Brazil has to make difficult choices

It was the briefest of trips but one I did willingly; a quick three-day journey across the South Atlantic to Brazil. Twenty-two hours of flying to spend 48 hours in Curitiba — a metropolitan city of 3.5 million people and the state capital of Parana, in the subtropical south of the country.

I was here to film for CNN Future Cities because for many years Curitiba has been seen as a beacon of civic planning. (It won the Global Sustainable City Award 2009.) But this trip also gave me the chance to see how Brazil is coping in this next phase of the financial crisis. This is very relevant with the final round of voting in the presidential election.

The battle is between Dilma Rousseff, former chief of staff to the current president, Luiz Inacio Lula da Silva, but who has never held elected office in her own right; and Jose Serra, former mayor of Sao Paulo and governor of Sao Paulo state.

Fierce criticism

In Curitiba, where President Lula is far from popular, few people I spoke to had a good word to say for his years in office. Curitiba and Parana state is not his natural home. Here they are fierce in their criticism saying he had diverted too much of the industrial wealth created in the south, to subsidise the agricultural voters in the north, Lula's home turf.

Whoever wins the election, Brazil has some difficult choices to make as it continues to map its phenomenal economic development. The country sailed through the great recession with barely a scratch.

But now things are getting tricky as the government grapples with the success of being the darling of the investment world. The Brazilian economy will grow 7.5 per cent this year. So its currency, the Real, has rocketed against the dollar.

Fund flows

Since its recent low in May, the Real has appreciated around 14 per cent against the dollar. In the past 18 months the gain is nearer 45 per cent. With low interest rates, low rates of economic growth and low investment prospects in much of the developed economies, global funds are flowing into Brazil at a staggering pace.

In Curitiba the standard of life reflects this economic good cheer. But companies here find themselves between the proverbial rock and hard place. With the currency frothy, one machine tool manufacturer said his factory in Germany was now more competitive than his Brazilian plant.

Those who live in Curitiba fear this cannot last. They can live with an election result they don't like, but what they will find more difficult is if the economy takes a turn for the worst. They are the victims of their own success and for the time being, at least, there isn't much they can do about it.

Tune in to CNN International each weekday at 2200 UAE time to catch Richard's show, Quest Means Business.