NOT long ago, the BRICs were lionised as fast-growing superpowers-in-waiting. These days Russia is portrayed as a corrupt petrostate. India is ensnared in red tape, unable to muster the political will to break free. The mighty Chinese economy has slowed in recent weeks (see article). Even South Africa, which considers itself to be the “S” in BRICs, seems sluggish and hidebound next to the gazelles to its north.
Now it is Brazil's turn. Much is being made of Brazilian threats of huge fines and prison sentences against executives of Chevron, an American oil company, after a small leak of oil off the coast. Critics have taken to complaining about Brazil's expensive welfare state and dependence on commodity exports. Its torpid economy ground to a halt in the middle of last year. Admittedly officials say that they deliberately cooled the economy, to drive down an overvalued currency and astronomic interest rates. Yet their expectation of growth of 4.5% this year and a bit more next looks implausible.
Does Brazil deserve the backlash? Some of the criticism is misplaced or inaccurate. Unemployment is low, wages rising and foreign direct investment pouring in ($67 billion in 2011, a record). Most economists reckon that Brazil can continue to grow at around 3.5% without triggering higher inflation. Many countries would love to have Brazil's highly productive farms and its big new oilfields, two of the sources of its commodity dependence. Compared with Russia, China and even India, Brazil more clearly enjoys the rule of law. Its welfare state represents a defensible political choice for a country of yawning inequalities. Above all, Brazil's strength is a democracy that has yielded broad political continuity and economic stability.
Even so, its government must start to confront the country's weaknesses. That 3.5% growth rate may seem lavish by Western standards, but it is below both what Brazil needs to be to continue recent social gains—and what it could be. Some of the sources of the faster growth of recent years may now be exhausting themselves. These included a bonus from the stabilisation, opening and reform of the economy in the 1990s, and a huge lift in the country's terms of trade, thanks to China's appetite for commodities. Henceforth Brazil's labour force will not grow as fast, even as the pension bill rises. Domestic credit cannot go on increasing at today's rate, as households are starting to struggle with debt (see article).
