Lee Alston, co-author of a great new book on Brazil, has an excellent piece on Brazil’s political crisis.
He points out that so far the impeachment has been a good thing: markets have risen and Interim President Michel Temer is known as a “dealmaker” who can manage Congress.
But! Temer has a hard row to hoe. He needs to restore fiscal stability while retaining social inclusive policies: i.e., income redistribution that actually redistributes income and gives people a stake in their polity. How can we know whether he can do that? Well, take it from the source:
In Brazil in Transition, my coauthors and I pose three questions to help us assess whether a leader such as Temer has what it takes: does he know what policies are needed to recover from the shock? Can he coordinate a coalition that includes economic and political actors as well as citizens to embrace those policies? And is he trusted and does he possess moral authority?
Lee doesn’t come out and say it, but his tone is negative. (He even briefly feints in the other direction, sardonically pointing out that at least you have to admit that Temer isn’t afraid of controversy.) His conclusion:
His early moves may please markets, but to satisfy Brazil’s diverse citizenry, he will need to demonstrate that he is not abandoning social inclusion. On this as well as his own fate in the ongoing corruption scandals: the jury is still out.
As for me, well ... I think the list of questions is an excellent one. The answers to the three are maybe, probably not, and hell no. The jury is certainly out, but there are a lot of signs coming out of the box.
Meanwhile, buy the book.
Some of the comments in the link had my eyes rolling, like "social inclusion, sounds great, but bad in practice"... Ooooooh boy. Thing is, I've been reading too much material on the degree to which economy dysfunction is a result of a lack of social inclusion, most recently Pesek's Japanization. So it's no surprise that he advocates a little austerity for the little guy.
My main issue, though is the fiscal situation. While guys like Alston can go with the waste-fraud-abuse angle, in Brazil, most of that is entirely accepted among people with considerable power to frustrate reform. Things like Bolsa Familia, or the expansion of education are a relative drop in the bucket such that I understand.
Culture war, such as seen in Kansas or Louisiana, will only get you a thimbleful of revenue nominally, and probably net out as larger losses due to the probable high fiscal multiplier (compared to white elephant infrastructure)
As in Argentina (and Spain), Brazil's provinces and municipalities are in excruciating fiscal crisis and need restructuring. However, restructuring such that it would do any good needs a large cash investment. Brazil certainly has the reserves, and hey, the national fiscal situation isn't that unbalanced. The mentality is the problem, though, when fixing things means allowing a more sizable national fiscal deficit (assuming Brazil can issue the debt) and spending down reserves. On top of ending some of the fun and games by the rent-seekers.
Posted by: shah8 | May 17, 2016 at 11:34 PM