The chart below shows the trajectory of the Brazilian economy since the 1st quarter of 1996, whose value was standardized at 100. The data are from the IBGE and go up to the first quarter of 2022.
The red line is a curve that grows at a rate of 1.4% per year, representing the growth trend for the triennium from 2017 to 2019.
According to the table, the economy operated, in the first quarter of 2022, 1% below the previous trend. The sharp 11% drop in the pandemic was quickly reversed.
The graph also shows the crisis of 2008 and 2009. There is a large loss between the 3rd quarter of 2008 and the 1st of 2009, of 5%, totally reversed in some quarters.
Both the great global financial crisis and the pandemic, which caused, respectively, the Brazilian crises of 2008 and 2020, are exogenous to the dynamics of the Brazilian economy. By this
For this reason, despite all the social cost, much greater in the current crisis than in 2008, these crises did not leave deep marks on the trajectory of the economy as a whole. The economy drops and comes back.
It is different with the great crisis that goes from the 2nd quarter of 2014 to the fourth quarter of 2016. This left a mark on economic activity in the form of a permanent loss of 10% in the product.
The question then follows: what happened? It does not seem to make sense to attribute the permanent loss to the movement of raw material prices. These go up and down. We fall and don’t get up again. There are two readings.
In the first, by fellow heterodox economists, the permanent decline is attributed to economic policy mistakes made in Dilma’s second term and in the Temer and Bolsonaro governments. These analysts place great emphasis on fiscal and monetary policy, which, according to them, would have been very tight in the period. The tightening of economic policy delayed the recovery and turned a slump that would be
cyclic in permanent loss.
In the second reading, neoclassical or orthodox economists emphasize economic policy mistakes made in President Lula’s second term and in Dilma’s first term.
As I showed in the May 28 column, the central government’s structural primary surplus, calculated by the IFI (Independent Fiscal Institution), fell from 1.8% of GDP in 2005 to -2.4% of GDP in 2014.
In addition to the permanent fiscal worsening, a series of interventionist policies harmful to the quality of regulation and the legal and institutional framework in general produced a permanent loss of productivity. Bad interventionist policies often come and stay.
As an example of the unsuccessful interventionism of the period, it is worth remembering the policy of national content, the disastrous changes to the regulatory framework for oil and electricity, the hypertrophy of public banks and tax exemptions, among many other policies that do not survive a simple cost analysis. and benefit.
Additionally, the very expansionist macroeconomic policy practiced between 2012 and 2014, which kept the economy operating beyond full capacity, with repressed inflation and huge external deficits, explains part of the permanent loss of output.
Between the two readings, the reader selects his own.
I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
