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http://www.wsj.com/articles/howbrazilslulaconnedtheworld1470606701

OPINION | COLUMNISTS | THEAMERICAS

HowBrazil sLulaConnedtheWorld

TheWorldBankratesBrazilat174thof189economiesinstartingabusiness.

BrazilianPresidentDilmaRousseffandformerPresidentLuladaSilva.PHOTO:ZUMAPRESS

ByMARYANASTASIAOGRADY
UpdatedAug.7,20166:03p.m.ET
The2016OlympicGameskickedoffinRiodeJaneiroontheweekendwithoutmajor
incidents.Thatseemedanearmiracleafterweeksofgrimreportsaboutshoddy
construction,anunpreparedsecuritydetailandmonstroustrafficjams.Whetherthe
athletes,visitorsandCariocas(asRioresidentsareknown)cangetthroughthenexttwo
weekswithoutacatastropheremainsanopenquestion.
Itwasntsupposedtobelikethis.Thenagain,whenRiowonthecompetitionin2009to
hostthesegames,Brazilwasntforecasttolooklikeitdoestodaywithabudgetdeficit
equaltosome8%ofgrossdomesticproduct,inflationnear10%,twoyearsofeconomic
contractionandacesspoolofcorruptionscandals.
In2009,PresidentLuladaSilvaoftheWorkersParty(PT)hadbeenatthehelmfor
morethansixyearsandwassomewhatofaworldrockstar.Hishiprhetoricdenigrated
theeconomicliberalismofthe1990swhilehypinganewandimprovedbrandof
socialismwithasambatwist.
MuchoftheregionboughtLulas2.0versionofbiggovernment.Concernsaboutthe
returnofleft-wingLatinpopulismanditspotentialdamagetoentrepreneurshipand

economicgrowthweremetwithassurancesthatthistimewouldbedifferent.
LulawasamanoftheleftbuthewasntHugoChvez,conventionalwisdomexplained.A
November2009EconomistmagazinecoverstorywastitledBraziltakesoff.Itciteda
forecastbytheconsultingfirmPwCthatby2025SoPaulowouldbetheworldsfifthwealthiestcity.Mostofpunditryagreed:Brazilwasoncoursetotakeitsrightfulplaceas
aworldeconomicsuperpower.
Lulasteppeddownaftertwotermsin2011,handingpowertohisPTsuccessor,
PresidentDilmaRousseff.The2016Olympicsweresupposedtoshowcasethesocialist
paradisehehadcultivated:anurbanutopiamixingaffordablehousing,national
industrialchampionsandorderlypublic-transportationnetworkstoprovideatranquil
andenvironmentallyapprovedlivingexperience.
Instead,attheOlympicVillage,justweeksbeforetheopening,sinksfelloffthewalls
andtherewerevariousotherplumbingdisasters.TheAustraliannationalteamfled
fromitsquartersuponarrivalbecauseitfound,amongotherthings,exposedelectrical
wiresnexttoindoorpuddlesofwater.GuanabaraBay,thevenueforopen-water
swimmingandsailingraces,isagiantpetridishofbacteria.Anewmetrolinethatwas
supposedtotakevisitorstothegamesendseightmilesshortofitspromised
destination.
TheRiosecuritycompanythatwashiredtoscreenspectatorswasfired10daysagofor
noncompliancewithitscontract.Organizersscrambledlastweektohireandtraina
replacementteam.
Theworldseemsstunned.Itshouldntbe.RioisamicrocosmofLulasBrazil,where
bureaucracyrunsthingsfromthetopdownandhumanbeingsareanafterthought.The
onlythingmissinginthisRioanalogysofaristhecorruptionthatflourishedatthe
federallevelduring14yearsofPTgovernment.
Brazilspoliticiansaspiretofirst-worldgrandeurbutinsistonpreservingthird-world
institutions.Itsnotbecausetheydontunderstandtheeffectivenessofindependent
institutionsandchecksandbalances.Itsbecausetheydounderstandit.
PresidentFernandoHenriqueCardosooftheBrazilianSocialDemocracyPartywasan
exceptiontotherule.Duringhiseight-yeartenureaheadofLula,Brazildiscovered
macro-stabilityusingresponsiblecentral-bankpolicy,afloatingexchangerateandthe
goaloffiscalsurpluses.Thecentralbankadoptedenhancedtransparency,predictability
andinflationtargeting,allofwhichgeneratedmarketconfidence.Thecentralbankalso
tookanactiveroleinsupervisinggovernment-ownedbankstoavoidexcessesin
financingeitherthestateoritscronies.
UnderLulaandlaterMs.Rousseffwhowonelectionsin2010and2014the
commitmenttofiscaldisciplinegraduallyeroded.Thegovernment-ownedbankCaixa

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Econ
mica
Feder
aland
the
natio
nal
devel
opme
nt
bank

(BNDES)rapidlyexpandedcredit.Thiswasinflationaryandrisky,butthecentralbank
ignoredtheproblem.
WhileLulaandlaterDilmawerehawkingBrazilasaworld-classplayer,theydidlittleto
reducetheburdenofgovernmentonentrepreneurs.The2016WorldBankDoing
Businesssurvey,whichstudiestherelativeeaseofentrepreneurshipin189economies,
ranksBrazil174thinstartingabusiness,169thindealingwithconstructionpermits,
130thinregisteringproperty,178thinpayingtaxesand145thintradingacross
borders.Thatdoesntsoundlikethestuffofaneconomicsuperpower.
InlateJuly,LulawaschargedbyaBrazilianfederalcourtwithobstructionofjusticeina
corruptioninvestigation.Ms.Rousseffhasbeenimpeachedforcookinggovernment
booksandisnowbeingtriedbythesenate.Ifpoliticalfraudforleadinganationtoruin
wereacrime,theybothalreadywouldhavebeenconvicted.
WritetoOGrady@wsj.com.

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