Lost Decade Behind, Brazil Is Definition of Optimism Turnaround in Latin America

Article excerpt

When President Clinton visits Brazil next month, he'll encounter a people brimming with optimism. In its latest international poll, the Gallup Organization found that Brazilians are the most optimistic people on earth. Fully two-thirds of Brazil's population of 165 million expect this year to be better than last.

For many Americans, perceptions of Brazil are outdated. A recent Foreign Policy Association survey disclosed that 9 out of 10 respondents believe that the Brazilian economy is suffering from hyperinflation, that 8 out of 10 were unaware that Brazil is a democracy, and that 7 out of 10 wrongly assumed that Russia's gross national product was larger than Brazil's.

Brazil, once a paradigm of central planning, is in the midst of a significant transition as it adopts a "market friendly" approach to economic development. Brazil's economic expansion, now in its fifth year, is displaying considerable resilience. Pedro Malan, Brazil's finance minister, forecasts that by the end of 1997 the Brazilian economy will have grown 24 percent since 1993 - a far cry from the economic slowdown of the '80s, known in Brazil as the "lost decade." Direct foreign investment in Brazil, which was below $1 billion in 1993, will surpass $15 billion in 1997. Credit for the economic turnaround goes to Brazil's president, Fernando Enrique Cardoso. While finance minister, he crafted the ingenious stabilization program (the "Real Plan") that has brought inflation down from four-digit levels in the early 1990s to 6 percent this year. A massive privatization program and a repudiation of import substitution policies have given additional momentum to the Brazilian economy. The Cardoso administration appears resolute in its commitment to liberalizing the Brazilian economy. It has taken the lead in building the Mercosur common market with Argentina, Chile, Paraguay, and Uruguay, creating a $1 trillion market that gives it leverage in its negotiations with the US for a Free Trade Pact of the Americas in 2005. The stabilization of the Brazilian economy has benefited a large and growing consumer base (50 percent of the population is under 20) and spurred a resumption of investment in productive assets. Brazil continues, however, to have the most skewed income distribution in the world. Economists are concerned about both the country's current account deficit and an overvalued foreign exchange rate. Speaking of Latin America in general, Maurice R. …


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