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ECONOMIC CRISIS OF 2008 AND THE AGGREGATE CONSUMPTION IN BRAZIL
Brazilian Government faced international crises by implementing fiscal stimulus to raise internal consumption while sustained a high interest rate with flexible exchange rate system and low capital flow control. The mix of economic policies has increased the internal expenditure level, lowered income differences and has sustained inflation controls. The composition of internal expenditure has changed and external firms captured the higher demand. Therefore, an imbalance in transactions account is an increasing macroeconomic problem. This paper analyses the relation between recent shifts in macroeconomic policies in Brazil, the growing importation of final goods and a different insertion and external sharing of Brazilian exportation. Fiscal policies, instead of increasing sales and firms revenues, has increased imbalances in transaction account and has feed the discussion about Dutch Disease and Deindustrialization in Brazil. We can define deindustrialization as a lower share in industrial jobs in the total employment in the country (Rowthorn & Ramaswany 1999). The broad concept is a decrease in the industrial value added share to gross domestic product in addition to a lower industrial employment share (Tregenna 2009). In the first part, we discuss three different interpretations of causes of deindustrialization. Follows an analysis of consumption in Brazil and transaction account data. For some economists Brazil faces a historical and structural trend to currency valuation, related to commodities exports. These phenomena must be corrected through export taxation in order to sustain product diversification and national firms in manufacturing sector (Bresser-Pereira 2011). Others consider that the mix of economic policies combined with low capital controls and pre-salt announcement, led to deindustrialization and devaluated currency. In addition, we can find in the literature that deindustrialization is a recent phenomenon closely linked to 2008 crisis (Bacha 2013). Finally, some economists think that deindustrialization is a natural phenomenon and as economy growth, we can observe a pattern where service sector grows more than manufacture sector. This is related to the income increases and family demand (services has higher income elasticity of demand than manufacture goods). In the second part of this paper, we show how a wage-led strategy to growth has increased imports and decrease exports instead of increasing national firms’ sales and revenues. Recent data shows an imbalance in external accounts and a huge change in imports and exports composition. In the third part, we show the consumption contribution to growth, aggregate demand since 2008, the increase in importation and the consumption pattern for durable, no durable goods. We also analyze the growing indebtedness of households and shifts in income sharing. Finally, a shift in composition of exports and imports ends the third part showing a different insertion of Brazilian economy. The conclusion shows that firms in national territory fails in benefiting from increases in demand and in competing for exports. We raise questions about when one country should adopt fiscal stimulus to fight against crises and poverty. When fiscal policy is combined with monetary contraction and currency appreciation, the results are that firms cannot benefit from a growing demand and we call that Access Theory: exchange rate is strongly related to consumption level for national goods.
