View From Rio: How Brazil Pays the Price for ‘Economic Miracle’

BY Larisa Epatko  March 24, 2011 at 2:10 PM EST


President Obama plays soccer with some children in Rio de Janeiro (Jim Watson/AFP/Getty Images)

When President Obama visited Brazil this week, he touted the two countries’ similarities and the mutual benefits of economic cooperation. But while Brazil is enjoying an economic renaissance, its residents are experiencing some growing pains along the way.

Brazil’s diversified economy, including healthy exports of ethanol, soybeans and airplane parts, has helped the Latin American country not only weather the global recession, but grow into one of the world’s economic powerhouses.

The upsides of the country’s rapid growth are more jobs, better pay and increased manufacturing, said GlobalPost’s Erik German in Rio de Janeiro. But the downsides are steadily increasing prices for even the basics, such as food, and fears of high inflation rates as foreign investors flock to buy up the Brazilian currency.

One of the easiest ways to track rising costs is the “Big Mac index,” German told us by phone. These days in Brazil, a McDonald’s Big Mac sandwich costs more than US$5.

“Everybody says they’re worried about inflation, and part of that is political, because Brazil has a nasty history with inflation,” said German. “For the past several decades, there have been periods of time when inflation was so out of control that the value of people’s paychecks would fall demonstrably between pay day and when they actually made it to the grocery store,” making it impossible for people to save money, he said.

The Brazilian government is trying to do its part by reducing government spending, which has raised some objections, but in general doesn’t have a lot of options for controlling inflation, said German.

Brazil hosts the World Cup in 2014 and the Olympics in 2016, which will bring new economic opportunities, but in the meantime requires upgrades in roads, bridges, hotels, public transportation and airports to handle the onslaught of visitors, said German.

“There’s a lot of concern that Brazil won’t get ready in time and some demonstrated problems with infrastructure,” he said, though he noted one recent move that garnered public approval — the appointment of Brazil’s longest-serving central bank chief Henrique Meirelles as head of the Olympic Public Authority.

“He is very well-respected and one of the people most identified with Brazil’s economic miracle,” German said.

In a speech delivered in Rio de Janeiro, President Obama spoke of expanding trade and investment to create new jobs and opportunities in both countries.

He described American and Brazilian companies’ commitment to student exchanges to increase the skilled workforce, and ongoing efforts to strengthen cooperation between the two countries’ scientists, researchers and engineers.

But German said President Obama did not address one of Brazil’s key issues: U.S. tariffs on Brazilian ethanol, which is made from sugarcane rather than corn, as in the U.S. Failure to mention the matter shows the trip was more symbolic than it was aimed at concrete results, he concluded.

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