Brazil’s economy: Why I was wrong to be an optimist

Tens of thousands of protesters in red shirts took over the streets of Brasilia on August 15, the last day to register candidacies for the upcoming presidential elections. They were demanding that the Supreme Electoral Court accept the bid of Lula da Silva. Held captive in a cell in the southern city of Curitiba, the former president could only assert his political rights through an op-ed in The New York Times.

Lula remains the most popular politician in Brazil. The memory of economic prosperity under his government makes him favorite to regain the presidency, if only he is allowed to run. While that remains unclear, now that the presidential race is officially underway, the sluggish economy will be at the center of the political debate either way.

The unemployment rate is above 12 percent and poverty and extreme poverty are on the rise. For the fifth year in a row, Brazil will run a sizeable primary budget deficit. A recent study linked the current government’s rash austerity measures to increasing child morbidity and mortality. The key question all presidential candidates will have to answer is, how they can bring back the booming performance that made Brazil one of the BRICS.

Two years ago, in an article for The Conversation, I claimed that the Brazilian economy was “in for an upswing”. Against prevailing pessimism, I suggested the country would rapidly recover from the steep decline of 2015 and 2016, when GDP contracted by almost 8 percent – arguably Brazil’s worst recession on record. Stretching my argument to the limit, I predicted that an imminent recovery would “put whoever emerges victorious in the current political dispute...