November 10th brought much attention to Brazil as a blackout in Rio de Janeiro and Sao Paulo shrouded Brazilians in darkness. The rest of the world on the other hand is starting to see Brazil in a new light as the BBC World Service reported the announcement of the first steps towards physically accessing massive oil reserves on Brazil’s coast. Brazil’s coastal reserves will possibly make it one of the largest oil fields to be developed globally in the last twenty years.
While signs of this oil find have been known since 2007, the positioning of Brazil as the third BRIC to become a significant economic power has become the focus of many economic success stories since the economic crisis began this time last year. The fifteen-minute blackout in Brazil’s two largest cities was nothing compared to the day long blackout of the Eastern US and Ontario Canada in 2003. While many weary Brazilian’s might see this as a sign of poor government control or a lack of proper infrastructure, the economic heart of the world has also blacked out for much longer periods of time and will remain strong despite electrical and economic issues in the past.
Brazil on the heels of the Olympic win might be able to claim a medal in the near future as the third BRIC to develop to its full economic potential. What is of more importance than being the third country of the four to grow into its own media hype, is the ability to stay in the running to become the most stable BRIC nation in the long run. Brazil is not a typical BRIC as its growth did not come about in the same fashion as Russia, India or China. Due to the resilience of its economy, diversity in its global position, and ever growing positive reputation outside of Brazil, the South American giant will likely become the next Super Economy.
Unlike the other BRIC nations, Brazil has grown to its current potential through a series of economic failures and lessons and has made diverse growth a part of its overall growth policy, in addition to a little luck. Politically, there have been many debates in the country and criticisms of policy and the new constitution since the 1990s, but the growth of the country from right of centre to left of centre governments have tried to maintain the same prudent growth strategy while addressing poverty reduction. Poverty reduction and community development combined with economic success has been a slow climb to bring Brazil into a position where its internal issues do not hinder its ability to position itself abroad.
In comparison to the other BRIC nations it must first be noted that the relation between the BRIC nations comes from some simple measures, mostly the physical and population size of the country, its relative economic weight, and political importance in its respective region. Success in these large developing economies could plausibly lead to another combination of four or more nations, which despite their size have little in common when considering growth and poverty reduction. Countries such as Mexico, Indonesia, Ukraine, Iran, Nigeria and Egypt could possibly become future BRICs, but have stronger similarities to a China or Brazil, Russia or India. In the future, the positive and negative growth trends of the original BRICs will likely become the typical measure for different developing countries that are large and emerging economically but have little in common with each other.
When referring to Brazil, it must be noted that its economic diversity and policies addressing poverty reduction outright is notably different than those growth policies in the other BRIC nations. Latin America only competes with Africa with regards to inequality between rich and poor, and this inequality is the historical and structural burden of every Latin American country and citizen. For this reason, when luck arrives in the form of a previously undiscovered oil field, the use of its revenues to grow the economy for the whole of society can be relatively balanced with equitable policy or the expectations of such revenues for Brazil as a whole. Structural problems in places like Nigeria or Iran simply turns its vast oil wealth into a source of wealth for few and is used as political leverage against its own citizens. Russia, one of the co-BRICs, also is a country with large amounts of oil and gas, but often it is used to leverage itself politically against its neighbours and maintain its own security position in the region. The lack of diversity in the Russian economy and its link to oil and gas as its main commodity might bring in a lot of economic successes in good times, but it can harm the Russian economy when oil or other commodities are hurt in poor times. Russia becomes a BRIC however as the potential of a diverse economy and a large population could make it into a large economic power as opposed to a significant country for solely security reasons and cultural influence. Brazil’s long term policies and diverse training and economy has been able to balance its resources with other economic leverages, oil simply supports the Brazilian economy, but is not the economy itself.
With regards to China and India, links to Europe and North America has played a large role in the rapid growth of both these economies. Chinese growth is completely linked with the US consumer and other Western consumers who purchase much of their lost cost items from factories in China. These factories sell directly to US and European companies who choose to move their manufacturing to China and delegate production to small manufacturing concerns in China. Quality and safety becomes an issue for many large multinationals as they can only monitor production by second hand means, and growth in China also becomes dependent on many workers with artificially low wages to grow the country. Legal measures and equality are limited for the sake of growth, and this medium term strategy may likely fail in the long term if wages do not rise or few Chinese are allowed to benefit in the long term. It is not to say that China’s growth is limited, but policy approaches to balance growth with benefits must be addressed to make China into what the pre-2008 media hype believes it to become.
