The New Development Bank: The start of a new economic consensus?

July 21, 2014

Erica Kliment – Brazil Institute, 7/21/2014

2014 BRICS Summit in Brazil

The leaders at the 2014 BRICS Summit in Brazil

Is the rest of the world ready for a new order upheld by developing nations? In 2010, when former President Luiz Inácio Lula da Silva invited then-President Mahmoud Ahmadinejad of Iran to the Itamaraty Palace in Brazil, the meeting was highly criticized by the Obama administration. Lula, who had seemed to enjoy international acclaim when dealing with regional politics, was then chastised when he had reached too far out of the western hemisphere. His response was that he was merely attempting to better situate Brazil on the global stage, yet could the criticism have come from the fact that larger power players did not believe Brazil was ready to graduate from the role of regional babysitter?

Four years later, with an unexpectedly successful World Cup under Brazil’s belt and planning on another fruitful mega-event in just two years, the Summer Olympics in Rio de Janeiro, the developed world seems slightly more willing to accept developing nations’ role in the international sphere. Individually, these nations’ global clout is diminishing with slowing economic growth rates, yet collectively, they have the potential to create a new platform upon which they and future developing nations can flourish. Towards the close of the most recent BRICS Summit, five of those countries reached an agreement that, depending on its success, could bring developing nations one step closer to the position they desire – the forefront of international affairs.

During the 2014 BRICS Summit in Fortaleza, the leaders of Brazil, Russia, India, China, and South Africa jointly created the New Development Bank, a multinational fund of $150 billion in capital to provide stability and finance infrastructure for the five developing nations involved in the negotiations as well as future emerging markets. It will be headquartered in Shanghai with its first president from India, on a five-year rotating schedule, and with Brazil taking chairmanship of the board. Read the rest of this entry »

Brazil police occupy drug-infested Rio slum

August 5, 2013

Associated Foreign Press, 08/05/2013

Some 180 elite Brazilian police officers deployed into a drug-infested slum complex in northern Rio on Monday in order to prepare the way for a permanent presence there.

“We are here to stay,” Rio state governor Sergio Cabral told the daily O Dia.

The Mangueirinha complex, located in the Baixada Fluminense district, is home to 25,000 people and comprises the Corte 8, Sapo, Santuario and Mangueirinha favelas.

Read more…

In the Spotlight: Are Brazil’s world class events a catalyst for growth or misallocated public spending?

July 19, 2013

Carolina Cardenas – Brazil Institute, 07/19/2013


Ever since Brazil achieved macroeconomic stability with the implementation of the Plano Real in 1994, the country has come a long way, surpassing the UK to become the 6th largest economy in 2012. Sound economic policy coupled with a recent commodities boom allowed for decreasing poverty levels, rising purchasing power, and an addition of forty million Brazilians to the country’s middle class.  Along with economic growth has come a strong desire for international recognition. As one of the four original “emerging markets,” coined BRICs, Brazil has sought to expand its presence in international organizations. This can be seen in the country’s ongoing request for a permanent seat on the United Nations Security Council and the appointment of Roberto Azevedo as director general of the World Trade Organization in 2013.  This global growing emergence has also translated into a growing tide of hosting world class events.  In an attempt to further elevate Brazil’s world status, the country will be hosting the 2014 FIFA World Cup and the 2016 Olympic Games.

In addition to international expansion, there is a second trend that has emerged as a result of Brazil’s economic growth. Widespread protests that have taken over the country’s streets since mid-June are representative of a Brazilian society that is demanding more from its government. Brazil’s expanding middle class has become more educated and further exposed to examples of transparency and ‘democracy with equity” worldwide, setting this benchmark for itself. Citizens are demanding better public services, infrastructure, education, health care and a change in the framework of Brazil’s democratic system. The government’s decision to host the World Cup followed by the summer Olympics has propelled Brazilian civil society to initiate a necessary debate on public spending priorities.

