Brazil is Rich in Resources but Beset with Poverty Despite its Social Spending

Posted by PITHOCRATES - December 18th, 2011

Week in Review

The Portuguese colonized Brazil.  Which is why Portuguese is one of the top ten most spoken languages in the world.  Because there are a great many Brazilians speaking Portuguese.  So there is a strong bond between Brazil and Europe.  Home of tiny little Portugal (and a wonderful dessert wine.  Port).  Perhaps a little too strong (see Brazil state struggles with poverty despite rich natural resources posted 12/12/2011 on the Los Angeles Times).

Brazil’s huge northern state of Pará is about three times the size of California, home to much of the Amazon rain forest and is the second-largest producer of the nation’s most important export, iron ore.

But poverty levels are well above the national average…

Even opponents of the bill, however, recognized the predicament, and it’s one that is repeated in parts of Peru, Colombia and elsewhere in South America: the lack of central government representation for states that are resource-rich (be it mining, gas or other commodities) but poverty-stricken.

“We can’t accept that in this country, natural resources benefit companies, but not its people,” said Simão Jatene, governor of Pará. “The Brazilian fiscal system is extremely perverse with respect to Pará…”

In Brazil, the last decade of economic growth has brought tens of millions of Brazilians out of poverty, powered by commodities exports, consumer credit growth and social spending. But the country still remains extremely unequal, across class and geographical lines. Some parts of the southeastern cities of São Paulo and Rio de Janeiro have a higher gross domestic product per capita than rich European countries, while in remote parts of Pará, residents who are struck ill must brave a five-day boat ride to the nearest hospital for treatment, O Globo reported.

The Amazon rain forest, eh?  Perhaps part of the problem is the environmentalists trying to save the rain forest.  Preventing any development there.  Condemning these people to a life of poverty.  Because it is usually a trade off.  Save the planet.  Or save man.  Rarely can you do both.  At least the way the environmentalists see it.  Who won’t be happy until they take civilization back to the days of Neanderthal.  And you know there are those out there who would bitch about Neanderthal’s use of tools changing his environment, too.  Which is the greatest crime man can make.  Changing his environment.

The lack of central government is the problem?  Funny.  The lack of central government didn’t stop the British and the Industrial Revolution they kicked off.  And the lack of central government didn’t appear to be a problem for Andrew Carnegie as he created a steel revolution in the United States.  Which is far bigger than California.  Yet the economy of the country grew so great it topped the mighty British Empire from the top spot.  One country with a limited central government.  Besting another country with a limited central government.

The problem the Brazilians have is spelled out in this article.  Their economy has been driven by the export of commodity materials.  Exporting raw materials?!?  This isn’t capitalism.  This is mercantilism.  And why only some Brazilians are living the good life.  They need to ignite an engine of economic exchange within Brazil.  Use those raw materials in domestic industries.  Build factories to transform them into consumer goods that Brazilians will buy with their factory wages.  Like the Americans did in the 19th century.  And we did that with less central government than we have today.  And I’m guessing that’s the only problem Brazil has.  Too much government.

Any country has the human capital to do what the Americans and the British did.  They just need the key to unlock that capital.  And the key to that lock is called free market capitalism.  Brazil is already far down this road.  They just need to let the rest of their country play catch-up.  And they’ve got to back off on the social spending.  Or else they’ll end up like Europe and their Eurozone.  Fighting for their life.  From excessive social spending.  If European capitalists had any advice for the Brazilians it would be this; don’t do it.  Don’t follow them down the Road to Serfdom.  Be free.  Stay free.  And let capitalism be free.

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