2007 Demographic #01 Brazil Forecast

PDF:  D01 Brazil
Brazil is the world’s fifth largest population, the largest land area in South America and the world’s largest Portuguese-speaking nation.  It is one of the largest iron ore producers and exports of this and other minerals are booming, driven by China’s voracious
appetite for all manufacturing inputs. It is also the world’s largest producer of sugar, coffee, beef and a major producer of soy, cotton, cocoa, forest products– all commodities with guaranteed ongoing demand.
Brazil’s experience of democratic government is recent and filled with disappointment. Since Lisbon’s rule ceased in 1808, Brazil progressed through various governments controlled by the landed elite or the military until 1985 when the military returned to civil authority the rule they had nervously appropriated in 1964. In 1989 Fernando Collor de Mello received 53% support in the first direct presidential election since 1960. In 1994 Fernando Henrique Cardoso received 54% and served for two terms. In 2002, Luiz Inacio Lula da Silva (“Lula”), having tried for office four times, received 61% of the vote. Lula is the first elected president in a generation with anything like a comfortable popular vote and polling indicates that Lula will be re-elected for another four-year term in
October 2006 unless something unforeseen happens. If re-elected, the margin of his vote will be an important indicator of the direction the administration will take. If both the Right and the Left polarize the country against him, he will preside over a precarious, inequitable Brazil: if his vote is increased above the 61% he will have a mandate both inside and outside the country to continue moderate-Left reforms.
According to the World Bank, Brazil (along with Venezuela) has the world’s most extreme concentration of land in the hands of a few so only Lula’s diehard enemies see land reforms as apocalyptic. But Lulu has faced increasing pressure from the landless movement, Movimento dos Sem Terra (MST), to make good on his promise to deliver land to over 400,000 families in his first term. Only about a quarter of that goal has been achieved but the government insists that families are being properly settled and given financial and technical support to ensure successful use of their land. [This is in contrast, for instance, to the catastrophic gesture towards land reform in Zimbabwe.]  When Lula’s election seemed likely in 2002, the Brazilian currency hit an all-time low and financial markets panicked at the prospect a one-time shoe-shine boy from the Workers Party (PT) gaining control.  Four years later, Lula is seen as successful above all expectations. Economic fundamentals are stronger now than in 2002 and the “markets” have fewer fears about what a Lula administration might do.  The IMF has applauded Lula’s “well-disciplined macro-economic management” but this has been at the cost of sweeping social reforms at a pace expected by his electorate [IMF says Brazilian economy stabilizes and has potential to grow (#7193)]. This is very similar to the situation in South Africa where the government has also taken great pains to be, and be seen to be, economically responsible in meeting the needs of a massive dispossessed and previously di
senfranchised population. In consequence, some of Lula’s fiercest critics are in the Left that elected him (as is true of the ANC in South Africa). For this reason, all that might disrupt Lula’s re-election in October 2006 is an attack from divided Leftist factions

[Leftist a threat to Brazil president (#8220)]. Some say Lula has been lucky, that world demand for Brazil’s export commodities in the last four years have been instrumental in turning around Brazil’s serious debt position. This is true but demand in just those commodities is certain to be maintained for the next four years and Lula’s critics are also certain to demand commensurate social benefit.
BRAZIL – Key statistics
Population: 188 Million
GDP (PPP): $1.6 Trillion
GDP per capita (PPP): $8,400
Unemployment: 9.8%
Poverty rate: 22% (1998 est.)
Consumer price inflation: 6.9%
Debt – public: 51.6% of GDP [reduced by 2006]
Debt – external: $188B
Military spending: 1.3% 2005 est. unless otherwise shown;
PPP – purchasing power parity-
Collation: OSS.NET from several sources
Brazil is classed as a ‘innovating developing country’ (IDC), along with China, India, South Africa – countries with the metrics of a developing nation but also the capacity to develop quickly. One measure of this is Brazil’s use of its equatorial location in October 2004 to perform it first space launch. But development is messy. In September 2006 Volkswagen forced 11,000 auto workers to take vacation following wage demands and strikes — the growing strength of the currency and rising wages means vehicles can no longer be produced in Brazil at “third world” prices.
Brazil is in a fortunate energy position. It will become a net exporter of oil by the end of 2006 with increased output from the Campos Basin and future reserves recently discovered off the coast of Rio de Janeiro state. As with Iran, oil is in surplus and means hard currency as hydroelectric power provides about 74% of Brazil’s energy needs. Capital projects also strengthen Brazil’s long-term energy security – a gas pipeline project announced in June 2006 will connect the country’s southeast with the northeast reducing dependence on imports from Bolivia and the US. Brazil also has joined Venezuela ’s in regional energy strategies such as joint exploitation ventures between their state oil corporations.
During 2006 there were pitched battles with the First Capital Command criminal gang. This unique level of endemic criminal insurgency is a legacy of a massive impoverished 81%-urban population. These urban areas are an important market for cocaine
from Bolivia, Colombia, Peru and a transshipment point for moving cocaine into Europe. The Tri-Border Area, a dangerous region at the convergence of Argentina-Brazil-Paraguay, is rife with money laundering and trafficking in arms and narcotics. The three stakeholder have recently opened an enforcement intellig ence center in the area.
International Relations
Brazil (like the US ) has refused to recognise the compulsory jurisdiction of the International Court of Justice. Although Brazil has not joined the Non-Aligned Movement, it is friendly to NAM’s aims and frequently sends observers to NAM summits. Brazil is a member of Mercosur (Mercado Común del Sur; Portuguese Mercosul,Mercado Comum do Sul- Southern Common Market) a customs union of Brazil,Argentina, Uruguay, Paraguay, Venezuela, founded in 1991.
US Relations
The US was the first country to recognize Brazil’s independence in 1822 and there have been several two-way state visits in recent years. Superficially US-Brazil relations are cordial but there is an instinctive distrust in Washington for any left-leaning regime in La
tin America which in past decades this led to direct often covert intervention in various nations. Well aware of this, the Lula administration is careful to maintain the blessing of bodies such as the IMF in its social reforms.
Near Term:
Brazil is the centre of gravity in Latin America. Stability or instability there will influence the future to varying degrees of its ten neighbors. Due to bountiful water, exportable commodities and energy security, only the most extreme misgovernance, with or without

external interference could bring Brazil to state failure. The US has long seen itself as the diplomatic leader in the Americas but with Brazil’s emergence as a world entity of the scale of Indonesia, diplomacy in the Americas may need to be rewritten on a more collegial basis.
Crime is a critical problem in Brazil. Fueled by cocaine and other crime monies, criminal gangs are not just a police matter; rather they engage government forces in pitched battles using heavy weapons.  Major criminals are able to continue control of their organizations from prison and the immense amounts of money involved in crime are able to suborn officials at every level.  This is a non-trivial impediment to Brazil’s development as it robs the nation of revenue and diverts government resources.  Only a prolonged military OOW campaign can dislodge the gangs.
t is still early days for social development in Brazil and adjoining Venezuela. There are obvious empathies, but Brazil has been careful to avoid any hint of union of socialist republics – partly because it is unnecessary and partly because it would cause a Congressional conniption in the US . However, synergies throughout Latin America, through vehicles such as Mercosur, seem certain to develop over time into a powerful trading entity similar to the EU or ASEAN  This would be a de facto regional challenger to the US.