THE
ROVING EYE Following the yellow BRIC
road By Pepe Escobar
Luis Inacio "Lula" da Silva was re-elected
president of Brazil on Sunday with almost 62% of
the votes. Just like the first round three weeks
ago, this was an entirely electronic election.
More than 125 million Brazilian voters encountered
virtually no glitches. Less than three hours after
polling closed at 5pm on Sunday, all results were
known - and uncontested - in the presidential as
well as in state-governor elections.
No
dodgy Diebold machines. No Florida 2000. No Ohio
2004. Mid-
term American voters in
Arizona, Colorado, Connecticut, Florida,
Indiana, Maryland, New York
state, Ohio, Pennsylvania and Washington state -
where scandals may possibly occur on November 7 -
would kill for this kind of transparency.
In the early 2000s, a group of Goldman
Sachs economists came up with the fuzzy concept of
BRIC, which grouped Brazil, Russia, India and
China as the great emerging economic powers of the
21st century - the main actors of a major
geo-economic shift.
Apart from this, there
are not exactly a lot of similarities within BRIC.
China is already the factory of the world. Russia
is what may be dubbed the Gazprom nation. India
strives to become a key supplier of services. And
Brazil, in the absence of a national project,
still does not know exactly what it wants;
certainly not just a role of key supplier of raw
materials.
True, the Brazilian economy may
overtake Italy's in 2025, France's in 2031 and
Britain's in 2036. The question is how. And
especially how to integrate the vast masses
excluded from the banquet.
Former
Brazilian president Fernando Henrique Cardoso
(1995-2003), a star sociologist converted to
neo-liberalism, does not believe in an abyss
between rich and poor in Brazil, but in a division
between a "modern" and an "archaic" country.
Voters declared this to be positively silly.
With more than 58 million votes, Lula - a
true political myth, former working-class hero
turned president - won his re-election because
Brazilians of all classes consider social
inequality the key national problem. With Lula,
for the first time a Brazilian government has done
something in practice to reduce this inequality,
which is imprinted in the country's history and
social structure. Brazil harbors one of the more
arrogant, rapacious and prejudiced elites in the
world, arguably worse than in India, Pakistan,
Turkey, Egypt or South Africa.
Lula - not
British Prime Minister Tony Blair - may have
offered an embryonic, political "Third Way" to the
bulk of the developing world. It's a mix of
neo-liberalism with attentive social policies.
Under the framework of a strict monetary and
budgetary policy, the first Lula government has
managed to raise the minimum wage by 25% and
extend the flagship, state-sponsored
family-allowance program to 12 million poor
families who are committed to sending their
children to school.
Brazil cut its budget
deficit and its dependence on foreign capital and
got rid of currency devaluations and recession.
The problem is that the country's economy grew
only by an average of 2.8% for these past four
years, a pittance compared with the other BRIC
nations.
So Lula's crucial task is to
create the conditions for the Brazilian economy's
serious growth. As Brazil is a federal state, this
implies somewhat painful compromises with state
governors (but now 60% of them are Lula allies).
Brazil essentially needs an agrarian reform, to
cut with Indian-style bureaucracy and
inefficiency, to invest heavily in education and
to increase productivity. And to better fight
against poverty and exclusion, Brazil must also
reform its pension system and lower interest rates
- the highest in the world.
China and
Russia have already found their respective
development models. China's approach has been
particularly seductive to Africa - while at the
same time the Chinese offensive in Africa is
regarded by many as a new form of imperialism.
Russia has met with widespread suspicion because
of internal violence and corruption.
As
two of the world's largest and more dynamic
democracies, it may be more enlightening for the
rest of the developing world to see how India and
Brazil are grappling with the long and winding
yellow BRIC road.
Brazil has an inflation
trauma - it lasted more than two decades. That
explains why the main focus in Brazil, unlike
India, is not growth, but to tame inflation. The
task at hand in India is even more staggering than
in Brazil: in India, more than 300 million people
subsist on less than US$1 a day. That's way more
than the total Brazilian population of 186
million. India has managed to grow its economy at
an annual average of 6% while keeping inflation
under control, at 5% a year. If India follows this
track it will have managed to reduce poverty
significantly by 2030.
Compared with
Brazil, India has better and longer-term-oriented
planning. The Manmohan Singh government's support
base in parliament is even slimmer than Lula's
Workers' Party in Brazil. But matters of national
interest seem to move at a brisker pace - such as
the approval of a straightforward measure allowing
foreign investment in infrastructure and the
construction business. Unlike Brazil, government
bureaucracy in India does not interfere with
essential issues. Lula has promised this will
change.
India invests more in research -
in more than 250 universities. Instead of
exporting manufactured goods, like Brazil, India
exports services, especially in technology.
Another key Indian advantage is the globalized
spirit of many of its leading corporations, such
as Mittal, Tata, Infosys and pharmaceutical giant
Dr Reddy's. Unlike Brazil, India knows very well
how to sell itself, in English, in the global
market. Brazil's global image may be as good as
India's - because of music, soccer, fashion - but
not as good in business matters. Any global
investor is attracted to India's skilled
workforce, which is relentlessly advertised as a
"competitive advantage". Not accidentally, one of
India's mantras is "fastest-growing free-market
democracy".
But in fact both India and
Brazil are still very hard to do business with. On
a global business-friendly list, Brazil ranks
121st and India 134th. In India it takes 35 days
to open a company; in Brazil it takes 152. The
global average is 16.1 days.
Brazilian
companies pay 71.7% of their profits in taxes;
Indian companies pay even more, 81.1%. The global
average is 47.8%. According to World Bank
research, for Brazilians the main problems to
doing business are high taxes and economic
instability, while for Indians they are corruption
and the cost of energy.
In India, if you
make more than $2,000 a year, you're considered
middle-class; that would be about $3,600 a year in
Brazil. In Brazil there is still not a concerted
effort to offer really popular products to the
lower middle classes and the poor. That's not the
case in India, where, for instance, Tata is
investing in the production of a popular car that
will sell for only $2,000.
Brazil is also
much more expensive than India for local business.
Corporate financing in India costs about 14% a
year. In Brazil it's 60%. Personal credit in India
costs about 26% a year. In Brazil it's 90%.
Micro-loans have already benefited 32 million
people in India, to the tune of $1.5 billion. In
Brazil the figure is close, $1.2 billion, but only
3 million people have benefited. The vast informal
economy represents 23.1% of India's gross domestic
product (GDP), and 39.8% of Brazil's.
Brazil holds a few comparative advantages.
India's public debt is larger than Brazil's -
79.5% of GDP, compared with 51.5%. And unlike
India faced with Pakistan and China, Brazil has no
border problems. So defense spending is higher in
India (4% of GDP) than in Brazil (only 1.5%).
Brazil is the de facto leader of the G20 - the
group of countries that fights in the World Trade
Organization against agricultural subsidies by the
US and the European Union. Were subsidies to
decrease by the next decade, that would be a major
boost for Brazil's powerful agribusiness sector.
Lula promised that Brazil's economy would
grow by 5% in 2007. It's still not enough, as 8%
is still not enough for India. The fact is the
developing world remains ready for a Third Way - a
more equitable system solving that elusive
equation of solid economic growth coupled with
social conscience.
(Copyright 2006 Asia
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