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Issue Date:  January 11, 2008

Brazil approaches 'mass consumer market' goal

Rio de Janeiro, Brazil
Inter Press Service

The Brazilian economy is finally coming close to the dream of creating the “broad mass consumer market” announced in 2002 as a campaign promise by President Luiz Inácio Lula da Silva. But several hurdles still lie ahead.

Gross domestic product grew 5.3 percent in 2007 and nearly 2 million formal sector jobs were created. However, full employment remains a distant goal, there are fears of a resurgence of inflationary pressure, and there is a risk of a repeat of cycles of economic growth and stagnation if international market conditions deteriorate.

In his year-end address to the nation last month, Lula said Brazil is experiencing a “virtuous circle” in which rising consumption foments investment, bolsters production and drives the generation of employment, thus leading to an expansion of the domestic market.

Holiday sales were the highest in a decade. In 2007, Brazilians bought some 2.45 million new cars, trucks and buses, nearly 30 percent more than in 2006.

From January to November, 1.93 million jobs were created, which, added to rising wages and a steady expansion of credit, expanded people’s buying power.

Social programs like the Bolsa Familia, which provides financial aid to 11 million poor families on condition that their children stay in school and be vaccinated, are also driving up consumption of basic goods.

Brazil “is becoming a country of many, and will not rest until it belongs to everyone,” now that “it has discovered how to grow with social inclusion,” said Lula.

The president is confident that the growth will continue over the next few years, thanks to the heavy investment projected by the government’s “accelerated growth plan,” mainly in the areas of transportation, energy, housing and sanitation.

The Brazilian economy thus seems to be moving toward Lula’s 2002 promises. However, in Lula’s first few years in office, the economy did not grow much, and the growth that did occur was largely driven by exports. Lula’s re-election in 2006 was chiefly attributed to the government’s social programs and other initiatives that benefited the poor, as well as the low inflation rate.

First he yielded to the requirements of the financial market, abandoned his radical rhetoric, and accepted the economic stability policies of his predecessors.

These included fiscal austerity policies and low inflation targets set by a conservative Central Bank, which is autonomous in practice.

Reconciling that economic approach -- which Lula, a former trade unionist, used to criticize as “neoliberal” -- with the broad generation of employment, production incentives and an income redistribution program based on cash transfers was the strategy his government hit upon to expand the domestic market as a key condition for growth.

Creating 4 million jobs in the formal economy and making small loans available to retirees, low-wage earners, and others previously unable to obtain credit modified the situation in the last two years, increasing consumption rates among millions of people in this country of 188 million.

National Catholic Reporter, January 11, 2008

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