There are two phenomena taking place concurrently: Brazil’s desire to emerge globally and the citizens’ desire for better public services domestically. Although many consider these to be conflicting, hosting mega events at a time of pressing social need presents an incredible opportunity for boosting development. If used positively, the World Cup and Olympic Games could accelerate investment in infrastructure and improve services to meet international standards. However, perceptions of protesters at the moment are that, “the quality of urban life worsened as precedence was given to internationally prestigious events that ended up absorbing the investments that were supposed to improve transparency, education, and public services in general.”

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Brazil at historic low No.22 in FIFA ranking ahead of Confed Cup; US rises 1 spot to No.28

June 7, 2013

Associated Press – The Washington Post, 06/06/2013

Brazil has dropped to a historic low of No. 22 in the FIFA rankings a year out from hosting the World Cup, and the United States has moved up one spot to No. 28.

Brazil fell three places this month as it continues to play only exhibition matches. They score less than competitive matches in FIFA’s calculations, which have ranked teams since 1993 across a four-year results cycle.

The South American country can make up ground when it hosts the eight-nation Confederations Cup warm-up event this month.

Read more…

In the Spotlight: Brazil’s cocaine epidemic

February 25, 2013

Compiled by Christopher Martin – Brazil Institute, 02/25/2013

Photo credit: Lunae Parracho, Reuters

Photo credit: Lunae Parracho, Reuters

In recent years, Brazil has enjoyed economic success, rising purchasing power, a growing economy, and decreasing poverty levels, which have turned it into a more attractive market for drug trafficking.  As cocaine use in the United States, the world’s largest cocaine consumer, has fallen by an estimated two-thirds in the past thirty years, South American drug traffickers are increasingly turning towards Brazil’s growing market.  This is proving to be an effective and profitable strategy; recent years have seen cocaine consumption quickly rising and health officials say a nation-wide crack-cocaine epidemic is taking hold.  This is obviously not the image the South American giant wishes to project as it prepares to host the 2014 FIFA World Cup, followed by the 2016 Summer Olympics.

With respect to cocaine, Brazil has a border control problem that no other nation in the world has: it shares half of its 10,000-mile-long border with the world’s three biggest cocaine producers: Bolivia, Colombia, and Peru.  To make matters worse, much of this border falls in difficult-to-control, remote, and largely unguarded jungle areas.  Colombia, which was long the world’s top cocaine producer, has seen the amount of land used for coca leaf production, as well as its ability to produce cocaine, tumble in recent years.  However, the decrease in Colombian cocaine production has been eclipsed by Peru and Bolivia, which have seen significantly ramped up production in recent years.

The source of cocaine in Brazil is increasingly landlocked Bolivia, which shares a 2,126 mile border with Brazil, which is longer than the Mexico-U.S. border.  Much of the border lies along the Mamore River, separating Bolivia from the Brazilian state of Rodonia, which is patrolled by federal police agents who are under staffed, ill equipped, and must count on a degree of luck to determine which of the countless boats crossing daily are transporting drugs.  To make matters worse, the river is dotted with many small and isolated ports that can be used by traffickers to evade authorities.  However, according to Sabino Mendoza, an adviser on coca issues to Bolivian President Evo Morales’ government, Bolivia does not consider itself to be a cocaine trafficking country.  Mr. Mendoza said the problem is cocaine originating in Peru that makes its way through Bolivia en route to Brazil.  “For us and for Brazil, obviously it’s a concern,” he said.  “And between the two countries we are resolving it.” Read the rest of this entry »

Guest post: Brazil’s advancing democracy

October 22, 2012

Paulo Sotero – Financial Times, 10/19/2012

Democracy is not for the faint-hearted… It requires hard work, constant attention, takes a lot of time to build and can easily be undermined by political polarization, regressive campaign finance rules and deficient laws on political representation. This month, two major events shed light on both the successes and failings of Brazil’s quarter century old, vibrant democracy.

On October 7, municipal elections brought over 115m voters to the polls to elect mayors and councilors in 5,568 cities and towns. A few days later, the country’s Supreme Court returned guilty verdicts in the largest trial of political corruption in Brazilian history.

