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3 revealing myths about Brazil's crisis

Demonstrators rally for Brazilian President Dilma Rousseff's impeachment along Paulista Avenue in Sao Paulo on March 16, 2016.
Demonstrators rally for Brazilian President Dilma Rousseff's impeachment along Paulista Avenue in Sao Paulo on March 16, 2016.
MIGUEL SCHINCARIOL/AFP/Getty Images

To many observers, Brazil appears one swarm of locusts short of a full-fledged biblical plague. Whether it’s the off-again, on-again impeachment of President Dilma Rousseff, the country’s worst recession in 80 years (or maybe ever), the spread of the bizarre and frightening Zika virus, or its continued struggle with drug gangs and homicides, Brazil looks anything but ready to host the world at the Summer Olympics this August.

Without a doubt, it has been a terrible 2016 — and a huge letdown after Brazil’s economic boom of the 2000s, which helped it win the Olympics bid in the first place. But the particularly confusing nature of this crisis, paired with the convergence of the world’s media hordes on Rio de Janeiro, has also produced a truly epic amount of misinformation, stereotypes, and wishful thinking.

So in the spirit of better understanding the Land of Samba and Surf (oops, a stereotype!), and trying to gauge where the political and economic crisis might be headed next, here are three common myths about Brazil’s current crisis. The myths themselves are revealing in what they say about the country’s image — among locals and rubbernecking visitors alike.

Myth 1: Brazil is "the country of the future, and it always will be"

This quote, based on the title of a 1941 book about Brazil by the Austrian novelist Stefan Zweig, gets trotted out every time the country hits a rough patch. (In fact, if you’re looking for a good drinking game during the Olympics, try downing a swig of Brazilian cachaça every time Bob Costas says it.)

The idea is that foreigners are always dazzled at first by the country’s abundant natural resources, tropical beauty, and charismatic, entrepreneurial people. But, the theory goes, Brazil is also cursed by a series of ills that will always hold it back — and keep its apparently glorious potential just out of reach.

It’s the kind of tragicomic, authoritative-sounding phrase journalists and pundits love. The problem is that the facts just don’t back it up.

In reality, Brazil has seen tremendous progress throughout most of the past century. From 1930 to 1980, only Japan’s gross domestic product (GDP) grew faster than Brazil’s among major economies. Since the mid-1990s, solid growth and innovative social programs have lifted roughly 40 million people — or about 20 percent of the population — out of poverty and into the middle class.

This strong, broad-based growth transformed Brazil into the world’s eighth-biggest economy, and also made it one of the few countries that actually reduced inequality in recent years.

So why does Zweig’s refrain still get repeated today?

Well, all that growth started from a very, very low historical baseline — and poverty and inequality remain very high. Put another way: A visitor can arrive in Rio today, see the favela slums and smell the sewage in the streets and ocean, and be forgiven for believing, at least at first, that progress has never touched Brazil’s shores.

For the country’s huge social debts, we can principally blame slavery. Over the centuries, Brazil imported more than 10 times as many slaves as the United States, and was the last country in the Americas to abolish the practice, in 1888. Freed slaves were largely abandoned to their own fate, with no access to education or health care.

This neglect continued well into the 20th century. As recently as the 1940s, fully half of Brazilians were illiterate, malnourished, and barefoot. Life expectancy at birth was only 43, compared with about 70 in the United States.

Today’s urban favelas are largely inhabited by descendants of slaves who emigrated from Brazil’s agricultural northeast in search of work and at least some amenities of modern life. The raw sewage in Rio’s Guanabara Bay that Olympic swimmers and sailors will have to reckon with is proof that these migrants, and their offspring, are still waiting all these decades later for the government to provide even the most basic services.

But, believe it or not, life for favela dwellers and Brazilians as a whole is significantly better than it used to be, thanks to the aforementioned economic progress.

About half the country is now considered to be in the middle class, for the first time ever. Hunger ceased to be a major issue about a decade ago. Literacy is above 90 percent. And life expectancy at birth is now 74, compared with 79 in the United States — a huge narrowing of the gap in just one lifetime.

