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17/09/2015

AsaBoomFades,BraziliansWonderHowItAllWentWrongTheNewYorkTimes

http://nyti.ms/1QrJW36

AMERICAS

AsaBoomFades,BraziliansWonder
HowItAllWentWrong
BySIMONROMERO

SEPT.10,2015

BRASLIAThepresidentofBrazilshouldhavebeenecstatic.Shehadjust
wonreelectionafteranintensecampaigninwhichshefiercelydefended
herroleinmakingBrazil,forafewfleetingyears,arisingstarontheglobal
stage.
ButinthedaysafterhervictorylastOctober,PresidentDilmaRousseff
wasworried,confrontedinprivatedeliberationswithherclosestadvisers
bysignsthatBrazilstriumphswereatriskofcomingundone.
Wewenttoofar,AlozioMercadante,Ms.Rousseffschiefofstaff,
acknowledgedpubliclythismonth,describingthesenseofalarmasthe
dustsettledaftertheelectionandMs.Rousseffandheraidesgrappledwith
theweaknessesinBrazilseconomy.
ItwasnotjustthedropinglobalpricesforBraziliancommoditieslike
ironore,theslumpingdemandinmarketslikeChina,oreventhebrewing
corruptionscandalatthenationaloilcompanythatwerehurtingthe
country.Ms.Rousseffsowneconomicpoliciesweretakingatoll,too,
officialsconcede.
Now,aneconomiccrisisisunleashingawitheringnationalexploration
ofhowBrazilsquandereditshardwonsuccess.
Highlightingthestrain,Standard&PoorsdowngradedBrazilscredit

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AsaBoomFades,BraziliansWonderHowItAllWentWrongTheNewYorkTimes

ratingtojunkstatusonWednesday,ignitingabroadselloffofBrazilian
financialassetsonThursday.TheblowisexpectedtoincreaseBrazils
borrowingcostswhilefocusingevenmorescrutinyonthegovernments
inabilitytoreininpublicspending.
Wewereputtingoffourdatewithreality,CarlosLangoni,aformer
chiefofBrazilscentralbank,toldreportersafterthedowngrade.Nowis
thetimetodoit.
Newcomerstothefragilemiddleclassarefumingastheeconomy
hemorrhagesjobsandinterestratessoar.TheFederalCourtofAccounts,
anauditingbodytiedtoBrazilsCongress,isexaminingwhetherthe
presidentimproperlyusedfundsfromgiantstatebankstoshoreupthe
federalbudget.
Fightingtokeepherjobascallsforherimpeachmentintensify,Ms.
Rousseffhasevenissuedararemeaculpa,sayingsheexperiencedaseries
ofscaresshortlyafterherreelectionasthecrisisgrewfarmoreserious
thanshehadimagined.
TheBrazilianmodelcelebratedjustafewyearsagoisturningintoa
slowmotiontrainwreck,saidMansuetoAlmeida,aprominent
commentatoroneconomicpolicy.Ourpoliticalleaderswanttopoint
fingersatChinaorsomeexternalvillain,buttheycannotescapethefact
thatthisselfinflictedcrisiswasmadeinBrazil.
Evenwiththecountryslegacyofeconomicturmoil,somehistorians
saythatMs.Rousseffstrackrecordoneconomicgrowthranksamongthe
worstofanyBrazilianpresidentsoverthelastcentury.
Brazilekedoutjust0.1percentgrowthin2014.Theeconomyis
expectedtoshrinkalmost3percentthisyear.For2016,economistsare
forecastingnogrowthatalloryetanotherrecession.
AsMs.Rousseffsadministrationandtheoppositionbickerover
austeritymeasures,thecrisisiscastingattentiononstrikinglevelsof
corruption,flaweddecisionsandagargantuanpublicbureaucracy

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AsaBoomFades,BraziliansWonderHowItAllWentWrongTheNewYorkTimes

