Synthesis of the Brazilian Economy

BRAZIL ECONOMICS - Report 08 Jul 2024 by Alexandre Schwartsman, Cristina Pinotti and Diego Brandao

OVERVIEW

RADICALIZATION AND UNCERTAINTY

It was necessary for Brazil to experience a much worse performance than emerging markets in general, as the Real weakened to R$ 5.70 per dollar, while expectations for both interest rates and inflation increased significantly, for President Lula to publicly backtrack in his inglorious battle against the Central Bank and its president, Roberto Campos Neto. The costs and repercussions of the created uncertainty will continue to be felt unless the president finds a rather different way to run the country.

CONTROLLED PYROMANIA?

Recalling Acemoglu, Egorov, and Sonin, “... institutions, as constraints on human behavior and a framework for coordinating expectations, are only meaningful if they are at least to some degree durable”. By definition, autocrats, from both left and right, abhor the limits imposed by democratic rules, and try to benefit from the chaos they create. Alternation of power is their greatest fear, and instead of governing for the common good, they spend time plotting how to perpetuate their power. They appoint cronies to the government positions ignoring criteria of impartiality, morality, and efficiency, harming the quality of public services and spending, as well as democracy itself.

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