Thursday, June 21, 2018

What's behind the Brazil protests

Demonstrations protesting hikes in bus fares are not uncommon in Latin America, so when we arrived in Brazil for a two-week visit, we did not pay much attention to reports of the protests breaking out in Rio de Janeiro and São Paulo.

There were no signs of unrest at our first stop in southern Brazil. I was convinced that they would soon be eclipsed by soccer. Brazil was hosting the Federations Cup, a prelude to next year's World Cup. When I was in Brazil in May, there were concerns about the stagnant economy and growing inflation, but the biggest topic of conversation was the under-performing national team.

But demonstrators soon took to the streets throughout the country. In a city in the interior of the state of São Paulo, protesters blocked our route back to the hotel and students shut down the university where my wife was scheduled to give a lecture. By the time we got to Rio, a million Brazilians were in the streets, and the rest of the nation glued to TV coverage.

Not only did the demonstrations — overwhelming peaceful — erupt throughout the country, but the protesters' wrath quickly encompassed a broad range of issues, not just bus fares. How did Brazil get to this point, and what is the outlook? What effect will the unrest have on Florida? Brazil is our leading trading partner. Brazilian visitors and investors are also important to the state's economy.

Brazil had been on an impressive roll since returning to democracy in 1985 after two decades of a military dictatorship. In the mid 1990s the government laid the foundation for sustained economic growth by bringing inflation under control and implementing market-friendly economic policies. Much to the relief of foreign investors and the local business community, Luís Inácio Lula da Silva, the winning presidential candidate of the leftist Workers Party in 2002, stuck to his predecessor's economic path during his two terms. Brazil became an attractive place to do business. The results were impressive: five years of high growth, rapid recovery from the 2008-09 global financial crisis and surging foreign capital flows.

Lula also gave priority to improving the lot of Brazil's poor. The key component of his social inclusion model was the bolsa familia, a monthly conditional cash transfer program for low-income women who keep their children in school and make sure they got regular health checkups. The combination of sustained economic growth and low inflation with targeted welfare programs transformed society. It is estimated that between 2002 and 2012, 25 million Brazilians escaped poverty into the middle class, which now makes up more than half of the population.

For Florida, the newly prosperous Brazil translated into increased trade and a flood of visitors who spent $1.4 billion in 2010. Because of the strengthened Brazilian real, a week in Miami or Orlando was a bargain for average families. In recognition of its importance to the state, Florida Trend magazine named Brazil as its 2011 "Floridian of the Year."

Progress at home gained Brazil respect on the world stage. For example, along with China, India and Russia, it was anointed one of the four leading emerging markets, or BRICs, that were forecast to drive global economic growth. But the current demonstrations reveal that while the country's leaders were basking in global acclaim they were increasingly out of touch with the people. A deep disjuncture exists between what has been accomplished and what still needs to be done. And unlike the divisive tea party and Occupy Wall Street movements in the United States, the student-led, nonpartisan demonstrations reflect a broad consensus that the government spending priorities need to be realigned and elected officials need to be held accountable. When the demonstrations reached the wealthy beach community of Ipanema, residents of some of the most expensive real estate in the world waved signs of support from their balconies.

In a recent address to the nation, President Dilma Rouseff, Lula's handpicked successor who is up for re-election in 2014, expressed sympathy for the protesters — reminding them that she was jailed and tortured for her opposition to the military dictatorship — and then she put forward a package of proposals directed at answering their demands. The key, and thorniest, challenge will be to push meaningful political reform through Congress.

Resolving the grievances will be messy. The visit of Pope Francis later this month and next year's World Cup will bring newly mobilized society back into the streets if progress is unsatisfactory. In this climate, the economy is likely to stay in the dumps as investors grow more cautious and deficit spending accelerates. For Florida, this means fewer exports flowing through its ports and fewer Brazilians exchanging the depreciated reais for dollars to spend in Florida theme parks and malls.

Terry McCoy is professor emeritus of Latin American studies and political science at the University of Florida, where he also directed the Latin American business environment program. McCoy, who has visited Brazil on a regular basis since 1976, wrote this exclusively for the Tampa Bay Times.

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