The American Suspense

The American economy grew 2.2 percent last year, completing 14 consecutive quarters of growth and contributing once more to the global recovery. But its performance in 2013 and in the years to come is still uncertain, while the government and opposition negotiate spending cuts and a possible increase in taxes for the richest taxpayers. An $85 billion cut in spending was planned to take effect in March; its first effects should be seen in April. If nothing is done, the expansion of activity will be compromised and unemployment will tend to rise. An accord in the coming weeks could halt or limit the damage. To that end, President Barack Obama will have to defeat the obstinate resistance of the majority opposition in the House of Representatives.

The cost of a restrictive fiscal policy was already felt in the final quarter of 2012, when GDP grew only 0.1 percent. The initial estimate had indicated a contraction of 0.1 percent. The revision of accounts ended up pointing to a positive result, although less than forecast by the financial markets (0.5 percent). The loss of rhythm, after 3.1 percent growth the previous quarter, was in large part caused by a 14.8 percent reduction in federal spending. The defense budget decreased 22 percent in that period. By annual average, these expenses were 3.1 percent lower than in 2011.

The year’s most positive data was the expansion of private investment by 9.6 percent. Businesses and families invested 12.1 percent more in homes, 7.7 percent more in other types of buildings and 6.9 percent more in equipment and software. The growth was driven, naturally, by a 1.9 percent improvement in private consumption. Employment conditions got markedly better during the year, apart from some fluctuations; this should have influenced consumer confidence. But the big increase in investment is an especially important figure showing more confidence in the economic recovery. Also, the reaction of the housing market, devastated as it was by the bursting of the credit bubble, is significant.

Foreign trade continued to grow. The export value of goods and services grew 3.3 percent; that of imports, 2.4 percent. The deficit decreased, but the American market continued absorbing an enormous volume of goods and services produced in other countries, contributing in that way to the reactivation of other economies.

Brazil was one of the beneficiaries of the American recovery. Exports of Brazilian goods to the United States, to the value of $26.8 billion, were 3.5 percent higher than the previous year, although the total amount exported decreased 5.3 percent. Half of the sales from Brazil to the American market were made up of manufactured products. It is ever harder to understand why then-President Luiz Inácio Lula da Silva, at the end of his term, declared himself happy to see the American economy in recession.

Apart from being notoriously poorly informed and having terrible advisors on international matters, he should have had some idea of the global importance of the American economy and its relevance — direct and indirect — to Brazil. Other major importers of Brazilian products, such as China, also depend on the prosperity of Western economies, starting with the biggest of them all.

All sensible people, all over the world, have the strongest motives, therefore, to watch with interest the negotiations between the American government and the opposition about spending cuts and the formulas to reduce, in coming years, the level of public debt.

But the American experience of 14 consecutive quarters of growth, despite the internal crisis and global difficulties, also has interesting lessons for the authorities in countries like Brazil. Once again the value of economic flexibility has been demonstrated. This characteristic allows adaptation to new situations and new challenges. It is worth reflecting, also, on the rapid increase in private investment. The Americans are now building competitive advantages for when the world comes out of crisis. Where will Brazil be when that happens?