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The pros and cons of political inertia

Brazil’s economy is growing fast, government spending is under control and foreign direct investment is flooding in. Despite all this, crucial structural problems persist. Capital markets are weak and underdeveloped, with an insignificant amount of corporate bond issuance and a semi-dormant stock exchange. In the wider economy, vestiges of policies of import substitution and economic isolationism hamper export growth.

President Fernando
Henrique Cardoso

There are a lot of Brazils. As far as the Euromarkets are concerned, Brazil is the largest and most important economy in Latin America, a liquid proxy for the emerging-market asset class as a whole. The CEO of a Spanish multinational will have a somewhat different view. He will see Brazil as an enormous untapped market, a country so potentially rewarding that no international company can afford not to be there. A tourist will be very happy sipping caipirinhas on the beach at Copacabana. The historian sitting next to him will see a country in an uncharacteristic period of relative economic and political stability. He will probably chuckle over his cocktail at the hubris of those who have pronounced an end to the country's turmoils.

The boys playing football on the beach know that their country has one of the most unequal distributions of wealth in the world.

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