Lead Story
Brazil's four-century growth puzzle shows long stagnation
New long-run GDP per capita series for Brazil, 1574 to 1920, reveals an early era of relatively high incomes followed by centuries of stagnation and a late, modest ascent.
CEPR researchers G Lus Lambais and N Palma construct the first continuous long-run Brazilian GDP per capita series, drawing on a hand-collected dataset of more than 30 000 archival observations from Bahia, Pernambuco, Rio de Janeiro, Rio Grande do Sul, and Sao Paulo. The findings challenge a narrative of rapid take-off and instead emphasise deep historical roots to today’s growth constraints, including slavery’s impact on demand, and the implicitly narrowing domestic market that dampened endogenous productivity growth.
The study shows that incomes in the late 1500s and early 1600s were comparable to Iberian Europe, but declined through the 17th century and stagnated for more than two centuries. A brief uptick during the 18th-century gold boom and a later surge tied to the coffee economy did not translate into sustained productivity gains. By 1920 Brazil remained well behind Western Europe and the United States, even as it compared more favourably with regional peers. The authors argue that the end of slavery, the growth of domestic markets, and gradual institutional reform were prerequisites for a modern rise in living standards, not accelerants in themselves.
The implications for current policy debates are stark. The authors contend that structural features rooted in centuries of coercive labour, inequality, and limited domestic demand constrained Brazil’s development long before modern macroeconomic policy became a lever for growth. They warn that societies with narrow consumer bases may struggle to realise endogenous productivity gains, and that addressing inequality and market breadth is not merely a social objective but a growth imperative. The piece invites policymakers to view contemporary reform through a long-run lens, recognising that institutional change accumulates effects over generations.
The piece concludes with a call for cautious, historically informed policy design: to broaden markets, invest in human capital and credit access, and align tax and governance reforms with a recognition that growth potential is socially embedded and time-delayed.
In This Edition
- Brazil long-run GDP per head 1574-1920: deep historical roots of today’s growth constraints
- Social conflict salience drives belief polarization: identity framing as driver
- Thematic investing dominates markets: portfolios tilt toward AI, energy security and reshoring
- Cybersecurity stocks in focus: bigger budgets and AI demand lift sector
- India energy resilience grows: domestic demand and tax cuts stabilise macro risk
- Diversifying with global trackers: funds to complement mega-cap exposure
- Lithium supply tightens; deficits possible by 2035
- Biofuels not the answer to shipping decarbonisation
- Europe energy crisis prompts policy shifts toward renewables
- Uzbek uranium giant begins production at new mine
Stories
Brazil's long-run growth puzzle revisited
Long-run national accounting casts new light on Brazil's development path and its modern growth constraints.
A CEPR study reconstructs Brazil’s GDP per capita from 1574 to 1920 using a hand-collected dataset of more than 30 000 archival observations across major provincial regions. The authors document an era of relatively high incomes in the late 1500s and early 1600s, followed by a protracted stagnation that persisted for more than two centuries. The pattern is not unique to Brazil, but its duration is striking, and its decline predates many conventional modern growth milestones.
The work highlights a sequence of commodity booms-sugar, gold, coffee-producing short-run income spikes without durable productivity transformation. It notes that independence struggles and early nation-building did not yield immediate economic uplift. Only from the mid nineteenth century did per capita incomes rise more persistently, aided by infrastructural improvements and gradual institutional modernisation, yet still lagging behind Western peers by 1920.
Crucially, the analysis links slavery to the long-run growth puzzle. By modelling the consumption patterns of enslaved populations, the authors argue that slavery depressed effective demand and slowed incentives for mechanisation and technology. The end of the slave trade and the abolition of slavery coincide closely with the first sustained gains in GDP per capita, suggesting a tight linkage between coercive institutions and growth capacity.
The study’s implications extend beyond historical curiosity. It frames today’s debates about growth and inequality as inheriting deep roots in the colonial and slave-based structure of the economy. It also underscores how narrow domestic markets and unequal structures can dampen endogenous growth, even amid global commodity booms. For policymakers, the message is that meaningful transformation may require patient, broadening reforms that touch credit access, education, and inclusive market participation.
