Fernando Alcoforado*
This article aims to show how the Lula government will be able to rebuild the Brazilian economy that has been in economic decline since 1980. The economic decline in Brazil resulted from the adoption of the neoliberal economic model since 1990, from the adoption of the spending ceiling in the federal government budget by the Michel Temer government and maintained by the Bolsonaro government and the growing commitment of the federal government budget to the payment of the public debt that are making it impossible for the Brazilian State to act as an agent for the promotion of national development. This article aims to demonstrate that the reconstruction of the Brazilian economy requires the abandonment of the neoliberal economic model with its replacement by the developmentalist national economic model to promote economic growth and the reduction of unemployment, the abandonment of the existing public spending ceiling policy in Brazil to unfreeze them in order not to restrict the federal government’s action in promoting public investment and renegotiate with public debt creditors the extension of the public debt payment period for the federal government have resources for investments because, if everything continues as it is, they will constitute impeding factors to the country’s economic and social progress.
1. The need to abandon the neoliberal economic model and replace it with the developmentalist national economic model to promote economic growth and reduce unemployment
Figure 1 shows that the participation of Brazil’s GDP in world GDP increased from the country’s independence in 1822 until 1980 and that, from 1980 onwards, there was a sharp decline until 2022. This means that Brazil has experienced economic decline in the last 42 years years old.
Figure 1- Share of Brazil’s GDP in world GDP from 1822 to 2022
The period between 1930 and 1980 was the period of greatest economic and social development achieved by Brazil because the country took a leap in socio-economic growth, as the population grew 3.3 times and the GDP grew 18.2 times, especially between 1950 and 1980, when the Brazilian population grew 2.8% per year, the Brazilian economy grew 7% per year and per capita income grew 4.2% per year. It was thanks to the developmentalist national economic policy put into practice by the Brazilian government that Brazil had high rates of social and economic development from 1930 to 1980. During this period, the Brazilian government played an active role in planning and inducing the country’s development, with emphasis on development of the internal market, with public investments, especially in economic infrastructure (energy, transport and communications) and social infrastructure (education, health, basic sanitation and housing), with import-substituting industrialization, with the implementation of state-owned companies to operate in strategic sectors for national development and offset the weaknesses of national private capital, with the granting of tax and financial incentives for industrial development and for all regions of Brazil, with the adoption of policies for scientific and technological development and with the policies to protect national companies from the predatory competition of foreign capital and imported products. It cannot be denied that there were positive legacies of the Brazilian national developmentalism from 1930 to 1980, such as, for example, the implantation of the industrial park in São Paulo and in other regions of the country, the increase in the size of the GDP, the growing generation of jobs and income, the increase in national income and the modernization of Brazil.
The causes of Brazil’s economic and social decline from 1980 to 2022 are related to the fact that, from 1990 onwards, Brazilian governments adopted the neoliberal economic model that is largely responsible for leading Brazil to economic bankruptcy and the social devastation of this period despite the efforts of the Lula and Dilma Rousseff governments to combat hunger and poverty in the population with income transfer programs such as Bolsa Família, among other social initiatives. It is worth noting that the neoliberal economic model has the following basic principles: 1) minimal participation of the State in the direction of the national economy; 2) privatization policy for state-owned companies; 3) little government intervention in the labor market; 4) free movement of international capital and emphasis on globalization; 5) opening of the economy to the entry of multinationals; 6) adoption of measures against economic protectionism; 7) reducing the bureaucracy of the State with the adoption of simpler laws and economic rules to facilitate the functioning of the economy; 8) decreasing the size of the State to make it impotent under the pretext of making it more efficient; 9) non-interference by the State in the prices of products and services, which must be determined by the market based on the law of supply and demand; 10) control of inflation by the State through monetary policies based on inflation targets; 11) adoption by the State of the floating exchange rate policy; and, 12) obtaining a fiscal surplus to pay the public debt service.
Practice has demonstrated the infeasibility of the neoliberal economic model in Brazil. The current economic recession, the accentuated deindustrialization of the country, the insolvency of the Union, States and Municipalities, the disproportionate increase in the federal public debt, the generalized bankruptcy of companies and mass unemployment demonstrate the unfeasibility of the neoliberal model implemented in Brazil. It is proven, therefore, that Brazil’s insertion into neoliberal economic globalization from 1990 onwards with the adoption of the neoliberal economic model was extremely negative from an economic and social point of view. Not only Figure 1, but also Figure 2 make it quite clear that Brazil’s insertion into neoliberal economic globalization from 1990 onwards meant a drop in GDP growth compared to the rates achieved from 1930 to 1980 during the governments of Getúlio Vargas, Juscelino Kubitschek and the post-1964 military governments, when Brazil adopted the national developmentalist economic model and presented ten-year GDP growth rates between 4.4% and 8.6%. However, Brazil presented very low ten-year GDP growth rates of less than 3.7% from 1991 to 2020 with the adoption of the neoliberal economic model.
