🇺🇦 Слава Україні! 🇺🇦

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Another entry in our series on Ukrainian cuisine! Previous entries:
Borshch Varenyky Salo Syrniki Korovai Horilka Pampushky Banosh Hrechanyky Kyivskyi Cake Makivnyk Vyshnyak Drunken Cherry Cake Varenukha Pumpkin Porridge Lazy Varenyky Holubtsi Kolach Kvas Christmas Borshch Uzvar Kutya Beetroot Salad Kapusnyak Nalysnyk Bublyk Deruny Wild Mushroom Sauce Yavorivskyi Pie Spring Dough Birds Kholodets Easter Bread (Babka/Paska) Khrin & Tsvikli Shpundra Teterya Green Borshch Kalatusha Elderflower Kvas Crimean Tatar Chebureky
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Ryazhanka

Ryazhanka made using a mason jar method. Photo: New York Times.
Today we will cover a drink that is not so internationally popular (yet!) but has potential for crossover stardom. It’s called Ryazhanka, and for many Ukrainians, it's a staple found in the refrigerator year-round. If you visit a Ukrainian store, you will likely find no shortage of brands that aim to dazzle you with their hearty yet refreshing drink.
Ryazhanka is a baked cultured milk drink that is traditional in Ukraine and Belarus. Its taste is sweet and super creamy and not quite sour - the tanginess from the fermentation gives it just a little kick.
It's also a very old drink. It is well recorded that during the era of Kyivan Rus, people made Ryazhanka in the Pich (the traditional Ukrainian oven). They would heat up milk and cream at high temperatures (but without bringing to a full boil!) until they acquired a nice caramelized color.
While on some level I do believe that our old pal Domovyk must of course be involved in the process of crafting Ryazhanka, I have also read in some sciencey places that during the baking process, milk proteins interact with the sugars in milk resulting in the formation of a new substance - melanoidins. Maybe Domovyk’s powers include control over high molecular weight heterogeneous polymers. :) Anyway, just like some other cooked dairy products (like ultra-pasteurized milk or ghee), melanoidins seem happy to provide the unique color of Ryazhanka. And of course, they impart a quite pleasant taste! To seal the deal, a little sour cream was traditionally added to the Ryazhanka after baking and with time the milk would ferment, adding another interesting element to the drink.
This stabilized drink of course allowed humans to preserve milk for a little longer before it went bad when civilization had not come up with refrigerators just yet; if you’ve been following this series, you’ll understand that Ukrainian cuisine is all about fermentation and preservation! And it's also worth mentioning that in a pinch, the rich and nutritious Ryazhanka could be a substitute for a meal, especially on a hot day, adding to its appeal.
Note: I am positive that you can find Ukrainian Ryazhanka in stores that carry brands from Eastern Europe, although I want to mention that regretfully the orcs developed their own knockoff brands so be careful and look for the country of origin on the label! And as we do not want you to support the war machine or get poisoned (are you sure Novichok is only in tea?), we’ll tell you how to make it at home!
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How to Make Ryazhanka (With or Without Domovyk’s Help)

To prepare Ryazhanka, you will need only two ingredients!
Ingredients

• Milk (full fat, as fresh as possible) - 3 Liters
• Plain whole milk Kefir - 4 Tbsp
  • Note: It is traditional to use sour cream, but I worry that for the purposes of this recipe all international sour cream might not have the right cultures in it to be able to kick off the process, whereas Kefir probably does. Substitute same volume for sour cream or you could try full fat active culture Greek Yogurt.

