Tim Harcourt

When I went to the University of Adelaide, I received a stroke of luck. Under the Colombo plan which enabled South East Asian students to get scholarships to Australian Universities, the grand old man of Singapore, Lee Kuan Yew, sent a number of very bright Singaporean students, who were meant to go to Oxford to study nuclear physics, to Adelaide to do economics with me! As a result, through having very smart class mates I got good grades in Mathematical Economics and Econometrics, I helped them with their Honours essays, and we had noodles every night (this was before Poh of Master chef fame had come to fame in Adelaide).

Of course, we know how well students from South East Asia and the rest of the region have done at University and how much life and vitality they have added to our campuses in Australia. But now we have a new wave of overseas students from a new frontier, South America with Brazil at the forefront.

This is one reason I was recently recruited to the University of New South Wales to teach international business strategy in the Australian School of Business. As part of the UNSW’s Australian Graduate School of Management’s MBA programmes, I will develop an international business strategy course for South America similar to the one designed for China and India.  This follows on from the book on Brazil and Australia I am co-authoring with Mark Thirlwell from the Lowy Institute and a distinguished Brazilian economist and past adviser to the government in Brasilia, Professor Fernando Carvalho from the Federal University of Rio de Janeiro (UFRJ) that was foreshadowed in the inaugural edition of Brazil Talk. The book will focus on Brazilian – Australian economic opportunity and will be published to take advantage of Brazil’s ‘double header’ hosting of the FIFA World Cup and the Rio Olympics. So Brazil can expect to see a lot more of me over the next 5 years or whether Brazil likes it or not! This will also provide great research for my future book The Airport Economist Goes to Rio.

So why all the interest in Brazil and South America from the UNSW and all Australia universities in general?

Firstly, the numbers are growing. Brazil’s growing middle class and its citizens who are being pulled out of poverty are hungry for education. Brazil’s human capital needs are Australia’s opportunity. Accordingly, our universities are doing more together particularly as many Brazilians now study in Australia. For Australia, Latin America now makes up just over 5 per cent of total enrolments, with Brazil ahead of the pack with just over 16,000 enrolments (followed by Colombia on 10,000, Peru on 2,200, Chile 1700 and Mexico 1500). And with Brazil leading the pack much vitality is added to our universities particularly in the schools of economics and business, the environment (e.g. marine biology), architecture and design which makes the typical Australian campus a much more attractive place to be nowadays.

Secondly, economically, South America is coming of age, with Brazil leading the pack. In 2002, on my first trip to Brazil, times were tough (see my previous article Blame it on Rio). Neighbouring Argentina was in the midst of economic crisis, (see the article Don’t buy from me, Argentina) and Brazil was concerned about contagion from her neighbour. In fact, Brazil had just got over a significant crisis in 1998 and didn’t want a repeat of those events. In 2002, Brazil was also facing a presidential election, with the perennial candidate, Lula from the Workers Party (PT) running for the fourth time. Whilst I noticed Lula had great support in Porto Alegre at the World Social Forum where I was a guest speaker, the business people and journalists I spoke to in Sao Paulo were apprehensive, and in any case, pessimistic about his chances of winning.

What a difference eight years makes. Lula did win in 2002, won re-election in 2006 and left office at the end of 2010 with a massive 80 plus percent plus approval rating which is an amazing result for a democratically elected politician at the end of their term anywhere. Even his successor, Dilma Rouseff, who has just entered the Presidential palace in Brasilia, has an equally healthy approval rate of 73 per cent.

So why the popularity of Lula and now Dilma? To use the old Clinton campaign line: It’s the economy stupid. Brazil avoided a major recession during the global financial crisis (GFC) and chalked up an impressive 7.5 per cent economic growth rate in 2010, which is expected to be followed by a solid 4.5 per cent in 2011 which should continue this year should inflation risks be contained. In short, the Brazil of 2012 is a different place to the Brazil of 2002. The country is more confident, it is playing a significant role on the world stage, (Lula opened 53 new Brazilian embassies in his term including 30 in Africa) its economy is now talked about as an emerging economic superpower along with China and India (now it is part of both the BRICs (Brazil, Russia, India and China) and the big emerging economies, the BEEs).  Historically we used to think of Brazil and other South American countries as causing a crisis themselves or being a victim of one. It’s very rare for them therefore to get through a major global economic crisis unscathed. And whilst they say Brazil is emerging, by the time of the Rio Olympics in 2016, will we be able to say that it has emerged? After all, it is the world’s 7th largest economy and after Rio 2016 it could well be in the Top 5. It’s no surprise that on my most recent trip to Brazil, one of my hostess’s in Rio de Janeiro commented that “even her maid took her holidays in Buenos Aires because it was now so cheap!”

In fact, education is a key reason for Lula’s success in Brazil. The success of the macroeconomic and fiscal performance of the Lula administration has been accompanied by a commitment to improving social conditions and human capital – mainly through education. According to Professor Fernando Carvalho, there has been “ a once in a generation increase in education participation – particularly amongst the lower classes. Around 32 million people have been added to the middle class, and education is a key reason.”

To be fair, Carvalho adds, these education measures were part of an expansion of social programmes , essentially an extension of the comunidade solidaria, started by Lula’s predecessor President Fernando Cardoso a famous Brazilian sociologist who later entered politics. According to Professor Carvalho: “Lula extended the programme and made it effective. Also by-passed local and state government and made more use community organizations and churches for delivery. This policy effectively has doubled the income of the very poor and at the same time has expanded the Brazilian middle class adding to the power of Brazilian consumers at the same time. As a result, education retention levels are higher, and the overall standard of living of the average Brazilian has increased.”

Thirdly, education is a key foundation for building stronger economic ties between Brazil and Australia in the future. People ties matter as today’s students are tomorrow political, business and community leaders and will be important as Australia forges stronger relationships with Brazil and South America. For example, in Singapore many of my classmates from the University of Adelaide are now cabinet Ministers (even the new President of Singapore Tony Tan went to Adelaide), and this pattern has been extensive across South East Asia as trade and investment ties have followed business and political relationships built at University. Hopefully, we will similar patterns with South America as more Brazilians and their neighbours study in Australia or participate in MBA courses across Asia, Australia and South America. But there’s work to be done at the Australian end. For as Brazil plays a stronger role in the world economy, and the 2014-2016 World Cup-Olympics double approaches, we will have to do more than just woo the girl from Ipanema, we’ll have to woo the hearts and minds of a globally very strong and popular Brazil.

In conclusion, I am sure many Australian students will now get the positive experience of studying with many students from South America, just as I did from South East Asia. And with all due respect, there is  better dancing in Rio and Sao Paulo than there is in Singapore but I am sure the intellectual and social benefits will be on par!

Tim Harcourt is the JW Nevile Fellow in Economics at the Australian School of Business and the author of The Airport Economist and The Airport Economist goes to Rio!