KKI STUDIES T-2018/04 Economic Crisis in Brazil: Its Roots, Causes and Scenarios A brazíliai válság gyökere, okai és várható kimenetele SÁNDOR GYULA NAGY–JUDIT RICZ INSTITUTEKÜLÜGYI FORÉS KÜLGAZDASÁGI FOREIGN AFFAIRS INTÉZET AND TRADE KKI Studies Series of the Institute for Foreign Affairs and Trade Publisher: Institute for Foreign Affairs and Trade Reviewer: Márton Ugrósdy Typesetting: Andrea Tevelyné Kulcsár Editorial office: H-1016 Budapest, Bérc utca 13-15. Tel.: + 36 1 279-5700 Fax: + 36 1 279-5701 E-mail:
[email protected] http://kki.hu © Sándor Gyula Nagy, Judit Ricz, 2018 © Institute for Foreign Affairs and Trade, 2018 ISSN 2064-9460 KKI STUDIES T-2018/04 Abstract: Brazil’s economic growth has been steadily decelerating from 2011 onwards. After 2014, it has obviously turned into recession, with the largest South American economy showing clear signs of crisis. After identifying the main features of the economic crisis, we1 highlight the causal macro-economic factors, such as a diminishing trade balance, a rapid increase of household consumption, a low level of investment and the deterioration of fiscal discipline, and attempt to uncover the underlying reasons for these processes. Then we focus on the micro-economic factors and analyze the low competitiveness of the Brazilian economy, as well as the structural changes deriving mainly (but not exclusively) from changes in the directions of trade policy (from the early 2000s onwards). The main conclusion of the paper is that the ongoing, complex Brazilian crisis cannot be explained only by changes in international economic trends (e.g. the falling prices of primary commodity goods); instead, Brazilian economic policy decisions have played a pivotal role as well.