Seasons Change

President Obama’s visit to Havana is not the only novelty in Latin America these days. The winds of change blow in many directions at the same time. Different regimes show increasing signs of wear and tear. Finances fall apart and government corruption surfaces. Economics finally prevail over ideologies. The end of a long widespread political cycle looks to be imminent.

Argentina is one classic example. Gone into default in the early 2000s, it has seen circumstances only aggravate since. The country became a sovereign debt record holder and was eventually considered an international financial outcast. Seemingly endless trouble tormented the current 21st economy in the world.

Then the election of opposition’s liberal candidate, former Buenos Aires mayor Maurício Macri, started producing results even before any real action could be taken. Stock exchange went up 40% and yields on government bonds fell sharply. Optimism instantly took over despite the huge challenges lying ahead of the new president.

The market which had grown used to the manipulation of foreign exchange and inflation rates, nationalization of private assets and the like, now clearly welcomes the ascension of a business friendly leader. Foreign investors evidently favor Macri’s rise to power and the envisaged devaluation of local currency. Substantial changes are not expected any time sooner than next year. But then if successful Argentina is to grow some sound 5% by 2019.

Brazil is three times as large, five times as populated and four times as rich as Argentina. Nevertheless it has equally endured severe public mismanagement. Odds of the current Brazilian administration not going full term, by means of an eventual impeachment or abrogation, are enough to make experts foresee a speedy recovery thereon.

Strikingly no less than 235,000 companies were established in the State of São Paulo even in the midst of crisis in 2015. Segments like cellulose, pharmaceuticals and agribusiness keep performing well nationwide. Yet Brazil remains hungry for infrastructure – perhaps up to 600 billion dollars worth of investments, another display of great potential.

These are hard times for sure, but they may be the necessary rupture with past mistakes, introducing a new era of rationalism, moderation and consistency. Many reforms and amendments remain to be made. They will cost and they will take time, but there is indeed a future to look for. For some eager observers, that future has already begun.

When Worse Means Better

As the political showdown in Brazil approaches its climax on Thursday and change at government becomes ever more likely, the stock exchange rose 6.6%, the highest climb on a single day since 2009, while the currency appreciated by 2.55%. Those intriguing moves are added signs that the country may have a reasonably swift escape route from the present crisis once the political dilemma is settled. This is an ongoing story.

A Call from the Streets

What happened on Sunday March 13 in Brazil was unprecedented and largely underestimated. In São Paulo a stretch of two kilometers on Paulista Avenue was absolutely packed with people. So were several of its crossing and parallel roads. Some came by subway. Endless lines of people climbed the hilly ways leading to Paulista at the city’s summit. An astonishing number of parked cars jammed the streets for dozens of blocks from the demonstration area.

The Guardian newspaper correspondent, for instance, grossly erred in linking the movement to a specific race or social class. That was just not true. The crowds instead consisted of a myriad of families with children, youngsters, elderly, men and women, a legitimate representation of the Brazilian society’s spectrum. It is also notable that, despite the huge agglomerations that formed, the acts were ultimately void of conflicts or incidents.

Another mistake is to interpret the present situation as a clash between left and right wings. To start with the current regime is anything but socialist. Doubtful short-lived welfare policies only served the creation of hordes of captive voters for an indefinite maintenance in power. Disruption of fiscal soundness and corrosion of the country’s once most favorable finances would subsequently shatter the pretended prosperity.

Worse yet is the now substantiated creation of a scheme to raise party funds by means of fraud, corruption and extortion. At some point some officials finally succumbed to petty bourgeois desires and used the same methods for self benefit. Thanks to some lower federal courts, prosecutors and police issues like those keep being investigated and brought to light.

Back at capital city the Executive remains in complete standstill, plagued by political inability and administrative incompetence, while still flirting with populist would-be solutions that could only exacerbate the present economic distress.

What the country is going through is surely not an ideological dispute. This government failed to improve education, the one proven means of effective social ascension. It equally failed to provide good public services, to seize the favorable circumstances of the 2000s and invest in infrastructure which would have spared the country from today’s worries. That is why people demonstrate.

In the meantime Justice gets slowly, gradually served and that is enough reason for celebration. So is freedom of speech. Both those elements shall eventually contribute to the rescuing of the country from turmoil.

A tip for restless business minds

As we tirelessly evoke the need to broaden one’s scope in the quest for alternative niches in times of hardship, some piece of news stands out. The International Atomic Energy Agency (IAEA) has recently certified Iran’s compliance to its committed abstention from developing nuclear weapons by which virtue US$ 30 out of 100 billion in Iranian assets will very soon be unfrozen.

Sanctions to be lifted include the EU embargo on imports of Iranian oil. The Persian state promptly responded with the possible immediate increase of half a million barrels per day in its export capability. Just as important is the necessary update in infrastructure that shall generate contracts of so many more billions in the years to come. Enough said for a sharp audience.

Heads and Tails

Brazil’s wounds have been largely exposed over the past couple of years. The nation went straight from the daydream of the BRICS heydays into the vexing realization of its having played the role of the cicada in Aesop’s fable. Once acclaimed social programs ultimately crumbled to the ground by means of demagogy, incompetence and theft and so did the economy as a whole.

Yet not all is reason for shame. While Brazil’s emergence may have been delayed for years, impunity gradually becomes a thing of the past. In other terms, venom is the very raw material of its antidote. As evidence of illicit behavior increases the odds of the government’s constitutional stand down, an otherwise downward market is instantly lifted up, with a surge in both the stock exchange and the currency.

If on one hand crisis introduces investment bargains and new opportunities in the territory, it also promotes the awakening of local businesses which have been long neglecting the global market in favor of a frantic domestic demand. After all the Real was over valuated, compromising the competitiveness of Brazilian exports. Now the tables are turned and making up for lost ground is neither easy nor inexpensive.

Years of policies for economic growth solely anchored on consumption have sadly impaired some manufacturing segments which will now need time to recover. Still there is so much more to the Brazilian production range. Agriculture for one has been breaking successive records with practically unlimited space for growth. Cattle-raising is number one in the world. Forestry, mining, water and energy are of equally monumental potential. Clean and creative industries as well as services, just to name a few, are other niches of great interest.

Over time the obsolete concept of foreign trade gave way to international business. Exports were replaced by partnerships. Nowadays assessing new markets requires more than ever knowledge and planning, developing durable relationships, understanding the culture and reaching out to one’s counterpart based in the principle of mutual benefit.

Acting globally is no spot business. Instead it requires patience and consistency to get due rewards. Some players will need to update strategies previously customary. Newcomers should in turn refrain from the inclination to immediacy. Even in the aftermath of a disaster there is much that can be achieved.

There will always be saturated markets in search of new challenges just as friendly regions that will welcome dependable associates. Let’s roll our sleeves up then.

Opening Skies

Legislation has just been passed increasing the limit of overseas stake in local airlines from 20 to 49%. The market in Brazil – currently almost entirely dominated by four major airlines –  ranks third in the world, only behind USA and China. It has tripled in the past ten years, having reached 111 million passengers in 2015. The Brazilian Airlines Association further estimates that such figure may nearly double until 2022.

The measure which has been discussed for a long time before being finally enacted comes at a time of temporary market retraction and extreme currency undervaluation. Those circumstances are all the more indicative of yet another investment opportunity for global players. Considering Brazil’s continent-size territory, the potential for growth in domestic air transportation is absolutely huge. Airports for their part, also an area where massive resources are needed, have been made available for concessions and PPPs a few years ago.