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Jeffrey Simpson (Bill Grimshaw)
Jeffrey Simpson (Bill Grimshaw)

Jeffrey Simpson

Great assets, so why hasn't Brazil done better? Add to ...

If it hasn't happened yet, Brazil will soon jump over Canada to become the world's third-largest agricultural exporter, after the European Union and the United States.

For the past decade, Brazil's agricultural exports have been soaring at about 10 per cent a year, compared to about 3 per cent for Canada. With China now Brazil's largest market for those products, and the Chinese willing to pay handsomely, the exports have produced a windfall for Brazil's economy.

Brazil has vast tracts of farmland, a temperate climate that can, in some cases, allow production of three crops a year, and forests that grow trees much, much faster than cold places such as Canada.

The result: Brazil is the world's leading exporter of sugar, chicken, beef, coffee, tobacco, orange juice and soy. It's fourth in cotton and pork. It also has huge amounts of arable land yet to be exploited. (It's also been cutting down too much Amazon forest for grazing land, a practice the government has pledged to curtail, although a certain skepticism is in order about its delivery on the promise.) Brazil is self-sufficient in oil now, but within a decade will be an exporter of note, courtesy of fields discovered deep offshore. It has a host of minerals, including precious metals.

Nature has also favoured the country in producing renewable energy. Whereas China and India are short of water, Brazil has it in abundance. Brazil gets about 15 per cent of its power from hydro, and 30 per cent from sugar-based ethanol, which is much more energy-efficient and climate friendly than ethanol produced from corn, as in Canada.

A gaggle of Brazilian firms is international in scope, from mining and engineering to construction and aviation. The banking system is dominated by three, big private companies that are, however, protected by the government from serious foreign competition, a bit as in Canada.

So with all these assets, why hasn't Brazil done better?

History is one answer. It had bad governmental systems of various kinds for a long time. The military left in 1985, but during its two decades in power, the economy was heavily protected, the state had its fingers in everything, and the economic principle was autarchy. Inflation was bad, growth slow, innovation limited. So give the country a break: It's only been emerging from those years for a quarter of a century.

Everywhere, there are complaints about infrastructure holding back growth. Whereas the Chinese are investing massively in rail and ports, Brazil has a pitiful rail network and plugged ports. Trucks are the major form of transportation, and the country's road system can't cope.

In China, research and higher education are national priorities: Both lag in Brazil. Top universities are good to excellent; the rest much less so. The same apparently goes for the preuniversity education system: some top schools, mostly private, but less than stellar public schools.

Brazil has wide open areas of its economy (where it is competitive), but it also protects other sectors from foreign competition, especially in certain industrial sectors. It's not easy for foreign entities to enter these sectors, except as joint-venture partners or suppliers to Brazilian firms. It's a kind of national industrial policy, popular politically, debatable economically.

Labour laws make shedding employees difficult, with resulting inflexibility in labour markets. The Brazilian legal system is deemed to be fair but very, very slow (even slower than snail-like Canadian legal processes). Bureaucracy is very slow, the rules for doing business complicated. The World Bank's 2010 Doing Business survey found procedural requirements for starting a business in Brazil took 120 days, compared to a regional average of 45 days.

There's no getting around the fact that poverty slows down any country's economic development (including Canada's), and Brazil has far too much of it. Poverty rates have been falling (as measured by the Gini coefficient), but a quarter of the population is defined as living in poverty.

The gap between the very rich (1 per cent of the population is thought to have 50 per cent of the national income) and the poor is immense. The visual contrast - to say nothing of the contrast in reality - between the gleaming towers of affluence and adjacent favelas, or shantytowns, is stark, ubiquitous and alarming.

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