Raining on the Samba parade: the challenges ahead for Brazil

Putting the ‘B’ in BRIC, Brazil is widely touted as a 21^st century success story.

What was once termed ‘promise’ has, according to conventional wisdom, flourished into achievement.

Its sheer size considered in tandem with its fertile land, its freshwater supplies (the largest in the world), and its vast hydrocarbon and mineral wealth (boosted in recent years by impressive offshore oil discoveries) has promoted Brazil to the premier league of geopolitics.

This at a unique historical juncture where it has enjoyed democratic governance, economic growth, and low inflation (though the latter has been on the rise since the turn of 2011), combined together, for the first time.

The days of accumulated inflation rates of an eye-watering 1,782 percent have passed.

Some of Brazil’s current economic highlights include coming second only to China in 2010 as a developing-nation destination for FDI inflows; overtaking Germany as the world’s fourth biggest car market; and maintaining its reputation as a commodities giant principally in being the world’s largest exporter of coffee, sugar, and now chickens amongst other items.

Some might say that Brazil has ‘made it’. And as is the fashion with newly ‘made’ states, Brazil has pursued a classic cliché.

Consider the following: you’re an emerging power with the collective eye of the international community fixed firmly upon you, somewhere between admiration and anxiety. You wish to meet this gaze with a bit of pomp. What do you do?

You host the World Cup.

This Saturday was a landmark on the road to 2014’s Samba football-fest as the countdown to the tournament’s kick-off reached 1000 days.

But Brazil’s preparation for what is arguably the world’s premier sporting event is symbolic (and in many ways directly evident) of its current unsuitability for the role of international prince-in-waiting.

It may have been all smiles for Rousseff and Pele as they held the famous canary-yellow jersey between them for the press’ benefit, but behind the contracted zygomaticus majors, things aren’t quite so swell.

Twelve stadiums remain to be constructed or upgraded not to mention roads laid and airport terminals built to connect the dots.

Just six days ago, a federal court in Brazil ordered an immediate halt to work on a new terminal at the main international airport in Sao Paulo as is typical of the lop-sided Brazilian legal system in which dams, roads and airports are easily blocked, but day-to-day issues such as black market trading and broken contracts are less easily managed.

What is more, as a percentage of GDP, Brazil’s investment in infrastructure has declined since the 1970s, averaging just two percent of GDP in the 2000s (down from 5.4 percent in the former period).

This is pretty damning stuff for Brazil’s bid to be ready on time for 2014.

OK, so the Chinese pulled it out the bag when things were looking a bit ropey prior to the Beijing Olympics. And Brazil will probably make it over the finish line by a nose-length too (though they may have bigger problems without China’s, shall we say, ‘available’, workforce).

But take a step back from the World Cup microcosm and it’s clear that the critical lack of infrastructure forms just one sprout of a hydra-headed strategic conundrum that threatens to derail Brazil’s meteoric rise.

The reality of it is that Brazil currently battles with a whole host of social, economic and political problems.

Chief amongst these is crime. Kidnappings are relatively commonplace, as is murder (the murder rate in 2008 was 20.5 per 100,000 inhabitants and, rather worryingly, 52.9 in the fifteen to twenty-four age bracket). Meanwhile, organised outfits such as Comando Vermelho wreak havoc in Brazil’s many favelas.

Suffocating self-imposed economic regulations are not far behind. On a macroeconomic level, one might argue that Brazil has the right to be proud of the way it has ridden the global crisis. But in terms of stimulating productivity at home, it is lagging far behind.

For one, the central bank’s headline interest rate was recently dropped by half a percentage point but still rockets at 12 percent. The bank’s head, Alexandre Tombini, has been grilled for the decision such is Brazil’s paranoia with inflation.

Moreover, stringent tax codes are something of a logistical nightmare for business. The World Bank estimated in 2009 that it takes the average Brazilian firm some 2600 hours’ work in order to pay its taxes each year, ranking Brazil 150^th out of 183 countries on how easy it is to pay taxes.

And let’s not forget Brazil’s aforementioned black market which crushes law abiding firms between unfair competition on the one hand and excessive bureaucratic and legal red tape on the other.

Internationally, Brazil faces other strategic hurdles. Its questionable courtship of regimes such as Iran has seen a red flag pinned above its head, not least in Washington. Brazil would be well advised to drop this relationship from its social network.

At the same time, Brazil is of course geographically bound to a hemisphere that already has one overlord.

Suspicion of the US is, as always, alive and well in Latin America (not least in Venezuela). But Brazil faces a strategic dilemma in that it is not yet powerful enough to challenge its northern neighbour while at the same time, it has failed to take on a regional leadership role.

Indeed, some of the suspicion generally reserved for Washington has begun to filter its way toward Brasilia instead as a consensus builds in the Latin American community that Brazil’s diplomacy is increasingly domineering.

Should Brazil fail to find a balance between tight cooperation with the US on the one hand and taking up a genuine regional leadership role on the other, it may find itself rather in limbo.

Of course, if Brazil is able to address these core dilemmas then it may one day perform on the international stage in a manner befitting Mário Zagallo’s iconic 1970 World Cup winning team. Until then, Dunga’s 2010 outfit seems a more appropriate yardstick; solid -- in comparison with its occasionally erratic forebears -- if not spectacular.

Dane Vallejo is the Associate Editor of The Commentator. He tweets at @DaneVallejo