Ever since a Goldman Sachs report coined the term “BRIC”s in 2001, acknowledgment of Brazil’s, Russia’s, India’s, and China’s shared future as major players on the world stage has become a touchstone of global strategic analyses. The NIC’s Global Trends 2030 (GT 2030) agrees, though it eschews the BRICs shorthand for the term “emerging powers,” a grouping that remains (wisely) undefined. The group seems clearly to include India and China, and Brazil and Russia most of the time. Occasionally Turkey, Mexico, and other countries are mentioned as potential actors of rising influence. A close reading of the GT 2030 suggests that regarding Brazil there is a higher level of uncertainty. In future scenarios, Brazil is not categorized as a “major power” as the others, but as the largest of a “middle tier” group of countries. Nowhere does the GT 2030 give Brazil in-depth analysis.
There are several reasons why Brazil is assumed to have an especially bright future. The foremost are its domestic market of almost 200 million people, with an expanding middle class, and its steadily growing economy. Brazil’s always been large. Over the last twenty years, however, several factors have combined to create conditions for GNP growth rates of 6-7 percent: a set of successful social programs that have increased school attendance and helped pull millions out of poverty; expanding financial and communications service sectors; increased foreign and domestic investment; and rising demand and prices for Brazil’s exports (driven chiefly by Chinese and East Asian demand).
Will Brazil be able to sustain such growth rates for another 20 years? Optimists point to numerous industries, many involving agriculture or natural resources extraction, which have ample room for long-term growth. Rising education rates and improved health, mostly among the poorest segments of the population, also give reasons for optimism. But most hopeful is the trend for steady, responsible economic and monetary policies now sustained across presidential administrations of different ideological stripes. Brazil’s economic and political institutions appear sound.
There are reasons, however, for uncertainty. First, while access to education has improved for many Brazilians, its education system is still poor by OECD standards. Businesses investing in Brazil, especially in the high-tech manufacturing and services industries of the future, lament the lack of trained Brazilian engineers, scientists, technicians, and laborers capable of learning and operating advanced systems. Other elements of the infamous “custo Brasileiro” or Brazilian cost remain: the lack and poor quality of roads, railways, waterways, and ports; burdensome government bureaucracies that slow investment and decision-making; an inefficient and unreliable judiciary system that increases risk; high labor costs; and corruption.
The government plans to spend over a trillion dollars in the coming years on a “Growth Acceleration Plan” which includes boosting energy production and building new infrastructure, but the timeline for the completion of those projects is uncertain. The current government seems no closer to reforming the federal government and civil service structure, the judicial system, and labor regulations than its predecessors who were concerned with these problems back in the mid-nineties.
These deficiencies do not preclude an ever-rising Brazil. After all, every nation suffers from inefficiencies and the largest often seem to suffer the worst. Nevertheless, without serious reforms the Brazilian cost will continue to hinder the country’s growth. One comparison to watch in the coming years is Brazil’s success at passing important reforms and improving its overall business and investment climate, versus its regional competitors Mexico and Colombia.
At the moment South America seems to be dividing into one economic block along the Pacific coast (including Mexico, Colombia, Peru, and Chile) that is pursuing freer markets and increased trade and investment, especially with Asia, and an Atlantic block led by Brazil and Argentina that prefers heavy state involvement in key industries and trade restrictions. Industrial and trade policies of this sort influence productivity and economic trajectories, often for decades. Given certain conditions it would not be shocking if, by 2030, Brazil is regarded rather as the sick giant in the region, instead of its most vibrant economy.
One of the values of the GT 2030 is that it reminds readers that the world is in flux, and we should not assume the trends and conditions of the last twenty years will continue. In Brazil’s case, one looming issue is how well could the country cope with an economic recession, or worse, in China? Brazil tolerated the recent recession in the U.S. and Europe’s continuing malaise largely by selling soybeans, iron ore, food products, and other primary goods to China, along with growth in its domestic market.
China’s appetite for South American primary goods has boosted investment and economic growth across the region, with the markets of which Brazil is ever more integrated. A Chinese slump, or a crisis in East Asia—the GT 2030 discusses possibilities of pandemics, economic crises, and conflict in the region—could challenge political and economic institutions across South America. How well is the Brazilian government prepared to make the hard decisions in its spending and investment that such events would require? Would Brazil still be able to wield influence around the world, if its neighborhood were to again become synonymous with poverty, social division and inequality, and internal conflict as during much of the previous century?
Less dramatic but more certain are the demographic changes occurring in Brazil. Brazil is among the nations whose demographic advantages, due to having a high ratio of working-age people to non-working-age people, will shrink significantly between now and 2030. In 2030 Brazil’s median age is projected to be 37.4, and the country will face rising demands for pensions and health care programs for seniors, with a shrinking labor pool to support that spending. As is happening in the advanced industrialized countries that are ahead on this curve, these pressures will slow economic growth and create new political pressures for the redistribution of wealth and public services. If we assume there is a reasonable likelihood of slowing rates of economic growth in China, along with slow growth in the U.S. and Europe, then with this demographic shift Brazil is likely to face much more difficult conditions a decade or two in the future.
But economic growth rates are not the only important variable in determining a nation’s international influence. Looking to 2030 and beyond, Brazil has at least two important advantages. First, global strategic assessments inevitably highlight the shrinkage of natural resources of all kinds, particularly as billions of Indians, Chinese and others demand goods and lifestyles typical of the U.S. or European middle-class. Brazil has an abundance of natural resources of all kinds: land for farming and ranching, the world’s largest fresh water flow, oil and gas, minerals, and vast biodiversity. Brazilians are also leaders in the technologies for developing these industries. Global warming and bad water conservation policies are expected to devastate China’s and India’s capacity to grow food. Brazilians can be optimistic that a time will come in the 21st Century when Brazil is among the world’s major exporters (perhaps alongside the United States, Canada, and Russia) of both food and energy, an excellent position from which to engage in geostrategic planning.
A second advantage for Brazil is its geographic isolation from the zones of the world considered most likely to suffer from instability, humanitarian crises, and inter-state conflict in the coming decades. To some extent, Brazil’s position as the giant within a region devoid of major wars has limited its geostrategic importance relative to the other giants. This could change in the coming decades, if Latin America continues to grow as a source region for critical goods and resources. But Brazil’s distance from zones of conflict and instability could be especially advantageous under potential conditions of severe crisis, conflict, or collapse which would engulf other powers more so than Brazil.
I plan to return to the topic of strategic positioning and international security in another blog later this week. For now, I look forward to your comments and reactions.