Brazil towards the economic collapse
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Brazil's economy has faced a significant downturn due to the policies of the Dilma Rousseff and Michel Temer governments, with GDP falling to levels not seen since 2010 and widespread economic recession affecting multiple states across the country. The document highlights the severe impacts on various sectors, especially in industrialized states like Amazonas and São Paulo, as well as the Northeast region, which suffers from both drought and recession. It concludes that without a change in governmental approach and potential political restructuring, Brazil is at risk of continued economic decline and social upheaval.
Brazil towards the economic collapse
- 1. 1 BRAZIL TOWARDS THE ECONOMIC COLLAPSE Fernando Alcoforado * The disastrous Dilma Rousseff and Michel Temer governments contributed to Brazil's present lower GDP (Gross Domestic Product) than in 2010 and made the economy of 12 states of the federation plus the Federal District (DF) back to the baseline of the beginning of the decade (2010). This is shown in a study by Tendências Consultoria Integrada. The most significant losses occurred in the four states of the Southeast (São Paulo, Rio de Janeiro, Espírito Santo and Minas Gerais), Rio Grande do Sul and Paraná, Amazonas, Rio Grande do Norte, Pernambuco, Alagoas, Sergipe and Bahia, beyond the Federal District. This means that the recession that hit Brazil was widespread, affecting both the richest regions of the Southeast and South, as well as the poor states of the Northeast. The bad conduct of Brazilian economic policy is the main cause of Brazil's economic debacle. The states of Brazil that had economic dynamics linked to government policies that were unsustainable, stimulating consumption, high BNDES resources and state- owned investments like Petrobras, will have to make a greater effort to recover again. This is the case of Rio de Janeiro, for example, which had a GDP drop of 7.2% in two years, and presented an unprecedented fiscal crisis. With the exception of the services sector, whose performance in Rio de Janeiro began to worsen in the second half of 2016, all other sectors in the regional economy not only showed large declines from mid-2015, but performed worse than average in Brazil. Amazonas and São Paulo are two highly industrialized states, and therefore more sensitive to economic cycles. Amazonas had the largest cumulative drop in GDP (12.2%) in the years 2015 and 2016 and the economy of São Paulo had a cumulative decrease of 6.9%. In the Amazon, unemployment in the Free Trade Zone has a domino effect on the state's economy. The current situation is about 80 thousand employees in the 600 companies in the Free Trade Zone. In its best phase, the complex reached 130,000 employees. The weight of industry in São Paulo is very large in the state's economy, although the service sector has already exceeded it. And because the two drivers in the industry, durable consumer goods and capital goods, are very sensitive to credit and employment, it often shrinks in times of recession, triggering a negative effect on other sectors and segments. In the Northeast, the economic recession and the severe drought have punished the region in recent years. One of the most affected regions was the one that includes soy, maize and cotton planting areas of Maranhão, Tocantins, Piauí and Bahia. Even with an increase in planted area and investments in technology, these states fell in the gross value of production between 8% and 44% in the 2015/2016 harvest. As the expectation is of record grain harvest in 2017 (215 million tons) these units of the federation have a better possibility of recovery than the other states. In 2017, with regularized rains, Maranhão, Tocantins, Piauí and Bahia should produce between 12 and 20 million tons of grains, returning to be responsible for 9% to 10% of the Brazilian crop. In the period prior to the Brazilian crisis, Northeastern, Midwest and Northern states were growing above the average of the Brazilian GDP, which between 2002 and 2014 expanded 3.5% per year. As the South and Southeast are responsible for 71% of the
- 2. 2 national GDP, they have rates closer to the result achieved by Brazil. Because they are not industrialized, the North and Northeast have economies of low dynamism because there is no chaining effect either forward or backward in the economic system. The Espírito Santo had the second worst performance with the recession. Its GDP fell by 11.5% in 2015 and 2016. Only Amazonas had a worse result (-12.2%). The Espírito Santo economy was hit hard by the Samarco disaster in Mariana (MG), which culminated in the shutdown of the miner's activities, which is still inoperative. The Samarco pelletizing plants are located in Anchieta (Espírito Santo). All of this is compounded by the fact that Brazil's public accounts show deficits projections expected by the Temer government in the budget of the Union of R$ 159 billion in 2017 and also in 2018, R$ 139 billion in 2019 and R$ 65 billion in 2020 which demonstrate, not