Brazil protests signify economic slowdown

Brazil protests signify economic slowdown

Protests have continued throughout Brazil in recent weeks, which may have important implications for the future of South Americas largest country. Primarily urban in nature, the protests have erupted throughout major cities with some estimating as many as 250,000 people having taken to the streets. The protests have been dubbed the Revolta de Salada, or the ‘salad movement.’ The name has been coined following reporters’ use of vinegar to counteract police deployment of tear gas against protesters.

While the term may seem humorous and innocuous, the protests have been anything but. Streets have been blocked, and fires have raged as protesters clashed with police and even climbed on top of the National Congress. Meanwhile, several cyber-attacks have been levied against the Brazilian government. Images of the protests have quickly gone viral. One photo of a woman being pepper sprayed in the face by a policeman in riot gear gained particular salience. While these images have certainly taken up much of the media attention, many of the demonstrations have in fact been peaceful. In a country that has seen steadily increasing global influence and economic growth for more than a decade, the implications of this blatant discontent are potentially significant.

The grievances of the protesters are many and signify a widespread discontent among the population in Brazil. The first outbreaks occurred following a 7 percent increase on subway and bus fares. The Free Fare movement and other movements and individuals have taken to the street, in part to protest what many feel is an inadequate return on taxes paid for services. The location of some of the demonstrations is significant as well. The Confederations Cup soccer tournament witnessed the protests, where President Dilma Rousseff was booed at a soccer match on June 15th.

The protesters themselves are a somewhat varied if not atypical bunch for demonstrating in the streets. According to the Brazilian pollster Datafolha, 84 percent of them are lacking any specific political party affiliation, about half are 25 years or younger, and nearly a quarter of them are students. Fifty-six percent of the demonstrators cited the rising fares as being the reason for their unhappiness, yet this number arguably does little to explain the protests given their sudden, non-localised nature, and in some instances, their intensity.

The underlying reason for the demonstrations can be seen just below the surface of the demographics and political affiliations of those taking to the streets. Brazils’ economy has dramatically slowed in recent years amidst rising expectations of a middle class that has become emboldened owing to the economic growth of the previous decade. Economic growth last year was a mere 0.9 percent; hardly enough to keep pace with a country grown accustomed to a boom that relied to a great extent on commodities. Indeed, that growth rate pales in comparison to even the 2.7 percent GDP growth rate of 2011. Equally important has been the monetary situation in the country, which has affected households and the hopes of Brazils’ middle class. Inflation is at 6.5 percent, its highest rate in two years. Factoring in the slowed economy, the growing costs of everyday goods have taken a particularly devastating toll on the country’s middle class.

The previous rapid rate of growth and the commodities boom worked in conjunction with greater financing abilities for Brazil’s relatively new consumer culture to further both expectations and growing debt for the average Brazilian household. 44 percent of the average Brazilian households’ income is now spent towards servicing that debt. Given the relatively rapid ascent of Brazil’s economic rise, and the corresponding expectations and needs, the stunted economy has proven particularly painful for many in Brazil. In addition to the transportation fares, which functioned as a catalyst for the protests, how the Brazilian government spends tax payers money has become a critical issue as well. Protesters have criticised the extent of corruption and inefficiency of the government and many see the recent 13.3 billion dollars spent ahead of the World Cup and the estimated 12 billion towards the Olympics as indicative of a government with priorities elsewhere. As one of the demonstrators said, “We just want what we paid in taxes back, through health care, education, and transportation.”

The Brazilian government seems to have quite the problem on its hands. Given an upcoming papal visit and the approaching World Cup, a greater degree of scrutiny and focus on the protests should be expected. For President Dilma Rousseff, who faces an election in 2014, this is certainly unwelcome news on the political front. Thus far, the government has responded cautiously and not overreacted. Rousseff released a somewhat empathetic statement acknowledging the legitimacy of some of the grievances and some local governments have even repealed the increased fares. However, given the deeper issues underlying the discontent, which speak to long held criticisms of inefficiency, corruption and a government viewed by some as more willing to court international prestige than deal with the basic needs of its population, it is highly unlikely that such myopic attempts will succeed.

For those who have heralded Brazils rise as an emerging power and rejected critiques of Brazil’s over dependence on commodities, these events deserve acknowledgement. Long held systemic issues in Brazil such as poor infrastructure and high taxation rates that fail to deliver essential services clearly present a problem and reason for substantial caution when setting short-term and perhaps even long-term expectations. How much of a problem will likely depend on the response of the government to the “Revolta de Salada.”

Categories: Economics, Latin America

About Author

Sean Durns

Sean Durns worked as a research assistant to a former high ranking Pentagon official and the Director of National Security Strategies at a DC based think tank. His analysis has been referenced by a variety of media outlets including The Wall Street Journal, Roubini's EconoMonitor, OilPrice, and many more. He holds a M.Sc. in History of International Relations from the London School of Economics where he focused on US foreign policy, security studies, and energy security.