Brazilian president Luiz Inácio Lula Da Silva says this is his country’s “momento mágico.” Well, he has some reason for feeling so chuffed. Inflation has collapsed, foreign capital is gushing in and consumer confidence is running high.

The buzzword in São Paulo’s business community is “stability,” which is a huge achievement for a country where boom-bust cycles had become a way of life. Economic forecasters have never felt so certain in predicting Brazil’s outlook. They all think the country is on course to regain its long-lost investment credit rating because the ratio of debt to gross domestic product continues to decline, inflationary expectations remain well anchored and fiscal discipline is maintained.

All this is rather impressive when compared to Brazil’s economic track record of the previous two decades, but hardly the stuff of magic by global standards. Brazil’s economic growth under Lula’s administration has averaged a relatively modest 3.5 per cent, far below the average 8 per cent expansion over the past four years in Russia, India and China — the other three rapidly expanding emerging markets referred to together as the BRIC. However, Brazil had to sacrifice some growth over the past few years to tame the inflation beast.

Still, Brazilian policymakers must seriously consider how to take the country to 4 or 5 per cent growth, which would put it on track to becoming a major economic power. To achieve this end, Brazil needs to look no further than a country with strong Latin connections — Spain. Twenty years ago, Spain was in exactly the same position as Brazil. It had a similar per capita income and had recently fought a victorious war with inflation. It was ready for initiatives to spur growth.

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