This document discusses the harmful effects of neoliberalism in Brazil. It argues that the neoliberal economic model adopted in Brazil since the 1990s has led to low economic growth, deindustrialization, rising debt levels, and inadequate infrastructure investment. Adherence to policies like privatization, deregulation, and free trade have weakened Brazil's economy and made it more dependent on foreign capital. The document asserts that overcoming these issues requires moving beyond the failed neoliberal approach.

1. THE HARMFUL EFFECTS OF NEOLIBERALISM ON BRAZIL AND HOW
TO OVERCOME THEM
Fernando Alcoforado *
David Harvey, British geographer, professor at the City University of New York, says;
1) neoliberalism is, in principle, the economic policy that defends the thesis that human
well-being can go further with liberalization of individual entrepreneurship and the
existence of an institutional framework characterized by strong private enterprise, free
markets and free trade; 2) the role of the neoliberal State is to create and preserve an
institutional framework appropriate to such practices by ensuring, for example, the
quality and integrity of money, besides having a military structure, defense, police and
legal, among other functions, required to ensure the rights of private property and secure
by force if necessary, the functioning of markets; 3) State intervention in the market
should occur at minimum level (HARVEY, David. A brief history of neoliberalism.
New York: Oxford University Press, 2007).
David Harvey adds that neoliberalism proposes deregulation, privatization and the
withdrawal of the state from many areas of social care. Almost all countries in the world
have voluntarily or under coercive pressures of neoliberalism from the 1990s. Even
China, which Mao Zedong tried to build a socialist society adhered to neoliberalism
under the leadership of Deng Xiaop-ing to institutionalize called "market socialism"
which is the construction of a capitalist market economy that incorporates, according to
David Harvey, neoliberal elements with centralized control of the State. With the
abandonment of the socialist project, the introduction of neoliberalism and the
institutionalization of State capitalism in China, the social protection of workers that
existed at the time of Mao Zedong ceased to exist.
The factors that led neoliberalism in the world were on the one hand, the crisis of the
world capitalist system with the decline of capital accumulation on a world scale
aggravated with the tripling of oil prices, literally the fuel of capitalism, in 1973 and
process again in 1979, when there was also a huge increase in US interest rates, which
led, in the 1980s, the so-called "debt crisis" in peripheral capitalist countries. The crisis
of the world capitalist system was in various scales: politics, economy, social life,
externally and internally in all countries. Whole crisis was demonstrated by the increase
in unemployment, the fall in investment levels and reduced profitability of capital, the
fiscal crisis of national states, etc. The answer to that was neoliberalism based on which
were adopted new ideologies, new forms of administration, management and
production. On the other hand, the end of the Soviet Union and the socialist system in
Eastern Europe also contributed to several countries that have adopted socialism in
Russia and Eastern Europe as well as some who adopted the State Social Welfare in
Western Europe as a capitalist counterpart the socialist system to replace the neoliberal
model.
Neoliberalism has the basics principles: 1) Minimum participation of the State in the
direction of the national economy; 2) policy of privatization of state enterprises; 3) lack
of government intervention in the labor market; 4) free movement of international
capital and emphasis on globalization; 5) opening the economy to the entry of
multinationals; 5) adoption of measures against economic protectionism; 6)
debureaucratisation of the State with the adoption of laws simplified and more
economic rules to facilitate the functioning of the economy; 7) decrease the size of
government to make it more efficient; 8) no State interference in the prices of goods and
1

2. services to be determined by the market based on the law of supply and demand; 9)
inflation control by the state through monetary policy based on inflation targeting; 10)
adoption by the State of the floating exchange rate policy; and 11) achieving fiscal
surplus to pay down debt.
The practice has demonstrated the impracticability of the neoliberal economic model in
Brazil inaugurated by President Fernando Collor in 1990 and maintained by Presidents
Itamar Franco, Fernando Henrique Cardoso, Lula and Dilma Rousseff. Low economic
growth in Brazil and the disproportionate rise in federal debt during the Cardoso, Lula
and Dilma Rousseff governments demonstrate the infeasibility of the neoliberal model
implemented in the country. Not only FHC left a compromising economic legacy of
Brazil's development. Lula and Rousseff are also responsible for this situation because
they were not able to adopt an economic model that would contribute to the
effectiveness of economic and social progress in Brazil.
As far as the Cardoso government, Lula and Dilma Rousseff governments maintained
the neoliberal model that helped to cause real havoc in the Brazilian economy from
2002 to 2014 set in: 1) the meager economic growth and runaway inflation; 2) the
bottlenecks on the economic and social infrastructure; 3) the de-industrialization of the
Brazilian economy; 4) the explosion of internal and external debt, the denationalization
of the Brazilian economy and the deepening financial crisis in the public sector; 5) the
failure of government social policy and the elimination of regional inequalities; 6) the
worsening state of the environment; and 7) the resumption of privatization policy.