Recipe

1. When fermenting, it’s really important that you make sure the equipment you use (pots including lids, spoons, etc.) are super clean.
2. Pour the milk into a pan, and bring it to a near boil. Don’t let it actually boil because it could scald and ruin the taste - just get it to look like it’s threatening to boil. Leave it at this temperature for about 5 minutes. At the same time, it is important to really monitor the milk so it does not spill over the edge. Periodically stirring it helps.
3. Heat oven to 150°C.
4. Pour the milk into a vessel that can be used in the oven. Best is a nice ceramic pot.
5. Place the pot with the milk in the oven and gently simmer for between 3 and 4 hours. Do not cover it with a lid.
6. At this point a coffee-colored foam will appear on the surface if it has caramelized properly - it is now baked milk! Take it out of the oven and wait until it cools down to around 40°C. Very important to wait until cool because otherwise the heat will kill the helpful little fermentation guys in the next steps.
7. You can remove the foam or leave it. [Ed. note: I leave it so I am not sure the difference exactly - if anyone knows, please tell us in the comments!]
8. Pour a small amount of milk into the Kefir (or your substitute) and stir until smooth. Then pour this small amount of mixture back into the larger pot of baked milk.
9. Cover the pot with a lid and then wrap it in a blanket, or towel, to retain heat. Leave in a warm place for at least 8 hours - it should become thick. You can keep it in this warm state for up to 24 hours, depending on the temperature of your warm place and desired thickness. I feel just a little bit dirty typing that.
10. You can drink it right away after it has reached its desired thickness, but in summertime I recommend chilling it first! It can be poured into jars, and keeps for about a week in the refrigerator.

Tips

• 1 liter of milk yields approximately 700 ml of Ryazhanka.
• There is an alternative mason jar version of the recipe where you pour it into the jars after Step 8. In this case, you must absolutely boil the jars to sterilize them. Then use a coffee filter and an elastic band to cover them while you wait for fermentation.
• You can use Ryazhanka for the same applications you would use yogurt for, but Ryazhanka is naturally much sweeter.
• Try adding Ryazhanka to smoothies to fortify them in a creamy way - or substitute for milk when making pancakes to lend a more velvety texture. Sometimes Ryazhanka is used when making fancy baked desserts!

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The 459th day of a nine year invasion that has been going on for centuries.
One day closer to victory.

🇺🇦 HEROYAM SLAVA! 🇺🇦

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Verified Charities

• u/Jesterboyd is a mod for ukraine and local to Kyiv. He is currently selling t-shirts raising money to buy some very interesting drones. Link to donation
• United24: This site was launched by President Zelenskyy as the main venue for collecting charitable donations in support of Ukraine. Funds will be allocated to cover the most pressing needs facing Ukraine.
• Come Back Alive: This NGO crowdfunds non-lethal military equipment, such as thermal vision scopes & supplies it to the front lines. It also provides training for Ukrainian soldiers, as well as researching troops’ needs and social reintegration of veterans.
• Trident Defense Initiative: This initiative run by former NATO and UA servicemen has trained and equipped thousands of Ukrainian soldiers.
• Ukraine Front Line US-based and registered 501(c)(3), this NGO fulfills front line soldiers' direct defense and humanitarian aid requests through their man on the ground, Ukraine's own u/jesterboyd.
• Ukraine Aid Ops: Volunteers around the world who are helping to find and deliver equipment directly to those who need it most in Ukraine.
• Hospitallers: This is a medical battalion that unites volunteer paramedics and doctors to save the lives of soldiers on the frontline. They crowdfund their vehicle repairs, fuel, and medical equipment.
• Humanity: Co-founded by u/kilderov, Humanity is a small team of volunteers securing and distributing humanitarian aid to the most vulnerable populations in temporarily occupied Kherson Oblast. Kilderov and his friends were under occupation in Nova Kakhovka in 2022.

You can find many more charities with diverse areas of focus in our vetted charities list HERE.