This does not mean that Brazil should be content with its accomplishments or with the status quo. Rather, it means that despite the country’s current mess, there is nothing irretrievably flawed or broken about Brazil. Progress is not only possible but the norm.

Myth 2: Brazil’s huge export sector will eventually turn the economy around

Many outsiders think of Brazil primarily as a huge exporter of commodities. And there’s truth to this. It’s the world’s largest exporter of sugar, coffee, orange juice, and beef, and is near the top in soy, ethanol, and iron ore. Demand for these commodities, mainly from China, was a big driver of the economic boom in the past decade.

But in reality, exports are a relatively tiny share of Brazil’s overall economy. Trade only accounts for about 24 percent of Brazil’s GDP, the lowest ratio of any major economy in the Western Hemisphere, according to data from the International Monetary Fund.

By comparison, Mexico’s ratio is 60 percent, while Peru is at 50 percent and Argentina is at 33 percent. The trade-to-GDP ratio in the United States is 28 percent.

Brazil’s economy is really best thought of as a large, mostly closed consumer market, shielded from the outside world by tariffs, "local content" rules, and other protectionist tools.

Whether this is sustainable over time is open to debate. But this much seems clear: Brazil is not going to export its way out of this recession.

The time-worn path by which countries stumble into crisis, their currencies devalue, and their exports become more competitive, eventually lifting the whole economy out of trouble (as happened in East Asian countries in the late 1990s, for example) isn’t likely to happen here, as trade probably just isn’t important enough to Brazil to pull this off. China isn’t helping this time around, either.

Instead, Brazil will have to look for a solution within its own borders. But the news here isn’t good either. Consumers in Brazil are overburdened by debt after the ups and downs of recent years. The only big engine left is domestic investment, which has declined for the past 10 straight quarters. Reversing that slide will require a revival of confidence, which is, in turn, in short supply because of the political crisis.

Which brings us to the final myth…

Myth 3: "Everything will be fine once Dilma Rousseff is gone"

You hear this one mostly from Brazilians. And there’s no doubt that President Rousseff deserves an enormous amount of blame for the current crisis.

Her disastrous handling of the government budget (and ensuing fudging of the numbers, for which she is facing impeachment), her refusal to engage in a new wave of economic reform, and her mismanagement of the corruption scandal at the state-run oil company Petrobras have destroyed much of the goodwill and stability that previous governments in Brazil had painstakingly built over the past 20 years.

Her replacement, Vice President Michel Temer, will be a clear upgrade in terms of his economic philosophy. Based on his probable picks for finance minister and other key cabinet positions, Temer will be much less likely than Rousseff to meddle in areas of the economy such as interest rates, or the rate of return for investors on infrastructure projects, that are best left to independent regulators or the private sector.

Temer may even take on longstanding obstacles to growth such as Brazil’s tax code (which the World Bank has called the world’s most complex) and the gaping hole in its pension system.

The problem is most of what’s needed to fix Brazil’s economy will be very unpopular, at least in the short term. And Temer will begin his presidency in a pretty deep hole in terms of popularity and legitimacy.

While 62 percent of Brazilians said in a recent nationwide poll that they wanted to see Rousseff impeached, a whopping 58 percent said the same of Temer. Only 12 percent said they expected him to be a good leader, and just 2 percent said they’d vote for Temer for president if there were an election tomorrow.

Temer reportedly isn’t interested in being elected — but he will need the Brazilian Congress’s help to pass a lot of measures, and they are less likely to support an unpopular leader.

That’s a pretty steep uphill climb, especially when Rousseff is likely to spend the next few months touring Brazil and the world, accusing Temer of having led a "coup" against her. A year from now, when the Olympics are a distant memory, the country could still be mired in crisis.

As one of the most famous local songwriters, Tom Jobim, once said, "Brazil is not for beginners." That’s one stereotype that does ring true.

Brian Winter is the vice president of policy of Americas Society/Council of the Americas and editor in chief of Americas Quarterly, a magazine and website about politics, economics, and culture in Latin America.

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