1. Neoliberalism and its impact on external accounts, economic growth and the
2
denationalization of the Brazilian economy
In the recent period, during the Dilma Rousseff government, Brazil showed the trade
deficit from 2007 to 2013. The balance of payments at current account consists of the
balance of trade, balance of services and unilateral transfers that was in deficit from
2007 to 2013 following the decline in the trade balance of Brazil. The causes of the
deficit in the balance of payments in Brazil were remittances of profits and dividends by
multinational companies that are growing tremendously in recent years, especially since
the 2008 global crisis when foreign arrays passed to help finance their branches,
becoming a surcharge forcing Brazil to help them weather to face the global economic
crisis. These remittances in recent years have far exceeded the value of remittances from
the foreign debt. The result of all this is the denationalization of the Brazilian economy,
which is the major problem that undermines the country's external accounts.
The denationalization of the Brazilian economy progresses through direct investments
in mergers and acquisitions of domestic enterprises (which account for over 50% of
foreign direct investments). This created a vicious circle: the coverage of the current
account deficit is through the dollars that come in the form of foreign investment, but
the goal of the inflow of foreign capital result ends up being the expansion of external
liabilities and denationalization, allowing growth revenues from foreign capital remitted
to headquarters. Therefore, besides contributing to the denationalization of the Brazilian
economy, the deficit of the balance of payments on current account further increased the
dependence of Brazil to foreign capital with the growing demand of foreign direct
investment.
While there was a worsening of Brazil's external accounts and the advancement of the
denationalization process also happened very low economic growth. The average

3. growth rate of GDP in Brazil during Fernando Henrique Cardoso government
(1998/2002) period was a meager amount of 2.3% per year, the economic growth of the
country during the Lula government (2003/2010) was too meager 3, 6% per annum and
the same occurred with the Dilma Roussef government when Brazil grew even less
(1.45% from 2010 to 2013) and are expected to have zero growth in 2014.
The economic growth of Brazil from 1994 to 2013 has shown a poor performance by
not presenting, sustainably rates above 5% per year needed to generate employment and
income in Brazil. The average growth rate from 2010 to 2013 was 1.45% per year. The
financial market predicts the Brazilian economic growth of 0.24% in 2014, the lowest
estimate since 2009. The drop in economic growth in Brazil result of the growing deficit
in the transactions of goods and services with the rest of the world, the difficulty of
investing in infrastructure, inflation above target requiring an increase in the interest
rate to curb consumption and high public debt.
2. Neoliberalism and the politics of privatization in Brazil
The policy of privatization of state enterprises countered by PT during the government
of Fernando Henrique Cardoso and suspended during the Lula government is being
carried forward by Dilma Rousseff government that arrived at the absurdity of
delivering 60% of the oil field Libra subsalt layer to foreign capital. The so-called
public private partnership (PPP) implemented by the current government is nothing
more nor less than the new name given to the privatization of ports, airports, highways
process, etc. The privatization policy is therefore one of the legacies of the FHC and
Dilma Rousseff in the last 20 years of serious consequences for Brazil.
3. Neoliberalism and its effects on the deindustrialization of Brazil
The opening of the Brazilian economy inaugurated during the Collor government and
deepened by governments Itamar Franco and Fernando Henrique Cardoso and
maintained by Lula and Rousseff governments contributed to the large influx of foreign
capital in Brazil translated in foreign direct investment. The large volume of foreign
direct investment, excessive inflow of dollars attracted by high basic interest rates
(Selic), the world's largest, adopted by the Central Bank of Brazil and the exchange rate
policy of floating exchange rates contributed to the overvaluation of the Brazilian
currency (Real) against the US dollar affecting competitiveness of Brazilian industry in
foreign markets and in relation to imported goods.
After a period of great expansion from 1947 to 1985, the participation of Brazilian
industry in GDP has been declining setting a framework of deindustrialization in 2013
that showed participation in GDP (Gross Domestic Product) equivalent to that recorded
in 1956 when the Juscelino Kubitichek government launched its Plan Goals. The
opening of the Brazilian economy since 1990 has aggravated the situation of Brazilian
industry that also lost competitiveness due to obstacles posed by “Brazil Cost” (high
public deficits, high real interest rates. High "spread" banking, high taxes, high labor
costs, high costs of the pension system, complex and inefficient tax laws, high cost of
electricity, poor infrastructure and lack of skilled labor). The weakening of the Brazilian
industry was decisive for half of foreign direct investment in Brazil was aimed at the
acquisition of many who were denationalized
4. Neoliberalism and its effect on the fall in investment and a rise in inflation in
3
Brazil

4. The public and private savings, which in 2013 accounted for 14.4% of GDP should be
around 25% of GDP to enable economic growth of 5% per year. Private investment
(15% of GDP) has been insufficient due to “Brazil Cost”. Meanwhile, public investment
is also insufficient (-1.4% of GDP) due to over-commitment of the Brazilian
government budget with ever increasing public expenditure costing and payment of
interest and amortization of domestic debt. The difficulty of Brazil to invest in
infrastructure stems from the failure of public and private savings.
