EDITORIAL: "An economic superpower, and now oil too: Oil could transform Brazil's economy. But not necessarily for the better," The Economist, 19 April 2008, p. 16.
The commodities boom favors Brazil right now, but the key thing is the rising economic connectivity: local firms going global and FDI flowing in at record rates ($35B last year).
Cyclical?
… some economists argue that Brazil is the beneficiary of a structural shift, in which the industrialization of Asia and the rise of a new middle class in the developing world will keep commodity prices high.
Count this amateur among them.
The fear is that the oil wealth will spoil the party. A bad tax system and labor code make firms unwilling to hire as much as they should, so 40% of the workforce stays informal. As past blog posts have noted, bottlenecks on infrastructure are a big problem left unaddressed. Then there is the usual temptation of pork barrel spending.
Something to keep an eye on.
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