FT on the Brazil's low growth

Now that Brazilian growth is entering a second year of low growth, the Financial Times claims that "carnival is over" for the country, which has grown 2,7% over the last year, following 7,5% growth back in 2010. Much of the cause of the problem, the editorial admits, is external - Europe's problems are grave, and together with the strong real, prospects are bad for exports this year. Yet the solutions proposed are all internal, basically reduced to "cut spending to reduce inflation".

The article makes writing editorials for the FT look pretty easy - it seems satisfied with citing a few well-known known facts about the country's economy, tying them together, throwing in a carnaval reference, and calling it a day. Some of the logic is also unclear to me, such as the need to cut welfare to reduce the custo Brasil. The major welfare program, Bolsa Familia, accounts for only 0.4% of the economy, and dozens of studies have it causing significant economic growth, making it a strange place for the FT to recommend taking the axe.

Welfare aside, the article tells Brazil what it already knows (or at least has been hearing for years), and probably isn't willing to do. Even if one really believes that the time to cut spending (rather than focusing on spending better) is now, will Brazil cut spending in a (non-federal) election year marked by an economic slowdown? Nope! I expect the government to prioritize credit and consumption growth, which has been a crucial ingredient in political success for the last decade. This FT editorial is falling on deaf ears.