The municipal elections were the first since the adoption of a new law barring candidates with criminal records. Cast in electronic ballot boxes, votes were tallied and results were published four hours after voting booths closed. There were no legal challenges. In 50 municipalities, including 17 of the 26 states capitals, where no candidate cleared the absolute majority of 50 per cent plus one, the two top candidates will go into a second round on October 28. The top prize is São Paulo, Brazil’s economic capital and home to the country’s third largest public budget.

Read more…

Insight: Taking on the “toga-wearing bandits” in Brazil’s courts

September 10, 2012

Brian Winter – Reuters 9/6/2012

Eliana Calmon takes great delight in provoking people. But even she didn’t realize at first what a bomb she had dropped.

“Look, I use a lot of colorful language, so when I said it, it didn’t seem that bad. But then the interview ended,” she recalled, starting to chuckle, “and I peered over at my aide, and he looked like he had seen a ghost! … And that was when the whole storm started.”

The offending phrase: Calmon, who serves as a kind of ombudswoman for Brazil’s judicial system, said her work was being undermined by “bandits who hide behind their togas” — corrupt judges who, she said, favor special interests and line their pockets with cash while doing as little work as possible.

Read more…

In the Spotlight – Brazil and Latin America: regional integration or regional domination?

July 27, 2012

Compiled by Lauren Phelps, 07/27/2012

Latin American regional relations have been under the microscope as of late, especially in light of the recent political shakeups inside Mercosur. The trading bloc is representative of contemporary continental interaction; ties between nations, now more than ever before, are driven by economics and regional integration efforts. Though Latin America has been working to achieve greater integration since the days of Simon Bolivar, the last decade has seen a concentrated spate of efforts to link the continent economically.

However, as Latin America continues its process of integration, the role of its leading economy is being analyzed with more and more scrutiny. There is no doubt that many Latin American nations stand to gain from a more integrated continent, and polling data reveals widespread support across countries for increased integration. However, whether the fruits of these efforts will be enjoyed evenly across the continent or be concentrated in the hands of its largest nation remains to be seen.

Perhaps the benefits gained from integration correlates to the resources donated to its development. Of the 31 projects completed from 2005-2010 by COSIPLAN, the Latin American Infrastructure and Planning Council, Brazil was a sponsoring partner of 15 of them, more than any other nation. This makes sense; as Latin America’s largest economy, they have the resources. In fact, BNDES, Brazil’s development bank, has spent 39% of this year’s disbursement (a number totaling more than $US20 billion with room for future increases) on infrastructure projects. Brazil’s fiscal reserves allow them to invest large sums in regional integration ventures; however, this permits Brazil to have significant input in the direction of the projects.

That BNDES is one of the major sponsors of regional integration, which allows for the possibility of some pro-Brazilian bias in integration efforts. BNDES funded projects include  local-content requirements (LCR’s), thus giving Brazil great influence and leverage in decision-making. These requirements can vary from project to project, however, in the end, the employment of Brazilian companies in conjunction with outside investors means that Brazilian businesses will reap more than the standard benefits from these ventures. The LCRs have thrown more than a few wrenches into BNDES’ work and have even discouraged outside investment. For example, many foreign investors bidding on mining projects, oil extraction, and wind energy have balked at the high prices of local goods and services. However, Brazil sees these requirements as a chance to stimulate a lagging economy and continue to facilitate job creation. In a time where many of the continent’s countries are seeing market losses and shrinking growth projections, this can only be good news for the South American giant.

In addition to providing an opportunity to increase business for Brazilian companies through local-content, many of the projects, though they aim to integrate the continent and level the playing field, may disproportionately benefit Brazil. This makes sense as well; given that the majority of the projects are aimed at increasing transportation efficiency  and that Brazil is the continent’s largest exporter of goods, they have an advantage. For example, the newly operational Brazil-Peru interoceanic highway will allow Brazil to further expand trade with China, arguably cementing their role as the continent’s economic leader.