The incompetence in management and insufficient resources for investment in
infrastructure have been the principal factors responsible for the deplorable situation in
which they find the sectors of transport and electricity in Brazil. As for transportation
infrastructure in Brazil, despite the huge coastline and navigable rivers, 60% of
domestic cargo is transported by road when it´s known that long distances (over 150
km), the most economical means of transportation is the railroad. Brazil has 1.7 million
kilometers of roads many of them in poor condition and only 200,000 km paved (11%).
Brazil's railway system has about 30,000 kilometers that besides scrapped and small,
has the gage different from one region to another making it impossible for a train to
move between regions over the country.
Brazil has only 19 thousand km of pipeline system and 14,000 km of waterways. As for
the ports of Brazil, it is estimated that the cost of cargo handling at the port more
efficient is US$ 13 per ton, while the world average is US$ 7.00 per ton. Freight in
Brazil reaches 35% of the final price of the product for export because is big share of
road transport to the ports. In at least ten major airports in the country, the demand for
takeoffs and landings is greater than the available infrastructure. This means that there
are more planes to land or take off than the ability to release them. In summary, the
situation of Brazil's transportation infrastructure is pitiable.
The energy infrastructure in Brazil only did not collapse because it is meager the
economic growth of Brazil who is facing the prospect of the threat of "black outs" in
electricity supply and the disproportionate rise in electricity tariff in 2015. Survey by
the Brazilian Center for Infrastructure (CBIE) reveals an alarming data as to the
difficulty that the national electricity system has to meet the demand of the country.
Since January 2011, until February 4, 2014, 181 "black outs" were reported. The risk of
energy rationing is just one of the problems that have accumulated in the energy area of
Brazil in recent years and are not restricted to the electricity sector. The risk of
electricity rationing may occur because are increasing the likelihood of its occurrence
given that already passed the threshold of 5% that is considered acceptable.
One of the reasons alleged by the Brazilian federal government to the vicissitudes
through which passes the electricity sector is that Brazil is experiencing one of the worst
droughts in history. With this, hydroelectric reservoirs, the largest power producers in
the country, fell to the lowest level since 2001. Neither drought nor increased
consumption should surprise the government because the Brazilian electrical system
should be sized to meet such extreme event. Measures taken to reduce the electric tariff
in 2012 provoked serious breakdown in the electricity sector because the federal
government has lowered the price of energy at a time when consumption went up and
did not accompany the electricity offer due to the drop in hydropower generation. This
situation forced the federal government to drive the thermoelectric plants of extremely
high cost to avoid electricity rationing in Brazil, a fact that will result in a very high
tariff of electricity in 2015.
4

5. The high cost of public spending of Brazilian government mean that there is no
budgetary resources available for investment in infrastructure. The necessary
investments in ports (R$ 42.9 billion), railroads (R$ 130.8 billion) and highways (R$
811.7 billion) totaled R$ 985.4 billion. Adding this value to the required investments to
ports and inland waterways (R$ 10.9 billion), airports (R$ 9.3 billion), power sector (R$
293.9 billion), oil and gas (R$ 75.3 billion), sanitation (R$ 270 billion) and
telecommunications (R$ 19.7 billion) totaled R$ 1,664.5 billion. In turn, the health
sector requires investments of R$ 83 billion per year, the education sector needs an
investment of R$ 16.9 billion / year to get quality education in Brazil and the public
housing requires R$ 160 billion to eliminate the deficit. The total investment in
economic infrastructure (energy, transport and communications) and social (education,
health, sanitation and housing) corresponds to R$ 1,924.4 billion, which is almost R$ 2
trillion.
With consumption growing faster than production capacity of the country, increase
domestic prices fueling inflation rate that was 5.91% in December 2013 and reached
6,746% in September 2014 and increases the demand for purchases of imported product
that result increase in the deficit in foreign transactions. The government has deficits
and mounting debt which implies inflation and high or increasing interest rates. Note
that high interest rates benefit the creditors of the public debt that pocket 5.5% of GDP
that the government pays in interest per year which equals 11 transfer income program
“Bolsa Família”. Inflation is not only well above target (4.5%) and in recent months has
exceeded the maximum tolerance limit (6.5%).
