Marola or Much More?

[Originally published March 2, 2009]

This morning’s papers in Brazil headlined the news from Basel that exports worldwide have declined dramatically. This makes Brazil and other developing countries more and more vulnerable to the economic crisis although their rates of GDP growth have tended to remain positive into the first quarter of this year.

I commented on Twitter last week that the PT government here in Brazil was being wholly unrealistic about avoiding the crisis. President Lula says he can give lessons on how to manage an economy at the upcoming G-20 meeting. Finance Minister Mantega insists that Brazil will continue to grow at a 4% rate.

However, Brazil depends on the export of commodities for its foreign exchange and trade balance. Already the government has reported significant falls in commodity exports. The news from International Bank of Settlements in Basel only adds weight to this. The picture in yesterday’s papers showing 400,000 empty containers in a Chinese port gives a dramatic visual portrait of our current problems in the BRIC and developing world.

Lula, Mantega and many smug Brazilian analysts need to wake up to the reality of the global dimension of the crisis. We are not exporting from here because developed countries are not importing. Lula’s keeps referring to his principal metaphor for the crisis: Brazil will experience a “marolinha” (a little wave) in contrast to the developed world’s tsunami. It’s time down here to recognize that the marolinha has already grown into a marola and could well become the tsunami that we all fear.