Event Summary – Regional Spotlight: Brazil’s Promise of Development
On August 25, 2016, the Bretton Woods Committee hosted a virtual conference entitled Regional Spotlight: Brazil’s Promise of Development. The event featured Augusto de la Torre, Chief Economist for Latin America and the Caribbean at the World Bank Group and Israel Klabin, President of the Brazilian Foundation for Sustainable Development
Against the backdrop of unprecedented national economic and political turmoil, the 2016 Olympic Games took place for two weeks in August in Rio de Janeiro, Brazil. When the 2016 Olympic Games and the 2014 FIFA World Cup were initially awarded to Brazil, the country’s economy was flourishing and the nascent democracy was stable. Significant progress had been made in poverty reduction, economic empowerment, and expanding access to education and other social services. These mega sporting events were to be a stage to showcase Brazil’s progress – a coming out party for Brazil as an emerging economic power. At the time, no one could have foreshadowed the economic and political turmoil that Brazil has experienced in recent years. With the conclusion of the 2016 Rio Olympics and the commencement of President Rousseff’s Senate impeachment trial, the speakers discussed the critical issues currently facing Brazil and the policy path forward.
De la Torre began by describing the current macroeconomic climate in Brazil. He argued that the growth agenda is constrained by the macro picture and underscored the fact that Brazil had little policy room to maneuver in this environment. He highlighted two key macroeconomic issues that he sees as Brazil’s most critical challenges to address: 1) the fiscal deficit that is now 10% of GDP; 2) the disequilibrium created by the high interest rate and short-term contract environment.
Klabin followed by offering a Brazilian perspective on the country’s economy and discussed the impact of the Rio Olympics. Klabin highlighted several positive indicators (i.e. fiscal adjustment progress, recent stock market gains, etc.) demonstrating that the economy had hit its lowest point and was ready to rebound. He argued that the success of the Rio Olympics had galvanized the Brazilian spirit and would offer a turning point for the country. He believed that the Olympics, as well as the forgone conclusion of President Rousseff’s impeachment trial, would provide the momentum necessary to set Brazil back on the path of economic prosperity.