aka THE COUNTING OF THE BONER
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Obligatory disclaimer: It's slow this weekend, so why not have some fun? Not shilling any religion here; I'm not even Jewish, just an English teacher who reads too much. Read it as a parable for the current situation we find ourselves in, because the universe likes to rhyme with itself. As others have said, though – for some of us, this is a spiritual play 🙏 All thoughts and beliefs welcome here.
Pt 1 - A Passover Tale (Not required reading; just having fun. It's metaphors, m'apes. Sure, these connections might be all in our head -- but maybe our heads are a lot bigger than we think?)
Today, May 27th, marks the 147th day of the year - a day sacred to all those who follow boobies and jimmies. It also marks the end of Shavuot and the Counting of the Omer. If you read my Passover DD, which I wrote half-jokingly and also earned me a ban from the main sub, I noted that Shavuot is one of the three major pilgrimage festivals in Judaism - because in the old days, these trips would take a very long time, and so their entire years were planned around these dates - and directly linked to Passover. (The gents among us might know it as "the pentecost.")
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If you recall the story of passover, basically the pharaoh and moses have a showdown as moses demands freedom of his people from slavery. But the pharaoh is like nah bro, so god decides to help Moses out by killing all the firstborn children in the kingdom if the house didn't mark their doors with the blood of a sacrificed lamb.
(Note: I don't recommend doing this, even though we are a cult. It's a metaphor for tallying up registered shares.)
So the Israelites have to leave with their shitty unleavened bread, since they didn't have time to wait for the bread to rise. (It's a metaphor for our stock price.)
Ah, remember the good old days, a month ago, when $.31 was considered \"low\" and not \"high\".... it's just an ice cream cone to me though
And when we last left our hero, he had split the buybuyBABY red sea, drowning the pharaoh in a red sea of his own greed aka mayo...
also me upon realizing that MOASS has started (I'm a MOASS guy what can I say)
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A happy end to Passover - or so they thought. Thus began the Exodus -- you may have heard of it. This is not to historical accuracy, but basically the Israelites were stuck wandering around the desert for like 50 days or some shit until god revealed the torah to moses. It was hot as shit and they were hungry, but fortunately moses provided them with water and manna (it's a metaphor for these small green days we've had).
Shavuot is now celebrated as an agricultural holiday, celebrating the wheat harvest and the fruits (🍏s & 🍌s) of our hard WORK. Whereas Passover seems almost restrictive and kind of lame with all that unleavened bread, during Shavuot, a sampling of the first wheat harvest is baked into two loaves of leavened bread. (Leavening is a metaphor for excess stock prices if you didn't pick that up. Aka squeeze.)
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"The act of counting the Omer emphasizes the special connection between the two holidays: Passover stands for physical liberation and Shavuot stands for spiritual liberation. During the period of slavery in Egypt, the [morale] of the Jewish people had sunken to a low level. Thus, the time between Passover and Shavuot is seen as a period of growth and self-improvement in preparation to receive the Torah. The 49 days of the Omer period also stand for the 49 Gates of Understanding."
RC bringing the harvest. I closed the blinds of my apartment to make this pic
You're going to be absurdly wealthy very soon. When you know you can have anything you want -- when you're at that level that you realize you are basically co-creator of your own universe, and anything could be yours in the blink of an eye -- doesn't a lot of what you used to want fall away? Nothing wrong with a little luxury and taking care of yourself, but once you've secured yourself materially, the question is no longer what do I want? but what am I going to do? How am I going to act?
I do think there is something transformative about this experience. The rabbit holes we've been down, this thing we've created that's even bigger than ourselves, but of which we are all still an important part. I've learned a lot about myself and the world. I've had to cultivate balance and patience; it's made me a better communicator, and a better member of any community of which I'm a part. I don't think this is the end of the saga, but another beginning -- GMERICA.
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me irl
This period of waiting is what separates the wheat from the chaff. If you're here now, you're gonna make it. We're all gonna make it. Patience will be rewarded.
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Hot take: moass is actually NOT tomorrow (except it is, because it's always tomorrow), so go read up on some cool new web3 project while we wait. Speaking as someone who would rather chop wood than stare at a computer screen, doesn't own a cell phone, and thought a lot of this shit was dumb at first -- there are a lot of cool projects out there. Protocol Gemini is doing some pretty cool stuff, and there's even a game you can play on their Discord.
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From The Parable of the Workers in the Vineyard
A cat on Twitter posted the above pic recently. And, like, I don't necessarily endorse the bible or anything, but I also, like, don't not endorse it? I said I'm an English teacher, okay -- I'm just here for the good stories. Anyway this is from a somewhat famous parable:
Parable of the Workers in the Vineyard - IYKYK...
The TL;DR of that parable is literally WAGMI. We're all gonna make it. No matter when you got in, how much you're down bad, how much you're up, how much copium you smoke or hopium you boof, we're all equal. All entitled to the same thing. All shareholders are gonna make it. Keep your eyes open.
"Maybe we live in a simulation." - u/hunting_snipes quoting u/edwinbarnesc quoting 🐍FCM 🐍

