Compared to other leading developing countries, including the big four often grouped together and labeled Bric — Brazil, Russia, India and China — Brazil is much better off and should be doing far better.
It has had stable and democratically elected governments for over a generation — and the past 12 years has seen the same political party in power. Added to its already diversified economy and abundant natural resource endowments are the discoveries in 2006 of large oil and gas reserves.
Although most of the energy deposits are off-shore and in the deep pre-salt level, large investments led by Petrobras, the oil company majority-owned by the state, have enabled Brazil to become a net oil exporter since 2011. More discoveries are expected, making Brazil's economic prospects even brighter.
Despite all that, Brazil has been in deep trouble, both politically and economically.
This is not due to the steep drop in oil prices for, unlike many oil exporters, Brazil depends much less on foreign exchange generated by oil exports. Nor is it a case of catching a strain of the Dutch disease, when the focus on developing natural resources leads to a decline in manufacturing. Although, in Brazil, the large discoveries of oil and gas have pushed up the exchange rate, so much so that other exports become less competitive.
And fortunately Brazil has not been invaded by foreign countries wishing to take control of its oil and gas reserves, directly or otherwise.
Rather, the trouble comes from a corruption scandal involving price-fixing, bribery, and kickback schemes generated in Petrobras. Although the investigations are still ongoing, a clear picture has already emerged: the upper echelon of Petrobras' management is involved and large sums of money — estimated to be in the billions of dollars — have flowed into the coffers of the political parties.
Dozens of people have been arrested and the chief executive officer as well as some members of the board of directors have confessed to the crimes and one former manager of Petrobras is reported to have promised to return $100 million (3.2 billion baht) received from the kickback scheme.
The money flows appear to happen like this: Major Petrobras contracts and purchases are inflated by 1-5%, with the extra money going into the pockets of some Petrobras managers or the accounts controlled by them. But they do not keep all the money as 0.5-1% of it is channeled to the political parties.
It is unclear when these money flows started but the recent discoveries of large oil fields, resulting in significantly more revenues, investments and other expenditures by Petrobras are believed to be the deciding factors.
President Delma Rousseff has denied any knowledge of the rampant corruption although she was chairwoman of the board of directors of Petrobras for many years before assuming the state's highest office. The scandal and arrests have had a major impact on the president's popularity and on the economy.
Although she recently won a second term, Ms Rouseff's popularity plunged to a record low of 23% in the early February poll, making it difficult for her to govern although her impeachment is not currently imminent.
The economy is adversely affected by lower investments and the troubled finances of many companies. Petrobras is postponing its investments and many of its contractors and suppliers cannot get credit while some are in dire straits and will have to file for bankruptcy.
As Petrobras contributes significantly to Brazil's economy — Petrobras and its associates are estimated to contribute about 10% of Brazil's GDP while its 2013 revenues amounted to around 6% of GDP — the scandal may very well push Brazil into a deep recession this year.
In some respects, our country is similar to Brazil: with a diversified economy, abundant natural resources, and a large petroleum company which is majority-owned by the government (PTT). However, there are also some significant differences.
Our current government is not democratically elected and major oil fields of similar size to those of Brazil have not been discovered. These differences, however, could soon disappear as the current Thai government has promised to schedule general elections by next year and some oil analysts believe it is just a matter of time before large oil and gas reserves are discovered in the Gulf of Thailand.
Even if PTT does not discover new, large oil and gas fields, the company's size in the domestic economy compared to that of Petrobras is already far more dominant — PTT's revenues in 2013 exceeded 23% of the nation's GDP.
Were we to find a lot more oil and gas, a case of the resource curse could befall Thailand: Wrong policies could lead to catching a strain of the Dutch disease; foreign governments could be tempted to interfere in domestic affairs to enhance their oil companies' interests; or oil executives could decide to follow the path taken by some Petrobras managers. No matter how it might happen, the end result is the same — trouble.
Sawai Boonma has worked as a development economist for more than two decades. He can be reached at sboonma@msn.com.