The downward trend in the base rate of the economy (Selic) recorded from 2003 to
2013 is being reversed at the current time with the decision of the federal government to
raise it to fight against inflation. The current Selic rate is 11.25%. The increase in the
Selic rate impacts negatively on the amount of domestic debt as well as the expenditure
on the payment of interest and amortization that increase at the expense of the Brazilian
economy. The government continues to spend more and more than it collects
accumulating debts that are among the highest in the developing world. Gross debt of
Brazil increased from R$ 153 billion to R$ 661 billion in government Fernando
Henrique Cardoso, R$ 881 billion to R$ 1.6 trillion under President Lula and R$ 1.78 to
R$ 2,4 trillion so far in the government Dilma Rousseff.
5. Neoliberalism and its effect on the increase in domestic and foreign debt and
5
the failure of public resources in Brazil
One of the most serious consequences of low economic growth that is recorded in
Brazil since the introduction of the neoliberal model is the increase in the public deficit,
a fact that makes it impede the government's ability to develop in all levels public policy
of investments in their core areas of expertise (health, education, social security,
infrastructure, security, etc.). It is necessary to note that the public deficit in Brazil is the
result of the conjunction of four factors: 1) the increase in domestic debt associated with
the sale of government bonds to control inflation by reducing the money supply due to
the sizable capital inflows external; 2) the financial costs associated with the servicing
of domestic debt; and, 3) insufficient public revenues due to the low growth of the
Brazilian economy level.
The largest expenditures of the Brazilian government for 2013 were provided to interest
and amortization of debt corresponding to 43.98% of the budget. Addition to the high
expenditure on the servicing of public debt, high interest rate Selic adopted by the

6. Central Bank of the federal government, the fifth largest in the entire world economy, as
well as the growing public sector deficit contribute decisively to the continued increase
of public debt in Brazil. Brazil's government refinance quarter of its debt every year,
another global extravaganza. The credit of the government of Brazil is therefore bad and
getting worse. Maintained the trend to allocate more resources for the payment of
interest and amortization of debt, there will be fewer resources available for federal,
state and local government to invest in economic and social infrastructure.
When Fernando Henrique Cardoso assumed the Brazilian government in 1994, the
federal public debt, which totaled approximately R$ 108.8 billion jumped to R$ 658
billion in 2002, while during the Lula government public debt was R$ 658 billion in
2002 grew to R$ 1.562 trillion in 2010. In 2014, public debt reached R$ 2.4 trillion
during the Dilma Rousseff government. If there isn´t a reversal of the trend of evolution
of domestic public debt and payment of interest and amortization policy, the imbalance
between demand and availability of resources to meet the needs of Brazil in economic
and social infrastructure is to accentuate in the course of time at the expense of the
population and the national productive sector. For the Brazilian government have
resources for investment in economic and social infrastructure, it will have to
renegotiate with domestic and foreign banks (creditors 55% of public debt), investment
funds (lenders 21% of public debt), pension funds (creditors 16% of the public debt)
and non-financial companies (creditors 8% of debt) reduction in spending on debt
service payment by lengthening the term of payment of interest and amortization of
debt.
Besides the domestic public debt, notes the existence also of a massive foreign debt
amounting to US$ 523.7 billion in August 2014, which is higher than the US$ 379
billion of Brazil's international reserves. There is a misperception on the part of the
population that foreign debt have it reset just based on official propaganda issued.
External debt has stabilized from 1997 to 2005. From 2005 to 2010, external debt grew
again significantly increasing from US$ 190 billion in 2006 to US$ 350 billion in 2010
to reach US$ 523.7 billion in August 2014.
The fact that almost half of the Brazilian government budget to be allocated to the
payment of interest and amortization of internal and external debt with a tendency to
grow in the coming years will result in the increasing inability of the Brazilian
government at all levels (federal, state and municipal ) to invest in solving the problems
of economic and social infrastructure and to promote the development of the country.
This will make the Brazilian government is bound to attract foreign capital further
increasing their dependence on outside. In other words, that situation not only have the
effect of denationalization of the Brazilian economy through the adoption of this
measure, profoundly affect the development of Brazil that will not have the necessary
resources to its economic growth and overcoming their deep regional and social
inequalities.
6. Neoliberalism and regional and social inequalities in Brazil
Brazil still presents considerable regional inequalities because it is very concentrated,
both populated and economically. In relation to population, three Southeastern states
represent over 40% of the total population of the country: São Paulo (21.63%), Minas
Gerais (10.67%) and Rio de Janeiro (8.38%). Brazil still focuses much of its population
and economy in the Southeast. The share of GDP by region, between 1995 and 2009
6

7. had no major changes. The Southeast participated in 59.1% of the GDP in 1995, and
now has 55.3% of the total. The Northeast rose slightly, from 12% to 13.5%, and the
South continued at the same level: 16.2% in 1995 and 16.5% in 2009. The concentration
is also noticeable when looking deeper into the paper industry. The State of São Paulo
has 43% of the manufacturing industries in the country, followed by Minas Gerais, with
5.6%, and Rio de Janeiro, with 6.6%. Similarly, almost half of large industries (49.08%)
is also located in southeastern Brazil [CALDEIRA, João Paulo. O retrato da
desigualdade regional no Brasil (The picture of regional inequality in Brazil).