The authors stress that institutional change takes time. The late nineteenth century saw a first significant change in growth trajectories, but the global frontier of development had moved on, and Brazil’s ascent remained relatively modest. This long-run history, they argue, should recalibrate expectations of what reforms can achieve in the near term, while reinforcing the case for policies that widen markets and reduce inequality as essential to unlocking productivity growth.
Narratives and Fault Lines
- Historical versus modern growth narratives collide: how much weight should history bear in today’s policy design?
- Coercive labour legacies and growth: can policy overcoming inequality translate into sustained productivity?
- Domestic market breadth as a multiplier for innovation: will inclusive credit, education and enterprise policies tilt the curve?
- Slavery’s economic shadow: how quickly do legacies fade, and what is the optimal pace of reform?
- Sectoral booms without transformation: is commodity wealth a blessing or a trap without structural change?
Hidden Risks and Early Warnings
- Slippage in domestic market depth could reappear if inequality remains high.
- Institutional reform tempo may lag behind the needs of a growing global commodity economy.
- Demographic and migration dynamics could recalibrate income convergence trajectories.
- Policy measures aimed at inclusion must avoid unintended fiscal or debt risks.
- Data revisions to long-run series could shift inferred timing of structural shifts.
- External shocks to commodity markets could test fragile domestic demand channels.
Possible Escalation Paths
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Long-run data revisions push the policy debate toward deeper market expansion and inclusion.
This would place emphasis on credit access, education and competition policy as levers for growth.
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A sharper quantification of slavery’s macro-damages could accelerate anti-poverty and land reform initiatives.
Observables would include changes in social expenditure, credit participation, and productivity measures.
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Global commodity cycles could sharpen focus on domestic market scale and export diversification.
Expect policy moves aimed at broadening consumer markets and industrial policy coordination.
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Institutional reform packaging may gain momentum if civil service capacity and tax collection improve.
Signals would include new tax reforms, bureaucratic simplification, and judiciary modernisation timelines.
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Policy experiments in regional credit and investment supports could gain traction.
Watch for pilot programmes, credit schemes, and infrastructure investments targeting small and medium enterprises.
Unanswered Questions To Watch
What is the current pace of Brazil’s domestic market deepening?
How much did slavery really depress demand in the 17th to 19th centuries?
Which reforms most effectively translate into productivity gains?
Will income convergence resume with faster modern growth?
How will inequality evolve alongside new growth incentives?
What are the macro risks of widening credit access without inflationary controls?
Will Brazil’s policy reforms outpace international commodity cycles?
How robust are long-run data series to archival revision?
What lessons transfer to other resource-rich economies?
What role will institutions play in shaping future growth?
When will structural transformation accelerate in the current century?
How might global networks interact with domestic reform timelines?
Social conflict salience drives belief polarization
An online experiment with a large US sample tests whether making social conflicts salient, without any new information, shifts beliefs.
In a pre-registered study with nearly 13 000 respondents, Gennaioli and colleagues find that merely highlighting a social conflict-economic or cultural-without presenting news increases disagreement on a range of issues by between 8 and 35 per cent. The mechanism proposed rests on latent group identities: once a conflict is salient, individuals interpret evidence through the lens of their in-group, widening gaps on both factual and normative issues.
The paper argues two effects: amplification and realignment. Amplification widens the ideological distance between those who identify with opposing groups on the foregrounded conflict, affecting attitudes even on issues they previously agreed upon. Realignment, by contrast, shifts individuals with mixed profiles across the progressive-conservative divide when a different conflict becomes salient. The authors emphasise that polarisation is strongest where groups already disagree, and that media narratives that stress identity can, in itself, drive broad shifts in beliefs.
The authors discuss the implications for political strategy and media governance. If simply making a conflict salient can polarise beliefs, then the incentives for politicians and outlets to curate identity content are strong. They suggest that interventions aimed at priming common identities or cross-cutting ties may be more effective than information provision or fact-checking in reducing polarisation. The findings are argued to be robust to partisanship and persist among independents, underscoring the role of social identities rather than partisan cues.
The piece situates its insights within broader debates about media ecosystems, including the role of cable news and social media algorithms in promoting culture-war content. It also highlights how foreign and domestic shocks might reshape identity-based divisions, with potential spillovers into policy preferences and electoral behaviour. The authors call for more ambitious experiments and policy tests to assess interventions that can de-escalate identity-driven polarisation.
