BRAZIL-The "de-construction" of the economy?"

The numbers make it look that way

During the 2014 presidential campaign the PT employed the term “de-construction” with reference to its approach to opposition candidates. The term refers to a form of “character assassination” common to bare knuckles political combat. It was used principally to undermine the campaign of Marina Silva who moved up on the PSB ticket when presidential candidate Eduardo Campos died in an airplane crash. While Silva’s chances of winning were relatively slim, the PT feared that she would draw votes away from Dilma Rousseff precisely in the region where the PT had its principal electoral base.

It’s no secret that I consider the Real Plan as one of the most significant policy successes in Brazil’s long history. By bringing inflation to developed country levels, it ended almost 500 years of chronic inflation. It created, for the first time in Brazil’s history, the basis for sustainable economic development and growth when 40 million Class D consumers moved up a notch to Class C and were touted in the media as a “new middle class”. I’ve written about this phenomenon in this blog ad nausea but there is little doubt about the plan’s impact.

Recent income distribution data show that at the end of 2014, the Class C income group was 54% of the population. In 2015 this group lost 4 percentage points and fell to 50%. That this represented a falling back is witnessed by the change in the share of the population in the two lowest rungs on the income ladder: Classes D & E that were 16% of the population in 2014 and rose to 27% in 2015.

This totally runs counter to the administration’s claims that it had logged major gains in reducing the level of poverty in Brazil through its “social programs”.

Together with the other numbers that have frequently been discussed herein, e.g. inflation, declines in GDP, unemployment, etc. it should come as no surprise that Brazilians are more pessimistic about 2016 than many others in the global economy.

In my post, “A blast from the past” (10 Jan) I referred to a concept raised during the years of oil price hikes and known as the “misery index”, i.e. the sum of the rate of inflation and the rate of unemployment. When this index is combined with the loss of economic status, one can readily conclude that Brazil is being “de-constructed” piece-by-piece.

Whether this is by accident, design, or simple stupidity is not known, but it is not reasonable to conclude that those in charge of the economy and policy-making are not at least aware of the situation. Various government agencies report the same statistics (e.g. PNAD) that presumably are analyzed by those running the show.

The one thing that is painfully clear is that Brazil is coming apart!

But, as I observed in a previous blog post when I quoted US Economist Herb Stein,  “Things that can’t go on forever, don’t”.