|| Brazil: wavering, wobbling, or what? |
Taken together, the FT's interviews in Brasília last week with Guido Mantega, finance minister, and Roberto Mangabeira Unger, extraordinary minister for strategic planning (click here for Brazil SWF to counter rising currency and here for Brazil banks on state for growth), give the impression of a government longing to change direction but knowing that to do so would be a mistake. President Luiz Inácio Lula da Silva recently announced the end of belt-tightening and the beginning of faster growth through more spending on public services - the opposite of what orthodox economists say is needed. With his unwavering public support for colleagues such as Hugo Chávez of Venezuela and Evo Morales of Bolivia despite the mounting instability their policies are causing, he has provided more evidence for those who think his government is preparing to ditch orthodoxy altogether.
Yet the government knows from experience that big government is not the answer to growth. Despite having coined "privateering" as a dirty word for privatisation during last year's election campaign, it has had to turn to the private sector to provide the money and - something in even shorter supply in government - the expertise to get investments in infrastructure off the drawing board. Any suggestion that the government is preparing to put at risk the benefits it has reaped by maintaining the tight monetary policies inherited from the previous government is, surely, just wrong.
Nevertheless, the impression that this is what it would really like to do is becoming hard to ignore. The proposed sovereign wealth fund appears to have the dual objectives of taking a significant policy tool away from the orthodox monetarists at the central bank and of providing a roundabout way to pump taxpayers' money into public-sector companies like Petrobras. While it remains probable that the government will keep such impulses under control, it is also hard to imagine that orthodox overhauls of such obstacles to growth as the pensions, tax and labour regimes will find their way to the top of the policy agenda any time soon. Jonathan Wheatley