denouncedaswastefulandinept.
MemoriesarestillfreshhereofBrazilsrecentglorydays,whenglobal
leadersapplaudedthecountrysrobusteconomicgrowth,itsreductionsin
inequalityanditsthrivingdemocracy.Summinguptheexuberanceas
Brazilboomedfromexportsofrawmaterials,PresidentLuizIncioLulada
Silvatriumphantlylikenedhugeoildiscoverieslessthanadecadeagotoa
winninglotteryticket.
ButtheeconomiccrisisisnowcurbingBrazilsambitionsathomeand
abroad,anditsleadersarestrugglingtomendpoliciesthathelpedexpose
LatinAmericaslargestcountrytoitsworstslumpindecades.
ManyeconomistsarguethatBrazilstroubleshavetheiroriginsina
seriesofpolicyshiftsthatMs.Rousseffpursuedonceitbecameclearthat
theeconomywasslowingafteraburstof7.6percentgrowthin2010,the
fastestrateinmorethantwodecades.
HopingtopreventBrazilfromcoolingtoomuchafterthesizzlingboom
ofthepreviousdecade,Ms.Rousseff,67,aformerMarxistguerrillawho
wastorturedduringthemilitarydictatorshipinthe1970sandtookofficein
2011,doubleddownonbetsthatshecouldstaveoffasevereslowdownby
harnessingawebofgovernmentcontrolledbanksandenergycompanies.
Ms.Rousseffpressuredthecentralbanktoreduceinterestrates,
fuelingacreditspreeamongoverstretchedconsumerswhoarenow
strugglingtorepayloans.Shecuttaxesforcertaindomesticindustriesand
imposedpricecontrolsongasolineandelectricity,creatinghugelossesat
publicenergycompanies.
Goingfurther,sheexpandedtheswayofBrazilscolossalnational
developmentbank,whoselendingportfolioalreadydwarfedthatofthe
WorldBank.Drawingfundsfromthenationaltreasury,thebank,knownas
theB.N.D.E.S.,increasedtaxpayersubsidizedloanstolargecorporationsat
ratesthatwereoftensignificantlylowerthanthoseindividualscouldobtain
fromtheirbanks.

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AsaBoomFades,BraziliansWonderHowItAllWentWrongTheNewYorkTimes

Ms.Rousseffscriticsarguethatshealsobeganusingfundsfromgiant
governmentbankstocoverbudgetshortfallsassheandherleftistWorkers
Partyheadedintoelections.
Theydeliberatelydestroyedthepublicfinancestoobtainreelection,
saidAntnioDelfimNetto,87,aformerfinanceministerandoneofBrazils
mostinfluentialeconomists.Takingnoteofthegovernmentsinabilityto
reininspendingasabudgetdeficitexpands,Mr.DelfimNettoandother
economistsarewarningthatofficialsmaysimplyopttoprintmoremoney,
stirringghostsinaneconomyonceravagedbyhighinflation.
SomecriticscontendthatMs.Rousseffsmisstepswerenotonly
tacticalbutalsoideologicalinnature.Likeherpredecessor,Mr.daSilva,
sheandtheWorkersPartypursuedamodelthatenhancedthe
governmentscloutintheeconomy,especiallyinindustrieslikeoiland
banking.Whilethestrategyseemedtoworkforawhile,earlywarnings
aboutitsdurabilitywentunheeded.
Ourleaderswantedtofindtheformulatoincreasetheirpowerand
remaininoffice,evenifthismeantintensifyingmediocrityinaneconomy,
saidReinaldoGonalves,aneconomistattheFederalUniversityofRiode
JaneiroandaformeradviseroneconomicmatterstotheWorkersParty.
ButsupportersofMs.RousseffcontendthatBrazilremainson
strongerfinancialfootingthaninthepast,rulingouttheneedtorequest
emergencyloansfromtheInternationalMonetaryFund.Indeed,Brazil
remainsanetcreditorafteramassinglargeholdingsofUnitedStates
Treasurybondsthecentralbankguardsabout$370billionofforeign
currencyreserves.
Moreover,programsinwhichthegovernmentpaysmonthlycash
stipendstothepoor,acentralpillarofdeclininginequalitysincethe
WorkersPartygainedthepresidencyin2003,donotseemtobeatrisk.
EvenMs.Rousseffsopponentsacknowledgethatsuchprogramsarea
relativelycheapwaytocombatextremepoverty,effectivelyassuringtheir
continuity.

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AsaBoomFades,BraziliansWonderHowItAllWentWrongTheNewYorkTimes

