Brazil's Prospects for Growth
Goldman Sachs' (GS) emerging markets chief says his native Brazil should seize a historic opportunity for growth as a new President takes over
How do you see Brazil right now? The economy is growing at almost twice the rate that it has in the last 10 years. Brazil is experiencing a fairly healthy increase in employment and wages, and an improvement in income distribution, so there is a feel-good factor. I would say this is a once-in-a-century kind of opportunity to accelerate growth to 6 or 6.5 percent and unleash all of this upward mobility.
How can Brazil make that happen?The key is structural reform—for example, a reduction in the tax burden, which would make exports more competitive. Also things that would boost productivity, like better education and a better health system.
Is Brazil growing too fast?Domestic demand is outstripping supply. The appreciation of the real also makes it cheaper to import from the rest of the world. Brazil would benefit enormously from some containment in fiscal spending and public credit growth and moderation in public-sector wage hikes.
Is that the direction you expect from President-elect Dilma Rousseff? She has the awareness and possibly the inclination to do some rebalancing of macroeconomic policies. We are on the eve of another significant monetary easing by central banks in advanced economies. However, at some point they will tighten significantly. The question is, will that lead to a sudden stop of capital flows or even a reversal? Brazil's macro policy should be prepared for that eventuality.