India has tried to address policy concerns and poverty reduction to some degree and might become a more stable economy in the long term, due to its large labour force, basic legal development of employment concerns, and diversity of economic growth as seen in its diversity in production, services, and technological training. India also has strong ties to the UK traditionally and may become a source for UK wealth as the financial sector in the UK continues to finance and fund growth in India due to their close relationship. India’s influence economically is also strongly tied to security issues and concerns as its growth is challenged by China’s economy and Pakistan’s and Afghanistan’s internal security issues which often brings India into the debate.
Links between growth in India and China and its European and American counterparts is responsible for much of their rapid growth, and many of its challenges as well. Brazil’s economy has recently been linking to a greater degree with other BRIC nations, but has often has balanced links with the US, EU, Asia and the rest of the world. Links with the EU and US over the last 40 years often bounced between 25% to 40% of Brazil’s economy and maintained a diverse position economically. Focus on MERCOSUR and Latin America has given Brazil better leverage and has balanced its influence in the world economy. While the US has been slow to react to Brazil’s influence outside of Latin America, other nations in the Americas would do well to take advantage of Brazil’s emerging position. Countries like Canada that are diverse and share an economic position like Brazil as not being terminally damaged by the economic recession of 2008-2009 could benefit via ties with Brazil as Canada is based in the financial and resource industry. Canada could become Brazil’s key to financial opportunities worldwide if Wall Street is slow to create stronger ties with Brazil. While economic ties remain diverse, Brazil is becoming a source of political attraction for many who often have little links with Latin America. Recently competing envoys from Iran and Israel have been sent to Brazil due to its new position as a global power and have been welcomed as Brazil seeks to balance its relations between the US and Venezuela with their counterparts in the Middle East. China continues to seek partners in Latin America as the US loses its economic clout and discusses the future of “Buy America” with its nervous allies. Brazil and other Latin American economies have been creating fast paced economic ties over the last two years as the US decides whether or not to approach the Americas with an open hand.
Media impressions of Super Economies are often done via a lens of paranoia that the US, the EU or Western countries will become the underdeveloped nations of the future. The likely outcome is that the US and EU will remain as strong economies as they have links abroad and are large and influential and will remain so for a long time. BRICs nations often do not involve themselves in other regions beyond a trading relationship or the need for resources. Brazil is balanced economically and resource wise to maintain its influence in Latin America, yet not come in conflict with other BRICs or Western Economies. While the Eastern US may not become an economic blackout in the long run, trends and policy concerns should create strong ties among strong neighbours economically and create decisive and strong coalitions between current or future BRICs and Western powers if economic hubs will grow or remain at their current levels of importance. Brazil is likely not going to be limited by 15 minutes of fame or of darkness, but will grow slowly and surely over the next few years.
The last month of economic news has been as diverse as the last 10 months of the same forecasts. With the start of July, the drop in recent markets worldwide and predictions of further problems in large economies such as the UK and Japan set to bring the recession further attention, but by mid month the result was that some US banks were making some profits, even paying back small sums of money to Mr. Obama and some auto manufacturers were not destined to be completely eliminated as stability slowly crept back into market forecasts. While these announcements will likely change in the next few weeks as SME’s continue to wind up their companies, the biggest market change seems to be coming from China and India. While many believe that only 8% growth in China may be the limit in order to stave off mass discontent among its population,
Not all US policy experts agree with Buy America, and some even have been making attempts to approach Brazil as the next India or China. Mind month, the publication and discussion of the new book:
BBC World News this past weekend held an interesting discussion on the current global financial crisis and its possible future effect on the world economy in its show
With the recent anarchy in the global economic system and Macroeconomics textbooks being reedited worldwide, many experts in the field have gone silent or have admitted their inability to predict the latest collapse and inability to give a definitive answer to the problem. In the midst of this chaos, the traditional debate of American foreign policy is taking place, whether to open trade and whither protectionism in order to increase ties among the US and its allies, or whether to close all trade ties, appoint protectionist leaders into the new Administration and hope that countries which have less than reputable human rights records will not recall their loans in an attempt to soften their own economic issues at home. At the heart of the debate is whether the US, the pioneer of open trade in the Americas, should take
With the announcement today of
Among the traditional trade debate, looming issues regarding the financial collapse on the world markets has not merely changed the rules of the game, but has made confident policymaking a thing of the past in many circles. As a reaction to the economic collapse, the traditional closing off of America in times of global war and crisis often leads policymakers to remove America from the rest of the world, push through regrettable policy initiatives without needed moments of clarity and mortgage the future relationships of the US with its allies in order to avoid dealing with issue, which this time around started and will end with the US. The Colombian trade agreement is the first test of America's ability to form a future with allies who rise and fall with the US and its actions, or the beginning of America's fall from hegemony if it chooses to neglect Colombia, and its future allies in the name of temporary comfort in a future which it has gambled away in the short 60 year timespan of the American Empire. Choices in the next few months will determine whether the Americas and the rest of the world will continue into a new century with America as a key player, or return us to a world which looks more like the early 20th century, only with slightly different actors and millions more Japanese cars. Elections and economic crisis come and go, but rhetoric during times of trouble never allow the future to forget poor decisions of the past.
