Foundry Daily News

BRIC States - Have the BRIC Nations Hit a Brick Wall?

When one of financial institution Goldman Sachs’ wizards orchestrated the acronym BRIC a few years ago, it seemed as B for Brazil seemed to have graduated to the level of China, India and Russia as representing the dynamics of the fast-developing group of nations, due to overtake the overaged developed world leaders (U.S., Japan, Germany) out of the miseries brought on by the global Great Recession of 2008-10.

Although China and India continue to head up the global economic expansion rate (at 7.5% and 5% respective 2013 growth rates), while Brazil was looked at as the wild card that might surprise on the upside, even South Africa was added to the equation to give the “forgotten continent” a presence in the world’s future growth leaders. But as the disappointing 2013 economy is on the verge of a fourth quarter putting a disappointing exclamation mark on that once hopeful comeback year, Brazil has become the major shortfall of a once surging four-nation developing leadership quartet.

Although the recipient of some of the world’s greatest offshore oil field finds in recent years, Brazil’s long-term claim to fame has been its dominant world position in coffee and cane sugar, accounting for one-third and one-fifth of the world supplies of these commodities, respectively. But with its offshore oil sites still in the developmental stage, while excess coffee and sugar is piling up in the nation’s plentiful warehouses, the once known “Land of Tomorrow” may have gotten stuck on a non-moving time turntable. This downturn of its plentiful cash crops has also put excessive downward value pressure on its once powerful domestic currency, the Real, reflecting the expected upward surge of its triple threat coffee, sugar cane, and oil. But this has been falling far below its export targets.

While intensively accelerating its imports during the recent growth years, Brasilia has found itself in an inflationary spiral, with its Real requiring twice the amount previous needed to raise the per capita living standard for its close to 180 million population, second only to the U.S. in the Western hemisphere. Also, the charismatic national leadership of former President “Lula” da Silva, was succeeded at the height of his two-term career, and is no longer available to put new life into his dispirited citizens.

The only saving grace of Brazil’s current predicament is that 57% of its overabundant sugar crop is converted into ethanol, which practically powers its nation’s total automotive fleet. Although anxious to ship more of its mounting supplies to the ethanol-mandated U.S. motor fleet, heavy American tariffs have so far protected America’s corn-based gasoline blend with a hefty import tariff.

Although looking forward to an exciting first time 2016 World Summer Olympics in Rio de Janeiro, it is doubtful that even this exciting shot in the arm will reverse Brasilia’s current dour mood. As the song goes: “There’s an awful lot of coffee in Brazil,” but not enough is being sold to make this ditty a happy refrain.

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