Introduction
Here's another effortpost on Brazil! This time I'll be talking about why the Brazilian economy stagnated, and what we can expect from Lula in terms of economic policy (I've talked about this in the past but now I'll go into more detail).
Between 1920 and 1980, Brazil was a clear economic success story. For 60 years, our GDP grew at an average of 4% a year. This 'golden age' ended in a hyperinflation crisis, which made the 1980s become known as a 'lost decade', and since its resolution in 1994 with the Plano Real, our economy has experienced minimal growth: from 1980 to 2020, the average GDP growth rate was only 0.7%.
Evolution of the Brazilian per capita product, at 2010 prices, from 1900 to 2021. The scale of the graph is logarithmic in base 2.
In this post, I'll try to explain the reasons for Brazil's low growth in the last four decades and what Lula's plans are to address them.
The debate
Before delving into the actual causes of the "semi-stagnation", I would like to explain the economic debate in Brazil. This debate revolves around two major groups of economists: the "developmentalists" and the "liberals." The term "developmentalism" may be unfamiliar to many people here, but it is very present in Latin America. A decent explanation for it could be "dirigisme with Latam characteristics."
In short, liberalism in this context is associated with economic orthodoxy and a pro-market orientation in economic policy, while developmentalism leans towards economic heterodoxy and advocates for direct state interference in the economy. This debate is, in theory, separate from the traditional right versus left political divide, as we have had governments from both ends of the political spectrum adopting policies aligned with either school of thought. For instance, Lula I (2003-2007) represented a left-wing liberal government, while Geisel (1974-1979) presided over a right-wing developmentalist government. However, in practice, liberalism is associated with the right-wing while developmentalism is associated with the left-wing.
One area of major divergence between those two groups is full employment. Liberals argue that the Brazilian economy generally operates at full employment, which means that there are well-defined supply-side limits and restrictions in the economy, whereas developmentalists believe it tends to operate below that level. This implies that the economy's natural state is one of perpetual aggregate demand deficiency, and thus the government could just increase spending to mobilize idle production factors and stimulate economic growth.
Furthermore, liberals typically view direct state intervention in the economy with distrust, opposing increased public investments in infrastructure and most forms of industrial policy. Their preference generally leans towards reducing government spending and relying on a 'crowding in' effect, together with supply-side reforms. Conversely, developmentalists perceive state intervention as a necessity to stimulate the economy, favoring a robust industrial policy and increased public investments.
Those are significant oversimplifications, and many economists do not align themselves with either group. In any case, I would say this categorization reasonably represents the current debate.
It's a tradition in Brazil to divide ministries between liberals and developmentalists to ensure a balance between the two. The current Finance Minister, Fernando Haddad, believes in a middle ground approach, with some of his secretaries (e.g., Guilherme Mello) leaning more towards developmentalism, while others (e.g., Bernard Appy) lean more towards liberalism. Planning Minister Simone Tebet and Industry and Commerce Minister Geraldo Alckmin are firmly in the liberal camp. However, due to the nature of his ministry, Geraldo Alckmin will probably concede more to developmentalist policies (as he's already doing). Aloizio Mercadante, the President of the National Bank for Economic and Social Development (BNDES), is considered the leader of the developmentalist branch of the government, along with Workers' Party President Gleisi Hoffmann (some people jokingly refer to her as the main opposition to Fernando Haddad and the 'Twitter Shadow Finance Minister' due to some of her tweets).
Without further ado, let's get to the causes of Brazil's stagnation.
Guido Mantega (Finance Minister between 2006 and 2014) and Antônio Palocci (Finance Minister between 2003 and 2006). Mantega is associated to developmentalism and Palocci to liberalism.
Education
First of all, the significant growth of the 20th century left a terrible educational legacy. Brazil only began to have a somewhat consistent educational policy in the 1990s and 2000s, when basic education was universalized. To put it into perspective, in 1990, the average number of years of schooling in Brazil was 3.8 years. Even Sub-Saharan African countries like Congo, Zimbabwe, and Zambia had higher average schooling levels than ours. Approximately a quarter of the population were illiterate.
The key change came with the 1988 Constitution, which decided that Brazil would try to become an European-style social democracy. Since then, considerable progress has been made, but clearly not enough. The main educational bottleneck lies in Elementary School II, which typically spans the ages of 12 to 15. It is during this stage in Brazil that the discrepancy between age and the appropriate grade level drastically increases, leading to higher rates of grade repetition and students falling behind in their education.
