Shifting Winds

No doubt there is much noise around as there has been for over two years by now. Trauma has been deep and extensive. A President's impeachment, enduring massive investigations over so many years of corrupt public-private relationship. Prosecution and jailing of the big and powerful. More than two years in recession after a long stretch of irresponsible, often criminal public spending.

Brazil is paying dearly for its belief in hollow promises. The new administration, merely five months fully in office, faces the arguably sum of all evils, both economic and political. Every move has to be made with extreme caution before the eyes of the understandably impatient nation and marketplace.
All throughout the crisis prophecies of doom have never materialized. Despite existing sorrow and distrust, risk of an actual convulsion has never been any more than malicious speculation. Institutions hold strong as the country slowly starts to lick its wounds. Imperfect as they may forever be, the pillars of democracy prevail.

After a long free fall and having hit rock bottom, there is finally a hint of good news. Unemployment is finally slowing down, inflation plummets and interest rates engage into a steep descent. Fire begins to die down out of oxygen deprivation. Some hope at last.

Make no mistake. The administration has a gargantuan task in the months ahead. Crucial reforms in the budgetary norms, in social security, labor laws, tax and perhaps more will be needed to ensure the comeback to a sufficiently healthy economy. Marginal growth in 2017, then timid progress in the following years until steadiness can settle in again.

Oddly enough even amidst chaos some segments are reported not merely to have survived the worst, but to be taking steps ahead. In the education industry, agribusiness and as far as in some niches of retailing positive figures and projected investments have been announced lately. The immense potential remains, added by a huge delay to be made up for. Food and plenty of other resources, industries and infrastructure to be updated, just to name a very few.

When senseless voices against global cooperation are being heard, ill-fated as they may be, yet another Brazilian characteristic stands out; the masses to feed, to educate, to house, to transport, to employ. If the trend for isolationism can only point to added stagnation, that backlog appears all the timelier for those aiming at a good challenge with great possible rewards.

Yes, it is indeed noisy around here. And yet, where is it not these days? Europe, the US? Civilization never seems to learn from past mistakes, so the same lessons have to be repeated over and over again. Thankfully some gain ends being made after each setback. Clairvoyance in turn has never been proven wrong. In the middle of all smoke and dusk, Brazil may well remain a wise bet after all.

A Kick-Start

As anticipated the constitutional amendment limiting Brazilian member state expenditure for the next 20 years was passed by the Chamber of Deputies last night. The 366 to 111 margin of approval is a significant victory for the Michel Temer cabinet. It further enhances confidence in the government’s ability to implement needed legislation for fiscal adjustment.

Economic recovery and the country’s credibility in the eyes of investors are the major beneficiaries of such important development. Next in line should be the delicate yet equally crucial issue of social security reform. One thing is for sure: in Brazil the ball is finally rolling again.

(photo credit: diariodonordeste.verdesmares.com.br)

A Long Climb Back Up

As these lines are written the government of Brazil appears to be taking gradual but positive steps towards the passing of critical legislation at Congress. After all, limiting member State spending will be crucial for restoration of fiscal equilibrium, one of a number of decisive measures to help rescuing the country’s credibility and its attractiveness to investors.

As political leaders negotiate the enactment of remedies unlikely to be too popular, yet nonetheless essential at this stage, experts seem all to point to infrastructure as the leading opportunity for investments. Quoted by Bruna Lencioni of the AméricaEconomia magazine, Eurasia Brasil’s Christopher Gardner anticipates up to US$ 269 billion in infrastructural projects open to PPPs for oil & gas, electricity, telecommunications, transportation, roads & railroads, ports & airports, sanitation, urban mobility and others.

For Zeina Latif of XP Investimentos the backlog is such that Brazil is currently spending less than 2% of its GDP in the maintenance of existing infrastructure alone – against an estimated minimum required of 3% and of the 5% being employed by neighbors Chile and Colombia. The consequent structural deterioration only adds up to the huge demand for all kinds of works in several domains.

Latif maintains that once economic order is reinstated people are bound to regain confidence in the system and at that point raising consumption will become another upward driving factor. She goes on to say that, should the government succeed in its correctional moves, by 2018 the scenario will push the next president in the direction of a more liberal agenda. “The potential is enormous!”, she concludes.

Trouble is far from over though. Unemployment remains excessive and the wheel of change has barely started moving. It will take time for the chain effect to salvage ordinary Brazilians from the deepest of recessions. Until it happens such words from specialists remain eloquent and useful to the cunning listener.

Landslide

Yesterday entrepreneur João Doria claimed an unprecedented first round win in the elections for São Paulo City Mayor. His victory at Brazil’s largest and richest city came along with a nationwide collapse of the PT Worker’s Party following a long series of corruption scandals during its 13 years in power now exposed.

