Bearish on Brazil
The Commodity Slowdown and the End of the Magic Moment
Ruchir SharmaRUCHIR SHARMA is head of Emerging Markets and Global Macro at Morgan Stanley Investment Management. This essay is adapted from his new book, Breakout Nations: In Pursuit of the Next Economic Miracles (Norton, 2012).
Brazilian President Dilma Rouseff at the White House. (Kevin Lamarque / Courtesy Reuters)
Until recently, the consensus view of Brazil among investors and pundits was almost universally bullish. Under the landmark presidency of Luiz Inácio Lula da Silva, the country became known as a paragon of financial responsibility among emerging markets. Having contained hyperinflation and reduced its debt, Brazil weathered the 2008 financial crisis better than most, growing at an average annual rate of nearly four percent over the past five years. And in the last ten years, some 30 million Brazilians have entered the middle class, giving their country, according to Brazil's promoters, the power to expand despite a turbulent global environment and to reduce income inequality even as it grew elsewhere in Latin America.
This decade of success has made Brazil