This problem is probably related to the transition from a single teacher trained in pedagogy in Elementary I to several specialists teaching only one subject. This transition also occurs at the onset of adolescence, which is naturally a turbulent phase already, with the introduction of drugs, alcohol and various forms of prejudice being normal. The result ends up being a distancing of the student from school.
Two Brazilian states, which have been governed by center-left parties for many years, serve as examples in Brazilian educational policy: Pernambuco and Ceará.
A highlight in Ceará is the Programa de Afabetização na Idade Certa (Program of Alphabetization in the Right Age), which aims to ensure that all students in the state's public school systems achieve literacy by the age of 7. The plan was based on the following pillars: (1) the elaboration of a specialized literacy curriculum that was adopted in all the municipalities, with structured materials for teachers and students containing a daily routine of classroom activities and homework assignments; (2) pedagogical practices to encourage reading in the classroom; (3) financial incentives for the municipalities that achieve better results in education; and (4) evaluation and monitoring of the program, with a census and diagnostic test that is applied at the beginning of every semester.
Pernambuco has implemented a Full-Time High School system that stands out. The system is based on the following pillars: (1) the introduction of a subject called "life project," which encourages students to create plans with goals and objectives for their lives; (2) guided study, providing a space for autonomy in learning and fostering self-directed learning skills; (3) hands-on, practical classes that combine theory and practice; (4) youth clubs, where collective interests of young people are pursued; (5) tutoring, where teachers (tutors) interact with students to support their development; and (6) full-time education, of course.
Both plans have been tremendous successes and could be implemented nationwide. The Member of Parliament Tabata Amaral has proposed the program "basic education like Ceará's, high school like Pernambuco's." We might see that put in practice. Izolda Cela, the mind behind Ceará's basic education plan, is the Executive-Secretary of the Ministry of Education, and the current Minister of Education is Camilo Santana, the governor of Ceará between 2014 and 2022.
Izolda Cela (Executive-Secretary of the Ministry of Education) and Camilo Santana (Minister of Education).
Public Investments
Furthermore, there is a general consensus that the significant decrease in public investment since 1980 explains part of the problem. During the Golden Age of Brazilian growth, public investment mounted to about 6% of GDP, whereas it currently stands at approximately 4% since the lost decade. Liberal economists tend to attribute this to the expansion of the welfare state, that came with a substantial increase in the tax burden (from 25% of GDP in the 1970s to 35% in 2000). On the other hand, developmentalist economists point to the decline in public savings due to the privatization of state-owned enterprises in the 1990s.
In his second government, Lula created the Programa de Aceleração do Crescimento (PAC) (Growth Acceleration Program), whose objective was precisely to expand public investments. Unfortunately, the plan ended up with highly controversial results, primarily due to the low administrative capacity of the Brazilian State and corruption (some like to call the plan the Corruption Acceleration Program!).
But now the Workers' Party has gained new experience. Many of its state governments became famous for extensive investment programs in partnership with the private sector, delivering positive results. Chief of Staff Rui Costa, in particular, had a successful experience with public-private investments during his tenure as the governor of Bahia. He is now expected to lead the "New PAC", which will probably be announced at some point between today and July. (The project still has no name and is provisionally being called "New PAC").
Here's what Rui Costa has said about the project: "We will have, in an unprecedented way, investments with Public Private Partnerships (PPIs) at the federal level. Many states, including Bahia, have made PPI projects. [...] We are negotiating with the Ministry of Finance the conditions for guarantees so that we can leverage these projects."
Lula wants to meet with the 27 state governors to determine which state projects the Union should prioritize for its investments. In recent weeks, Costa has held individual meetings with the state governments to define which projects will be included in the new PAC. In all, eight governors have already been heard.
In a speech on the May 1st holiday, Lula said the following about the project: "We are inviting foreign businessmen to invest in Brazil and we are showing them the great projects that we are going to present in the third PAC. It will be the largest infrastructure project in this country."
Former Governor of Bahia (2014 - 2022) and current Chief of Staff Rui Costa.
Deindustrialization