Available in <http://jornalggn.com.br/blog/luisnassif/o-retrato-da-desigualdade-regional-
7
no-brasil website>).
According to IPEA (Institute for Applied Economic Research), Brazil managed to
reduce inequality between states and between regions of the country, from 1995 to
2008, with regard to participation in the Gross Domestic Product (GDP) and GDP per
capita of federal units. IPEA said that trend was subtle and did not cause substantial
change in the distribution pattern of economic activity in the country. Based on data
from IBGE, IPEA study points out that the Southeast has lost share in the composition
of the national GDP. In 1995, four Southeastern states accounted for 59.1% of GDP. In
2008, fell to 56% - despite this, only São Paulo and Rio de Janeiro are responsible for
45% of the country's. GDP growth was highest in the Northeast, which increased from
12% in 1995 to 13.1% in 2008 their share in the national GDP. The Midwest region
rose from 8.4% to 9.2% over the same period; North from 4.2% to 5.1%; and the South,
from 16.2% to 16.6% [ESTADO DE S. PAULO. Desigualdades Regionais no Brasil
(Regional Inequality in Brazil). Available on website <http://desenvolvimento-regional-sustentavel.
blogspot.com.br/2011/04/desigualdades-regionais-no-brasil.html>].
Besides not having made great strides in overcoming regional inequalities, social
inequalities have rebounded in Brazil according to data from the Institute of Applied
Economic Research (IPEA), which showed that poverty increased in Brazil in 2013. It
is the first time that this happens in ten years. Between 2012 and 2013, an increase of
3.68% in the number of people below the poverty line - increased from 10,081,225
people in 2012 to 10,452,383 last year. The failure of Lula and Dilma Rousseff
government in the social arena translates into not having promoted the true social
inclusion of the poor with their entry to the labor market as a result of GDP growth, ie
the increase in national wealth. There was a false social inclusion because it took place
with the granting of "alms" to 50 million poor Brazilians through the “Bolsa Familia”
income transfer program with funds from the Treasury. The failure of PT governments
in the social sphere is also embodied in the fact that the real unemployment rate
corresponds to 20.8% of the economically active population as opposed to the official
rate of 5.3% of IBGE and 10.5% of DIEESE recorded in October 2012.
The official jobless rate is low because many unemployed were left out of the
calculation of the index such as the Bolsa Família beneficiaries. A striking proof that the
unemployment rate is high is the fact that public spending on unemployment benefits
climb without stopping in Brazil. The logical thing would be public spending on
unemployment insurance to be the minimum possible occurrence of low unemployment
rates. This contradiction exists only because the official unemployment rate is wrong,
underestimation of the amount of people actually unemployed in Brazil. The federal
government is cheating the official data of formal employment. Adding the growing
unemployment with the increasing expense of Bolsa Familia, one can conclude that
there are many Brazilians increasingly depending on state handouts to stay.

8. In turn, poor public services in education, health, public transport and housing make the
Brazil position itself in last place in the world as these public services to the population
of low-quality provider. To complete the grave social situation in Brazil notes the
existence of high crime in the country has the highest rates in the world with an annual
rate of about 22 homicides per 100,000 inhabitants while the United States and France,
considered examples , recorded six murders and 0.7, respectively.
Due to insufficient funding, the federal government, states and municipalities face in the
coming years serious financial crisis that many of them will be driven to bankruptcy.
This problem adds to crisis of management in the public sector at all levels (federal,
state and municipal) due to inefficiency and ineffectiveness of their organizational
structures that contribute to the generation of waste of public resources of all kinds. This
can only be overcome with the implementation of the reform of the State and Public
Administration in Brazil to contribute to the implementation of a model of efficient and
effective management in the Brazilian state based on rationalization of work processes.
The effects of these measures would reduce the operating costs of the state and hence
the tax burden on taxpayers.
7. Neoliberalism and the increase of international reserves in Brazil
International reserves have made a significant jump from US$ 15 billion in 1990 to US$
40 billion in 1994, another big jump from US$ 30 billion in 2001 to US$ 180 billion in
2009, US$ 370 billion in June 2013 and US$ 377,8 billion in March 2014. The recent
progression of the deficit in the balance of payments current account causes concern
because its evolution in the medium and long term may become unsustainable to
finance the current account deficit with external resources, thus contributing to the
reduction of international reserves that would become used to cover this deficit. Brazil
has 377,8 billion dollars in international reserves, but may need to resort to them in the
coming months if foreign investors lose faith in the economic growth of the country that
presents a fall in its recent evolution and fail to invest in Brazil.
