It's time to take Brazil seriously. While the U.S. and Europe have focused much of their attention on Asia's miraculous rise and unexpected fall, Brazil has quietly turned itself into a serious economic contender. Its $800 billion economy is finally being whipped into competitive shape, providing an enormous market for goods and services and making itself extremely attractive to foreign investors. And as the recent Summit of the Americas in Chile shows, Brazil is now seizing the trade leadership of the hemisphere from the U.S.
The promise of Brazil, of course, has always been greater than its reality. But this time, President Fernando Henrique Cardoso, unlike many of his predecessors, has taken the tough, unpopular steps to ensure his country's place in the world economy. Brazil's successful clampdown on inflation has changed everything. No longer are businesspeople concerned only about short-term currency fluctuations. With prices stable, they can invest for the long run. Every since the opening of Brazil's traditionally closed, mercantile economy, forces for change have been remaking companies. And by facing the Asian crisis head-on--by raising interest rates, rather than quickly devaluing the currency--Cardoso showed his commitment to stable growth.
More is needed. With the U.S. Congress blocking efforts to expand the North American Free Trade Agreement for the moment, Mercosur is becoming the most dynamic trade bloc in the Americas. But Mercosur's ambitions are too limited. Brazil talks about "free-ish," not free trade, implying that it prefers to retain tariffs and other barriers for years to come. Having come so far in remaking the economy, Cardoso should open it to compete fully in the global arena. Brazil and its partners in Mercosur must find the courage to take the next step for growth.