Brazil Discovered Credit; It Has Not Yet Discovered the Cycle

When a poor country mistakes credit for wealth, it does not become rich. It merely borrows its own hangover.

Brazil woke up with a new official word: acceleration. The government launched its Growth Acceleration Program, the PAC, as if turning on a lamp in an old house proved the wiring had been fixed. The country wants to grow. Good. The country wants to believe it has learned how to grow. Dangerous.

No civilization should despise infrastructure. Roads, ports, energy, sanitation, housing, logistics, all of this is the raw material of statecraft. A nation that cannot move goods, water, people, and energy efficiently is condemned to discuss ideology above open sewage. The question, then, is not whether Brazil needs investment. It does. The question is whether Brazil understands the difference between investment and ceremony.

Brazilian politics has an old addiction: it turns structural deficiency into a stage. The hole becomes a project. The project becomes a plaque. The plaque becomes a photograph. The photograph becomes political capital. And the problem, which should have been solved, is managed as an electoral asset. The state does not kill scarcity. It domesticates scarcity so scarcity can feed it.

Lula's second term begins under friendly skies. The world is buying commodities. China looks like an infinite stomach. Credit expands. Consumption rises. The Brazilian, after decades of inflation, confiscation, unemployment, banking humiliation, and broken promises, discovers the installment plan. The installment is a morally ambiguous invention. To those who never had access to anything, it looks like freedom. To those who understand cycles, it looks like rented time.

The country will celebrate the new consumer. They will say the middle class has grown. They will say the poor have entered the market. They will say Brazil found social progress without rupture. Some of this may be true. But truth escorted by propaganda deserves a body search.

The Brazilian is not merely consuming more. He is being introduced to a new form of dependence. Before, he depended on wages, favors, the state, the boss, and the price of beans. Now he will also depend on the monthly payment. The installment is the small modern shackle: it fits in the pocket, smiles in the commercial, and charges interest in silence.

Every political project wants to produce a character. Vargas produced the protected worker. Developmentalism produced the factory worker of national industry. Redemocratization produced the citizen-consumer of rights. Lulism is trying to produce the poor man who is banked, formalized, indebted, and grateful. Not necessarily out of evil. Politics rarely needs explicit evil. Incentives are enough.

The public sentence will be: "we included millions." The private question should be: included in what? Productivity or consumption? Human capital or payment booklets? Savings or debt? Autonomy or administered dependence?

Brazil is entering the most dangerous part of the cycle: the part in which vices look like virtues because the numbers are still smiling.

When growth is present, everything is forgiven. The tax burden looks manageable. Bureaucracy looks tolerable. Corruption looks like noise. Inefficiency looks like detail. State unionism looks like justice. Subsidized credit looks like strategic vision. Protection for national champions looks like sovereignty. Public spending looks like investment. The budget looks elastic. The future looks guaranteed.

This is how countries fool themselves. Not from lack of intelligence, but from surplus applause.

Brazilian economic policy wants to produce speed. But speed without direction is only an accident with a good soundtrack. The government talks about unblocking projects. But who blocked them? The same machine now presenting itself as liberator. The state creates the knot, sells the scissors, taxes the cut, and then inaugurates the rope.

There is a distinction almost nobody in Brasília wants to make: a strong state is not a large state. A strong state does a few essential things with discipline, impersonality, and continuity. A large state promises everything, interferes with everything, measures everything, delays everything, and then declares itself indispensable because everything depends on it.

Brazil does not suffer from lack of plans. It suffers from too many plans without executive shame. Every decade invents a beautiful name. Target plans, Brazil in Action, PAC, tomorrow another acronym. The name changes. The disease remains: low productivity, bad education, delayed infrastructure, slow courts, confused taxes, an extractive elite, and a population trained to wait for permission.

This letter is not against growth. Quite the opposite. It is against the idolatry of growth induced by complacency. True growth improves the capacity to produce. False growth improves the capacity to postpone the recognition of fragility.

If the PAC builds real infrastructure, reduces bottlenecks, and increases productivity, it will be remembered as useful public policy. If it theatricalizes investment, strengthens coalitions, irrigates contractors, expands the discretionary presence of the state, and manufactures electoral succession, it will be only a school for future resentment.

Here is the forecast: Brazil in 2007 will look more solid than it is. The combination of commodities, credit, consumption, and presidential charisma will produce the sensation of national destiny. Many will believe the country has finally defeated its curse. I doubt it. Countries do not defeat curses with slogans. They defeat them with institutions, savings, productivity, fiscal discipline, responsible elites, and a people educated to distrust benefactors.

Lula has a rare political gift: he understands the people as few do. But understanding the people is not the same as liberating the people. Sometimes the most talented politician is precisely the one who discovers the gentlest way to make dependence emotionally acceptable.

Brazil needs statesmen, not distributors of anesthesia. Churchill did not promise comfort when he saw fire; he promised blood, effort, and endurance. Marcus Aurelius did not confuse popularity with duty. Cicero knew the republic decays when private interest learns to speak the language of the public good. Aquinas would ask whether politics orders the city toward the common good or merely organizes appetites with an official seal.

The PAC will be sold as acceleration. Perhaps it is. But let us not forget: one also accelerates downhill.

Brazil will have a few years of celebration. The party will be real. Jobs, consumption, confidence, air travel, financed cars, new refrigerators, construction, happy banks, smiling politicians, subsidized businessmen, and commentators announcing the country's final arrival into the future. But the future does not arrive by decree. It arrives when a society can bear doing what is necessary even when there is no stage.

The great question of 2007 is not whether Brazil will grow. It probably will. The question is whether growth will make the country more adult or merely more euphoric.

Some countries use good times to become stronger. Others use good times to prove they do not need to change.

Brazil, I fear, belongs to the second group.

The hangover will come later, as it always does. Not necessarily tomorrow. The cycle is patient with the imprudent. It lets a person fall in love with his own narrative before collecting. First, credit looks like inclusion. Then it looks like normality. Then it looks like an acquired right. Finally, when income slows and politics tries to save the illusion, credit reveals its true name: debt.

Brazilian politics will struggle to accept that limit. Whoever builds power by distributing expansion does not know how to govern contraction. Whoever becomes used to being loved for abundance starts treating every adjustment as betrayal.

This is the danger: Brazil may leave this decade convinced it has discovered a morally superior formula to the economic cycle. It has not. It has merely entered the pleasant part of it.

Every nation has the right to dream. None has the right to call the dream accounting.

On the way in, credit will look like citizenship. On the way out, it will look like servitude with a receipt.

Leo Bentier