Environmentalists have put up a particularly strong fight against regional integration projects. Many of the trans-continental energy and transport projects must crisscross Amazonian rainforest and/or living areas of various indigenous populations. For example, Brazil and other nations have a vested interest in the construction of the TIPNIS highway throughout Bolivia that will eventually connect to the aforementioned transoceanic highway. Brazil has funds invested in the project as well, given that the Brazilian construction firm OAS is under contract to build it. However, the highway is planned such that it would bisect a large section of indigenous lands, possibly displacing many tribes and causing negative environmental impacts such as river pollution and species loss. Though Bolivian president Evo Morales canceled the contract for the highway’s construction after environmentalists’ protests, he has since returned to evaluating the original TIPNIS plan, arguably because of Brazilian pressure. Environmental concerns like these are echoed in protests against other large-scale infrastructure projects with regional impact, such as Brazil’s Belo Monte hydroelectric dam. Protestors have occupied the site and loudly declaim its negative environmental and social consequences. However, though the governments of nations like Brazil and Bolivia have expressed some environmental concern, the economic benefits attached seem to outweigh the costs.

Photo courtesy of Flickr user kvanmidd

In the Spotlight: Brazilian oil, Treasure or Trap?

July 23, 2012

Compiled by Elizabeth Sweitzer – Brazil Institute, 7/23/2012

Photo credit: Petrobas; BP

In the past decade, Brazil has been making tremendous strides in oil production, leading Latin American figures for total output and drawing the attention of international oil investors.  In the past 15 years alone, Brazil has tripled its production and is likely to double its production from its current 2.7 million barrels a day but the year 2020. According to a study by Harvard’s Kennedy School concerning global oil potential, Brazil ranks 4th in the world.

Recently however, Brazil has entered into a phase of economic inefficiency in their oil industry. Brazil’s state-owned Petrobras has suffered very low net revenue in the past 12 months, consequently raising the price of oil to Petrobas’s disadvantage. Meanwhile, other nations are forging ahead on oil production; Brazil’s negative figures have been met with new projections of oil abundance in the US, Canada, parts of Latin America and Africa. While horizontal drilling and hydraulic fracturing techniques have revolutionized natural gas and oil extraction in the U.S., Brazil on the other hand has to adapt to ultra-deep, fiscally draining, and environmentally hazardous pre-salt oil extractions. Just last year Petrobras expressed concerned that fixation on their resource sector in areas like oil and natural gas would make Brazil vulnerable to Dutch disease.

Brazil’s oil industry faces serious challenges maintaining positive production patterns. For instance, Jose Pinto believes that public-private sector coordination will be necessary in order to make the country attractive to foreign investors and to protect local industries. Through investing in chemical industry and broadening its manufacturing base, Pinto believes Brazil will be able to significantly curb its trade deficit. Others propose that Brazil’s protectionist scheme is precisely what slows foreign investment, development and innovation. Peter Millard and Rodrigo Orihuela suggest that Brazil should learn lessons from Mexico’s negative experience, where oil production fell to its lowest in 22 years this April, arguably as a result of Mexico’s failure to invest in exploration back in 2004. Finally, Brazil desperately needs to invest in infrastructure; for example, when Brazilian billionaire Eike Batista promised the moon in terms of oil production, he did not compensate for the infrastructural needs that would follow.

Instances like this remind us of the volatility of the oil industry, the extent of its tremendous costs, and the environmental consequences if there are mistakes.  Brazil’s prospects for deep-sea drilling 7,000 m below the ocean floor are juxtaposed against a stark reality of spills and leaks that have incredible repercussions. On July 17, reports stated that Chevron could receive as much as a US$25 million dollar fine for oil spills off the coast of Brazil after a leak from one of their deep-sea drilling sites.

Brazil is now actively considering expanding its renewable resource sector, investing in projects such as wind-power farms.  Nevertheless, Brazil depends on their oil manufacturing industry to provide some 390,000 jobs and billions of dollars in sales each year. Ensuring efficiency for their oil industry will be an asset for Brazil in the next few years in order to remain competitive in the global market and lead in global innovation.