8. Conclusions about the effects of neoliberalism in Brazil
The analysis exposed in the previous sections allows us to identify the devastation
wrought on the Brazilian economy by neoliberal model introduced by the government
of Fernando Collor in 1990 whose balance sheet is extremely negative from every
angle. The current stagnation of the Brazilian economy that will be accentuated in the
coming years should occur simultaneously with the rise in inflation which will result in
the phenomenon of stagflation. Most likely, it will grow the deficit in the balance of
payments due to the fall in export revenue and the increase in remittances of profits and
dividends by multinational companies that have grown dramatically in recent years, far
outpacing the amount of remittances of foreign debt interest.
As far as the inflow of dollars to cover the deficit in the balance of payments, foreign
direct investment, in turn, tends to also drop due to the likely decline in the growth of
the Brazilian economy. No foreign investor would invest in Brazil with a stagnant
economy as it is right now. The stagnation of the Brazilian economy will cause also
falling government revenues at all levels so that there wouldn´t have no public funds for
investment in enough quantity to invest in economic and social infrastructure as well as
to maintain the social income transfer programs as the "Bolsa Familia".
8

9. Maintaining the neoliberal model in Brazil will result in deepening denationalization of
what remains of public assets in Brazil and, consequently, a greater subordination of the
country from the outside. The results are in: meager economic growth, above-target
inflation, external imbalances, stagnant productivity and, now backward in the social
achievements. A government seriously committed to the defense of national
sovereignty, Brazil's progress and the social-welfare of its population must necessarily
repel this scenario replacing the neoliberal economic model for the national
developmental model of selective and controlled opening of the national economy that
would certainly make the country less vulnerable to attack by speculative foreign capital
with the government exercising effective control of the economy, and help revive the
national development.
A dynamic system like the economic system of a country like Brazil when it is subject
to "fluctuations" as in the moment is taken to a bifurcation point from which the system
evolves; 1) to a new stage that is allowing restructuring to overcome the existing
problems; or, 2) collapses. In summary, in the bifurcation point, the system has to be
restructured or will collapse. This is the situation faced by many countries, including
Brazil, that after the crisis that erupted in 2008 in the United States and spilled over the
planet, did not object to restructure its economic system by the Brazilian government.
9. Conclusions on the effects of neoliberalism in Brazil
The analysis exposed in the previous sections allows us to identify the produced
devastation on the Brazilian economy by neoliberal model introduced by the Fernando
Collor government in 1990 whose balance sheet is extremely negative from every angle.
The current stagnation of the Brazilian economy that will be accentuated in the coming
years should occur simultaneously with the rise in inflation which will result in the
phenomenon of stagflation. Most likely, it will grow the deficit in the balance of
payments due to the fall in export revenue and the increase in remittances of profits and
dividends by multinational companies that have grown dramatically in recent years, far
outpacing the amount of remittances of foreign debt interest.
As far as the inflow of dollars to cover the deficit in the balance of payments, foreign
direct investment, in turn, tends to also drop due to the likely decline in the growth of
the Brazilian economy. No foreign investor would invest in Brazil with a stagnant
economy as it is right now. The stagnation of the Brazilian economy will cause also
falling government revenues at all levels so that there is no public funds for investment
in enough quantity to invest in economic and social infrastructure as well as to maintain
the social income transfer programs as the "Bolsa Familia".
The maintenance of the neoliberal model in Brazil will result in deepening
denationalization of what remains of public assets in Brazil and, consequently, a greater
subordination of the country from the outside. A seriously government committed to the
defense of national sovereignty, Brazil's progress and the welfare of its population
social-must necessarily repel this scenario replacing the neoliberal economic model for
the national developmental model of selective and controlled opening of the national
economy that would certainly make the country less vulnerable to attack by speculative
foreign capital with the government exercising effective control of the economy, and
help revive the national development.
10. How to overcome the crisis in Brazil
9

10. The national economic developmental model of selective opening of the Brazilian
economy should consider the immediate adoption of the renegotiation of the interest
payments on the foreign debt and domestic debt of the country aimed at reducing the
burden to raise public savings for investment. Should be adopted in the short-term
economic policies that prioritize: 1) a drastic reduction of public expenditure costing; 2)
control the inflow and outflow of capital to prevent tax evasion and restrict access of
speculative capital in the country; 3) the sharp reduction in interest rates to encourage
investment in productive activities; 4) the selective import of raw materials and
essential commodities from abroad to reduce expenditures in foreign currency of the
country; 5) the adoption of a fixed exchange rate policy to replace the floating exchange
rate in place to protect domestic industry and control inflation; 6) the reintroduction of
market reserve in areas considered strategic for national development; 7) the re-nationalization
of privatized state enterprises considered strategic for national
development; and 8) the adoption of a tax policy that can provide the resources that the
state would need to invest in education, health, social welfare and infrastructure sectors,
among others, and burden the least possible on the population and the productive
sectors.
