The 'Economic Miracle' Saw Record GDP Growth but Paved the Way for the Lost Decade

A period of strong growth and industrialization in the 1970s came at the expense of indebtedness and hyperinflation that arrived at the end of the regime

São Paulo

The military also promoted exports and implemented measures to stimulate financial investments and savings, such as monetary correction, to protect applications from inflationary corrosion.

Another innovation was the creation of the Central Bank, which was tasked with controlling the money supply in the economy, previously the role of Banco do Brasil.

This phase would also provide a substantial increase in credit to families, which would end up supporting consumption and investments in the private sector, stimulating the arrival of companies from abroad and the creation of new companies in the areas of home appliances and automobiles.

Growth during this first half of the military regime increased job supply, which helped to expand domestic consumption.

During the period, consumption of durable goods increased by more than 25% per year - this is the creation of the Manaus Free Trade Zone, initially dedicated to manufacturing electronics products through tax advantages and replacing imports.

In 1966, the military had already created the Guarantee Fund for Time of Service (FGTS) to compensate for the end of the so-called ten-year stability, which guaranteed workers to remain in employment after ten years of work in a company. It could only be broken in dismissals for cause.

Used to finance the housing sector, the resources deposited by companies in the FGTS would also give impetus to civil construction, which would grow about 15% per year in the wake of constant migration of the population from the countryside to the big cities.

Between the 1960s and 1980s, the share of the country's urban population would jump from 45% to almost 70%.

Throughout the military regime, Brazil would also increasingly resort to foreign loans, rapidly increasing its dollar indebtedness.

Between the beginning of the dictatorship and the end of the "economic miracle" (1964-1973), the Brazilian external debt would jump from US $ 3.1 billion to US $ 12.5 billion.

But it would gain gigantic proportions at the end of the regime, reaching US $ 96 billion in 1985, as a reflection of unsustainable policies adopted to maintain economic growth.

At the beginning of the regime, and until the mid-1970s, the policies of relative sanitation of public accounts and increasing indebtedness led to an increase in the rate of public investment in relation to GDP of about 15%, in 1964, to more 23% in 1975.

With this increase, more jobs also came, especially in industry, which had a long period of development in the military regime.

Between 1965 and 1985, total jobs in the sector increased from 2 million to 3.5 million.

In the years of the dictatorship, the phrase attributed to Delfim that the Brazilian economic "cake" would first need to grow before it could be distributed was famous.

Although the former minister claims never to have made such a statement, the fact is that the cake grew, but it was not distributed in a balanced way.

In 1964, the wealthiest 1% of the population held between 15% and 20% of all the country's income.

At the end of the military regime, this wealthier portion would control almost 30%, according to the researcher from the Institute of Applied Economic Research, Pedro Ferreira de Souza, author of "A History of Inequality: the Concentration of Income among the Rich in the Brazil - 1926-2013" (Hucitec publisher).

"The economy is doing well, but the people are doing poorly" is another famous phrase from the period that was said by then-military president Emílio Garrastazu Médici, who ruled between 1969 and 1974, during much of the "economic miracle."

But it was at the end of the Médici government that Brazil's growth trajectory began to change.

In 1973, the world and Brazil would suffer the consequences of the so-called oil shock, caused by an Arab embargo on nations seen as Israel's supporters in the Yom Kippur War (1973), a conflict initiated by Egypt and Syria against the Israelis.

The embargo on the leading Western countries multiplied the price of a barrel of oil by four and seriously affected importing countries, including Brazil.

In addition to increasing the price of oil, the crisis became global. It began to limit credit in dollars to countless countries, forcing Brazil to refinance its debts and obtain loans at ever-higher interest rates.

The Brazilian GDP growth in 1973, from 14%, would fall to 9% the following year.

Brazil sought to maintain the strategy of obtaining foreign loans to finance investments, so its indebtedness accelerated until, in 1979, a new oil crisis - this time caused by an Islamic revolution in Iran - hit the world and Brazil in full again.

In this period of crisis, Brazil's unsustainable dependence on foreign loans to keep the economy afloat - and the military in power - would be evident in the explosion of dollar indebtedness.

Still, in the military regime, Brazil would plunge into the swamp of the so-called debt crisis, having increasing difficulties in honoring payments. At the same time, that growth would fall rapidly, and inflation would get out of control.

Between 1978 and the dictatorship's final year, 1985, in addition to increased indebtedness, inflation would multiply from 40% per year to more than 240%.

Inheritance of the military, the hyperinflation that would follow, and the moratorium on foreign debt in 1987 would be the chief marks of the lost decade of the 1980s.

1965 Member of the Consultative Planning Council (Consplan), an advisory body to the economic policy of the Castelo Branco government and of the National Council of Economics

Brasília 04/12/1972 - Delfim Netto (Foto: Acervo Folhapress) - Acervo Folhapress

Delfim Netto

1967 to 1974 Minister of Finance

1979 Minister of Agriculture

1979 to 1985 Minister of Planning

In December 1968, Delfim was one of the signatories to Institutional Act No. 5 (AI-5)