A rare consensus exists among Brazilian economists — the country not only needs to increase investments, it needs to do it at a pace faster than overall economic growth and for at least several years in a row.
“From 2004 to 2011, economic growth was generated by fostering consumption”, says Raul Velloso, managing partner of Brasília’s ARD consulting group. “But that model for development has reached a point of exhaustion”.
Rising salaries, massive welfare and benefit payments, and steadily increasing government spending have led to a huge increase in demand for goods and services. Yet investments haven’t kept up, and industry can’t keep pace, bringing hefty imports, a yawning current account deficit and inflation.
Deterioration is everywhere.
Growth has taken a hit too. Once the emerging-market darling of global investors, Brazil is now in its third year running of sub-par growth. A hoped-for 2013 rebound is likely to fizzle amid a consensus growth forecast of 2.5%. A bit less is expected for 2014.
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