During the first two quarters of 2013,
increasing, persistent social unrest in Brazil has negatively impacted retail
sales as indicated by data from the Brazilian Institute of Geography and
Statistics (IBGE), the official organ for economic statistical data (Table 1).
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| Table 1. Source: http://www.ibge.gov.br/home/ |
According to the Jornal do Brasil, the
Central Bank’s Index of Economic Activity (IBC-Br) grew 1.13% in June compared
to May.1 However, overall the second quarter closed with a grow rate
of 0.89% as compared to the previous period. This is a slowing trend in
relation to the last quarter of 2012, which registered a growth rate of 1.1%.
The IBC-Br index is considered a prime indicator of the Gross Domestic Product
(GDP), which has steadily declined since reaching a high of 9.3% YOY in March
2010 (Table 2).
 |
| Table 2. Source: http://www.tradingeconomics.com/brazil/gdp-growth-annual |
Not surprisingly, the US dollar has strengthened
over the same period, with a noticeable acceleration in June. By the end of the
second quarter, the dollar reached R$ 2.25 (Table 3), with the trend continuing
into August. By 15 Aug 2013, the dollar surpassed R$2.35, marking the greatest
gain since March 2009. The increased
buying power of the dollar could benefit foreign direct investments in the
Brazilian economy in areas that present the potential for stable growth, such
as agriculture which grew 17 percent in the first quarter of 2013, supported by
a strong harvest of soy (+23%), corn (+9.1%), tobacco (+5.7%) and rice (+5.1%).2
 |
Table 3. Source: Banco Central
do Brasil
http://www4.bcb.gov.br/pec/taxas/port/ptaxnpesq.asp?id=txcotacao |
It is important to note that the social
and political instability in Brazil does not necessarily indicate a troubled
economy in the long term. As Evodio Kaltenecker correctly points out, this is
not a parallel to the Arab spring, but rather the manifestation of a series of
unresolved issues: “Lack of trust in government
institutions, high levels of corruption, low quality of state-provided
services, high living & transportation costs, increase of inflation,
runaway costs of 2014 World Cup.”3 These underlying frustrations have
brought individuals out into the streets in a rather amorphous mass lacking any
over-arching organization or leadership. The cost of public transportation was
a flash-point, and the recent Confederations Cup hosted by Brazil fueled
criticism of the massive spending of public funds on World Cup preparation,4
but the demands call for reformation rather than revolution. These stem from
what James Hunter deems moral and practical dissatisfaction.5 The
former reflects the outrage fired by such things as the “Mensalão” corruption
trials that seemed to allow most of the guilty parties to escape punishment.
The latter stems from such things as disproportionately high prices, high
taxes, and faulty services including health care, education and transportation.
While the Brazilian unrest coupled with
the slowing economic growth certainly will taint foreign direct investment over
the short term, the current situation should not significantly destabilize Brazil’s
economy assuming the government avoids exacerbating the circumstances. So far,
President Dilma Rousseff has responded to the protests in an innocuous if
confusing manner by calling for a plebiscite not demanded by protesters,
pushing to repeal the hike in municipal bus fees that set off much of the agitation,
and promoting a polemic program to recruit foreign physicians to work in
under-served communities. The 2014 World
Cup will likely stir further contention, but in true “panen et circenses” fashion it will also generate significant
revenue as well as popular excitement and goodwill, especially if Brazil wins
the competition.