JosGuimares,acongressmanfromtheWorkersParty,attacked
Standard&Poorsafterthedowngrade,callingitanagencyfromtheend
oftheworld.
Thisdowngradewontdiminishthegovernmentsspirittofind
solutionsforbalancingtheBrazilianeconomy,hesaid.
Still,Ms.Rousseffisfacingfiercecriticismasshetriestounwindsome
ofthepoliciesshepromotedinherfirstterm.Whileenergypricesare
fallinginmuchoftheworld,theyaresoaringinBrazilasthegovernment
loosensitspricecontrols.Residentialelectricityratesalonehavesurged
morethan40percentthisyearastheauthoritiestrytorecouplossesat
publicelectricitycompanies.
TheeconomicandpoliticalcrisesswirlingaroundMs.Rousseffare
nowfeedingoneanother.ArulingagainstMs.Rousseffbythefederal
accountscourtcouldopenthewayfortheimpeachmentproceedingsher
opponentshavebeenpushingfor.
TheeconomicslowdowninChinaisalsolimitingBrazilsmaneuvering
room.AsBrazilgrewmorereliantonexportingcommoditieslikeironore,
soybeansandoiltoChina,theshareofmanufacturedgoodsinitsexports
fellto45percentin2013from62percentin2000.
WearepayingthepriceinBrazilforthegovernmentsmistakesover
thepreviousdecade,saidAndrNassif,aneconomistatFundaoGetlio
Vargas,aneliteBrazilianuniversity.
Brazilsunemploymentrateisalreadysurging,hittingafiveyearhigh
of7.5percentinJuly,largelybecauseofstalledorabandoned
infrastructureprojectsasconstructiongiantsremainembroiledinthegraft
scandalaroundthenationaloilcompany,Petrobras.
Thescandal,inwhichcontractorspaidanestimated$3billionin
bribestoofficials,couldwipeouttheequivalentof2.5percentfromBrazils
grossdomesticproductin2015,accordingtoGOAssociados,aconsulting
firminSoPaulothatmeasuredjoblossesatcontractorsandthescaling

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AsaBoomFades,BraziliansWonderHowItAllWentWrongTheNewYorkTimes

backofaggressiveexpansionplansatPetrobras.
Notsurprisingly,thenationalmoodissouring.Only21percentof
Braziliansexpressoptimismaboutthecountrysfuture,thelowestinmore
thantwodecades,accordingtoasurveybyaleadingpollingfirm,the
BrazilianInstituteofPublicOpinionandStatistics,knownasIbope.The
poll,conductedfromMay14to18ininterviewswith2,002people,hada
marginofsamplingerrorofplusorminustwopercentagepoints.
Everythingistrashtoday,andIhavenoideaifIllfindajobwhenI
graduate,saidDaianeAndrade,21,abusinessstudentinRiodeJaneiro.
Unemploymentandinflationarerising.Justwhenyouthinkitcantget
worse,itdoes.
Unemploymentisexpectedtoclimbevenhigherastheauthorities
ponderwaystocutafederalbureaucracythatgrewalmost30percentfrom
2003to2013,to600,000civilservants.
Apensioncrisisisalsobrewing,partlybecauseoflawsthatallowmany
Brazilianstostartreceivingretirementbenefitsintheirearly50s,even
thoughlifeexpectancyhasincreasedandthefertilityratehasfallen,
limitingthenumberofyoungpeopletosupporttheagingpopulation.
Howcanapersonwhois52yearsoldbeabletoretirewitha
pension?LuizFernandoFigueiredo,aformercentralbankofficial,asked
reporters.Thesethingshavetobeconfronted.Ifnot,thecountrywill
becomeanotherGreece.
PartsofBrazilsbusinessestablishmentareinrevolt,openlyexpressing
disdain.Exame,aleadingbusinessmagazine,devotesanentiresection
calledOnlyinBraziltodocumentingproblemswiththepublic
bureaucracy.
Theseexamplesincludea$120millionlightrailsysteminthecityof
Campinasthatliesabandonedbecauseofpoorplanning,andameasure
requiringcompaniestoobtainaspeciallicensebeforeallowingemployees
toworkonSundays.

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AsaBoomFades,BraziliansWonderHowItAllWentWrongTheNewYorkTimes

EconomistswarnthatfixingBrazilsproblemscouldtakeyears,
drawinguneasycomparisonstothesocalledlostdecadeofhyperinflation
anddebtcrisisinthe1980s.ThepoliticalbattlesbetweenMs.Rousseffand
heropponentsareheighteningtheuncertaintyasmanytrytogauge
whethershewillsurvivethestorm.
Brazilianskeptondancingeventhoughthemusichadstopped,said
NormanGall,directoroftheFernandBraudelInstituteofWorld
EconomicsinSoPaulo.Now,theyarescared.
Correction:September11,2015
AnearlierversionofthisarticlemisstatedtheageofPresident
DilmaRousseff.Sheis67,not66.
MarianaSimescontributedreportingfromRiodeJaneiro.
AversionofthisarticleappearsinprintonSeptember11,2015,onpageA6oftheNewYork
editionwiththeheadline:AsaBoomFades,BraziliansWonderHowItAllWentWrong.

2015TheNewYorkTimesCompany

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