Both the Mexican and Brazilian governments have issued statements that aim to defend the economic models that their respective nations have decided to implement. On one hand, President Dilma Rousseff as well as former President Luiz Inácio “Lula” da Silva hail the boom that has been observed in Brazil – particularly from 2000 to 2010, where the nation reached an average of 3.6% annual growth. On the other hand, Mexican President Peña, alongside with the country’s Secretary of Finance, Luis Videgaray, have applauded the expected future growth that will arise from the structural reforms that have been undertaken by the current PRI administration. Although Brazil celebrates its past while Mexico cheers its future, in reality, both the country that is host for this year’s World Cup as well as Mexico face a low growth and strong political and social problems, although for very different reasons.
Regarding the statement issued by former President da Silva, who said that Mexico is only an economic promise rather than a reality as is Brazil, it has to be said that this criticism is the first international voice that does not agree with the international consensus that praise Mexico’s economic growth for the coming years and also puts doubts into the potential scope of the reforms. However, it is also important to acknowledge that this criticism follows an internal logic, given that it was said in a context of internal Brazilian politics rather than one of an intra-continental rivalry especially taking into account that there will be Presidential elections in October.
Rouseff’s administration has faced a growing discontent from the general population, which has uncompromisingly reacted against the economic model with low growth rates from 2011 to 2013 (where the economy only grew an average of 2.0%), something that has increased its vulnerability in the face of a potential reelection. In addition, while in 2010, only 50% of Brazilians were satisfied with the state of the country, for 2014, that number was reduced to 26%. On the other hand, while only 36% assessed the economic situation of Brazil as bad, by 2014, it represented 67%. Nowadays, 61% of Brazilians think that the World Cup will have a negative effect on the country. That way, the economic model implemented by Cardoso, da Silva and Rouseff was not strong enough to deliver results that would last until the Olympic Games and, once again, puts the government in an increasingly awkward position.
By comparing both countries there is a need to generate a discourse of rivalry or antagonism when what is really important is to analyze their respective features and, above all, learn from their experiences. One of the most notorious differences between Mexico and Brazil is that the latter implemented its model in a time of general economic wellbeing, prior to the 2009 crisis, whilst Mexico set out reforms in a time where the world grew at low or zero rates. Brazil backed up high rates based on the high prices of commodities within a context of a relatively protected economy as well as a high tax burden that translated in several subsidies; on the other hand, Mexico implemented a strategy of economic liberalization that has succeed as a country leader in manufacturing exports but has not achieved to transform the internal economy. Brazil subordinated its growth to China and its high growth rates, whilst Mexico depends of the American market, an economy that is still recovering.
Nevertheless, despite all the differences, the Brazilian model has some lessons for Mexico’s future. For instance, relying on the high prices of a market of high added value is a risky bet in the long term. Subordinating a country’s growth to the growth of other powers (whether it is China or the United States) is quite daring. The priority should remain in developing the internal economy, enhance productivity and competition as well as broadening the network of suppliers and trade partners. In addition, long-term growth cannot happen without the boost of human capital, innovation and technology transfer. Lastly, if growth does not create any new opportunities for the creation of new companies or activities from individuals from all social status that will reduce inequality in the long term, a higher income per individual will not alleviate the problems of social and political unrest. When comparing both countries, the economic model developed by Brazil, although controversial and enclosed, boosted the country for 10 years while Mexico has only started looking for data.
CIDAC
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