Criterion of the Month
Ref: COM-10-18


The Brazilian election through the lens of competitiveness

Christos Cabolis

By Chief Economist of the WCC Christos CabolisChristos Cabolis

The Brazilian voters casted their ballots in the first round of the presidential elections this past Sunday and will return for the final second round on October 28. There is a lot of interest and many articles in the popular press and social media about the election. Brazil is after all, the 5th country in the world by population and the 8th by GDP. In addition, following recent global trends, this election has been divisive and polarized.

Most articles attempt to call the next president of the country: will it be the frontrunner, far-right candidate Mr. Jair Bolsonaro of the Social Liberal Party? Or the left-wing Mr. Fernando Haddad of the Workers’ Party? In this edition of the Criterion of the Month, we will approach the election from a different perspective. We examine how the country has evolved in the last twenty-five years. In doing so we highlight two dimensions. First, we underline some of the issues that are at the heart of the current election, for instance, corruption. Second, we accentuate the conditions that the new president will inherit.

As always, we rely on the IMD World Competitiveness Dataset and most importantly on the IMD Executive Opinion Survey responses that we have received throughout the years from mid- and upper-level managers in Brazil.

As Table 1 shows, six out of the seven presidents in Brazil after the end of the military rule in 1985, have been accused of corruption.

This alarming fact is reflected in the perceptions of executives. Figure 1 presents the evolution of the responses that executives working in Brazil have given to three questions related to corruption. The depiction in the graph is telling. Executives perceive the government to be non-transparent, and the economy to be affected by the level of bureaucracy as well as by bribery and corruption. In fact, in 2018, Brazil ranked 57th, 61st, and 59th out of the 63 countries we study in these three questions.

A distressing feature is that in all three questions the responses have been increasingly negative in the last quarter of the century. The extent of corruption and non-transparency result in misallocation of resources, low quality provision of goods and services as well as the presence of a shadow economy. These implications are reflected in hard data. Figure 2 compares the real GDP growth of Brazil with that of Russia, India, and China. These four countries form the BRIC group, the economies that were perceived to exhibit high potential in the beginning of the 21st century. Brazil has been falling behind the rest of the countries consistently in the last twenty-five years, ranked 61st out of the 63 countries we study in 2018. 

A similar picture is provided in Figure 3 with Brazil having the largest unemployment rate among the BRIC members, ranked 58th in 2018.

As expected, the combination of low confidence in the functioning of the government and low outcomes affect negatively social measures of the country. This point is illustrated in Figures 4 and 5

Figure 4 compares the response of the executives of Brazil to that of the rest of the BRIC members with respect to social cohesion in their country. Brazil performed well until five years ago when the social fabric seems to have been impacted placing the country in the 55th position in the year 2018.

Figure 5 exhibits the intentional homicide rate per 100,000 people. Brazil underperforms the rest of the BRIC members for the period for which we have data ranking 59th in 2015 with 26.7 homicides per 100,000 people.

Of course, there have been improvements in the lives of the citizens of Brazil. Figure 6 captures the healthy life expectancy in Brazil which in the last fifteen years has increased from 61 years of age to 66.

Figure 7 provides the Human Development Index, that is, an index that combines economic, social and educational indicators, for Brazil. In the last fifteen years, Brazil managed to increase the index by 15%.

The next government of Brazil will have a very difficult task ahead. The new president will lead a country characterized by high levels of corruption, crime and inefficient government operations. He will have to navigate a weak economy with high levels of unemployment to a much-needed recovery. Moreover, the accumulation of problematic conditions has deteriorated criteria related to social solidity. Importantly, he will have to lead a highly divided country. At the same time, there are positive accomplishments like the improvements realized in the areas of life expectancy and human development.

It remains to be seen whether the new president will be able to turn the negative economic and social conditions into positive outcomes for the people of Brazil.



The Brazilian election through the lens of competitiveness
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The new president will lead a country characterized by high levels of corruption, crime and inefficient government operations. 

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