The medium-term economic policy to be adopted should contribute: 1) to increase
public and private savings aimed at raising investment rates of the Brazilian economy;
2) to realization of foreign investments in the areas preferentially targeted for exports
and those in which domestic firms are not able to supply the domestic market; 3)
maximization of Brazilian exports to expand foreign exchange earnings of the country
and leverage the growth of the national economy; 4) the granting of tax incentives to
attract private investments in less developed regions of Brazil; 5) the encouragement
and strengthening of research and development and educational system of the country
activities; and, 6) the reduction of social inequalities contemplating the adoption of
measures that contribute to supply the basic needs of the population in terms of food,
clothing, housing, health and employment services, and a better quality of life. This
whole set of measures should be implemented based on the planning of national
economic activity to ensure economic growth and development in the country on a
sustainable basis.
With the national economic developmental model of selective opening of the economy,
the Brazilian government should adopt a policy able to overcome as quickly as possible
the current impediments represented by technological dependence on the outside. This
challenge can only be overcome if the federal government to develop a lot of effort and
determination alongside the national productive sectors, the centers of R&D and
universities in order to develop own technology substitutive of imports technology and /
or import technology arising from countries with which Brazil are made strategic
alliances in sovereign bases. It should be noted that the national economic
developmental model of selective opening of the economy is the antithesis of the
neoliberal model because it focuses on national interests and not those of the market.
The objectives and strategies required immediately for overcoming current
vulnerabilities in the Brazilian economy are as follows:
Objective 1: Reverse the decline in the trade balance
Strategies: a) Adopt a policy of import substitution to reduce expenditures for the
purchase of inputs, raw materials, goods and services abroad; and b) establish the fixed
10

11. exchange rate as exchange rate policy for the government to exert control of foreign
trade by reducing spending on imports and increasing export revenues.
Objective 2: Reduce the deficit in the balance of payments on current account
Strategies: a) Adopt a policy of import substitution internally producing in Brazil what
is imported; b) restricting the remittance of profits and dividends by foreign companies;
and c) limit spending Brazilians traveling abroad.
Objective 3: Reduce dependence on foreign capital for investment
Strategies: a) Increasing public savings by renegotiating with creditors public debt
lengthening the term of payment of interest and amortization; b) increasing fiscal
surplus by reducing the cost of government spending and the basic rate of economy
(Selic) to lessen the burden of paying the public debt; and, c) increasing the domestic
private sector savings by reducing the tax burden, the interest rate Selic and the "spread"
banking rate.
Objective 4: Replace the policy of floating exchange by a fixed exchange rate
Strategy: Adopt the fixed exchange rate for the government to exercise control of
foreign trade policy replacing the floating exchange rate which is based on market laws
and relies almost exclusively on variables that are not under government control, as the
growth of the world economy impairing national development.
Objective 5: Reduce the burden of debt repayment
Strategy: Lengthen the term of payment of interest and amortization of external debt by
renegotiating with lenders to the government have resources for investment.
Objective 6: Increase the rate of economic growth
Strategies: a) Develop investment plans covering all regions of the country for
exploitation of natural resources in the fields of energy (hydroelectric, wind farms, solar
power plants, biomass, petroleum in pre-salt), mineral, agricultural and industrial; b)
Raise public sector savings by reducing public expenditure and expenditure on the
payment of domestic and foreign debt; c) To combat inflation by encouraging public
and private investment in increasing production of goods and services in Brazil able to
meet demand and adopting a fixed exchange rate to avoid inflation by importing raw
materials, supplies, and products; d) Adopt a policy of import substitution producing
internally what is imported; e) To attract foreign capital for investment conditioned in
generation of trade balances; f) Structure the development axes integrating
economically together the poles of growth and national development; and g) Structure
the Brazilian state network with a profound reform of the state and public
administration in Brazil.
Objective 7: Reduce the burden of the payment of the domestic debt
Strategies: a) Reduce the Selic rate; and, b) Extend the term of payment of interest and
amortization of debt by renegotiating with Brazilian government creditors (domestic
and foreign banks, investment funds, pension funds and non-financial companies) to
have resources for investment.
Objective 8: Increase government savings for investment in infrastructure
11

12. Strategies: a) Extend the term of payment of interest and repayment of domestic debt
by renegotiating with your creditors (domestic and foreign banks, investment funds,
pension funds and non-financial companies) for the Brazilian government have
resources for investment; b) Extend the term of payment of interest and amortization of
external debt by renegotiating with lenders to the government have resources for
investment; c) Reduce the maximum public expenditure costing to the government have
fiscal surplus required to pay the service of domestic and foreign debt and resources for
investment in economic infrastructure (energy, transport and communications) and
social (education, health, sanitation basic and housing).
