.
At time of writing, Brazil’s economy first quarter marks are out. According to a federal public agency, the IBGE (The Brazilian Institute of Geography and Statistics), the country’s GDP shrunk by 0.2% for the quarter, this in relation to last year’s fourth quarter GDP performance. Further and, while comparing to same period in 2014 (Q1/14), the economy dropped a significant 1.6%.
In fact, the metrics don’t lie, nor they attempt to enliven such bleak economic retraction, for the political and social environments have long telegraphed, what to many was naturally destined to happen.
Nevertheless, truth is, the retraction could have been worse, analysts say, if it wasn’t for Agriculture and Livestock Farming, as food and commodity outlets remain big business in Brazil. These continue to strive as panaceas, a cure-all remedy destined to appease President Roussef’s and her Finance Minister’s Joaquim Levy fiscal and monetary policies. Indeed, much to Brasília’s elation, and as the Gross Domestic Product remains ever so intrinsically dependent and reliant on, it happened again: generous bounties of soy-beans came to rescue. Whereas the sector produced a 4.7% yield increase in economic activity when comparing to Q4 2014, and 4%, when in comparison to same period in 2014 (Q1/14).
Looking into the Industry and Service sectors, one denotes an expected contraction behavior. Whereas the Industry sector lost 0.3% of economic growth in relation to Q4/14, and a notorious 3% when comparing to same period last year (Q1/14). This happened amid serious energy supply and management crisis issues, mostly resulting from a nearly exclusive hydroelectric dependent energy grid, which persists in showing consistent signs of outdated infrastructure, while succumbing to the administration of lethargic and politically infused public companies. All of this, no less, during a time of shortage and subsequent rationing of the water supply—not a very promising outcome at all.
Also in decline, the Service sector contracted 0.7% in relation to Q4/14, and 1.2% when comparing to same period last year (Q1/14). Wherein the drop is mostly associated with a 6% dip in retail and wholesale economic activity. According to the IBGE, Q1/15 registered the worst record in retail sales since third quarter 2003—back during President Lula’s first term. And this situation persists to unravel as loss of purchasing power, rising prices at supermarkets, and scarcer access to credit. Accordingly, and before such economic conjectures, consumption can only cool off.
Back in January this year, Joaquim Levy predicted a recession for 2015’s first quarter; so far he was right. Also he was assertive that a recessive first quarter would not impact the overall yearly activity. Nevertheless, and as counterpoint to Levy’s oracle, both market analysts and the IMF do not seem to be as pollyanna when it comes to Brazil. The IMF for example foresees a negative performance of 1% by year’s end.
The weaker than expected economic growth, considering President Roussef’s surplus targets of 1.2% for 2015, trickled a decline of revenues at a faster pace than that of actual expenditures. Now, manning these two curves—revenue vs. spending—is far more complex than many purport it to be, and certainly, continuous austerity and expenditure cost-cutting are mere palliatives, deemed only to partially compensate, as opposed to deliver resolve, before the decline, hence loss of federal revenues.
In parallel, Moody’s, like the sword of Damocles, keeps hanging by a hair, ready to announce its inevitable thrust. Especially as Brazil’s weak economic activity and high interest rates impact debt reduction efforts, while debt levels continue to increase cyclically from 2015 onwards. Whereby the country’s debt ratios, according to the credit rating agency, and despite government fiscal and debt consolidation efforts, are higher than its Baa-rated peers. While considering the aforesaid, one thing is certain: such behavior can only weaken Brazil’s credit profile.
Now, going back to the preface: the 1.6% drop in GDP during 2015’s first Quarter, pushes Brazil very close to the end of the line in relation to major global economies. Austin Rating, a risk assessment company, while compiling a list entailing the economic performance of 33 countries for Q1/15, proceeded to enlist Brazil in a vainglorious 31st position. Note, only slightly ahead of Russia and Ukraine’s quarterly performance, and behind Greece’s.
Of course, it would be an obvious disservice, failing to underscore Russia’s and Ukraine’s moment in time. The first is undergoing the toll of an embargo that is masterfully imposed by the west; the second, lives through conflict and civil war, only to see the plunder of its economy.