Whilst those political and legal circumstances set new parameters of transparency and governance, the shift to a liberal business-friendly mentality at the São Paulo City Hall, for instance, also comes with the promise of new opportunities for international players.

The mayor-elect, who had based his municipal campaign on State downsizing and meritocracy in the administration, now anticipates privatization of public assets like the Anhembi exhibition complex and the Interlagos race circuit among others. Doria also hints the elaboration of PPPs in different areas, yet another source of potential interest to investors.

Naturally the effectiveness of the new administration’s policies remains to be seen. The city is huge and complex, so some degree of resistance even to common sense initiatives is not unlikely to materialize. If however the future mayor succeeds in using the force of a colossal 53% straight electoral victory for audacious steps, São Paulo may prove to be the ultimate laboratory for similar well-fated moves across the country in the next few years.

The Olympic Factor

The weeks of August drag on as Brazilians stand by the approaching epilogue of a long political crisis that is at the core of an unthinkable economic imbalance and the consequent delay of a long awaited national emergence.

With the slow passing of time the apparent result becomes ever clearer and the provisional government is set to become definite by the end of this month. That plain change in status should finally legitimize the profound reforms and sour short-term measures now required for the country’s recovery.

The market is prompt to react. After almost two years of exclusively dark prospects at last the prospects begin to improve. Inflation is somewhat under control and the currency holds strong – too strong perhaps for local exporters’ taste, actually. If only a real tightening of fiscal policies is indeed implemented, foreign investments to the country may be upgraded from speculative to lengthier productive ones. The economy will then have become more solid in a country able focus on catching up with all the wasted time.

It is under those circumstances that the Olympic Games come to the land with its analgesic properties. Two years after failing to enjoy the full benefits from hosting the World Cup, distress seems to have ripened Brazil’s attitude to a certain extent. Its perception is made more realistic and responsible than before.

Brazil came to host the two global events by virtue of the fascination its former administration once exerted over important circles worldwide. That means the very regime that was later to fall in disgrace due to its colossally corrupt methods and outspread incompetence in office.

Falling short from having an adequate lasting legacy can also be explained by the combination of those two characteristics. So as August draw closer, Brazilians were no longer lethargic as in the days of the early alarms of crisis in 2014. Instead they braced in anticipation of a possible organizational disaster.

But the evening of the opening ceremony had a welcome surprise in stock. Talent and creativity surpassed luxury and high tech in an occasion of poignant beauty and meaningfulness. National pride would thus live to see another day.

No, the continuing event has not been free from flaws since, but neither has it been the shameful catastrophe once imagined. The IOC is equally to blame for things that did not go as impeccably as some might have called for at the Olympic Village. No excuse for the city’s shortcomings, such as lacking urban infrastructure, endemic security issues or water pollution. Much less for the local audience which at times may have breached the boundaries of courtesy and fair play.

In the end Rio de Janeiro is a truly wonderful place claiming for good leadership to overcome whatever jeopardizes its path of well-deserved glory. More could have been done to its lasting benefit in relation to the Games. Yet, as the say goes, one should not cry over spilt milk. One had better look ahead and make good use of past mistakes.

Now what really seems to save the day is the sheer diversity and tolerance, unmistakable attributes of the Brazilian people. That alone is quite an accomplishment, setting an important example in this troubled world of hours. Leave the rest to hopefully conscientious opinion makers and to education for the new generations to sort out.

Countdown

After seemingly endless months of somber economic reviews and projections, the tone finally starts to give signs of change for the better. After all August is set to bring more than just the Rio Olympic Games, incidentally an event which organization and legacy are largely viewed with skepticism inside Brazil.

What is really decisive this coming August is the conclusion of removed President Rousseff’s ongoing impeachment process at the National Congress. Although technically speaking her return cannot yet be deemed impossible, hardly anyone would bet on it at this point. For one thing her disastrous policies have been determinant to an otherwise avoidable crisis. Above all, an extremely unlikely reinstatement would not give back her administration’s long lost political governability.

In anticipation of such foreseen outcome the market has been appreciating the Brazilian currency, while confidence in interim President Temer’s economic team begins to slow down – if not halt – the country’s freefall first initiated with the revelation of fraudulent data that had allowed Rousseff a marginal reelection almost two years ago.

With the loss of investment grade duly absorbed and put behind, there is increasing reason to believe Brazil’s luck already started to shift. The Brazilian real has regained 9% of its value in the past three months – out of 19% since January. In turn the stock exchange went up 10% in the last days and no less than 26% in the current year, indicating that the investors’ faith may be actually coming back.