The broader takeaway is that the architecture of information environments matters as much as the information itself. If identity salience is a core engine of disagreement, then responsible policy may involve designing questions, prompts, and shared challenges that foster cross-cutting identities. The authors propose a research agenda that tests practical interventions designed to reduce salience-driven division, from national projects to externally framed challenges that unify diverse groups.
Narratives and Fault Lines
- Identity as a driving force behind political disagreement, independent of new information.
- The potential of cross-cutting identities to dampen rather than exacerbate divisions.
- Media incentives and algorithms as amplifiers of identity-based polarisation.
- The practical challenge of designing interventions that are scalable and non-manipulative.
- The limitations of fact-checking in the face of salience-driven misalignment.
Hidden Risks and Early Warnings
- Salience-driven polarisation could erode social trust and public consensus on policy.
- Interventions may backfire if mis-targeted or mis-timed around electoral cycles.
- Media ecosystems might tighten identity cues to sustain engagement, paradoxically increasing division.
- Policy responses could be misapplied if they focus on information rather than identity dynamics.
- The role of social media in shaping latent group memberships remains hard to control.
Possible Escalation Paths
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Cross-cutting identity projects gain political traction.
Trigger: shifts in messaging around shared national challenges and joint aims; observable in public discourse and polling.
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Polarisation intensifies as economic shocks interact with cultural divides.
Trigger: rising belief gaps on core issues; observable via surveys and social media sentiment metrics.
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Policy experiments to depolarise identify gains momentum.
Trigger: pilots in education, civic engagement, and cross-partisan initiatives; observable in programme rollouts and evaluations.
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Media platforms adjust content strategies in response to research findings.
Trigger: experiments with prompt structures and inter-media collaboration; observable in engagement metrics and editorial policies.
Thematic investing dominates markets
Portfolio construction increasingly favours thematic exposures over geography or sector, with resilience and AI-driven themes taking centre stage.
Jamie Mills OBrien of Aberdeen argues that themes, not broad sectors or geographies, are driving market leadership. He cites enduring focus on AI, energy security, reshoring and defence spending as core themes shaping performance, while geopolitical frictions such as the Iran conflict and the Strait of Hormuz elevate concerns about supply chains and domestic capability. The upshot for investors is a shift toward thematic exposures designed to capture structural shifts in technology, policy, and geopolitics.
This thematic tilt reportedly reorders leadership across markets as investors seek exposure to durable trends rather than cyclic beta. The implication is a more nuanced approach to portfolio design, with attention to company-level catalysts within thematic baskets rather than blanket sector bets. As AI adoption, manufacturing localisation and national resilience gain policy priority, the winners and losers within AI, cybersecurity, industrials and energy-tech may diverge more sharply from traditional benchmarks.
The commentary also highlights how evolving supply-chain dynamics, including reshoring efforts and heightened defence expenditure, could re-wire earnings trajectories for firms with exposure to AI, automation, semiconductors, and advanced materials. Investors are advised to monitor earnings trends in firms positioned for reshoring and for those benefiting from rising AI-related demand, alongside any shifts in winners and losers as the technology and policy environments evolve.
On the cautionary side, the shift toward thematic exposures raises questions about concentration risk, the reliability of thematic leadership, and the potential for regime changes that erode the assumed long-run winners. The call is for ongoing scrutiny of earnings momentum and management discipline, as well as for close attention to policy developments that may reweight which themes are most actionable in the near term.
Narratives and Fault Lines
- The rise of thematic investing challenges traditional benchmarks and risk metrics.
- Thematic leadership depends on durable macro and policy support.
- AI, reshoring and energy security are redefining winners and losers.
- Market rotations may amplify concentration risk in popular themes.
- Policy and earnings signals must align to sustain thematic momentum.
Hidden Risks and Early Warnings
- Thematic bets can underperform in shifting macro cycles or policy reversals.
- Concentration risk may increase if a few themes dominate indices or funds.
- Valuations for AI-related beneficiaries could compress in a downturn.
- Cross-border supply-chain disruptions may alter theme relevance quickly.
- Thematic funds may have opaque or concentrated exposure to a small set of companies.
Possible Escalation Paths
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Thematic leadership concentrates as AI and reshoring push earnings ahead.
