Octavio de Barros is one of Brazil´s best-known economists and heads the economic research department at the country´s largest privately-owned bank. He is the joint editor of a book which has just been published called Brasil Globalizado which contains a forward by the Central Bank chairman, Henrique Meirelles, and an article by former President Fernando Henrique Cardoso. The aim of the book is to urge Brazil to grasp the opportunities the current situation arising from the boom in commodities caused by the growing Chinese economy offers. de Barros reckons Brazil has 10 to 15 years leeway before this bonanza ends which it should use to catch up.

Octavio de Barros: Fabio Giambiagi, who is one of the best thinkers in Brazil and a friend of mine, and I were having a chat and decided to produce this book to try and get rid of the idea which still exists in certain circles that we should return to the old ways of having a closed economy with all the associated aspects such as controls on currency, capital flows etc. These people represent the Brazil that wants the rest of the world to be open to its products but, at the same time, wants to keep its own market closed. Despite globalization, Brazil is still is one of the most closed economies in the world. We asked leading thinkers who also reject this view to contribute articles and consider how Brazil should fit into the globalized world. We believe it is time for Brazil to stop behaving like a little boy who has become an adolescent but who is afraid to leave his short trousers behind and assume responsibilities.

de Barros: Brazil wants to be big power but does not want to abandon some of its own practices. This shows that it has not yet become a mature country. Some people think there is some kind of world conspiracy against Brazil´s interest. Brazil wants to imitate China without assuming any of the commitments this brings. It boasts of certain advances it has made in terms of the stability and the fact that it is becoming a “normal” country after decades of macroeconomic confusion. However, it also portrays itself as a weak country which cannot defend itself. It aims to be recognized by the others as a leader but often refuses to pay the cost involved. It is very efficient when it comes to defending itself - for example, when the United States wanted to make progress on the proposed Free Trade Area of the Americas - but less so when it comes to defining what Brazil really wants. I worked for the Organization of Economic Cooperation and Development at the time when Brazil was invited to join and remember how it turned down the chance and decided to remain an observer. No reason was given but Brazil feared that by joining the top table it would lose its so-called leadership of the Third World. This approach is completely wrong. Brazil needs to have the courage to stand up and assume the responsibility that goes with its size.

de Barros: When a plant is shut down and workers lose their jobs, it makes the headlines but you rarely see anything in the media about the overall gains the economy has been making. Industry has never been as strong as it is today. I find it difficult to believe that, nine years after letting the currency float freely, there are still some people who want to go back to the old system or introduce controls on imports. It is true that some sectors, like footwear and textiles, have suffered and there have been some victims but others, including footwear and textiles, have adapted successfully. Those companies which have imported most have been among the most successful.

de Barros: I´m not an academic economist living in an ivory tower. I´m a pragmatist or a “possibilist” as Albert Hirschsmann put it. For example, most of the research we produce in our bank is for the buy-side and the internal organization. We cover 72 different sectors and are constantly producing and updating in-depth reports. I have also been a member of the Economic Committee of the Federation of Industry of São Paulo (FIESP) for seven years and have frank discussions with business leaders who recognize that Brazil is undergoing an exceptional moment and has outstanding opportunities. 

de Barros: Former president Cardoso wrote a long original article entitled Um Mundo Surpreendente (A Surprising World) which is exclusive to our book. It´s an impressive piece of scholarship and he makes no kind of political points or criticism of the Lula government. We were very pleased that he became a contributor and liked his article very much. We have other distinguished contributors such as Claudio Haddad, Affonso Celso Pastore and Luciano Coutinho. The launches in São Paulo and Rio de Janeiro were a greater success and the response has been so good that the book has already gone into its second edition.  

de Barros: Brazil has benefited from a happy combination of circumstances and events which have affected the international economy in recent years. Many are expected to continue in the coming years, such as the emergence of China and India as consumers of raw materials in which Brazil is an outstanding position. This has put heavy pressure on commodity prices and the boom in world demand has allowed Brazil to expand its exports substantially. The combination of geopolitical risks and rising oil prices has led to a search for alternative sources of energy exactly at the moment when Brazil was beginning to develop the use of biofuels. On top of all this, there have been discoveries of large reserves of petroleum and gas. The challenge now facing Brazil is how to proceed in the best way in the coming 10 to 15 years so that the country makes a genuine leap forward.

Brazil has won in the lottery but the current cycle of high commodity prices will end one day. There will be lots of other prizes to win but Brazil needs to show that it knows what it will do with the prize it is currently holding. Will it invest in the future or consume it in short-term policies? The main challenge is to transform this external bonanza into investments for the future.

What´s your verdict on the Lula administration?
 
de Barros: I think Brazil has benefited greatly from having Lula as President. He has been a pragmatic leader and has overseen institutional advances. At the same time, if we look back over the last 15 years we see that the economic policies of the governments have been basically correct. In net terms, Brazil has got things right more often than wrong. This period has been one of cumulative and incremental advances. Brazil has had and will continue to have incremental improvements from the institutional and democratic progress which has been made. However, given the size of the lottery prize we have won and will keep winning, progress which is merely incremental is a waste of time. Brazil has to go much further and catch up and recover lost time.

de Barros: I have just got back from London where I attended an event by Euromoney magazine and can state that Brazil is definitely on the radar of foreign investors. They are optimistic and not as skeptical as they were in the past. I think the destructive way Argentina has been approaching its problems makes a distinct contrast to Brazil´s more responsible approach and foreigners are highly aware of this.

de Barros: I was the chief economist of Banco BBVA when Bradesco bought its Brazilian assets. I was given freedom to build up the research department to match the size of Bradesco which is Brazil´s biggest bank. We have a big team producing research mainly for the internal organization but also for clients. We carry out surveys and know that we are regarded as one of the best research teams in Brazil. We made about 300 presentations last year at home and abroad and I have attended meetings of the IMF, IFC and the OECD. We also have a site which is open to the public called economiaemdia.com.br which is full of information and updated daily.

Note: Brasil Globalizado O Brasil em um Mundo Surpreendente (Published by Elsevier Campus, São Paulo)

(c) John Fitzpatrick 2008