Having ridden out the 2009 global recession relatively
unscathed, Brazil is now facing tough internal issues as one of the most
promising of the emerging markets comes to terms with a rising middle class, the
need for economic and social reforms and infrastructure that has not kept pace.
Recent demonstrations, mostly from the middle class, show
the mounting frustrations for reforms such as improvements in education,
transportation and health services. A
telling quote is from a university student in Brazil, "Brazil is currently
living through a generalized collapse of its infrastructure. We have problems with ports, airports, public
transportation, health, education. We're a poor country and the level of
taxation is very high."
Indeed, despite the relatively low unemployment rate and high
wages, Brazil is struggling with many issues that seem to have tarnished this
country’s shining star as one of the leading countries to emerge from the
aftermath of the 2009 global recession.
As host to the upcoming World Cup in 2014 and to the
Olympics in 2016, the country has been scrambling to prepare and improve
infrastructure – airports, roads, transportation etc. This focus is to prove to
the world that Brazil is a country that deserves to be on the international
stage. However, this has also prompted public outcries that the country is
neglecting social reforms as well as increasing concerns of persistent
corruption.
Meanwhile, infrastructure to support its international trade
continues to suffer. Ports remain
clogged as bumper crops of soybeans and wheat struggle to arrive at the ports.
As a means to clear up some of the blockage, a new ordinance that prohibits
trucks from parking at the Santos port at night appears to have caused more harm
than good. Recently, trucks were backed up as much as 31 miles to deliver
record soybean crops to the port.
Other measures have been recently approved by the government
to improve efficiencies and to attract investments to ports. As one of its
major exports, Brazil’s agricultural commodities have been hampered by not only
port delays but also by increases in transportation costs caused by a shortage
of trucks. According to Maersk, ship
wait times at the ports, which soared to longer than two months this season,
are mostly due to difficulty getting bulk commodities to port, not to actual
port capacity.
Due to very little investment in the country's rail and
waterways, Brazil is overwhelmingly reliant on trucks for transport. According
to one observer, "2013 is shaping up to be a very difficult year for
agribusiness logistics in Brazil. Three factors have combined to drive
transport costs for major commodities, such as soybeans, sugar, and corn
higher. The first factor is new legislation impacting the number of hours that
truck drivers are permitted to drive per day. The second is increases in the
price of diesel fuel. The third factor relates to bumper crops and the
expectations of large export shipments for soybeans, sugar, and corn."
Brazil is faced with numerous issues that it must resolve in
order to compete effectively on the international level. Like other emerging
markets, its middle class is growing and flexing its voice and although the
government has made some concessions to address concerns, demonstrations continue.
How successful these concessions are implemented will be of interest internally
as well as to outside markets. Lastly, it is also concerning that the
government response towards trade, in particular, seems to be typical of those
in the past – industrial subsidies and trade barriers to protect jobs. As a
result, Brazil’s shining star may remain dim for some time.
