Why Brazil will not grow
Para meu orgulho, num fato inédito, segue tradução do meu artigo de hoje no jornal DCI “Porque o Brasil não vai crescer”, já publicado neste blog, do meu caro amigo J. Clovis Lemes, da Candex USA, a quem agradeço a deferência e também por enviá-lo a importantes amigos.
Analysis by Prof. Samir Keedi, Consultant, Teacher and Analyst on the DCI – Diario Comercio & Industria Newspaper.
Some numbers the government hides… And the insanity of the Lula/Dilma crony capitalism/socialism era…
Maybe the title of this article seems intriguing to Brazilians, because it is in fact a statement. However, it is not so to our readers and students. For more than a decade we have been writing on the future (the current situation) of our economy. It’s a shame we don’t have been taken into account.
The reason we affirm that Brazil won’t grow is simple, and the facts will be described below. So, it’s not a question of optimism or pessimism. In economics there are only facts, therefore, realism. Economics is an exact science, and the result is the sum total of what you do.
In the last 36 years, since 1981, our annual average growth was 2.3%, against the excellent past booms of 4.9% between 1901 and 1980. And 7.4% between 1950 and 1980. Improving to 8.1% between 1959 and 1980. Reaching, between 1967 and 1974, the average annual growth of 11.0%. We were “Chinese” before the Chinese, who began to grow what we know only from 1979 onwards. During this period of our growth, China grew nearly 10% annually.
During this period we have lost our industry, which today represents half the importance in our economy compared what the industry had in 1980. So, it no longer has the conditions to leverage an “enviable” growth.
Our consumer market is torn apart. Probably it is now only of 20 to 30 million people, in a population of 205 million. More than half of the population earns up to two minimum wages. And about 50 to 60 million are part of “alms bag” (a social welfare program of the Brazilian government, part of the socialist “Zero Hunger” network of federal assistance programs). That “income”, obviously cannot leverage growth.
Unemployment in Brazil, evaluated at 12 million is, in reality, about 50-60 million people, the analysis being is biased by the Brazilian Institute of Geography and Statistics (IBGE). They ask in their polls if the person is looking for a job, rather than asking if they are unemployed. Thus, the beneficiaries of the “alms bag” are considered to be employed!
The Brazilian tax burden, said to be 32% to 33% of the gross domestic product (GDP) is, in reality of 50 to 60% of the GDP, as we demonstrated in our last article “Tax Burden is of 50%”. So, with disposable income so small, there’s no way to consume. And, if there is no consumption, there is no production, no job.
Any economist knows that to grow, it is necessary to invest, and that 20% of the GDP is enough to level the economy, to recover the wear and aging of the structure, etc. To grow 5% it is necessary to invest 25%. To grow 7%, the minimum necessary to Brazil, we have to invest 30%. And Brazil, between 1995 and 2016 invested annually, the dab of 17-18%. Thus, less than necessary to spare. What makes it a mystery our average annual growth of 2.3%. China has always invested around 45% to grow.
Our interest rate is the highest in the world, both in nominal terms as real terms, and nobody has any means to grow with this. The Selic – the basic interest tax defined by the government – is only the nominal fee. The entrepreneur pays much more, not to mention consumers. There’s no way to invest and consume in this way. Our transportation infrastructure is in tatters and our array of transportation is terrible. No logistics.
The biggest obstacle to Brazil is undoubtedly the unpayable domestic debt of R$ 4.5 trillion today, and the real destruction of Brazil, as mentioned in many of our articles. There’s still a lot more, but that’s enough for now.
Published by DCI – Diário Comércio Indústria & Serviços
Translation by J. Clovis Lemes