On the other hand, Greece is also no gage, at least for Brazil, an emerging actor, say: the world’s seventh largest economy. In particular since Greece remains assailed by serious fiscal crisis, dribbles the imminence of default day after day.
This report makes it particularly interesting because both President Roussef—along with her political base, The Worker’s Party (PT)—plus her Finance Minister Levy, insist in playing down, trivializing in a way, the country’s poor economic performance, while evoking as context a somber economic world recession that is supposedly leveling economies across the globe, thus driving/setting the need to instill newly adjusted economic standards. Furthermore, one may read in between the lines: Brazil should be so happy, for although the macro-economic context is a force of uncontended proportions, the country’s economy only contracted a mere 0.2%. Alas, the idea that this year’s first quarter performance was not that bad, and that Brazil is doing ok sort of attitude, must be purged, for it sets a standard that is unworthy of an emerging actor seeking to modernize its economy.
Well, this liturgy is not selling anymore, the buyer, say the People—the Worker’s Party base at large—is simply not buying. Their interest and behavior are surprisingly fading. The supply promise has greatly increased over demand, and this is likely the first time one observes such behavior, at least ever since the institution of the Worker’s Party hegemony—from President Lula in 2003 until present with Roussef.
In a recent past, when the Worker’s Party appealed to the good faith of the Brazilian People, mostly and by enlarge, those of lower income and residing in least developed rural areas, the premise of the deal was clear: increases in human/social development, economic equity, higher paying jobs, social programs, access to education, free/accessible and good quality health care, and the availability of jobs. Essentially, this was the Worker’s Party manifesto that was indeed the deal: the promise of a fair, egalitarian and socially inclusive Brazil, marked by a modern and stable economy, and a striving cross-country industrialization effort.
The populist appeal was terrific, whereby, every time that President Lula and the party summoned the People, millions of Brazilians flocked to the ballots and exercised their right of suffrage, no questions asked.
Without further ado, Lulopetism—the anglicization of the Portuguese word: “Lulopetismo”. A doctrine whereas former President Lula, being a larger than life figure, governs the Worker’s Party’s agenda as his own—was born, thus rendered a well-established hegemony, which defeated back-to-back opposition. And has thus far granted the Worker’s Party four consecutive Presidential terms, also followed by unquestionable dominance over both houses. But, Lulopetism, considering the dynamics of recent, whether it be by the Mensalão Graft case, or as result of the Petrobras scandal, has long lost its luster. And now lives to see its President Dilma Roussef, who is weakened by the inexorable toll of a poor economy, attempting to keep her head above the water, while battling the worst tide of approval ratings a Brazilian President has faced since 1992 (and that President was impeached).
It is now obvious to many, including the people—The Worker’s Party’s base—that Lulopetism traded its leftist intellectual ideals of equity and social good for the designs of an addictive and ill machine whose only concern is to perpetuate itself in government. This metastasizes, irrespective of Lulopetism’s original promise, and converges in detriment of the People, to whom President Lula, President Roussef and the Worker’s Party have all turned their backs.
The People were defrauded, for they believed and sought change, thus valiantly exercised their right of vote. But who knew: they chose the wrong signatory on their social contract. One may argue: the most basic yet the most important of all agreements.
Not to hold the Worker’s Party and Lulopetism, in the very least, partially accountable for the lack of progress, would simply be a fallacy. It would be equally or even more egregious, not to deem the Worker’s Party also partially responsible for the country’s current state of economic affairs. Yes of course, one must reckon that there are other factors, for Lulopetism cannot be the absolute malaise and cause for all evils, but that does not expurgate the Worker’s Party shared responsibility.
However, one can still hear Lulopetism’s concerted tune, where its proselytizing, akin to a soothing lullaby, aims to sedate the People, like it did for so long, mainly hoping to secure a renewal on the social contract, while conferring fiduciary rights to the Worker’s Party’s plan of continued government. But it feels different now, for the promise of change is long due, and voters have yet to collect its dividends. Whereas, this debt, if left at default, may indeed compromise Lulopetism’s ongoing political hegemony. And in the very least drive the People back onto the streets again, perhaps in dimensions even greater than those last seen in June of 2014.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.
