the students’ learning. “We don’t discuss the student in education; we don’t discuss the learning of students,” stated Marcos Lisboa. For Armínio Fraga, former president of the Central Bank, the country is in a “vicious cycle”, as it fails to make the teaching career attractive to the best talents, perpetuating educational delay.
Chronic Crises and the Difficulty of Reforms
In addition to structural problems, political instability and a succession of crises have created a “perfect storm” for stagnation. “The difference with Brazil is the number of crises. We had 26 years of growth against 14 years of crisis. 14 years of crisis during this period is a lot”, pointed out Marcos Lisboa. Two impeachments and constant clashes between branches of government have created an environment of uncertainty that drives away investments.
Since 2014, Brazil has faced a chronic public deficit that only deepens, creating further constraints to growth. In the view of specialists consulted by CNN, the outlook for reforms that could unlock the economy is not optimistic. To complete the scenario, the country has remained relatively closed off from international trade. “Brazil has been waiting for decades to connect with the world […] and I think this has cost us a lot,” concluded Armínio Fraga.
Do you agree with this analysis? Do you think these factors really impact your daily life and the market? Leave your opinion in the comments; we want to hear from those who experience this in practice.
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