Figure 2- Decennial GDP growth rates in Brazil (%)
The economic development achieved by Brazil during the period 1930/1980 with the national development model was sustainable due to the high rates of public and private investment that occurred, as shown in Figure 3, unlike the period 1990/2019, which showed a decline with the adoption of the economic model neoliberal.
Figure 3- Investment rate in Brazil (% GDP)
Source: https://blogdoibre.fgv.br/posts/taxa-de-investimentos-no-brasil-menor-nivel-dos-ultimos-50-anos
In the period 1930/1980, with the adoption of the developmentalist national economic model, there were large investments by the federal government in the expansion of economic infrastructure (energy, transport and communications) and social infrastructure (education, health, housing and basic sanitation) and national private investments and foreigners in the expansion of industry, commerce and services. It was these investments that contributed to the high GDP growth in Brazil from 1930 to 1980. In the period 1989/2019, with the adoption of the neoliberal economic model, there was a drop in the rate of public and private investment in the Brazilian economy, which fell from 27% of the GDP in 1989 to 15.5% of GDP in 2019, as shown in Figure 3, a fact that explains the drop in GDP growth in the same period and Brazil having been led to economic stagnation and consequently to the vertiginous increase in unemployment, to the drop in household consumption and the widespread bankruptcy of companies in the country.
Another serious consequence for Brazil imposed by the neoliberal economic model was the process of deindustrialization of the Brazilian economy in the period 1989/2019, as shown in Figure 4. The analysis of Figure 4 highlights the decline in the participation of industry in the formation of Brazil’s GDP from 1987 to 2019, which fell from 27.3% in 1987 to 11% in 2019, unlike what happened in the period 1947/1987 when the national developmentalism economic model was adopted and its participation in the GDP of Brazil evolved from 16.5% in 1947 to 27.3% in 1987. This means that neoliberal economic globalization also contributed to the deindustrialization of Brazil. Deindustrialization occurred in Brazil due to the opening of the Brazilian economy, which caused the national industry to be destroyed with competition from imported products.
Figure 4- Participation of industry in the formation of Brazil’s GDP (% GDP)
Source: https://valoradicionado.wordpress.com/tag/pib/
From the above, it can be said that the Brazilian economy will only grow again if the neoliberal economic model is abandoned and replaced by the national developmentalist economic model with the Brazilian State acting as an inducer of economic and social development, which is the condition for raising public and private investment rates in the economy, stop the country’s deindustrialization and promote the growth of Brazil’s GDP. The national developmentalist experience from 1930 to 1980 in Brazil is a clear demonstration of the need for the Brazilian national State to act as an inducer of the national developmentalist process.
2. The need to abandon the existing public spending ceiling policy in Brazil in order to unfreeze them in order not to restrict the federal government’s action in promoting public investments
For the Lula government to qualify itself to act as an inducer of development in Brazil, it consists of putting an end to the neoliberal policy of the existing public spending ceiling in Brazil, because it is an impeding factor to the country’s economic and social progress. The Spending Ceiling inserted in the Constitution of Brazil based on PEC 55/2016 during the Michel Temer government is a crime against the development of Brazil because it limited public spending for the next 20 years, starting in 2017, which will only be readjusted based on on the official inflation of the previous year with the possibility of revision from the tenth year onwards. This means that the growth of public spending will be completely controlled by law and the federal government will be prevented from preparing the Union’s budget larger than the previous year, being able only to correct its values according to inflation. This implies that, in practice, public spending will not be able to grow during its 20-year term, that is, public spending will be frozen for 20 years, compromising public investments in infrastructure of energy, transport, communications, education, health, basic sanitation, and popular housing necessary for the economic and social development of Brazil.
The public spending ceiling was approved by the National Congress on the grounds that the containment of Union spending would reduce the public debt, which, quite the contrary, is on an upward trajectory, as shown in Figure 5.
