Leader Says Brazil Will Overcome Crisis

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BRASILIA, Brazil - Brazil's president promised on Wednesday that the corruption scandal that has shaken his administration will not divert him from the drive to improve South America's largest economy. Luiz Inacio Lula da Silva's, the country's first elected leftist leader, said that he would not allow "ill-intentioned" people to force the government to change economic and social policies. Silva, a founder of the Workers Party, has not been directly implicated in the scandal, but his popularity ahead of next year's presidential election has dropped sharply.
Associated Press, September 7, 2005

Brazil Is in a Class by Itself
Following dismal economic growth in the '90s, it seemed that Latin America's leaders had convinced themselves that good economics was bad politics. In late 2002, the international financial community was convinced that with the election of Luiz Inacio Lula da Silva, Brazil, too, was going to join the renegade camp. The continent was a lost cause.

The real story is Brazil's rediscovery of the only proven model for a political economy: capitalist democracy. Well, the powerful global economic expansion of the past 18 months has made for many comeback tales, but Latin America's has to be the most impressive. In 2004, the region is estimated to have grown at 5.8 percent, the highest annual gain in its recorded history. Blockbuster growth was accompanied by an average inflation rate of 7 percent, a surplus in the current account (which includes both trade in goods and financial flows) of 1.8 percent of gross domestic product and nearly balanced government budgets.

To bounce is easy, but to stay airborne is hard. And Brazil has by far the best shot at doing so. The reason for optimism over Latin America has to be that the region's largest economy is headed the right way. If they're smart, others will follow.
Newsweek, February 12, 2005

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Leader Says Brazil Will Overcome Crisis

Category: POLITICS

By: Pete Kendall, September 9, 2005

We were able to the flesh out a socionomic profile [of Brazil] in which developments danced almost perfectly to the beat of the Bovespa, Brazil’s primary stock average.
The Elliott Wave Financial, October 2003

According to the new highs in the Bovespa, Lula is probably right about Brazil overcoming its recent political crisis. To see an updated version of the Bovespa chart that was first shown in the October 2003 issue of The Elliott Wave Financial Forecast click here. The new high in the Bovespa (in dollar terms), suggests strongly that the latest round of scandals will blow over. Notice on the chart the low prices that accompanied the start of the probes. The Wall Street Journal marked the occasion with this headline on May 25: "Brazilian Agenda Is Stalled by Probes." Since then, the corruption charges have escalated, but the Bovespa has marched higher. The new high to near the peak of 1997 signals a rising social mood that should snuff out public agitation over the scandals – for at least a little while. Longer term, however, social mood may be approaching the elevated levels that produced the big reversal of 1997. Notice the similarity between the Newsweek article in February and the "Brazil Comes of Age" headline in 1997. One possible explanation for the explosiveness of this year's scandals is that they are foreshadowing a return to the "Era of Political Scandal" shown on the chart. If this is the case, the scandals will be back and bigger than ever once the Bovespa turns lower.

Additional References
EWFF, October 2003
CULTURAL TRENDS
Brazil’s Bear Market Politics
In preparation for a recent lecture tour of Brazil, Santa Fe Institute scholar John Casti asked if Elliott Wave International could use Brazil’s recent history to create a chart that would illustrate how the trend in social mood shapes events. One of the great things about the Wave Principle is that it transcends language and cannot be kept at bay by any international border. So, we dove in and, with the help of some of John’s Brazilian colleagues, were able to the flesh out a socionomic profile in which developments danced almost perfectly to the beat of the Bovespa, Brazil’s primary stock average. The only missing element was any fundamental evidence that 2000 was a peak moment. Based on the headlines and the recollections of Brazilians, the best of times was clearly 1997 when Brazil received its first long-term syndicated loan since the Latin American debt crisis of 1982, the constitution was changed to allow free market crusader Henrique Cardoso a second term as president and a host of pro-market edicts made Brazil “one of the most attractive emerging markets.” Was this an exception to socionomics? No, we realized that the apparent discrepancy was due to the fact that the peak in 2000 was valued in reals. When we standardized our gauge of Brazilian mood with a dollar-based Bovespa, the events of 1997 took their rightful place as ultimate manifestations of Brazil’s 1990s bull market in social mood. The chart on the next page tells the story of a classic socionomic cycle from the impeachment of Brazilian president Fernando Collor near the lows in late 1992 to Brazil’s coming of age in 1997 to the ousting of the ruling free-market party at last October’s low.

At the bottom in October 2002, an angry Brazil elected Lula DaSilva, the first leftist candidate to gain the presidency in Brazil’s history. In a telling nod to the primacy of social mood, however, DaSilva has complied with the countertrend rally by doing little to disrupt earlier free market reforms. In fact, in recent weeks, as the Bovespa has charged to a new high for the rebound, he has gone the other way. To appease the markets, his administration has enacted pension reforms and deficit reduction schemes that will reputedly restore investor confidence. At this month’s global trade talks, DaSilva even turned the tables on the supposed “free market” G7 countries. The talks collapsed when Brazil-led developing nations in demanding the elimination of G7 agricultural subsidies. Obviously, DaSilva is one cagey politician.

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