Objective 9: Reverse the process of de-industrialization of Brazil
Strategies: a) To promote the fall in the tax burden for the industry; b) Adopt
appropriate allocation of infrastructure resources by establishing effective programs to
eliminate existing bottlenecks; c) Increase the productivity of the industry to rise its
levels of efficiency and effectiveness and strengthening their supply chains; d) To
overcome the huge problems of education in Brazil at all levels; e) Develop knowledge
resources by adopting programs to implement R&D centers, further education
institutions, technology acquisition and attracting brains from abroad; f); Encourage
links between the supply chains of companies and their suppliers to eliminate existing
gaps; and g) combat predatory competition from imported goods and services by
restricting or limiting their entry into the national market.
Objective 10: Reversing the process of denationalization of the Brazilian economy
Strategies: a) Adopt measures of macroeconomic policy aimed at protecting industrial
Brazilian company in the confrontation against the installed foreign company in Brazil
and against imported products; and b) Adopt as a government policy priority purchasing
of goods and services from Brazilian companies in the domestic market.
Objective 11: Reduce “Brazil Cost”
Strategies: a) Combat the endemic corruption in the Brazilian public sector with the
completion of a policy reform and a reform of the state and public administration
through an exclusive Constituent Assembly; b) Reduce or eliminate the public deficit;
c) Adopt measures to reduce real interest rates, the "spread" banking rate, labor costs,
costs of the pension system and the cost of electricity; d) Simplify tax laws; e) Solve the
problems of infrastructure-related blackouts in the electricity sector and saturation of
ports, airports, roads and railways; f) Adopt measures to obtain higher qualification of
the workforce; g) Dramatically reduce the tax burden by lowering the cost of
government spending and the burden of public debt with lower interest Selic and
performing a thorough reform of the state and public administration in Brazil; h) Drastic
reduction of public debt with lower Selic rates; i) Eliminate the logistical bottleneck
with incentives to public and private investments in infrastructure, energy, transport and
communications; ; and j) Establish organizational network structure in the Brazilian
state to raise levels of efficiency and effectiveness of public administration in Brazil.
Objective 12: Reduce regional inequalities in Brazil
Strategies: a) Adopt governmental policies of fiscal and financial incentives to
decentralize the Brazilian economy by promoting investment in all regions of Brazil,
especially in the North and Northeast; b) Recover the investment capacity of the
12

13. Brazilian government not only to invest in infrastructure in the less developed regions,
but also to provide tax incentives for the private sector to feel attracted to invest in
them; and, c) Carry out a reform of the State and Public Administration in Brazil that
contribute to the formation of regional development structures that have a fundamental
role to integrate the actions of federal, state and local governments in promoting
economic, social and environmental development.
Objective 13: Reduce social inequalities and overcome the environmental problems
of the country
Strategies: a) Strengthen civil society organizations in order to pressure the holders of
economic power and the government to make social concessions that result in improved
income distribution in Brazil, too, with its participation in the design of government
policies of national development; b) Invest in improving the infrastructure of education,
health and sanitation and the public transport system; c) Increase the supply of
affordable housing to meet the demands of society; d) Adopt a policy to prevent and
combat crime by providing the majority of the population of the minimum livelihood as
employment, education, health and housing, as well as restructuring the police and
justice to combat crime without the disproportionate use of violence; and e) Take
measures to prevent and mitigate the various forms of aggression to the environment
throughout the national territory.
Objective 14: Improving public sector management at all levels (federal, state and
municipal) levels
Strategies: a) Develop plans for global, regional, state, local and sectoral development
with the participation of various government bodies after listening parliaments in their
federal, state and municipal levels, as well as civil society; b) Implement a model of
efficient and effective management in the Brazilian state based on rationalization of
work processes; c) Structure the Brazilian state network supported by modern
information and telecommunication systems that enable the centralized management
and control of all processes; and d) Make the federal and state governments to take
regulatory and global, regional and sectoral planning in integrated basis functions, while
the municipal authorities, regional development agencies and state-owned enterprises
would also part of the executive articulately.
* Fernando Alcoforado , member of the Bahia Academy of Education, engineer and doctor of Territorial
Planning and Regional Development from the University of Barcelona, a university professor and
consultant in strategic planning, business planning, regional planning and planning of energy systems, is
the author of Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova
(Des)ordem Mundial (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São
Paulo, 2000), Os condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado.
Universidade de Barcelona, http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e
Desenvolvimento (Editora Nobel, São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX
e Objetivos Estratégicos na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of
the Economic and Social Development-The Case of the State of Bahia (VDM Verlag Dr. Muller
Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe
Planetária (P&A Gráfica e Editora, Salvador, 2010), Amazônia Sustentável- Para o progresso do Brasil e
combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011)
and Os Fatores Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012),
among others.
13