Figure 5- Evolution of the Public Debt in Brazil
The exponential increase in the public debt has resulted in the growth of the primary deficit (Figure 6) of the federal government since 2015, which, in order to cover it, has become even more indebted with the sale of public securities, the consequence of which is the commitment of the budget of the Union that allocated 50.8% of the resources for the payment of interest and amortization of the public debt in 2021 (Figure 7). It should be noted that the primary deficit corresponds to the difference between government expenditures and what is collected from taxes without considering the expense with the payment of interest and the amortization of the public debt. The total public deficit corresponds, therefore, to the sum of the primary deficit and expenditure on interest payments and debt amortization. Figure 6 shows that until 2015 the federal government collected more than it spent to maintain the government administrative machinery. It should also be noted that the more the federal government has in primary deficit, the more its debt increases and it pays more in interest and amortization of the public debt, which means that there are fewer resources to meet the needs of Brazilian society in the various areas of responsibility of the federal government, such as education, health, among others.
Figure 6- Federal government primary deficit
Source: https://analisemacro.com.br/economia/politica-fiscal/por-que-a-reforma-da-previdencia-e-prioritaria/
Figure 7- Federal budget in 2021
3. The need to renegotiate with public debt creditors the extension of the public debt payment term for the federal government to have resources for investments
In order to reduce the Union budget commitment each year, which allocated 50.8% of the resources for the payment of interest and amortization of the public debt in 2021 (Figure 7), the federal government needs to renegotiate with its creditors the extension of the payment of interest and amortization of the public debt so that the federal government has resources to invest in the country’s economic and social infrastructure. If the purpose of the Brazilian government is to reduce the public debt, the correct thing is to promote economic growth in Brazil, which is impossible to achieve with the existence of the neoliberal economic model and the public spending ceiling. The country’s economic growth and the extension of interest payments and amortization of the public debt would be the strategies to be adopted to reduce the public debt in Brazil and not the establishment of the public spending ceiling as adopted by the Michel Temer government and maintained by the government Jair Bolsonaro. Economic growth can only happen with the federal government playing a proactive role in making investments, especially in infrastructure, which cannot occur with the existence of the “straitjacket” represented by the public spending ceiling. In addition to economic growth, another basic recipe for reducing the public debt is for the federal government not to spend more than its tax revenues.
4. Conclusions
To rebuild the devastated Brazilian economy, the Lula government must adopt the following strategies:
i) Abandon the neoliberal economic model that has devastated the Brazilian economy from 1990 to the present day with its replacement by the national developmentalist economic model to promote economic growth and the reduction of unemployment in Brazil.
ii) Abandon the current policy of capping public expenditure in Brazil to unfreeze it so as not to restrict the action of the federal government in the promotion of public investment.
iii) Renegotiate with public debt creditors the extension of the public debt payment deadline so that the federal government has resources for investments.
Without the adoption of these strategies, the Lula government will be prevented from promoting economic growth in Brazil and fighting the recession with the adoption of compensatory measures from the macroeconomic point of view.
* Fernando Alcoforado, awarded the medal of Engineering Merit of the CONFEA / CREA System, member of the Bahia Academy of Education, of the SBPC- Brazilian Society for the Progress of Science and of IPB- Polytechnic Institute of Bahia, engineer and doctor in Territorial Planning and Regional Development from the University of Barcelona, university professor and consultant in the areas of strategic planning, business planning, regional planning, urban planning and energy systems, was Advisor to the Vice President of Engineering and Technology at LIGHT S.A. Electric power distribution company from Rio de Janeiro, Strategic Planning Coordinator of CEPED- Bahia Research and Development Center, Undersecretary of Energy of the State of Bahia, Secretary of Planning of Salvador, is the author of the books Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem Mundial (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado. Universidade de Barcelona,http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e Desenvolvimento (Editora Nobel, São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social Development- The Case of the State of Bahia (VDM Verlag Dr. Müller Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011), Os Fatores Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012), Energia no Mundo e no Brasil- Energia e Mudança Climática Catastrófica no Século XXI (Editora CRV, Curitiba, 2015), As Grandes Revoluções Científicas, Econômicas e Sociais que Mudaram o Mundo (Editora CRV, Curitiba, 2016), A Invenção de um novo Brasil (Editora CRV, Curitiba, 2017), Esquerda x Direita e a sua convergência (Associação Baiana de Imprensa, Salvador, 2018), Como inventar o futuro para mudar o mundo (Editora CRV, Curitiba, 2019), A humanidade ameaçada e as estratégias para sua sobrevivência (Editora Dialética, São Paulo, 2021), A escalada da ciência e da tecnologia e sua contribuição ao progresso e à sobrevivência da humanidade (Editora CRV, Curitiba, 2022) and a chapter in the book Flood Handbook (CRC Press, Boca Raton, Florida, United States, 2022).
Site Title 