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DBR: Brazil: O país do futuro?

Author: Markus Jaeger
May 30, 2006


Brazil used to be referred to as the “country of the future”. For a while, during the 1960s and 1970s, it certainly looked as if Brazil was going to realise its huge economic potential, derived from a large domestic market, abundant natural resources, and low labour costs. But during the 1980s – the so-called “lost decade” – and the 1990s, Brazil underperformed relative to expectations and relative to the fast-growing East Asian economies such as South Korea and Taiwan. Although Brazil managed to overcome hyperinflation during the second half of the 1990s, it continued to experience repeated economic and financial instability. Economic growth averaged a mere 2.4% in 1995-2004.

In recent years, economic fundamentals have been improving and some observers have started talking about how economic growth could reach 6% a year and how Brazil could follow Mexico and become an “ex-emerging market”. If this does not quite sound like “fifty years in five”, it is still a very optimistic assessment relative to Brazil’s more recent performance. In this note, we seek to assess Brazil’s medium-term economic growth prospects and the various implications of alternative growth scenarios.

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