I'm confused. Both Julius Malema, the ANC Youth League leader, and Zwelinzima Vavi, Cosatu's general secretary, the new vanguards of nationalisation, have used Brazil as an example of economic success. Vavi has even suggested that President Jacob Zuma should be more like former Brazilian president Luiz Inacio "Lula" da Silva. But Brazil's is a story of successful privatisation, not nationalisation. And although Lula may have grown the state infrastructure during his two-term tenure in office, it is widely acknowledged that he built on the success of neoliberal reforms and steered clear of nationalist rhetoric, instilling investor confidence through policy continuity. Brazil's recent success in social development is now well known. Lula's administration is widely credited for lifting 40-million people out of poverty. But fewer here in South Africa seem to know the full story and formula behind this success, which dates back to Lula's predecessor, Fernando Hemique Cardoso, and his reforms in the 1990s. Difficult structural reforms and liberalisation policies implemented by Cardoso provided the necessary foundation and revenues for Brazil to benefit from the commodity boom and ultimately grow. Capital and growth were essential prerequisites for the far-reaching social policies that followed under Lula.
One of the best examples of privatisation through this period was the national iron-ore champion Vale. The rationale behind Vale's privatisation from a completely state-owned and state-controlled enterprise was clear. By the early 1990s, in the face of rising competition, Vale had fallen from its grand status as a cutting-edge mining company of the 1970s, unable to sustain its over-resourced commitment to its 20000 employees as returns on investment and profits were reducing rapidly. Privatisation helped raise the capital needed to diversify beyond Brazil and beyond purely iron ore mining. Vale's growth exceeded all expectations. Under the leadership of Roger Agnelli, an investment banker who was part of the new consortium of shareholders, Vale's market capitalisation grew from about $7.5-billion in 1998 to an astonishing $160-billion in 2010. It employs more than 140000 people around the globe and is the second-largest mining company in the world. It is true that the government retained a stake in Vale both as a direct shareholder and through a complex arrangement of shares held by the national development bank and civil-servant pension funds. But like other national champions, including Embraer, the leading aircraft manufacturer, privatisation has ensured competitive growth through foreign investment and improved technology, which the Brazilians themselves insist would not have been possible under state control. These companies form an important part of the Brazilian development model and the country's rise as a new global power... click here for more
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