There are a few realities that have hit the world this past year and this past month, to which most of the world has been affected by to some degree. Luckily enough, the issues which affect most Americans have made the greatest impact in the last few weeks of the election campaign, and the decisions people will make when casting their vote will be based on how they wish to change the past, and how they wish to see themselves in the future. Both candidates have accomplished something remarkable. The last two election campaigns offered many a lack of choice in a candidate who they felt would really push the country in a proper direction.
With soldiers dying in Iraq, and allied soldiers giving their lives in support of freedom and lives in their own countries as well as the US, Afghanistan and Iraq need to be taken as a whole and the support should be given by the US to help fix problems abroad.
With a world depending on the US economy to operate, those nations in Latin America and Europe need a strong United States that will work and support their nations as those nations wish to work and support the US itself. While there is much criticism coming out of socialist governments in Latin America, the majority of nations who have spent the last few years in cooperation with the US and achieving great stability and peace within their own borders should be supported by the US and credit given to their development.
Not all countries, even developed ones, are in the same position as their European and American counterparts. In an IMF report published in the second week of October, countries such as Sweden, Australia and Canada were credited with having very stable banking systems with well regulated capitalization requirements and having sturdy foundations to best weather the latest economic storm.
In 2001 the head of the Inter-American Development Bank spent much of his time fighting speculation that one of Latin America's giants, Argentina, had enough national reserves to maintain a 1:1 ratio between the Peso and the US Dollar and maintain confidence for investors that they would have their investments returned with acceptable risk. Five Presidents later and six years later,
While Argentina has announced this month that it will make moves to pay back its international creditors (Risk insurance for Argentina is very high or not offered), what is the effect if a whole industry makes poor business decisions and the borrowers simply return their capital and leave the lenders with large numbers of very nice houses?
In much of the popular political debate in English speaking media, issues of defense and economy often shape the question of what is considered a democracy. Defensive explanations for altering a country towards a democratic systems is most notable in Iraq and Afghanistan, where many who took the stance similar to the Bush administration that the actions the US and its allies took in Iraq were for the democratization of the country and its people. While the true effect of the war in Iraq will most likely be seen only in hindsight, the strategy of democratization of foreign countries in order to ensure stability was used before Iraq and Afghanistan were issues on the world stage, often claiming that open trade and stable economics is the root is democratic government.
This past year has been a clear example of how the waning interest in Bush has lead to increased criticisms of Chavez and his personal activities and policies as leader. With the year beginning with an insult from the King of Spain, well respected for his assistance in the democratization of Spain in the late 1970s, Chavez helped in the release of some kidnap victims in Colombia, followed by his open support for the FARC in Colombia and threats of attacks on Colombia due to their assault on a FARC leader in Ecuador and eventual pulling and reinstating of Ambassadors between the two nations. In a page from the same playbook, on September 11th Chavez pulled his ambassador from the US and recalled his own in support of political troubles between the US and Bolivia and claiming that the US Embassy in Venezuela was being used in an assassination plot against him within Venezuela itself. Despite all of these activities, the Bush administration has had little reaction to Chavez, allowing Colombia to take much of the lead on dealing with the FARC and Chavez while the world cheered the release of Ingrid Betancourt, and justified claimed that Chavez has been supporting the FARC and the drug trade which has left Colombia in ruins for the last 30 years. Sympathy and support could no longer be blamed on Bush and democratization in Latin America, as the narrative moved on, Chavez has been seeking a role to play in the next stage of the region's politics, hanging on with oil revenues and seeking to increase his power before oil prices and political ideals bring his term in office to an end involving economic collapse or violence.
Argentina has always been marked by two political trends that have been eventful enough to attract the attention of foreign investors and playwrights alike. Regarding investment, Argentina has always been a special case because of the large amount of potential in its economy that often seems to end in varying degrees of chaos as opposed to bringing the country on to another well deserved economic level. The second trend has always been that of having power couples in the Presidency during times of economic upheaval, without a doubt an interesting dynamic, but in recent history likely not exciting enough to be put on Broadway. As Nestor Kirchner's popular term in office was finally concluded by the election of his wife, Cristina Fernandez de Kirchner, the beginning of a Presidency which is entangled in the result of years of populist policies and less than ideal economic planning began and has been taking a toll on the popularity and support of President Cristina. Cristina has not been adopted as the next Evita by any means, but likely has a few strong words for her husband regarding the current predicament. Publicly she has made other moves to slow the decline in growth from 8% to 5% and again place Argentina on the world stage for investment and commerce.
In a