Another problem is the early deindustrialization that is taking place in Brazil: we are losing our industry before becoming rich. In the beginning of the lost decade, the industry accounted for one-quarter of the Brazilian GDP, whereas today it represents around one-tenth. The reason for this process is complex, and once again, economists disagree. Liberals point to the new form of production organization that emerged with globalization, where the manufacturing of goods was fragmented into different stages, each executed in different countries. According to this line of thinking, Brazil failed to adapt to the new industrial configuration and remained stuck in an unrealistic autarkic dream. On the other hand, developmentalist economists usually argue that after the end of hyperinflation, Brazil fell into a trap of having an overvalued currency and high interest rates, demolishing the industry's competitiveness. (I am more inclined towards the first thesis, although it is a fact that the Brazilian exchange rate was detrimental to the industry after the Real Plan).
Now I want to talk a little bit about the Brazilian industrial bourgeoisie and its problems. In the 1960s, the then sociologist and future president Fernando Henrique Cardoso published his thesis on the Brazilian industrial entrepreneurs. Based on his research, he concluded that Brazilian industrialists did not have any national project, and (1) "only cared about their personal interests when speaking on behalf of the class" and (2) "[their] political action consists of personal participation in the patrimonialist game." Brazil has a serious problem related to what we call 'patrimonialism,' which refers to the capture of resources from the Brazilian state to benefit private interests.
Unfortunately, industrial policy in Brazil often results in tax exemptions, subsidies, tariff protections, etc., for an inefficient, patrimonialist, and somewhat broken industry that was developed in the 20th century. The Workers' Party itself fell into this outdated corporatism while in power, especially during the first Rousseff administration (2011-2015). It is a shame that advocating for greater state involvement in the economy ends up becoming a defense of those interest groups.
In this sense, I find myself opposed to both liberals and developmentalists. While the latter end up promoting an agenda that only benefits private interests, albeit with good intentions, the former dismiss any state planning, believing in an 'economic abiogenesis.' Since 2016, we have been reducing the role of the state and waiting for a crowding in effect, but with no success. We need strong a industrial policy, but it has to be transparent and not perpetuate the old game of patrimonialism.
In the words of the brilliant economist Laura Carvalho: "We want a State that identifies ways to stimulate technological innovation and product development in partnership with the private sector. But this policy cannot become hostage to the existing private sector. We have remnants of our industry of the 20th century, for example the automobile industry, and when we do industrial policy, we end up just giving incentives to them. This is a state that does not choose winners, but rather is chosen by losers. Those who are struggling in the industry try to eat the resources of the state to survive."
Unfortunately, the signals from the new Lula government are quite negative. Industry and Commerce Minister Geraldo Alckmin recently announced a plan of incentives for the automobile industry, which is essentially the same program that has failed several times in the past. There are positive things coming from his ministry, but few of them have much to do directly with a well-made industrial policy. It's a shame.
His plans beyond industrial policy appear positive, as shown in the following excerpt, at least: "Brazil had an early deindustrialization. Europe also deindustrialized, but ours was precarious and severe. More than reindustrializing, we need a neo-reindustrialization. A central issue is the competitiveness agenda. There is a principle in medicine that says: suppress the cause and the effect ceases. We have to act on the causes of low growth. Our tax model generates an absurd cost for companies. It is not fair. We have an absurd judicialization that leads to legal insecurity and hinders exports. The whole world has a VAT (value added tax. I defend it. I think Haddad is doing well and I am a great enthusiast of the tax reform."
Probably more than any other politician of expression today, Haddad positions himself as a republican and talks about reducing the patrimonialist distortions of the Brazilian public budget. He talks about "closing the drains of what is called Brazilian patrimonialism" and "ending a series of abuses that have been committed against the fiscal base" of the country. He says that many sectors have been "overly" benefited "with rules established over the decades and that have not been reviewed by any outcome control. Many have expired from the point of view of efficiency, and need to be revoked."
Former Governor of São Paulo (2001 - 2006; 2010 - 2017) and current Vice-President of Brazil and Minister of Industry and Commerce Geraldo Alckmin.
Business Environment
