Jim O’Neill on two Brazilian presidents

I would like to suggest a great future lunch for the FT, or at least for me: it would be on Ipanema beach with both Fernando Henrique Cardoso and Luiz Inácio Lula da Silva to debate Brazil’s future, and I would be sitting in the middle alternating between sipping a Caipirinha, taking in the sights but remembering to adjudicate occasionally between my very wise guests.

For much of the past two years, I have often found myself saying to people that Lula has claim to be regarded as the most successful G20 policymaker of the past decade. I occasionally stop, in fact, to wonder whether he might be a direct descendant of his predecessor, Cardoso, in some clever disguise. For it was much of what he inherited from Cardoso that gave Lula the platform to be such a success. And where Lula has been so smart is that he has chosen to keep most of what he inherited. The additional key to Lula’s success has been his touch with the Brazilian masses, which has allowed him to translate the benefits of stability to the many, enabling people to rise up the income scale. In turn, this has added a virtuous circularity to it all, giving policymakers the credibility needed to persist with stability-orientated policy.

I am fond of telling the story of how back in 2001, when I introduced the Bric acronym, many, especially in Brazil, thought I had taken leave of my senses. Lula was going to be the latest in a long list of policy leaders who would take Brazil back down to deep depths of crisis. I took a gamble. But the reason I included the “B” was because of the fruits of Cardoso’s policies, in particular, the introduction of inflation targeting and the decision to allow Brazil’s currency, now the real, to float. Many Brazilians had been used to living amid huge uncertainty, largely because of rampant inflation. Here, with Cardoso and then Lula, was the potential to break that multi-decade process, and to transform Brazil into a new country. Or, at least, one that wasn’t the country that had always failed to deliver. With this one bold move, Brazil could become the country of now.

Fast forward to today. While Brazil’s demographics make it extremely unlikely that the country can grow at Chinese or Indian levels for a sustained period, it could grow at five to six per cent for many years. On Goldman Sachs’s measure of basic economic sustainability/ productivity growth, our Growth Environment Scores, Brazil currently scores the highest of the four Brics, just ahead of China. It also does well on general macro issues and many key micro issues including technology and education – relative to the other Brics. Yet, the scores are not as high as they need to be to get to the best standards of the developed world. Too little international trade, too big government and too big a degree of corruption are three areas for major improvement.

Jim O’Neill is chairman of Goldman Sachs’s asset management

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