Unlike in Venezuela, there is a viable scenario in which both visions - macroeconomic orthodoxy and greater social justice - can be realised.
-Wrong, there isn´t
Suppose Brazilian interest rates stabilise at a high but not astronomical 10%, the economy grows at 4% per year, and the government achieves a "primary surplus" - a surplus of taxes over programme spending - equivalent to 4% of GDP. These are all feasible targets; if they are met, then Brazil's government debt will be a stable 60% of GDP.
-To achieve this 4% surplus we are following devastating recessionary policies -who let our economy stagnated for 3 in the last 4 years. Still we are paying -8% of our GNP as interests rates in a year, so our "primary surplus", a -phantasy notion, led to real 4% deficit in GNP. This happened despite a -dramatic rise of taxes/GNP values (from 26% in 1994 to 35% now), a extensive -privatization program and the collapse of public investment. Our hospitals, -transports networks and energy generation system are near collapse, since -the government has no money to invest. And to achieve this 4% surplus, our -budget had public investment slashed to unprecedent levels. And all this -is being done to KEEP the public debt as 60% of GNP.
Once investors see that Brazil's fiscal policy is sustainable, and they see continued low interest rates in the industrial core, Brazil will look more attractive. Foreign direct investment will flow in, bringing more access to world-class technology and further boosting economic growth.
-The old cry of neoliberals who ruined our country! We received unprecedent -levels of foreign investment in the last 8 years, to reach a GNP growth -near 2,5% an year (less than 1,5% in three of the last 4 years)
Soon, Brazil's government would find itself able to roll over its short-term debt on more favourable terms, as interest rates drop below 10%. Reduced debt-service costs would mean that the debt/GDP ratio would start to fall, and government spending on infrastructure, education, healthcare, and redistribution could rise. Reduced government debt would also mean more money available for private investment, providing a further boost to labour productivity.
-More wishful thinking....how will interest rates fall if debt/GNP ratio -is constant and the country is in a deep recession?
But all of this would require extraordinary patience on the part of the Workers' Party and its supporters, whose hopes must be deferred as immediate priority is given to appeasing the bond market. Will Lula have sufficient command over Brazilian politics to keep his supporters and political cadres happy with promises of jam tomorrow when it is clear that there will be no bread today?
-Easy to say....just ask patience to a country where 30% of population lives -on less than US$60,00 a day (PPP adjusted)
Remember, these are the type of people who once thought that selling dog food over the internet was a brilliant business strategy, and that by 2010 Qualcomm would be able to sell two mobile phones a year to everyone in the northern hemisphere. If such people cannot be appeased, or if they panic for no particular reason, then everything goes down the drain. Lula becomes a failure and Brazil loses another decade as its economy sinks into a depression of uncertain length and suffers inflation of uncertain magnitude.
-He forgets to mention that the cost of appeasament is usually an increase -in interest rates, so in will make the favorable scenario unfeasible. The -markets aren´t so irrational. They know Brazil has fairly high risk of -default.
Perhaps this assurance of broad international support made it prudent - or at least less imprudent - to appease the financial markets first. It is not at all clear that the Bush administration and today's IMF can offer similar support. So Lula's odds do not look particularly high. But they still look better than the odds attached to any alternative political-economic strategy - and certainly than anything being offered by khaki-clad would-be commandantés.
-Translation. We´re fucked whatever policy we follow. That´s the point I -agree with Mr. De Long...