Brazilian productivity has been stagnant for decades. What is causing this? The main suspect is the Brazilian tax system. There is an enormous complexity in the various indirect taxes (ISS, ICMS, PIS/Cofins, and IPI), which forces every company to have an excessively large department dedicated to tax payment. Additionally, numerous divergences of interpretation arise between the Federal Revenue, state authorities, and businesses. On every corner of our cities, there is a specialized tax law office to assist companies in dealing with the extremely high level of litigation in our taxation system. To make matters worse, our indirect taxes discourage investment in locations with higher social returns, as the tax complexity and special tax regimes artificially alter the profitability of investments and production. A general simplification of these taxes, with the adoption of a Value Added Tax, could have an impact on the economy's efficiency equivalent to the Plano Real, which ended hyperinflation.
Even beyond the tax issue, the Brazilian business environment is terrible. According to the World Bank's Doing Business 2020 report, which measures the ease of doing business in 190 countries, Brazil ranks 124th. This problem is related to excessive bureaucracy, unexpected judicial decisions, loopholes in regulatory frameworks, and disrespect for contracts.
The Tax Reform is going to be the government's main priority after the approval of the New Fiscal Anchor. Planning Minister Simone Tebet summed up the reform as follows: "The Tax reform is the only silver bullet that we have to save Brazil."
And here's what Finance Minister Fernando Haddad has said about it: "There is no way to grow Brazil's productivity with this tax system [...] We are developing a tax reform that is even more modern, because it introduces in the national tax system a Value Added Tax that solves a good part of the flaws of the current system that, in my opinion, is the great villain for the low growth rates of our productivity." The idea is to approve the Tax Reform still this year (Haddad talks about doing it in the first semester!).
Special Secretary for Tax Reform Bernard Appy.
Economic Isolation
Brazil has a very closed economy. Among the 160 countries analyzed by the World Bank, the Brazilian economy is only less open than that of Sudan. The average protection applied by Brazil to capital goods is 14 times higher than in Chile and 25 times higher than in Mexico. This is probably the most expressive cause of the low productivity and deindustrialization in Brazil, together with the tax system. Here, I quote the brilliant economist Edmar Bacha: "[The closure of the Brazilian economy during the Geisel government (1974 - 1979)] caused a tremendous drop in the economy's productivity and an increase in the cost of capital goods. And this, I believe, is what lies at the root of our stagnation after the so-called economic miracle (1968-1974). Our industry became unable to compete internationally. And we were forced, because the industry has this extraordinary lobbying capacity, to prevent the redesign of the Brazilian industry to participate in global value chains."
Bacha's argument makes sense: the collapse of GDP growth coincides with the collapse of capital accumulation (the growth rate of the capital stock) after Geisel's government. Why did capital accumulation collapse? Bacha explains that using a decomposition of the investment = savings relationship: K' = s(1/p)v - δ, where K' = capital accumulation, s = savings rate, p = relative price of investment, v = output-capital ratio, and δ = depreciation rate.
Between 1950-1980, the "golden age" of Brazil, K' grew at nearly 9% per year. Between 1981-2014, this number was 3%. Why? Looking at the historical series, the difference is not in savings or depreciation. What happened was that the output-capital ratio fell by about one-third, and the relative price of investment increased by one-third. In other words, the capital requirement per unit of output increased significantly, and at the same time, the price of investment goods rose significantly. According to Bacha, this process occurred between 1973 and 1983, a period in which the Military Government pursued an autarkic economic policy.
The ideal scenario for Brazil would be to open its economy and have an export-oriented industry. The industry we have developed is heavily reliant on our domestic market, without external competition. In the words of economist Nelson Barbosa: "Brazil cannot produce ships, but it can produce airplanes. Brazil does not have car manufacturers, but it has bus manufacturers. Brazil cannot have a domestic production of microelectronics, but it has a good domestic production of electric motors. So we need to study what worked in these sectors to see if it can be replicated in other sectors. All these successful sectors, Embraer, Weg, Marco Polo, are sectors that are competitive in Brazil and in the world. Here is the first clue: correct industrial policies create domestic production that competes domestically and internationally. They are integrated products that import and export extensively. Value chains."
However, an open trade policy without a plan may not be positive either. In Nelson's words: "Development always means increased productivity. Opening the economy can stimulate productivity, but it can also lead to a negative specialization. You can open your economy and become a country that only exports commodities, with an inflated services sector that only sells domestically, with a significant portion of your population relying on informal jobs. Which is what happens in Brazil. So I think trade openness is inevitable, more developed countries are more open, but thinking that just opening up will automatically lead to development is naïve and something we shouldn't do in the 21st century. I believe that strategic trade integration is crucial and necessary for development. Unilateral openness, without any plan, will only reinforce the specialization we already have today."
