Opinion – Samuel Pessôa: The Brazilian economy in the long term

The figure below shows the evolution of the per capita product of the Brazilian economy from 1900 to 2021. I downloaded data from IPEA (Institute of Applied Economic Research). For 2021, I used the FGV Ibre projection of 4.6% real growth. Data are measured in constant reais (R$) for 2010.

The graph was made on the logarithmic scale. On this scale, whenever the growth rate is constant, the trajectory will be well approximated by a straight line whose slope will be the growth rate.

There are clearly three periods: from 1900 to 1917; from 1917 to 1980; and from 1980 to 2021. There were, therefore, two structural breaks in the series of the Brazilian economy in the last 120 years: in 1918 and 1981. The annual growth rates in each of the three periods were, respectively, 0.3%, 3.8% and 0.7%.

In addition to the GDP per capita at the beginning and end of the series, respectively R$ 1,245 and R$ 20,144, I marked in the figure the GDP per capita in 1929, R$ 2,256, in 1995, R$ 15,752, the first year in which we surpassed the peak 1980, and in 2013, R$21,667, the peak before our big crisis from 2014 to 2016. It took 15 years to
to surpass the 1980 peak, and in 2021 we were still 7% below the 2013 peak.

Contrary to the perception of many, the period of high growth did not begin with the Revolution of 1930, but 12 years earlier, in 1918.

The structural break that produced the acceleration of growth was probably the closure of the world economy after the end of the pax britannica, with the First World War. The closure of the global economy was slowly reversed after the Second World War, and globalization picked up speed from the 1980s onwards, precisely when we unlearned how to grow.

Also in the 1980s there was the transition from the military dictatorship to democracy. Democracy, naturally, greatly increased the demand for social spending, the great omission of the previous period, and compromised the capacity for public investment in infrastructure. We still haven’t managed to find a package that reconciles development with equity and maintenance of the Brazilian State’s investment capacity.

Additionally, the prevailing ideology of our elites, which the rest of the world wants to exploit us, ends up generating defensive reactions —the change in the oil regulatory framework in 2010 is a paradigmatic example— that make it difficult for the Brazilian economy to enter a world globalized.