Sometimes it takes a big disappointment to cause a big change. Brazil has had two in the past year: First came the economic letdown, as the country went from being the darling of investors after the global financial crisis to slipping toward recession. Then came President Dilma Rousseff\u2019s poor showing at the polls, barely eking out a second term as president. In the aftermath, policies are inevitably starting to shift. Brazil\u2019s longstanding \u201cdevelopmentalist\u201d approach to growth is being discarded. But what will replace it?<\/p>\n
Starting in the 1950s, much of Brazil\u2019s economic policy hinged on the policy mix known as developmentalism: protectionism, central planning, and the cultivation of the welfare state to encourage the growth of the internal market. In the late 1990s, the government of Fernando Henrique Cardoso moved away from this approach by privatizing state industries and beginning to open Brazil\u2019s markets. The subsequent center-left governments of Luiz In\u00e1cio Lula da Silva and Dilma Rousseff maintained his reforms. But until recently, they also fell back on developmentalist rhetoric and a corresponding tendency to assert the state\u2019s control of the economy.<\/p>\n
Today, that\u2019s looking like a step backward. Policies based on the belief that the state should boost growth through strong monetary and fiscal expansion combined with price intervention haven\u2019t worked out for Latin America\u2019s biggest economy, which is heading into its deepest recession in 25 years.<\/p>\n
As an\u00a0International Monetary Fund report\u00a0published in May pointed out, the new economic team Rousseff chose for her second term is faced with the challenge of\u00a0restoring policy credibility\u00a0and bolstering confidence in executive decision-making \u2014 this in a context of weakening domestic support and a volatile external environment. Economic growth is expected to recover in the medium term, although its potential will depend on the pursuit of much-needed structural reforms, followed by critical fiscal improvements.\u00a0 Rousseff Veers to Austerity<\/strong><\/a><\/p>\n Sometimes it takes a big disappointment to cause a big change. Brazil has had two in the past year: First came the economic letdown, as the country went from being the darling of investors after the global financial crisis to … Continue reading ![\"ROuseff\"](\"http:\/\/www.w-t-w.org\/en\/wp-content\/uploads\/2015\/06\/ROuseff.jpg\")
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