Opinion – Arminio Fraga: Global challenges bring risks and opportunities to Brazil

The world lives in an astral hell of short-term and long-term threats. In a brilliant recent lecture, Tharman Shanmugaratnam, Singapore’s senior minister, listed five risks that, for him, constitute a “long perfect storm” for the planet. In this article, I will discuss the implications of this framework for Brazil, also seeking to identify available opportunities.

The background is familiar. When waking up from the dream of the peaceful and integrated world at the end of Fukuyama’s history, we are faced with growing tensions, which manifest in multiple spheres. The most shocking of all and the first topic on Tharman’s list is the Ukrainian tragedy, which configures the rupture of a global governance that guaranteed the sovereignty and territorial integrity of all nations.

To this return of the original Cold War, of an ideological (modified) and military nature, is added the Cold War.2 between the United States and China, also ideological, but much more complex in its dispute fronts.

The clash between the two giants characterizes a period of absence of a hegemonic global leadership that, as Charles P. Kindleberger correctly diagnosed, tends to be very unstable. From an economic point of view, the two cold wars inevitably demand an important rethinking of alliances and global production and trade relations.

For Brazil, it will be necessary to return to the Itamaraty’s traditional foreign policy, focused on the pursuit of the national interest through good relations made possible by our historical attachment to universal principles and our natural multilateral vocation. It is up to us first and as soon as possible an unequivocal defense of the integrity of all nations. We also have to ensure that we maintain mutually beneficial relationships with most countries.

In his second major theme, the author discusses the danger of prolonged stagflation. The epicenter of the problem is in the United States, where an economy overheated by expansionary policies has been hit by the supply shocks of the pandemic and the cold wars. For Brazil, the greatest risk comes from the real possibility that the American central bank will have to raise interest rates well beyond what the markets already anticipate. It would remind us of the phrase “when the North sneezes, the South gets pneumonia”.

An alternative scenario, also not comforting, would be an even greater fall in the stock markets, accompanied by a new collapse in real estate prices, today above the levels of the bubble that burst in 2008.

On this side, the picture is even more complicated than in the United States, because even in recession, inflation reached double digits. It is not difficult to imagine a perfect storm for Brazil, where external and internal challenges are reinforced. The next president will have to conduct economic policy with courage and competence, preferably with the qualitative support of the answers to the other challenges, which I discuss below.

The existential threat of climate change is the third theme of the speech. Here, Brazil will have the opportunity to promote a truly alchemical shift: exchanging a position of environmental pariah, resulting from attitudes that increased deforestation and organized crime, for a shift that would put us in a position of global leadership on the subject, with extremely positive results outside and inside the country.

The creation of a carbon market, as discussed in Congress and promised by the Executive, would be an essential step in this direction. It is essential that the market be designed in such a way as to allow the country to fully enter the global carbon market, an alternative not currently available. I see ample potential for investments in the sector, in a competitive environment and fully aligned with the public interest (I am investing in this area).

The high risk of new pandemics comes next. Science recommends all care with the topic. Here I also see ample space for a hobby horse. It will be necessary to strengthen the SUS from all angles, which, with its 4% of GDP in resources, urgently needs to climb the scale of priorities in the budgets of all spheres of government.

It is also important to include more support for research in the nation’s priorities. Resources for such efforts are not lacking, as I have argued here. What is lacking is budget transparency and political will.

Last on the list, but not least, are inequalities in growth and well-being within and between countries, the richest at an advantage in both cases. This situation has been getting worse with the “perfect storms” and represents fertile ground for populism and authoritarianism. Brazil has a lot to do in this area.

With success on these fronts, Brazil would qualify to be relevant in the reconstruction of a global governance now in tatters. The advantages would be immense, as it would help itself in everything else. However, without success, the damage to the population would be enormous. A better future will only come if and when our democracy is no longer threatened and somewhat dysfunctional.