Any person that has been interested in Brazil has heard someone say that Brazil is the country of the future… and always will be.Well, that joke may be starting to lose its basis and I will explain why.
After many years of sluggish economic performance and being known for its inequality and political instability, Brazil in 1995 started a string of political, economic governance and legal reforms that have dramatically changed the outlook of the country.
A full description of all the developments would be tiresome, but it is worth mentioning some of them that have had a lasting impact.
The first is political stability. After a military dictatorship and three successive civil governments that only managed one crisis after the other, the political scenario changed dramatically and since then Presidents Cardoso and Lula da Silva have been able to govern in relative tranquillity and to implement some important reforms. The general expectation is that the election that will take place in 2010 will not change this scenario.
Another very important development has been economic stability. At the start, a large privatisation programme transferred inefficient industrial and service companies to the private sector and generated a great leap in productivity in some important sectors of the economy. Inflation, which at some points in time reached peaks of more than 30% per month, has been tamed by a well-managed inflation-targeting system and stabilised at reasonably low rates. GDP growth has been healthy even after the 2008 world financial crisis and the Brazilian currency, the real, has gained value against the currencies of the major economic powers.
The legal and regulatory system was also subject to many improvements. For instance, a modern bankruptcy code enabled many companies to survive after facing financial difficulties that would probably lead to liquidation in the past. The same law also provided more security for lenders, thereby helping to support an impressive growth in bank lending in the country. New concession and public-private partnership laws made it possible for private sector operators to render services in several areas, including telecom, energy, transportation, and others, with huge improvements when compared with the prior level of services. New capital markets and corporate governance rules were the basis for a market that has become one of the fastest-growing stock markets in the world. New consumer protection laws, environmental laws and antitrust laws have all greatly improved the impact of business on society as a whole.
All this has brought the country to the present situation, which has placed Brazil in another role, of a major player in world events.
Does all this mean that there are no problems? That everything is now perfect and Brazil turned into a paradise on earth? Of course not, the country still has huge problems and has to face the challenge of acting to eliminate or greatly reduce them.
Social inequality is still a marked characteristic of Brazil and although the government has made a great effort to reduce it there is still a long way to go for us to reach the levels of mid-income countries elsewhere. Urban violence is still a major problem in the big cities. Huge governmental investments in health and education programmes will be necessary in the coming years.
At the same time, the country will also have to work on the improvement of its general infrastructure to provide the conditions for the continuous growth of the economy. Ports, airports, roads, railways, underground rapid transit rail lines and power plants will have to be built or expanded if Brazil wants to fulfil its potential.
And to top it all, Brazil has been chosen to host the two most important sporting events in the next few years, the 2014 Football World Cup and the 2016 Rio de Janeiro Olympic Games. Both events will require very large investments in both the actual venues of the games and in the surrounding transport, hospitality and telecommunications facilities.
All this will put a lot of pressure on the country, which will have to prove its capacity to raise the necessary funds for all such investments and the organisational skills to manage them.
This brief account shows that there will be a lot of work to be done in the foreseeable future and that the government and the private sector will have to work very hard and exercise a lot of creativity to structure and finance so many projects.