By Mustafa Sönmez, Hurriyet Daily News, May 2, 2016
As efforts intensify to predict the trends in Turkey by observing what is happening in Brazil, an analytic comparison may give crucial clues
Despite the differences that have emerged in the past two years, Brazil and Turkey are two countries that are economically comparable. Recently, efforts have intensified to predict the trends in Turkey by observing what is happening in Brazil.
Brazil is the 7th country in the world in terms of national income, which actually corresponds to three Turkeys. It has a population of 190 million. In 2012, its growth was 1.8 per cent and in 2013, it was 2.7 per cent; however, in 2014 its growth fell to 0.1 per cent. In 2015, it plummeted and shrank 3.8 per cent. A drop with a similar tempo is expected for 2016.
The country risk premiums, or Credit Default Swaps (CDS), are particularly for guiding investors. When CDSs are taken into consideration, it can be seen that during the 2005-2014 period, there was not a big difference between Brazil and Turkey. However, as of 2015, both economic circumstances and the political climate in Brazil worsened, constituting a major variance from Turkey. At the end of 2015, Brazil, with its 446 risk premium left being behind Russia and peaked among emerging countries. At the same date, Turkey’s risk premium was 274. At the end of April 2016, Brazil was still at the top with 361 while Turkey had 251. The difference is clear.
The 14 years of AKP and PT
It is possible to say that during the governance of the Justice and Development Party (AKP) in Turkey and the Labor Party (PT) in Brazil that have exceeded 13 years, world conjuncture and international trends have played major roles. The AKP started its governance venture with the November 2002 elections by taking over a Turkey that had gone through the 2001 crisis and after tasting the bitter pill of the IMF, it was about to recover.
The PT came to power with the 2003 elections. The PT was one of the biggest parties of the rising left populist wave in Latin America in the 1980s. It had large working class grassroots, union support, a socialist wing and a former labor leader, Luiz Inácio de Silva (Lula).
When Lula lost the 1989 presidential elections to “neo-liberal” Cardoso, the PT started shifting to the right. Its left wing was removed. The effect of the unions and social movements over the party decreased. Lula entered the 2003 elections with a “growth plan with neoliberal principles” and he won.
Both the AKP of Turkey and PT of Brazil enjoyed the wheel of a “growing” economy until the 2008-2009 global crisis. The generosity of the global markets of the time and the abundance of liquidity had lifted the anchor of both countries. Both grew with foreign direct investments, inflowing hot money and generous international loans causing unprecedented foreign resource inflows.
During the period of 2003-2007, while Turkey’s growth rate neared seven per cent, Brazil’s remained around four per cent. This “dolce vita” period provided the opportunity of the governments in both countries to strengthen their positions.
The crisis year of 2008 did not immediately affect Brazil; Turkey grew less than one per cent. However, both countries later experienced negative growth, with Turkey living through a more severe one… In 2010 and 2011, foreign resource inflows came again to both countries. Brazil benefited from China’s growth as its supplier. Even though economies grew, both countries had current account deficit problem and in 2012, the strain of this caused their economies to shrink.
Just like Turkey’s capitalism, Brazil also experienced the outflow of foreign hot money with the emerging of the possibility of a Fed rate hike mid-2013. From that day on, the Brazilian real is losing value against the dollar. The loss of 2015 was the peak, with 45 per cent.
In Turkey, the factors of political risk and geopolitical risk are important in foreign capital withdrawal. In Brazil, the withdrawal of foreign capital is more related to the increase in economic risks. Some 20 per cent of Brazil’s raw-material-dominated exports are to China and thus, with the drop in foreign demand and prices, its economy started shrinking, its foreign currency income dropped and its foreign currency balance developed a deficit. Nevertheless, its current account deficits have reached only four per cent of its national income, while Turkey’s was nearing 8 per cent in 2013; in the following low-growth years, it went down to the four per cent corridor.
Brazil’s political risk
Many analysts consider “a coup attempt” is happening in Brazil as several corrupt parliament members are trying to remove President Dilma Youssef. The circumstances that kept the PT in power for 14 years have changed rapidly after 2010. After 2003, government programs were shaped according to the demands of international capital as well as those of local entrepreneurs’.
Brazil took its share from the stagnation following the global crisis. The social support and the welfare perception among the segments the PT almost “bought” rapidly vanished when resources started to dry up. As the crisis deepened, the dominant capital and its international partners focused on efforts to access state resources. When Dilma gave in to neoliberal austerity policies, the popularity of PT crashed.
Analysts express that organizational and/or organic ties have not been established between the PT and the masses it was based on but that the relationship was built based upon interests. When resources dried up, the social support of the populist party vanished. The economy shrank four per cent, unemployment reached seven per cent, inflation became 11 per cent and its currency lost 45 per cent in 2015. This is expected to continue throughout 2016.
What Turkey lacks
The risks of Turkey and Brazil were parallel until 2013. Due to different conditions of the two countries, Turkey’s economy was not as shaken as Brazil after 2013; it was able to manage low growth rates. The domestic market somehow continues to contribute three to four per cent to the growth. Even though the political tension and geopolitical risks have not declined, the instability of the world conjuncture keeps the up and down interest of hot money. Construction-based growth helps maintain the support of the masses. Mostly, the propaganda works to suggest that the political stability is under domestic and international threat.
But, beyond all these, there is no climate in Turkey to organize the discontent and turn it into an effective opposition. The opposition in Turkey does not have a free hand as in Brazil: Organizational activities have been weakened and even the freedom of expression is under huge pressure.
That is the most important thing which Brazil has and Turkey does not.
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The May Day rally began with one minute’s silence for all those killed in the massacres of Suruç, Ankara and Amed, and continued with speeches of DBP (Party of Democratic Regions) Co-chair Kamuran Yüksek and HDP (Peoples’ Democratic Party) Group Deputy Chair Çağlar Demirel.
DBP co-chair Kamuran Yüksek called attention to the system of exploitation and oppression that workers are suffering from, adding; “We are being through a process when the Middle East and world order is changing. I believe the Kurdish people will be taking to the state during the coming century and the model built in Rojava today will serve as the resolution of the labor issue and the Kurdish question. We do also defend democratic autonomy, a system which is similar to the Rojava model. We have two reasons as to why we demand democratic autonomy; preservation of the state’s unitary structure and protection of the peoples and the proletariat. This model should therefore be supported by all the workers and laborers.”
Speaking after, HDP Group Deputy Chair Çağlar Demirel stressed that they as HDP would continue waging a struggle and resistance against the dominant powers in factories, streets, workplaces and every area of life.
