The world spotlight focuses on Brazil now because of the Summer Olympics. Roger Noriega of the American Enterprise Institute hopes observers also will take note of the cautionary tale linked to the nation’s recent political history.
It wasn’t long ago that Brazil seemed to be soaring to global prominence along with the other BRIC countries. The Rio Olympic Games and the 2015 FIFA World Cup were supposed to showcase Brazil’s economic and social development, energy, wealth, and organizational prowess.
Today, the reports coming out of Brazil ahead of the Rio Olympics are far less auspicious. Foreigners read about serious security and health risks in the host city. And the local press is filled with the melancholy details of political and economic turmoil that led to the impeachment of President Dilma Rousseff earlier this year. It seems that Rio will not be the grand “coming out party” that many had hoped for.
Under President Lula da Silva of the Workers’ Party (PT), Brazil acquired a reputation as a country that embraced the market economy and trade, but prioritized social spending to help pull people out of poverty. Brazil’s economic growth, fueled by the commodity boom and international investment, appeared to vindicate these policies.
However, now that commodity prices have collapsed, the windfall of revenue from the export of petroleum, minerals, and agriculture goods can no longer compensate for populist spending and big-government policies. Although Brazil’s rise impressed many observers, its economic foundation was compromised by corruption, cronyism, and statist policies that prioritized securing votes over promoting sustainable growth.
Numerous corruption scandals have taken down some of Brazil’s presidents, dozens of prominent politicians and business leaders, and have cost the economy billions. Under the control of the Workers’ Party for over a decade, the state expanded massive welfare programs but smothered the private enterprise needed to create permanent jobs.
The Lula and Rousseff governments imposed burdensome regulations on businesses that made it nearly impossible to create companies or fire under-performing employees. The state continued to increase the minimum wage well into the current economic crisis. As a result, Brazil’s private sector struggled, while the state rewarded corrupt cronies and drove jobs into the unstable informal sector.
