Randy McDonald pointed out this odd article about Brazil in the Globe and Mail. The author lauds Brazil as a particularly good exemplar of economic management over the past few years, while blasting Canada:
“On the other hand, Canada should have done much better too: Our economy grew dramatically, fuelled by a new resource boom, and our banks stayed on a short leash, so none failed. But for the most part, we were among the champagne-sprayers. Our wealth fund, which shamefully lies in provincial hands, is needlessly tiny. And a decade of lacklustre government spending by both parties has robbed us of the chance to become a world leader: Our measures of equality and poverty are no better than they were at the beginning.”
To which I respond: bollocks! (I like that word. I don't think I've ever actually spoken it. I don't think anyone in the United States has actually naturally spoken it since 1892, although I have been known to say “bollixed up.”) Brazilian economic management has been fine, but not exemplary, whereas Canada has done everything it was supposed to do.
Point #1: yes, Brazil paid off its debt to the IMF. Very nice ... but Canada never had any IMF debt to pay off.
Point #2: yes, Brazil reoriented its social spending to bring real results in improving public health and reducing malnutrition ... problems Canada does not have.
Point #3: Between 1998 and 2008, Brazil managed to hold its net federal debt to 25% of GDP. It also managed to redenominate most of its debt into its domestic currency. Both excellent accomplishments. But Canada's debt was already denominated in its own currency, and in the same period Ottawa reduced the federal debt from 63% of GDP to 30%, a much more impressive accomplishment, and exactly what the author accuses Canada of not doing.
Two more points below the fold.
Point #4: Brazil does have foreign reserves five times larger than Canada. But that's because Brazil is a vulnerable country, not because there is something good about having lots of foreign reserves. Reserves are, in essence, a zero-interest loan to foreigners. (Caveat: they're usually held in U.S. treasuries, but these days that's about a zero-interest investment.) Why is a poor country going around lending $191 billion to the United States? Because its government is terrified that it might need that much to defend its currency ... which dropped by a third anyway in October. A Canadian government that built up similarly-sized reserves would be engaged in rather strange behavior.
Point #5: Doug Saunders, the Globe and Mail author, seems oddly confident that Brazil will come out of this year's economic shocks with “2-to-4-per-cent growth.” That's especially odd because all the signs are that the Brazilian economy is already in recession, and growth projections have already fallen to the lower end of that range. There's a good chance that Brazil will be able to pull out of the year with positive growth (there's still room for the currency to fall, although that risks sparking inflation) but there's also a good chance that it won't.
Similarly, he's oddly secure that Brazil “won't need to cut social spending or go into deep debt.” Maybe. The slowdown is already hitting the country and Brazil still faces the dilemmas of emerging market Keynesianism.
I'm not knocking Brazil. I think Lula has done a fine job. But so did Canada's last two Liberal governments. Inasmuch as Brazil has done more than Canada, it's because Brazil faces far graver problems. Canada didn't spritz champagne nor smoke cigars during the recent boom, and Canadians should be proud of how their country has managed its economic affairs. Even if it sometimes needs a little help from the British Empire ...