Just as even at its worst moments the crisis managed to induce unique business opportunities, the present hints of improvement may shed new light on segments of interest, such as Brazil’s mighty agriculture, concessions and privatizations, delayed infrastructure or the overconcentrated banking segment, just to name a few. Yet again all that remains for sharp eyes and minds to grasp.

Vital Signs

Brazil will have more to endure until the end of its economic purgatory. The new federal administration cannot be deemed unequivocal prior to mid-August, when the impeachment of the politically agonizing and suspended President is set to be decided upon without further appeal. But the latter and her allies refuse to let go without a fight, their final desperate bet being to attempt toppling the new government through its implication in the same corruption scandals by which means they themselves have fallen in the first place.

For a country in need of urgent reforms and solid support to tough emergency measures, any instability – purposefully induced or not – is bound to retard any soothing effects. But even in such a scenario intended change of direction alone produces encouraging consequences which may range from steady financial indexes to industrial performance. That is exactly what transpired in the local media this week. 

According to the O Estado de São Paulo newspaper the country’s industrial revenue in the first four months amounted US$ 2.39 billion, an unexpected increase of almost 2% from last year. In the past two years automakers hired 1,230 workers just to cope with increasing export demand. In the past few weeks alone Brazil’s top companies combined managed to amass close to US$ 10 billion through the offer of bonds in the international marketplace.

No time for predictions yet, but that might mean the worst is past. Just perhaps.

Equals Attract

Consul General Paulo Lourenço opens the seminar

The Consulate General of Portugal in São Paulo undertakes the "Empreenda - Innovation & Culture" seminar as part of the "Experimenta Portugal '16" multidisciplinary event. The initiative coincides with the National Day of Portugal and very appropriately suggests cultural similarities as a facilitating element of bilateral cooperation. Well done once again, Consul General Paulo Lourenço!

The mayor of Porto and the president of SEBRAE-Brasil are mediated by Lidia Goldenstein

Tables Turned

Brazil feels like having finally waken up from a long enduring nightmare. Enough with the truth-twisting official speeches, just as delirious as the theory of a developing coup d’état raised by an ailing regime in despair.

A country in trance had marginally reelected a president based on lies and fraud that soon started coming afloat, leading to an administrative standstill that magnified an economic crisis induced by her very erratic policies. The rule of law and the voice from the streets have ultimately triggered her downfall. That is the plain truth.

The first appointments of the recent interim government seem to have mercifully reinstated some logic to the scenario. Those now nominated may not be flawless, but they do have a public service record to their favor. The new cabinet points to a more business friendly attitude and that is good enough for a country in need to get back on track.

There will surely be no easy path, but the general mood has already shifted overnight. It is time for a little goodwill and patience, for sour measures are just at the corner for Brazilian taxpayers. Yet, if remedy is inevitable, let's start the treatment right away and make it the least painful possible.

For those who might think this is a biased account from inside out, here is an invitation to further look into it for yourselves. The giant lives on and better times will inevitably come. For some of the ultimate acute vision, the glass is definitely half full.

Growing Up Hurts

Brazilians ask themselves why their long-awaited path to grandness had to be abruptly interrupted by a tsunami of political scandals and a nightmarish economic recession. After all, for over a decade they had grown used to being so close to the top five. How will they now cope with their deepening predicament?

Well, no one could have predicted the extent of damage to the economy made by 14 years of populism. Some may panic while part of the press tends to overestimate trouble. Plainly, the country is not falling apart just yet. Much less is there any possibility of serious social tension or conflict. With only 9% support to the government, the president’s departure instead is favored by a landslide majority.

In a nutshell Rousseff, Lula and the PT worker’s party refuse to let go of power, even though striking legal evidence against them adds up every day. Their destiny now hangs in the balance at different simultaneous fronts – all of them constitutional – as the ailing leaders vociferate their obstinacy with increasing despair and incoherence.

For now, with the establishment still in their hands, they have opted for the ludicrous strategy of trying to win last minute votes from opportunistic congressmen, in the aim to escape impeachment. However their ability to influence either Legislative or Judiciary crumbles at the same rate as public exposure of their moral and judicial decay increases.

With the 1964-1985 totalitarian interim all but forgotten, Brazil remains very sensitive to any hint of institutional breach. Hence there is no chance whatsoever that rules are broken in the process of delivering justice to those accountable and lawfully overthrowing the regime. It is only reasonable that so much zeal demands a painstaking process currently in motion.

Developments that point at an abbreviation of the presidential mandate invariably benefit economic indexes. While inflation slowly loses momentum, export segments finally reemerge. Although employment and consumption remain on the downside, experts speaking on the niche of luxury items are warning hasted quitters of their possible regret by the time the storm dies down. Other economists will stress on the instant positive effect of eventual political change. We are sure to follow it all up.