Trigger: stronger results from AI-enabled firms and resilience plays; observable in quarterly reports.
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Defence and energy-security themes gain policy backing and funding.
Trigger: increased public spending and revised procurement cycles; observable in government budgets.
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Value-chain resilience prompts new corporate strategies.
Trigger: firms announce localisation investments and supplier-diversification plans; observable in capex announcements.
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Thematic ETFs and funds reconstitute more frequently to reflect evolving narratives.
Trigger: rebalancing cycles and new product launches; observable in fund disclosures.
Lithium supply tightens; deficits possible by 2035
Lithium market tightens as EV demand softens, with Canaccord warning of a possible deficit as early as this year and extending to 2035.
Canaccord argues that lithium supply has tightened considerably even as EV demand softens. Prices have fallen by around 80 per cent in the year to mid-2025, prompting miners to curtail or defer capex and even suspending production in some cases. Zimbabwe’s export ban on raw lithium adds an extra layer of supply-side risk, while China’s overcapacity-driven cuts further complicate the supply picture. The net effect is a potential supply deficit in the mid-2030s unless investment accelerates.
Observers emphasise the geographic concentration of lithium resources in the Lithium Triangle and the limits this imposes on bringing new supply online quickly. The prospect of a deficit could re-emerge as EV penetration and energy storage scale, while policy shifts and refining capacity in producer countries influence the timing and cost of new supply. The narrative remains sensitive to investment climate, project approval timelines, and the pace of demand normalization.
Policy and market watchers will be watching for new mine approvals, capex plans, and price signals that could push project timelines forward. If new supply comes online faster than anticipated, the deficit risk could ease; if not, prices could rebound as demand concentrates on a smaller set of sources. The geopolitical frictions around supply chains, particularly in Africa and South America, will also colour expectations for pricing and project viability.
Narratives and Fault Lines
- The demand-supply balance for lithium hinges on EV uptake and storage needs.
- Concentrated resources raise risk of supply shocks and price volatility.
- Policy actions in Zimbabwe and other producers will influence global flow.
- Capex cycles and project approvals determine timing of new supply.
Hidden Risks and Early Warnings
- Delays in mine development could push deficits forward.
- Price volatility could re-emerge if demand surprises to the upside.
- Refining and processing capacity constraints may bottleneck usable supply.
- Exchange-rate movements could affect project economics.
- Environmental and social licence issues may slow new mines.
Possible Escalation Paths
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New lithium mines come online faster than anticipated.
Trigger: faster regulatory approvals and capital expenditure; observable in mine commissioning and production data.
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Demand surprises to the upside as EV adoption accelerates.
Trigger: stronger EV sales data and battery storage buildouts; observable in price and usage metrics.
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Policy shifts in key lithium producers alter export dynamics.
Trigger: export taxes or bans adjust global supply; observable in trade data.
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Prices rebound on supply constraints.
Trigger: a sustained price rally and capex resumption; observable in miner guidance and project development plans.
Biofuels not the answer to shipping decarbonisation
Biofuels are unlikely to be the final answer for decarbonising shipping, with ILUC risks and land-use impacts drawing scrutiny.
The IMO Net-Zero Framework targets GHG intensity reductions, but the reality is that many biofuels rely on food crops, which can drive indirect land use change and deforestation. ICCT estimates point to potential biofuel demand of 140 billion litres by 2035, a scale that could induce significant competition for feedstocks and elevate vegetable oil prices. Green methanol and ammonia are emerging as longer-term alternatives with lower land-use impacts and potential for compatibility with existing or near-term propulsion systems.
Policy developments, particularly in the EU and global bodies, are intensifying scrutiny of Indirect Land Use Change (ILUC) emissions and the sustainability attributes of biofuels. If bodies like the IMO align with stricter ILUC standards, many high-ILUC biofuels could fail to meet targets, reducing their role in decarbonisation. In contrast, green methanol and ammonia, produced from renewables and captured carbon, offer a path with fewer land-use conflicts, though with higher current costs and scale challenges.
The shipping industry faces a broader imperative to balance decarbonisation with food security and land-use considerations. If the uptake of food-crop based biofuels is constrained, the sector may accelerate the adoption of alternative fuels and propulsion systems. The regulatory environment will continue to shape investment decisions for shipowners, refiners and port operators as the industry seeks scalable, low-emission solutions that do not trigger unintended environmental or social costs.
