End of the miracle and reaction to the oil crisis marked the economy in 1977

An economy in forced march. This is how, in 1977, the government of General Ernesto Geisel tried to maintain the country’s growth, four years after the first oil shock put an end to the so-called “economic miracle”.

The Brazil of the “Letter to Brazilians”, the manifesto of the time for democracy, was a more unequal country, with restricted access to public education and health services and without a wide network of social protection.

The rise in prices eroded the purchasing power of Brazilians, with inflation that would reach 40% that year. It was the beginning of an acceleration process towards hyperinflation that would only be definitively interrupted with the Real Plan (1994).

Of the 112 million inhabitants, about 100 million fewer than currently estimated, a large portion still lived in the countryside.

To keep the economy going, the government’s main instrument was a state program of major infrastructure works, subsidies to industry and import substitution, financed with a lot of external indebtedness, the 2nd PND (National Development Plan).

Part of the objective would be achieved. After growing at an average rate of 10% per year from 1968 to 1976, the Brazilian economy had an annual growth rate of 6.5% in the following four years.

It was the transition between the miracle and the period of recession that would come after a new turn in the world economy. The oil shock of 1979 brought a global wave of inflation, followed by a sharp rise in interest rates in the US and the collapse of indebted Latin American countries. Among them, Brazil, which went into recession in the last years of the military dictatorship.

The barrel of oil went from US$2.48 to US$13.60 after the first shock, and to more than US$30 after the second. Interest in the US reached 16% a year in the early 1980s.

“The disaster that was the 1980s and the beginning of the 1990s is closely linked to the public policy choices made in that period”, says Mauro Rodrigues, professor at FEA (Faculty of Economics and Administration at USP) and member of the team at the because.com.br

Like many economists, he considers that it is impossible to know what would have happened to Brazil if the government had opted for a policy of austerity instead of seeking economic growth.

Carla Beni, economist and MBA professor at FGV (Fundação Getulio Vargas), says that the growth financed by debt in hard currency took a heavy toll on the country in the following years, but that the government achieved some objectives, such as strengthening the base and reducing dependence on oil.

She sees a parallel between the economic situation in 1977 and 2022: rising energy prices, soaring inflation, rising US interest rates and slowing major economies. But he says that the issues surrounding the manifestos in both eras are much more political than economic.

“We are not having this manifesto because inflation has risen. The defense of the democratic rule of law is broader and deeper than economic issues. “

The economist says that an important difference between the two moments is the rights guaranteed by the 1988 Constitution, which replaced the Charter granted during the dictatorship. Mauro Rodrigues, a professor at FEA, also highlights this point. “The country was more unequal, and access to public services, such as health and education, was not for everyone. This came with the 1988 Constitution.”