Harvard economist on Brazilian economic growth

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Brazil will not again grow between 7% and 8% annually, says economist Dani Rodrik, professor of international political economy at Harvard University and a leading expert in development economics.

According to Rodrik, the beneficial global environment — high-growth in China, high commodity prices, growth in advanced countries — will not be repeated. “It is unrealistic to expect a growth rate of 3% to 4% in Brazil,” said Rodrik, who attended yesterday’s seminar by the magazine “Carta Capital”.

According to him, the phase of high growth in the world is over. Brazil, with strong democratic institutions, is resilient. “But the country should not be overly ambitious, it needs to be careful and fiscally safe to deal with external shocks that are likely to come.”

Folha – Brazil grew 0.9% in 2012 and there is a perception that the growth model based on consumption is exhausted. What do you think?

DR – Two years ago, everyone said that Brazil was experiencing a new economic miracle. I thought it was a huge exaggeration. Now, people are jumping to conclusions on just one year of growth.

Brazil will not grow over 7%, like the economic miracle before the debt crisis or even like in 2010 (7.5%). It is unrealistic to expect a growth rate of 3% to 4%. If the global context improves, 5% is a reasonable rate.

Folha – You say that from now on, high growth in the world will be the exception. Where is Brazil in this scenario?

DR – The conditions that allowed growth of 7% to 8% will not be repeated. Before, we had the early stages of industrialization, when taking labor from rural areas or in the informal sector and bringing it to the industries, we had 400% gains in productivity. Now, we have no great gains without having more investment in education and technology. As technology changes, the industry is very capital-intensive and does not absorb as much manpower. And Brazil, in fact, already reached the peak of industrialization and is now de-industrializing. But this is true for most countries. It is inevitable. The discussion now is the speed of deindustrialization, it is faster than it should be. The industry is no longer the engine of growth. Services and other areas will generate productivity gains.

Folha – You were disappointed with the decision of the BRICs (Brazil, Russia, India, China and South Africa) to create a development bank …

DR – This is a notion of the 50s, that you have to have financing for infrastructure. Often, what obstructs the development is not lack of funding, but weak institutions, excessive regulation, lack of industrial policy and overvalued currencies. Funding is only one factor. I do not think it’s the appropriate focus for the BRICs. It lacks new ideas on how to fix globalization and create a new relationship between the emerging and the rich.

Folha – You say that the BRICs must stop “pleading”. What is the message that Brazil should send in world forums?

DR – I would you like to see Brazil not address the international system as a developing country, saying it is poor and needs help. Instead, Brazil needs to position itself as a policy maker, who also has great responsibilities. In areas such as climate change, for example, there will be no reduction of emissions if emerging economies do not take responsibility.

Folha – What do you hope from Roberto Azevedo ahead of the World Trade Organization?

DR – The WTO agenda needs to change. The Doha Round has died and people should just accept it. The real challenge for the WTO is to establish a new narrative, that is not limited to: “you reduce your rates and in return we open our markets.” At the moment, the biggest problem is not the lack of trade openness.

And Brazil needs to change its attitude. Brazil occasionally needs to protect its industry, but it has to understand that the rich countries are going through a very difficult situation and they also need to protect their industry. Brazil, despite all the recent increases in rates, can not be called a closed economy. Incidentally, I think that the current tariff structure in Brazil is even positive.

Folha – Why?

DR – Because the bank is giving temporary protection to some industries being decimated by currency appreciation. We live in the possible world, not in a doctrinarian world.

Folha – What is the importance of having a Brazilian leading the WTO?

DR – Brazil may take a pragmatic approach to the WTO, not doctrinarian, which is an evolution of the proposed radical of the free market — that is how the economic policy of Brazil is today. So having a Brazilian in charge of the WTO is very positive.

Folha – You ranks countries as mercantilist or liberal. Where on that range is Brazil?

DR – Brazil is a good mix — it uses liberal rules in its financial system, monetary and exchange policies, but it’s more mercantilist in terms of industrial policies, protection by tariffs, local content rules and usage of the BNDES. Maybe you need less liberalism on the macroeconomic front and more on the trade front. – Source (PT)

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