Not long after I got back from my recent trip to Brazil, I called some economists to gain a better understanding of where the country stood economically. To me, Rio de Janeiro felt a little like Shanghai: There was plenty of high-end shopping in neighborhoods like Ipanema — and plenty of poverty in the favelas, or slums.
There was also a lot in between. What is most striking to a visitor is how many middle-class citizens there seem to be. Cars were everywhere; traffic jams, I’ve come to believe, are a sign of a growing middle class. It means people have enough money to buy automobiles.
What I saw was no illusion. Though its starting point was quite extreme, Brazil is a country that has seen income inequality drop over the last decade. Unemployment is at near record lows. And the growth of the middle class is quite stunning. By most estimates, upward of 40 million people have been pulled out of poverty in the last decade; extreme poverty, says the government, has been reduced by 89 percent. Per capita income has continued to grow even as GDP growth has slowed.
Nevertheless, the economists I spoke to were uniformly bearish about the short-term future of the Brazilian economy. They pointed, for starters, to that slowdown in GDP, which they didn’t expect to pick up anytime soon. Despite the country’s enormous economic gains since the beginning of this century, there has been very little accompanying productivity gains.
Indeed, several economists told me that the main reason unemployment was so low was that the economy was terribly inefficient. Too much of the economy was in the hands of the state, I was told, and, what’s more, it was a consumption-based economy that lacked necessary investment. And on and on. I got the sense that many economists believe that Brazil had been more lucky than good, and now its luck was running out.
In a recent article about the Brazilian economy, the Economist put it starkly: “The Deterioration,” read its headline.