Brazil: Leading the Brics?

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  • Topic: Brazil, Luiz Inácio Lula da Silva, Workers' Party
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9-711-024
REV: AUGUST 3, 2011

ARTHUR A. DAEMMRICH ALDO MUSACCHIO

Bra azil: Leading the BRI t ICs?
On January 1, 2011, in fron of a crowd of thousand gathered o Brasília’s central espla n nt d ds on anade, Brazil newly elec l’s cted presiden Dilma Rou nt, usseff, shouted energetically, “We are living in one of the d , best periods of our national life!” She then added, “I have c o l come here to consolidat the o te formation we experienced under Presid e d dent Luis Iná ácio Lula da S Silva.”1 Know to Brazilia as wn ans transf Dilma her enthusi a, iasm appeare justified sin Brazil ha sustained a average an ed nce ad an nnual GDP gr rowth of 4% since 2000. Between 2002 and 2009, ine B equality and p poverty had d declined sign nificantly and more than 30 million Br razilians had advanced fr d rom lower in ncome strata to the midd class. Alth dle hough Brazil was not gro l owing as fast as its fellow BRIC (Brazi Russia, Ind and Chin countries India t w il, dia, na) and China, it held important le C eadership pos sitions in the Group of Tw wenty (G-20) and had beco ome a major player in multilateral trade negotiati r m ions. Yet, Bra azil’s success in World T s Trade Organiz zation (WTO disputes concerning developed country agricu O) c d ultural subsid dies, use of WTO compu ulsory licens sing provision to break patents, and diplomatic ne ns d egotiations wi Iran had g ith generated ten nsions with the United Sta and the European Uni t ates E ion. Di ilma had to decide wheth to follow the internati d her ional policies associated w s with her two o-term prede ecessor, Lula, or to advance a new agenda. During he inaugural s e er speech, Dilma started to outline n her am mbitions: “We will not make the slighte concession to protection policies in rich countri as e est n nist ies, they repress the op r pportunity for developing countries to o r overcome poverty.” To pu ursue this plan, she had to either push for develop h ped countries to reduce a s agricultural s subsidies and open marke by d ets completing the Do round of global trade talks or contin to fight tr oha g t nue rade disputes through the WTO s settlem ment process a route th Brazil ha recently pursued wit success ag s, hat ad th gainst U.S. c cotton subsid dies. Should Brazil take a leading role in mult r tilateral nego otiations on trade and g global gover rnance? Did th country of a visionar new appro he ffer ry oach to global leadership? Do omestically, Dilma set an ambitious ag D a genda for grow wth, declarin “It is nece ng, essary to guar rantee price stability and continue el d liminating th obstacles t he that inhibit t the dynamism of the Bra m azilian econo omy.” Goldm Sachs exp man pected the BR RICs to be am mong the five largest econo omies in the w world by 2030, forecastin a growth rate of more than 5% per year for Braz Optimistic foreign investors ng r t zil. c had tr ransferred mo than $30 billion in portfolio investm ore b ment to Brazil in 2010 alon However, Brazil l ne. faced significant obstacles to growth, includ o g ding rising in nflation, high interest rate an apprec h es, ciating excha ange rate, po oor infrastru ucture, excess sive bureauc cracy, and p persistent crim Could D me. Dilma overcome these ch hallenges, whi Lula also had pledged to fix in his in ich h naugural speeches in early 2003 y and 2007? Was Bra the countr of the futu as investo hoped, or was its recen economic su azil ry ure, ors nt uccess part of a boom-bus cycle in com o st mmodities?

_______ _______________ _______________ ________________ _______________ _______________ _______________ ________________ ______ Professo Arthur A. Daem ors mmrich and Aldo Musacchio prepared this case. HBS ca M ases are developed solely as the basis for class discussio Cases on. are not intended to serve as endorsements, so i a ources of primary data, or illustration of effective or ine d ns effective manageme ent. Copyrig © 2011 Presiden and Fellows of Harvard College. To...
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