The Brazilian Economic Miracle

There's really nothing new in Matt Moffett's front-pager on Brazil in today's WSJ, but it's worth a read anyway, especially if you haven't been following the Brazil story very closely.

My favorite phrase in the piece comes from the president of Fiat in Latin America, who describes the country's recent economic success as "a bottom-up economic shock". Brazil's socialist president is writing monthly checks to the poor, and that money is trickling up and helping to create a massive new middle class:

A recent study by the local office of the French research firm Ipsos found that since 2005 more than 20 million people had entered the middle class, defined here as families with monthly income of around $635. The percentage of middle-class Brazilians has grown to 46% from 34%.

Moffett's story does mention Brazil's weaknesses, too, but even those are in a weird way fuel for hope. Yes, Brazil's 15-year-olds aren't as well educated as their Russian counterparts - but there are many more of them, and Brazil has much more of a future, demographically speaking, than Russia does. Yes, reforms in Brazil move at a glacial pace, but that means that anything which has been achieved - and there are many items on that list - is here to stay.

Obviously Brazil has had more than its fair share of luck: the commodity boom, especially in iron and soy, has served it very well indeed. But it has also leveraged that luck adroitly - Brazil's agricultural scientists are the best in the world and have made the most of rising prices.

I'm also impressed that Moffett didn't do the obvious thing for any WSJ reporter and use the soaring Brazilian stock market as a proxy for economic success. But checking it right now, I see that the Bovespa is trading over 70,000 - a number almost unimaginable for someone like me who's been following Brazil for years. It's doubled in the past 18 months, and it was below 10,000 back in 2002. Who needs high-flying tech stocks when you can buy Brazilian banks and mining companies instead?