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Lulopetism: A Brazilian Social, Political, and Economic Lullaby
Sugarloaf Mountain
June 9, 2015
At time of writing, Brazil’s economy first quarter marks are out. According to a federal public agency, the IBGE (The Brazilian Institute of Geography and Statistics), the country’s GDP shrunk by 0.2% for the quarter, this in relation to last year’s fourth quarter GDP performance. Further and, while comparing to same period in 2014 (Q1/14), the economy dropped a significant 1.6%.
In fact, the metrics don’t lie, nor they attempt to enliven such bleak economic retraction, for the political and social environments have long telegraphed, what to many was naturally destined to happen.
Nevertheless, truth is, the retraction could have been worse, analysts say, if it wasn’t for Agriculture and Livestock Farming, as food and commodity outlets remain big business in Brazil. These continue to strive as panaceas, a cure-all remedy destined to appease President Roussef’s and her Finance Minister’s Joaquim Levy fiscal and monetary policies. Indeed, much to Brasília’s elation, and as the Gross Domestic Product remains ever so intrinsically dependent and reliant on, it happened again: generous bounties of soy-beans came to rescue. Whereas the sector produced a 4.7% yield increase in economic activity when comparing to Q4 2014, and 4%, when in comparison to same period in 2014 (Q1/14).
Looking into the Industry and Service sectors, one denotes an expected contraction behavior. Whereas the Industry sector lost 0.3% of economic growth in relation to Q4/14, and a notorious 3% when comparing to same period last year (Q1/14). This happened amid serious energy supply and management crisis issues, mostly resulting from a nearly exclusive hydroelectric dependent energy grid, which persists in showing consistent signs of outdated infrastructure, while succumbing to the administration of lethargic and politically infused public companies. All of this, no less, during a time of shortage and subsequent rationing of the water supply—not a very promising outcome at all.
Also in decline, the Service sector contracted 0.7% in relation to Q4/14, and 1.2% when comparing to same period last year (Q1/14). Wherein the drop is mostly associated with a 6% dip in retail and wholesale economic activity. According to the IBGE, Q1/15 registered the worst record in retail sales since third quarter 2003—back during President Lula’s first term. And this situation persists to unravel as loss of purchasing power, rising prices at supermarkets, and scarcer access to credit. Accordingly, and before such economic conjectures, consumption can only cool off.
Back in January this year, Joaquim Levy predicted a recession for 2015’s first quarter; so far he was right. Also he was assertive that a recessive first quarter would not impact the overall yearly activity. Nevertheless, and as counterpoint to Levy’s oracle, both market analysts and the IMF do not seem to be as pollyanna when it comes to Brazil. The IMF for example foresees a negative performance of 1% by year’s end.
The weaker than expected economic growth, considering President Roussef’s surplus targets of 1.2% for 2015, trickled a decline of revenues at a faster pace than that of actual expenditures. Now, manning these two curves—revenue vs. spending—is far more complex than many purport it to be, and certainly, continuous austerity and expenditure cost-cutting are mere palliatives, deemed only to partially compensate, as opposed to deliver resolve, before the decline, hence loss of federal revenues.
In parallel, Moody’s, like the sword of Damocles, keeps hanging by a hair, ready to announce its inevitable thrust. Especially as Brazil’s weak economic activity and high interest rates impact debt reduction efforts, while debt levels continue to increase cyclically from 2015 onwards. Whereby the country’s debt ratios, according to the credit rating agency, and despite government fiscal and debt consolidation efforts, are higher than its Baa-rated peers. While considering the aforesaid, one thing is certain: such behavior can only weaken Brazil’s credit profile.
Now, going back to the preface: the 1.6% drop in GDP during 2015’s first Quarter, pushes Brazil very close to the end of the line in relation to major global economies. Austin Rating, a risk assessment company, while compiling a list entailing the economic performance of 33 countries for Q1/15, proceeded to enlist Brazil in a vainglorious 31st position. Note, only slightly ahead of Russia and Ukraine’s quarterly performance, and behind Greece’s.
Of course, it would be an obvious disservice, failing to underscore Russia’s and Ukraine’s moment in time. The first is undergoing the toll of an embargo that is masterfully imposed by the west; the second, lives through conflict and civil war, only to see the plunder of its economy.