only, the incompetence of the Michel Temer government that insists on maintaining the failed neoliberal economic policy that has led the country to the status of "scorched earth" since 1990. A fiscal target of successive deficits from 2017 to 2020 will increase even more the government's huge debt, which will need to borrow to fund spending. According to an unpublished study by Credit Suisse Bank, with data from 68 countries, the gap in Brazilian public sector accounts will only be lost to Venezuela's deficit. With the spending path predicted by Credit Suisse Bank, Brazilian public debt will reach 99% of GDP in 2024. Fitch warned of the risk of downgrading of Brazil's sovereign credit note if the government does not adopt extra measures to contain expansion of public debt. Countries that were on the verge of breaking recently, such as Greece, Spain and Portugal, do not find a deficit as alarming as the Brazilian. The conclusion Is that the challenge of balancing government accounts is high. In addition, the expected correction may occur too late. In the Fitch Ratings analysis, Brazil's economic scenario has improved with the fall in inflation due to the recession, but stagnant business confidence, extremely high consumer debt and high unemployment hamper Brazil's economic recovery. According to Credit Suisse, even if the next post-Temer government pursues the limit on spending expansion and pension reform is approved, public debt would cease to grow only in the middle of the next decade. Waiting ten years to finally stabilize Brazil's accounts is a very long time. Neither the limitation on the expansion of government spending (PEC 241) nor the possible approval of the Pension Reform will be insufficient to avoid this scenario. The patience of the population towards the government will come to an end. The maintenance of this policy by the Michel Temer government means continuing the economic "bleeding" that leads Brazilian companies to bankruptcy and the suffering of the immense majority of the Brazilian population with mass unemployment. This situation will only come to an end with the departure of Michel Temer from the presidency of the Republic and its ruling group with the installation of a national salvation government made up of personalities with proven competence and unblemished morality to convene a new Constituent Assembly to correct the distortions of the 1988 Constitution and make it possible to establish new directions for Brazil, not only in economic, political and social terms, but also in ethical and moral plans. After the Constituent Assembly, with the political sanitation of Brazil, general elections would be called. The current moment is demanding a great mobilization of the
- 3. 3 population and an effective participation of entities such as the OAB, ABI, among others, besides the participation of great personalities related to the legal areas, science and the arts in general and politicians and political parties committed to the reorganization of national life. It is not possible for the Brazilian people to remain in current passivity by watching the political institutions demoralized and an anti-social and anti-national government like Michel Temer's continuing to turn Brazil into a scorched earth. In order to solve this impasse, it is necessary that the population, civil society entities and the great personalities leave the passivity in which they are to make viable the constitution of a government of national salvation that calls a new Constituent Assembly to construct a new social pact in the Brazil in order to reorder the national life without which, will inevitably occur the social upheaval in the country that could turn into a civil war of unpredictable consequences. * Fernando Alcoforado, 77, member of the Bahian Academy of Education and the Brazilian Academy of Letters - Bahia Section, engineer and doctor in Territorial Planning and Regional Development by the University of Barcelona, university professor and consultant in the areas of strategic planning, business planning, regional planning and planning of energy systems, is the author of the books Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os Condicionantes de Desenvolvimento do Estado da Bahia (PhD Thesis, University of Barcelona, http: //www.tesisenred.net/handle/10803/1944, 2003), Globalização e Desenvolvimento (Editora Nobel, São Paulo, 2006), Bahia- Desenvolvimento da Bahia do Século XVI ao Século XX e Objetivos Estratégicos na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social Development- The Case of the State of Bahia (VDM Verlag Dr. Müller Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011), Os Fatores Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012), Energia no Mundo e no Brasil- Energia e Mudança Climática Catastrófica no Século XXI (Editora CRV, Curitiba, 2015), As Grandes Revoluções Científicas, Econômicas e Sociais que Mudaram o Mundo (Editora CRV, Curitiba, 2016) e A Invenção de um novo Brasil (Editora CRV, Curitiba, 2017). Possui blog na Internet (http://fernando.alcoforado.zip.net). E- mail: [email protected].