Lulo Da Silva seems to have a credibility with Brazilians - and non-Brazilians - that previous presidents have not had. The story of rising from poverty to become President of Brazil is something most people can identify with in almost any country.
And Da Silva has done something that the US government has not done - but should've done anyhow. Which is one reason why Brazil's economy is on the ascendant.
If the Obama Administration could do just that, the US would get out of recession and stay out of it as well.Between being elected and taking office, Mr Lula da Silva wrote a “letter to the Brazilian people” assuring them his government would honour all contracts and eschew adventurism. The message was aimed equally at foreign investors – and it worked. Foreign capital, which had fled the country on fears that the leftwinger would go on a spending spree that would end in a debt default, returned.
However, as for Brazil exporting commodities to China - perhaps the biggest national market on the planet right now - the following is true.
Of course the commodities trade between China and Brazil is highly profitable, but Brazil would be well served to engage other trading partners - and save up for a rainy day. Should Chinese manufacturing enter even a modest downturn, prices for Brazilian raw materials will fall and then the plans of Da Silva's government will have to be changed to account for that - unless an additional market can be found for Brazilian raw materials and goods, to makep up for the shortfall. Just because the sun is shining brightly one moment will not mean that a storm will not occur the next.There are risks, of course. Brazil’s commodity wealth is a boon when mineral and food prices are high. But an abrupt Chinese slowdown could reverse that trend – and half the companies on the stock market have commodity exposure. Domestic industry could be hollowed out by an uncompetitive real strengthened by hot money inflows. Government spending is also rising. Although the fiscal deficit is small, the constitution makes it hard to cut entitlements and the public wage bill is a growing concern.
However, Da Silva seems to be doing things right so far. Hopefully he will continue to practice that kind of level-headedness.