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October 28, 2015

Brazil is the most underrated country, says Harvard economist

Original article written by João Pedro Caleiro at EXAME on 10/26/2015
Click here for article in Portuguese
Translated by Pedro Ferreira

Image by Andrzej Barabasz/Wikimedia Commons

São Paulo - Dani Rodrik, Professor of Political Economy at Harvard University and one of the most influential economists in the world, believes that Brazil is being underestimated by investors.

Rodrik made this remark at the Mercatus Center in an interview with Tyler Cowen, a professor at George Mason University and author of the popular blog 
“Coversations with Tyler.” Captain Economics identified Cowen and Rodrik’s twitter handles among the most influential on economics.

When Cowen asked Rodrik which country was being underrated by investors, Rodrik cited Brazil:

“Brazil, I think, is deeply underrated right now. I think that when you look at what’s happening, on the one hand, in Brazil it shocks you that there is all this widespread corruption with Petrobras that seems to go all the way up.

On the other hand, when you look at how they’re dealing with this situation it’s incredibly impressive. It’s something that even in an advanced country you wouldn’t think would happen, that there you have these prosecutors and judges who are actually following the rule of the law.”

Studied in the de-industrialization phenomenon, Rodrik said that Brazil's industrial policy, “isn’t great but they at least are trying to do something about it." Anyway, that’s a somewhat separate issue.

What matters is the growing sense of social responsibility: “they’re demonstrating a political maturity in the way that their system operates that is decades ahead of even the advanced industrial countries. I think the fact that they’re dealing with this and are going to have it behind them five years from now, eventually, it’s going to put them... I'd bet in Brazil for the long-term.”

During the Q&A segment, a Brazilian member of the audience thanked Rodrik for the “words of hope,” but asked what were the prospects for a country where “crony capitalism and draconian regulations are more the rule than the exception in Brazil.”

Rodrik said that his vision on Brazil was formed in comparison to other developing nations such as his native country, Turkey, where president Tayyip Erdogan and his family are directly implicated in corruption, while explicitly politically influencing the judicial system.

“It’s the kind of thing that Dilma could be guilty of pales in comparison. The fact that anything in Turkey, in terms of trying to delete the judiciary when it went into trying to clean this system up, it did it in a way that was explicitly politically motivated. Therefore, it made it much easier for Erdogan to clamp down on it because it was clear that it was a politically motivated attack on him, which makes neither side really right.”


To Rodrik, India is currently the most overrated country to investors, because it is betting on a large-scale industrialization that is difficult to sustain in the current context. 

Further, the economist recommended humility when judging the acts of the Chinese government against their most recent difficulties: “We’re talking about the country that has engineered history’s most miraculous poverty reduction program ever.”

Rodrik is famous for the book, “Has Globalization Gone Too Far?” and the formulation of the globalization trilemma, which suggests that democracy, national sovereignty and global economic integration are mutually incompatible, so countries can only choose a maximum of two out of the three.

In a 2013 interview for EXAMERodrik said that “Brazil’s bad luck began with beginning de-industrialization before South Korea. And this explains a good part of the difference in income levels of both countries. Unfortunately, it is very difficult to revert the loss now.”

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