In the Spotlight: Airplanes and Mind Games; Analyzing Recent Events in Brazilian-U.S. Security Relations

July 11, 2012

Compiled by Elizabeth Sweitzer – Brazil Institute, 7/11/2012

Photo credit: Don Sullivan

In the years since the post-9/11 security reforms, the U.S. and Brazil have been strengthening relations in the security sector. As Brazil has developed into a prominent actor on the South American continent, the U.S. has increasingly considered Brazil to be a key figure in building relations with Latin America as a whole. In the realm of security, this developing relationship has been characterized by bi-lateral and multi-lateral initiatives, but at the same time has been tested by recent events that portrayed an all-too-silent security dilemma between the two nations. What could this mean for the future of U.S.-Brazilian relations?

In 2010 during the Haitian earthquake crisis, the U.S. and Brazil truly actualized the extent of their defense relations as they worked side by side in emergency relief operations.  The success of this dualism resulted in an increased interest in joint U.S. and Brazilian military training in Brazil, and U.S.-Brazilian joint assistance in monitoring Africa and supporting peaceful interventions.  Indeed, this strengthening has even been met with recent commitment to co-develop defense technology, as the countries recently launched a new Defense Cooperation Dialogue with hopes of creating an innovative partnership.

For Brazil, developing a strong defense agenda is and will continue to be a prerogative. While the country has enjoyed smooth border relations with its 10 neighbors, Brazilian Defense Minister Celso Amorim is interested in enhancing the nation’s defense technologies, border policing, and overall military capabilities: in order to protect the assets of its developing economy, Brazil must protect its forestry, oil, and mining industries.

After the U.S. Air Force shook hands with Brazil’s Embraer on a deal to purchase 20 of their A-29 Super Tucano turboprop planes for use by Afghan forces priced at $355 million in late 2011, Embraer’s competition for the bid, Kansas-based Hawker Beechcraft, made waves by suing the Pentagon, under the allegation that the Air Force erred in its decision to grant Embraer the winning bid. To Brazil’s surprise, the U.S. Air Force quickly canceled the deal with Embraer in March 2012, all while the U.S. was pressuring Brazil to purchase their Boeing KC-390 aircraft. At a recent conference in April 2012 with Defense Minister Amorim and U.S. Secretary of Defense Leon Panetta, Panetta encouraged Brazil to purchase American-made aircraft, underscoring a somber tone of decreased trade between the U.S. and Brazil as a result of China’s influence in the region.

Although the conference seemed to shed light on coordinating enhanced defense relations and the possibility of the U.S.  resuming the Embraer purchase in the future, events just in the last decade underscore tensions in normative awareness between the U.S. and Brazil. Brazil’s foreign policy advisor Marco Aurelio Garcia even went as far as to say that  “political interferences” are to blame for contention surrounding the canceled deal. This apolitical understanding of the incident is supplemented by the idea that Brazil values the principle of sovereignty and its own independence more than the U.S. truly realizes.

While some have portrayed emergency intervention in Haiti in 2010 a success on Brazil’s part, it has also been viewed as competitive in nature as the U.S. and Brazil seemed to be battling for influence. Brazil’s absentee vote in the United Nation’s Security Council Resolution 1973 on the status of Libya indicates Brazil’s infirm support for humanitarian intervention and principles such as Responsibility to Protect especially after the country had initially voted to indict General Qaddafi to the International Criminal Court in the UNSCR 1970. Further, on a transcontinental scale, Brazil’s presence in Latin America has been characterized as being largely hegemonic rather than a spokesperson of regional leadership. Ted Piccone of the Brookings institute even offers that Brazil’s position toward the OAS has dramatically hurt the power of the organization, while Brazil has also undermined, even excluded the US from economic integration in the region.

Nevertheless, months after the Embraer-U.S. Air Force incident, Embraer and Boeing agreed to collaborate on the KC-390 aircraft program in June 2012. While U.S.-Brazilian defense relations often appear discursive, moments like this indicate that the nations are equally capable of empathizing with one another.


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