In any case, it is certain that the current excessive protectionism cannot be maintained. Opening up would allow broader access for companies to (1) cheaper and higher-quality inputs and (2) foreign-produced capital goods and technology, (3) create significant competition effects to invigorate the economy, and (4) create a 'selection effect' that would eliminate losers and favor winners.
But this is the agenda that I am least hopeful about. Trade openness is a topic that faces strong opposition from the Brazilian left and would likely only occur under a moderate center-right government. I hope, at least, that some trade agreements can be reached to open up the economy. The European Union-Mercosur trade agreement would have a significant impact and would be very important but I'm not very hopeful that it'll be approved.
Haddad is still optimistic, though! He said that a more emphatic diplomatic effort will be made starting in the second semester, in a movement that will take advantage of Brazil's leadership in Mercosur and Spain's leadership in the European bloc.
Simone Tebet (Planning Minister) and Fernando Haddad (Finance Minister).
Interest Rates
Interest rates in Brazil are much, much higher than the global average. Our credit is scarce and dysfunctional. Lula likes to repeat that Brazil is a capitalist country without capitalism because there is no credit.
Brazil has the second-highest bank spread in the world, second only to Madagascar. This means that banks in Brazil charge very high interest rates for lending money. To give you an idea, Brazil's bank spread is higher than the average observed in countries at war. There are several reasons for this, but some stand out: (1) savings in Brazil have historically been very low (around 20% of GDP), (2) the government consumes a significant portion of savings to finance itself, and (3) the Brazilian banking sector is extremely concentrated, with a few banks dominating the entire sector.
The other issue in this discussion is the current policy interest rate set by the Central Bank. Brazil currently has the highest real interest rate in the world, at around 9%. The debate about whether this interest level is correct or not is quite active in Brazil, with its proponents arguing that the current Brazilian inflation is demand-driven and pointing to inflation in the services sector and core inflation, while its critics argue that inflation is not demand-driven, pointing to the fact that Brazil has had a negative output gap since 2015 and that supply shocks can explain the inflation in services.
This debate is complex, and it is hard to determine definitively which side is right. Nevertheless, the Central Bank is strongly adhering to the first thesis.
The current Chairman of the Central Bank, Roberto Campos Neto (RCN), is the grandson of an economist of the Military Dictatorship and was appointed by Bolsonaro. He will remain in his position until 2024 due to the new autonomy granted to the Central Bank in 2021. In this scenario, Lula engaged in a public war against RCN, urging him to lower interest rates. The situation became tense, but Lula never showed any willingness to take effective action to remove him, remaining only in rhetoric. Throughout the conflict, Haddad positioned himself as a moderate, playing a certain "good cop, bad cop" game with Lula and gaining trust in the financial market. Apparently, Lula intends to nominate former executive-secretary of the Finance Ministry Gabriel Galípolo to replace RCN in 2024. He was recently appointed as director of monetary policy at the Central Bank, and is widely identified as a heterodox economist.
Haddad's current plan is to stabilize Brazil's deficit to allow for a monetary loosening. Here's what he said: "We are not at a point where fiscal expansion is going to help the economy. If there is room for any stimulus, it will be monetary. If we know how to make the transition, there is room for a lower interest rate, you just have to give security to the monetary authority." He does not seem to be concerned about banking concentration, though.
Chairman of the Central Bank Roberto Campos Neto.
TL;DR
The Brazilian economy has seen very little growth since the the lost decade in the 1980s. One of the primary factors contributing to this stagnation is the economy's low productivity. There are several reasons behind this low productivity, including:

1. Inadequate infrastructure and insufficient investments in its development.
2. A significant delay in comparison to other countries in terms of investing in education.
3. Unreasonable economic protectionism.
4. Private groups exerting undue influence and capturing the Brazilian state (patrimonialism).
5. Failure to adapt our industry to a globalized world.
6. Excessively high bank spreads.
7. A terrible business environment, particularly due to the tax system.

There are other reasons for sure, but I'd say most people would agree those are the most important ones. Also, here's my effortpost on the Workers' Party, in case you haven't read it.