Although the 21stcentury has just begun, it is already possible to notice important differences from the precedent decade’s standard in the Brazilian economy. More precisely, from 2003 onwards, Brazil is passing through an incipient process of income distribution that is still modest to face the exorbitant inequalities, but is relevant because of its unprecedentedness. Does it mean therefore that a new model of growth has been erected in Brazil? Is it possible to say that Brazil has finally taken a consistent road to development? This research aims to shed light on these questions. The paper proposes that the main achievements of Brazilian economy in the last ten years are: amelioration in income distribution, reduction of poverty, decline in the unemployment rate and decrease in external vulnerability. The crucial problem however is that these achievements are not perennially obtained yet. They are based in social programmes and in government decisions, but it is not sure that they would be kept and deepened in the future. Moreover, it is not possible to know for how long these achievements would last with lower rates of economic growth. The objective now has to be therefore to return to high rates of growth. Since the international trade will not be as vigorous as it was before the crises, Brazilian economy also has to count on domestic demand sources.In this sense, it is necessary to have a stimulus from the demand side in order to put Brazilian economy in a sustainable growth path. Coming up to a recommendation, two crucial aspects must be highlighted. The first one is that the public debt in Brazil is absolutely under control (and, additionally, that the public sector has now a relief on the payments of the debt service due to the decline in interest rates). The second one is that Brazil still suffers from a dramatic lack of infrastructure and public goods. Connecting these two evidences with the necessity to foster economic growth, it is possible to propose that public investment should be used as the main demand source for the future years. With a higher level of investments and higher rates of growth, it would be important to keep working on the consolidation and strengthening of the achievements of the last ten years, but facing the challenges that still remain, that is, reverting the de-industrialization process, diversifying exports and making agrarian reform.

Bruno De Conti

Published in Berlin Working Papers on Money, Finance, Trade and Development, October 2013