Narratives and Fault Lines
- Biofuels versus non-land-use alternatives: which path delivers timely decarbonisation?
- Indirect land-use change and deforestation risks shape policy direction.
- The role of green methanol and ammonia as long-term options versus current technologies.
- Regulatory alignment on ILUC standards could reframe biofuel economics.
- The economics of shipping decarbonisation depend on fuel mix, not only on technology.
Europe energy crisis prompts policy shifts toward renewables
EU measures aim to shield Europeans from fossil fuel shocks and accelerate a homegrown energy transition.
In response to the fossil energy crisis triggered by the Iran conflict and Hormuz disruptions, the European Commission proposes measures to protect households and industries while accelerating renewable capacity. A Fuel Observatory will track production, imports, exports, and stock levels to identify shortages and coordinate emergency responses. The plan also includes measures to relieve price pressures on jet fuel and diesel and proposes a legislative push on network charges and taxation to favour renewable generation.
The Commission frames the crisis as a turning point toward energy security and decarbonisation. An electrification action plan targets faster deployment across industry, transport and buildings, with a long-term emphasis on reducing dependence on fossil fuels. The immediate measures focus on ensuring refinery capacity, stabilising supply chains, and mitigating consumer impact, while longer-term strategies prioritise homegrown energy and storage capacity.
Observers note that Europe’s challenge is to translate urgency into durable transformation. The plan acknowledges that opening lines for private investment and streamlining permitting processes will be essential. The European energy strategy thus pivots toward a more integrated and secure energy system, with renewables, storage, and grid interconnections at the core of policy reforms and investment incentives.
Narratives and Fault Lines
- Short-term relief versus long-run transition: what mix best reduces vulnerability?
- Regulation versus speed: how far should permitting be streamlined to accelerate deployment?
- Domestic energy security versus global trade dynamics.
- Financing and governance: how to mobilise private capital for rapid electrification?
Uzbek uranium giant begins production at new mine
Uzbekistan’s state-owned Navoiyuran has commenced commercial sales from its Qizilkok project in the Navoi region, marking a milestone in the country’s uranium ambitions.
Qizilkok sits in the eastern part of Uzbekistan’s central mining region, and the start of commercial production signals a deliberate push to diversify energy and feedstock supply in a geopolitically sensitive market. The development is expected to influence regional uranium supply dynamics and pricing as ramp-up progresses.
Observers will be watching official production volumes and ramp-up updates in the coming weeks. The move could affect global uranium flows, potentially shifting pricing and supplier dynamics in a market sensitive to geopolitical developments and new supply sources. The milestone underscores Uzbekistan’s growing role as a player in the global uranium landscape and its influence on regional energy strategy.
Narratives and Fault Lines
- National energy strategy and resource nationalism versus global supply chains.
- The pace of production ramp-up and its impact on uranium pricing.
- Regional influence and the politics of energy security.
Hidden Risks and Early Warnings
- Ramp-up delays or technical challenges could temper expectations.
- Pricing dynamics may respond to new supply in conjunction with policy shifts.
- Regional geopolitics could influence international buyers and contracts.
Possible Escalation Paths
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Uzbek supply ramp accelerates; pricing adjusts.
Trigger: higher-than-expected volumes; observable in quarterly outputs and contracts.
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Global uranium markets recalibrate with new supplier dynamics.
Trigger: shifting spot and term prices; observable in exchange and contract activity.
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Regional policy adjustments affect demand for Uzbek uranium.
Trigger: changes in export controls or bilateral agreements; observable in trade data.
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Demand drivers adjust with nuclear energy policy shifts.
Trigger: changes in public or regulatory stance; observable in procurement plans.
Unanswered Questions To Watch
Will Qizilkok’s ramp meet projected timelines?
How will Uzbek volumes affect global uranium prices?
Are buyers diversifying away from traditional suppliers?
What role will regulators play in export controls?
Will new contracts reflect the ramp-up pace?
How will uranium demand patterns evolve with nuclear policy?
What infrastructure accompanies new uranium flows?
Can Uzbekistan sustain sustained output growth?
This briefing is published live on the Newsdesk hub at /newsdesk_commodities on the lab host.