Brazil and Its Turning Point, the Possible Impacts of the Ideology on Private Investment Behavior

Abstract

This paper analyzes the loss of dynamics in the Brazilian economy from 2015/2016 onwards, which has resulted in a worsening of social conditions in Brazil and seeks to answer what caused this loss of pace of economic growth. The dominant ideology that started to rule the Brazilian economy in 2016 is strictly related to the logic of reducing the public sector participation in the economy, and the widespread belief among its supporters is that this would lead to an increase in the private investment and, consequently, to boost the economic growth. Nevertheless, we did not observe this: despite the implementations of the neoliberal logic, the investment decreased, the GDP levelled off around only 1% per year (from 2017 to 2019), and the unemployment rate surged in parallel to the worsening of social conditions. Here we try to explain what has been happening in the Brazilian economy, supported by the institutional economy. It is essential to understand this due to the importance of the Brazilian economy in the global and regional context. What took place in Brazil could occur in other countries. Therefore, understanding the hindrances to economic growth, even considering that the elites had implemented an ideology that they believe is crucial to provide sustainable growth, is pivotal because the assumptions of the ideology ex-ante its implementations did not produce the results that were expected.