Santa Claus in Brazil – Illusion and Reality

Brazil Takes Off
Brazil Takes Off

The following is the first article from our corespondent in Porto Alegre, Brazil.

Lula (the nickname of Brazilian president Luiz Inácio Lula da Silva) is on a roll. He will complete his second and final term in office next year, basking in adulation both at home and abroad. He was everywhere at Copenhagen, schmoozing with world leaders from China, India, America … anybody who really mattered. He has an 80% popularity rating at home, and, according to Barack Obama, “He’s the man!”

It is hard to see his smiling, round and bearded face at this time of year without thinking about Papai Noel. After all, under his leadership Brazil has finally “emerged”. In spite of the global economic crisis, its economy is booming, its currency and stock markets are near all time highs, and the world is finally paying attention. The Economist magazine recently displayed a cover entitled “Brazil takes off” and the BRIC (Brazil – Russia – India – China) acronym has become one of the foundations of current day economic terminology. The future is even more encouraging: Brazil’s potential for growth in agricultural production is one of the highest n the world (even without damaging more of the Amazon rainforest), and a recent massive offshore oil find called the “presal” holds out the promise of major income flows for many years to come.

Lula's no Papai Noel
Lula's no Papai Noel

It hasn’t been all luck; Brazil’s Papai Noel can indeed claim a great deal of credit. When the former machine operator and his Workers Party came to power in 2002, in spite of fears to the contrary, they sensibly continued the liberal economic policies of the preceding government, but also introduced a range of policies to better the plight of the Brazilian poor. The Bolsa Familia, a monthly allowance to poor families who keep their children in school and their medical inoculations up to date, has been credited with allowing millions of Brazilians to move into the “lower middle class”. Sales of consumer goods, from refrigerators to TVs to small cars have exploded in recent years and the malls are packed this Christmas. To counter the economic crisis, the government has invested billions in affordable housing and infrastructure projects. Brazilians have a sense of pride and confidence about the future that has been lacking until recently (in everything other, of course, than the country’s prowess in football).

And yet … so much of the optimism seems to be based on an illusion. Some of the signs are glaring. This government, like those before it, has made little progress in improving the abysmal state of public education and health care. Violence and crime remain rampant. The favelas (slums) of Rio de Janeiro at times resemble war zones, with invading police units facing drug gangs armed with equal or superior fire power. Public infrastructure, especially in the north of the country, is totally inadequate and a major impediment to development. Politicians at all levels are assumed to be corrupt. Recent hidden camera footage shown on national television, of politicians stuffing wads of cash from contractors into their underwear and socks, has confirmed existing perceptions (and provided enormous scope for satirists and cartoonists).

Upon closer inspection, it becomes clear that Papai Noel isn’t quite the altruistic benefactor he seems to be. What he gives so generously and publicly with one hand, he quietly takes away with the other. Brazil is one of most highly taxed countries in the world. Yes, the expensive toys of the middle and upper class, such as imported luxury cars and large LCD TVs, cost two to five times as much as elsewhere. But, far more importantly, many struggling Brazilians must spend excessive portions of their income on drugs not covered by or available from the public health system, at prices that include some 30-40% of government tax. Likewise many of the basic food items sold in Brazilian shops and supermarkets have prices inflated by excessive taxes.

The poor working Brazilian who needs to buy a fan, stove or refrigerator for his home soon finds another hand in his pocket as well. The good news is that he can buy these items on credit with a small down payment. The bad news is that he will pay effective annual interest rates well in excess of 40%. In a country with stable inflation hovering around 4-5%, an unholy alliance of powerful banks and apparent government indifference has kept interest rates at totally unjustifiable levels, further reducing the limited purchasing power of the average Brazilian. Yes, the Brazilian worker  is justifiable proud of his country, but he is also very angry.

Brazil has some of the nicest people, finest music, and most beautiful beaches in the world, but it is a long way from being a paradise, even at Christmas.


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