Brazil: An economic superpower, and now oil too

Oil could transform Brazil’s economy. But not necessarily for the better

THE legend is that Brazil never lives up to its vast potential. When Stefan Zweig, an exiled Austrian writer, said in 1941 of his new home that it was the


Brazil’s previous growth spurt was derailed by debt and high oil prices, a debacle that obliged its then military government to give way to civilian rule. The early years of restored democracy saw chronic inflation, economic torpor and political drift. In the past decade and a half, however, under reforming democratic governments, Brazil has conquered inflation, opened a protected economy to the world and begun to tackle its social problems. Poverty and inequality are falling steadily. Under President Luiz Inacio Lula da Silva, the left came to power in 2002 and, to the surprise of some, maintained its commitment to economic stability and openness.

All this has gradually created a new mood among business people. Brazilian companies, traditionally inward-looking family-owned affairs, are going to the stockmarket to raise funds, in many cases to finance expansion abroad. Some, such as Vale, the world’s second-biggest mining company, and Embraer, its third-largest maker of civilian aircraft, both privatised in the 1990s, are well-known. A string of others are about to become so. Outsiders have caught the mood: foreign direct investment reached a record $34.6 billion last year.

The Economist