Opinion – Samuel Pessôa: Brazilian democracy has not sustained long cycles of growth

In recent weeks, some texts by people linked to the PT political group have evaluated the PT’s experience in government.

The argument is that the performance was very good, with some difficulties in Dilma’s first term, until Operation Lava Jato, Aécio’s refusal to accept the election result and the reversal of commodity prices threw us into a deep economic crisis.

Thus, to debate our past, PT believes that the worsening of the crisis in 2015 and 2016 has nothing to do with the policies adopted by the Executive. The PT government’s bill for PT ends in 2014, according to my interpretation of those texts and other manifestations
coming from that political group.

My argument is that the best moment we’ve lived since redemocratization, the eight years of Lula’s presidency, had an unsustainable economic policy from 2006 onwards. Sooner or later we would test the limits. These were tested in Rousseff’s first term. The fact that she has doubled the bet from 2012 largely explains the gravity of the crisis.

I have already dealt with the unsustainability of economic policy prior to the worsening of the crisis from the point of view of fiscal policy. The figure shows the difficulty our democracy has in building sustainable growth cycles from the point of view of private sector profitability. It is the companies’ profit, before interest, taxes, depreciation and amortization (EBITDA) payments, as a proportion of the net operating revenue (NOR), which is the net income of indirect taxes paid.

The data were obtained from the Economatica database (thanks to my JBFO colleague Jefferson Honório for tabulating the data).

It is noted that there was a clear cycle of rising profitability in the private sector, between 1995 and 2004, and a cycle of decline, between 2005 and 2015.

From 1998 to 2004, based on 1997, profitability rose 12 percentage points. Between 2005 and 2014, taking as a base 2004, it dropped 11 percentage points. Even in 2012 profitability was close to 1997 levels.

Regardless of the severity of the political crisis, or the economic effects of Operation Lava Jato, or even the drop in commodity prices, our growth cycle would not continue.

It is a fact that Dilma tried to fix the situation in 2015. The measures proposed by Joaquim Levy and Nelson Barbosa were in the right direction. However, the political crisis prevented the situation from being fixed.

As illustrated by the figure, we have advanced in building the macroeconomic conditions to sustain a new growth cycle. I dealt with this topic in the July 18 column.

The question is how to finish building the conditions for a new growth cycle and prevent it from being a new chicken flight. Ideally, these questions should guide the electoral debate in 2022.