(Bloomberg View) -- Brazil may have just clawed its way out of recession, but many Brazilians are still hurting. Thirteen million are out of work, some 4.1 million have fallen back into poverty, and per capita income has retreated to 2009 levels. And just when the country's disgraced political class could seem to sink no lower, the federal police stumbled on a tainted former minister's $16 million alleged stash of purloined cash that took a small actuarial task force nearly four hours to count.
All of that would leave little to cheer about this week as Brazilians took a holiday break for national independence. But much like the euphoria of its booming 2000s, the current pall of despair clouding the country is overwrought. Even as the Cassandras tote up the costs of another lost decade, Brazilians can also take pride in its gains -- an unprecedented civic awakening that has shaken a scandal-numbed populace into action and set a new threshold for public ethics that aspiring politicians will ignore at their peril.
Start with the Carwash investigation. The historic mop-up of graft has already outlasted Italy's iconic Clean Hands probe, and after more than three years, shows few signs of flagging. What's more, the broad support for the case's presiding judge, team of prosecutors and busy federal police (whose heroics have inspired a fawning feature film launched this week) suggests that Brazilians seem far less willing to indulge the miscreant politicians in their midst. Consider the 57 percent of Brazilians who say they would not vote for a presidential candidate from any of the country's biggest political parties.
One reason Brazilians no longer appear willing to look the other way is the baseline conviction that economic bungling can no longer stand. Twenty-three years ago, I watched federal agents feed bricks of inflation-ravaged bank notes into a blast furnace. As the worthless "cruzeiro real" bills went up in smoke, everyone wondered whether the new currency, the real, and the bold new stabilization plan it heralded, would follow.
Two decades later, the answer is in. When President Dilma Rousseff flouted the two-decade consensus on fiscal sobriety and stoked inflation, she was run out as the economy tanked. The irony of this week's spectacular corruption bust is that even cash-hoarding thieves understand the value of a stable currency. And perhaps one of the reasons protesters are not besieging Rousseff's even less loved stand-in, Michel Temer, is that prices again are under control.
Nor has the current economic torpor killed Brazil's animal spirits. The nascent recovery may be fragile, but as the eager response to Temer's plan to privatize dozens of state concessions has shown, investors will rally if you give enterprise an air hole.
Temer may be guilty of "selling lunch to buy dinner," in the words of Monica de Bolle of the Peterson Institute for International Economics. But a cornered Brazil has repeatedly managed to pivot from profligacy to opportunity. The game-changing real plan was born in the blast furnace of hyperinflation. Fiscal penury in the 1990s drove the sell-off of state behemoths, converting the loss-making telecoms into tax-generating giants and forcing cosseted Petrobras to compete with benchmark global oil companies. For all the criticisms of the Temer government's pro-market reforms, including reopening the oil sector, tighter governance for state companies, and more flexible rules for the workplace (retiring the 1940s labor code inspired by Benito Mussolini), they will help Brazil grow and attract investment.
Moreover, eager as Brazilians are to grow again, they no longer seem willing to endorse development at any price. Sustainable development is now a cause celebre. Look no further than the national backlash, from social media and the courts to the catwalk, against Temer's decree to open up a huge Amazon rainforest preserve to mining and development. The government has since committed to reexamine the measure.
Brazil needs much more than a shift of heart, of course. Although Temer has drawn flak for raffling off crown jewels, in fact his aggressive reforms don't go far enough. Just one example: Last year's landmark government spending cap will likely fail unless Brazil also overhauls its bankrupted social security system, where constitutionally mandated benefits will soon swallow up any savings.
The dilemma is not lost on Brasilia, where Temer's maneuvers to rescue his mandate trump his potentially transformative agenda. "Whoever is elected next year clearly will have to return to pensions and deepen structural adjustments," Alberto Ramos, an analyst at Goldman Sachs, told me. The country's renewed civic spirit will need to get behind the tough and mostly unpopular reforms ahead. But for now, refusing to suffer bunglers and scoundrels is already something Brazilians can parade about.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Mac Margolis writes about Latin America for Bloomberg View. He was a reporter for Newsweek and is the author of “The Last New World: The Conquest of the Amazon Frontier.”
To contact the editor responsible for this story: James Gibney at jgibney5@bloomberg.net.
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