Exceptional times, exceptional measures
Younger people may not be aware of what the oil crisis of the 1970s was and the lessons it taught Brazil. The country was living through the years of the "economic miracle," sung about in prose and verse by the military dictatorship, when the producers, united in OPEC and dominated by the Arabs, embargoed supplies to countries allied with Israel in the Yom Kippur War.The decision, in 1973, took the West by surprise. In five months, the oil price, which for decades had been crawling under $3 a barrel, rose 300%, to $12. Brazil then imported 70% of the oil it consumed.Critics say that the country should, at that time, have adopted rationing of oil products consumption and launched programs to replace the energy source or increase domestic production. It is true that the Proálcool program (to promote the use of ethanol as a transportation fuel), which was successful many years later, and the risk contracts, by which private-sector national and foreign companies took over oil prospecting, until then a monopoly of Petrobras, were created. The results of both programs, as expected, were not immediate, and rationing was not adopted in time.With good international relations, Petrobras continued to import the oil needed to run the economy, but at exorbitant prices, leading to constant deficits in the trade balance and the accumulation of an unpayable foreign debt. In 1979, there was the second oil shock, when the Islamic Revolution drastically reduced production in Iran, which at the time was one of the largest international suppliers. And oil prices rose to almost $40.To avoid going bankrupt, according to critics, Brazil should slow down the economy and reduce imports. Mario Simonsen, Finance minister from 1974 to 1979, even tried, but without success. Then followed a decade of economic woes for the country, which faced super inflation and went to the IMF for dollars to avoid a foreign default. The crisis even helped to bring down the military dictatorship, but left in the hands of the new civil democratic regime a country almost destroyed. The debt with the IMF, which imposed an austerity policy on Brazil, was only paid off in 2005, during the Lula da Silva administration.This reminder serves to show that exceptional times call for exceptional decisions, whether for a tightening or an expansion of the economy. By disobeying this principle, Brazil was destroyed in the 1970s and interrupted a growth cycle that has not been resumed until today. The...
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