The Economic Policies and Performance of Brazil’s Leftist Government: A Critical Analysis

As is well known, the Brazilian economy moved from a situation of stagflation (low economic growth and high inflation) and fiscal and external vulnerabilities in the 1990s and until 2002, to another characterized by “higher” economic growth, low inflation and improved macroeconomic fundamentals, that is, fiscal budget balance, sustainable public debt, and balance of payments equilibrium, from 2003 to 2012. Table 4.1 shows that, in the latter period, under leftist governments: (i) GDP grew by an average of around 3.8 percent per year, (ii) annual inflation averaged 5.8 percent, (iii) net public debt dropped from 52.4 percent to approximately 35.0 percent of GDP, and (iv) the external situation became comfortable, with foreign reserves increasing almost 657.0 percent from 2003 to 2012 to reach a total US$373.2 billion in 2012 (and, as a result, Brazil becoming a net creditor on the international financial market). Of course, these figures are modest in comparison with other emerging economies, such as China and India, but they are a remarkable change for Brazil. Moreover, since 2003, Brazil has displayed a healthy combination of macroeconomic resilience, sustained job creation, income redistribution and poverty reduction.