Brazil: will promise land deliver?

The country of carnival and soccer has always been an attractive touristic destination, Brazil has always been known for its friendly people, majestic beaches, great parties, wonderful biodiversity and beautiful women. But in the last few years the nation has been on the spotlight for another reason, its economic boom. Brazil is considered an emerging economy and there has been a lot of hype when projecting its economic growth, Guido Mantega - Brazil finance minister. said a few months ago that it will take 20 years for Brazil to reach european standard of living. Today, a few months later, this scenario seems a bit uncertain.

Brazil had a GDP growth of only 2.7% last year, and the projection for this year is less than 2%.

Aside from the developed nations economic crises, Brazil faces its own challenges.

The "Brazil cost" is one of them,  Brazil is a very expensive country to invest in, every business has to face terrible roads, outdated labor laws, high energy costs and a slaughtering bureaucracy. The government promised to tackle these issues, but nothing has been done so far. The government points its fingers to the public-sector workers, which have been on strike constantly, demanding a better pay. In the last few months Brazil has constantly faced teachers, federal police and regulatory agencies on strike. Dilma Rousseff has made clear her irritation, she states that most of these workers have received decent pay increases since 2003. but because of the strikes, plans to tackle the "Brazil cost" have been postponed.
IMD, which evaluates the business competitiveness among countries, ranked Brazil number 46 out of 59 countries.

Just like many countries around the world, the Brazilian population is in debt. Approximately 40% of the population owes money to credit cards and bank loans. The federal government latest economic measures to boost the economy, such as the one to make credit more available by lowering the taxes of loans, is not being as effective as before. Also, inflation is at 5.2%, and comparing to last year house prices have risen 19%.

Of course, not everything is looking this dark, the unemployment rate is at 5.8% and the Chinese demand for Brazilian commodities continues to thrive. Brazilian officials  promise that next year the country will have a 4.5% GDP growth.

The government needs to be bold, its new plan to bring private firms into building and running infrastructure (roads, railways, airports...) is a step in this direction. If Brazil finds a way to efficiently tackle the "Brazil cost" and starts prioritizing education, it is likely that promise land will indeed deliver.

Sources: The Economist, BBC and Valor Economico.