On the other hand, Greece is also no gage, at least for Brazil, an emerging actor, say: the world’s seventh largest economy. In particular since Greece remains assailed by serious fiscal crisis, dribbles the imminence of default day after day.
This report makes it particularly interesting because both President Roussef—along with her political base, The Worker’s Party (PT)—plus her Finance Minister Levy, insist in playing down, trivializing in a way, the country’s poor economic performance, while evoking as context a somber economic world recession that is supposedly leveling economies across the globe, thus driving/setting the need to instill newly adjusted economic standards. Furthermore, one may read in between the lines: Brazil should be so happy, for although the macro-economic context is a force of uncontended proportions, the country’s economy only contracted a mere 0.2%. Alas, the idea that this year’s first quarter performance was not that bad, and that Brazil is doing ok sort of attitude, must be purged, for it sets a standard that is unworthy of an emerging actor seeking to modernize its economy.
Well, this liturgy is not selling anymore, the buyer, say the People—the Worker’s Party base at large—is simply not buying. Their interest and behavior are surprisingly fading. The supply promise has greatly increased over demand, and this is likely the first time one observes such behavior, at least ever since the institution of the Worker’s Party hegemony—from President Lula in 2003 until present with Roussef.
In a recent past, when the Worker’s Party appealed to the good faith of the Brazilian People, mostly and by enlarge, those of lower income and residing in least developed rural areas, the premise of the deal was clear: increases in human/social development, economic equity, higher paying jobs, social programs, access to education, free/accessible and good quality health care, and the availability of jobs. Essentially, this was the Worker’s Party manifesto that was indeed the deal: the promise of a fair, egalitarian and socially inclusive Brazil, marked by a modern and stable economy, and a striving cross-country industrialization effort.
The populist appeal was terrific, whereby, every time that President Lula and the party summoned the People, millions of Brazilians flocked to the ballots and exercised their right of suffrage, no questions asked.
Without further ado, Lulopetism—the anglicization of the Portuguese word: “Lulopetismo”. A doctrine whereas former President Lula, being a larger than life figure, governs the Worker’s Party’s agenda as his own—was born, thus rendered a well-established hegemony, which defeated back-to-back opposition. And has thus far granted the Worker’s Party four consecutive Presidential terms, also followed by unquestionable dominance over both houses. But, Lulopetism, considering the dynamics of recent, whether it be by the Mensalão Graft case, or as result of the Petrobras scandal, has long lost its luster. And now lives to see its President Dilma Roussef, who is weakened by the inexorable toll of a poor economy, attempting to keep her head above the water, while battling the worst tide of approval ratings a Brazilian President has faced since 1992 (and that President was impeached).
It is now obvious to many, including the people—The Worker’s Party’s base—that Lulopetism traded its leftist intellectual ideals of equity and social good for the designs of an addictive and ill machine whose only concern is to perpetuate itself in government. This metastasizes, irrespective of Lulopetism’s original promise, and converges in detriment of the People, to whom President Lula, President Roussef and the Worker’s Party have all turned their backs.
The People were defrauded, for they believed and sought change, thus valiantly exercised their right of vote. But who knew: they chose the wrong signatory on their social contract. One may argue: the most basic yet the most important of all agreements.
Not to hold the Worker’s Party and Lulopetism, in the very least, partially accountable for the lack of progress, would simply be a fallacy. It would be equally or even more egregious, not to deem the Worker’s Party also partially responsible for the country’s current state of economic affairs. Yes of course, one must reckon that there are other factors, for Lulopetism cannot be the absolute malaise and cause for all evils, but that does not expurgate the Worker’s Party shared responsibility.
However, one can still hear Lulopetism’s concerted tune, where its proselytizing, akin to a soothing lullaby, aims to sedate the People, like it did for so long, mainly hoping to secure a renewal on the social contract, while conferring fiduciary rights to the Worker’s Party’s plan of continued government. But it feels different now, for the promise of change is long due, and voters have yet to collect its dividends. Whereas, this debt, if left at default, may indeed compromise Lulopetism’s ongoing political hegemony. And in the very least drive the People back onto the streets again, perhaps in dimensions even greater than those last seen in June of 2014.
The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.
