When Standard & Poors downgraded Brazil’s bonds to junk grade last month, the immediate cause was the country’s struggling economy and growing deficit. But the roots of the crisis, economist Paulo Roberto de Almeida told students at Yale School of Management on October 13, lie in Brazil’s major structural problems, including imbalanced public finance, inadequate savings and investment, high tax burdens, and low productivity.
The Latino Leadership Association hosted the talk by Almeida, deputy consul general of Brazil in Hartford and professor of political economy at University Center of Brasília, at Yale SOM. Almeida discussed Brazil’s current fiscal crisis in a talk titled “How Brazil was Downgraded: Economic Challenges and Political Turmoil.”
Among Brazil’s longstanding problems, Almeida said, is an insular approach to trade that prevents it from playing a major role in the world economy.
“Brazil is too introverted,” Almeida said. “The coefficient of opening [in] the Brazilian economy is less than 20% compared to the world average of more than 40%—China [is] 60%.”
Despite some historical periods during which Brazil had a larger share in world trade—during the post-World War II era, for example—insularity has long been the norm for the Brazilian economy, Almeida said.
“Historically, Brazil [accounts for] just 1% of the world trade,” he said. “Even in the last decade, when Brazil benefited from the Chinese bonanza, there was much more increase in value than in volume. For an economy who pretends to be the sixth- or the seventh-largest economy, it’s too low a share.”