Roger Cohen – The New York Times, 08/15/2016
When I was a correspondent in Brazil 30 years ago inflation was rampant. It ran at an average of 707.4 percent a year from 1985 to 1989. The salaries of the poor were wiped out within hours of being paid. The country went through three currencies — cruzeiro, cruzado and cruzado novo — while I lived in Rio. The only way out for Brazilians, people joked, was Galeão, the international airport.
Antônio Carlos (“Tom”) Jobim, the composer of “The Girl from Ipanema” (whose name is now affixed to that airport), famously observed that, “Brazil is not for beginners.” It was not then and it’s not now. It’s a vast diverse country, a tropical United States, whose rich and poor are divided by a chasm. High crime rates are in part a reflection of this divide. Flexibility is at a premium in a culture fashioned by heat, sensuality, samba and rule bending. Life can be cheap. You adapt or you perish.
Edmar Bacha, a friend and economist, had coined the term “Belindia” to describe Brazil — a prosperous Belgium perched atop a teeming India. I wrote a story about the poor kids from north Rio, far from the beaches of Ipanema and Leblon, who would get their kicks as “train surfers” — riding the tops of fast-moving trains — rather than surf Atlantic waves. Often they died, electrocuted. I will never forget the twisted corpse of one in the city morgue.
Tyler Cowen – Bloomberg, 08/11/2016
Brazil, it is often and not quite fairly said, is the country of the future and always will be. As the Olympics focuses global attention on the country, it’s worth exploring the various ways in which this maxim is — and may not be — true.
The puzzle with Brazil is neither its successes nor its failures, but rather the combination of the two. The country has such a dynamic feel, and in the postwar era it saw many years of double-digit economic growth. The Economist featured the country on its cover in 2009 as the next miracle take-off, and in 2012 Germany’s Der Spiegel published a long article titled “How Good Governance Made Brazil a Model Nation.”
Yet Brazil never caught up to the developed world: Its gross domestic product per capita falls about 4 to 7 times short of the U.S. — about where it was more than a century ago. It is now experiencing one of the most severe depressions of any country in modern times. The president, Dilma Rousseff, is in the midst of an impeachment process. The combination of corrupt and violent police, muggings of athletes, polluted water and inadequate facilities have led many to wonder whether Brazil can pull of the Olympics without major embarrassment.
Michale O’Boyle and Bruno Federowski – Reuters, 07/13/2016
Foreign investors in Latin America are warming to Brazil as a promising turnaround bet while souring on Mexico and its landmark energy reform that has yet to deliver.
Brazil has yet to recover from its worst recession in decades, inflation and interest rates remain among the highest in the region and it is saddled with a bloated public sector. In contrast, Mexico’s economy is growing at around 2 percent, has lower fiscal deficits and sounder public finances.
But while Brazil interim president Michel Temer’s reform agenda offers some promise, Mexico, once a darling of foreign investors, is now a source of disappointment. A slump in oil prices dashed hopes that President Enrique Pena Nieto’s energy sector opening in 2013 along with telecoms and banking reforms would boost foreign investment and supercharge growth while clouds are now gathering over its budget and economy.
Lise Alves – The Rio Times, 07/11/2016
SÃO PAULO, BRAZIL – If suspended president Dilma Rousseff is impeached from office in August, Brazil’s interim President, Michel Temer, plans to take his first official overseas trip as leader of the country in September to China, Industry and Foreign Trade Minister Marcos Pereira announced over the weekend. Temer’s main goal is to boost Brazilian exports to the Asian country, especially of aircrafts and beef.
Last year, during Chinese Prime Minister Li Keqiang’s visit to Brazil, the two countries signed investment agreements worth US$53.3 billion to be made by Chinese companies in Brazil in the areas of agribusiness, auto parts, equipment transport, energy, railways, highways, airports, ports, storage and services. Now Temer wants to increase the presence of Brazilian products in China.
Julia Leite & Paula Samba – Bloomberg, 06/27/2016
Brazil is winning over derivatives traders as Acting President Michel Temer seeks to repair the nation’s finances.
The cost to hedge against losses in Brazil’s bonds with credit-default swaps has tumbled by almost a third in the past six months, the biggest drop among the world’s major economies. Prices of the swaps are also now back to levels that prevailed before S&P Global Ratings cut the country’s rating to junk in September.
The turnaround is part of a rebound in Brazil’s financial assets this year fueled by the removal of President Dilma Rousseff from office while she faces an impeachment trial. Since taking the reins last month, Temer has proposed spending caps to help shrink a near-record budget deficit and struck a deal to ease a fiscal crisis roiling Brazilian states amid the longest recession in more than a century.
Brian Winter – Americas Quarterly, 06/22/2016
It’s been yet another rough week for Brazil’s international image, with an Olympic mascot shot dead in an absurd accident and another national political figure dragged into scandal. But the biggest blow of all came from Declan Ryan, co-founder of the Irish budget airline Ryanair, who told an Argentine newspaper that he was considering expansion into every South American country “except for Brazil, where there is lots of corruption.”
This is precisely the wrong lesson to draw from Brazil’s struggles – akin to believing that the house that gets the most exhaustive inspection must also be the most rotten one on the block. It’s telling that Ryan made his comments (which became huge news in Brazil) while announcing an expansion into Argentina, where the corruption under 12 years of Kirchner rule is only now coming to light. Just last week, a former Argentine secretary of public works was arrested while trying to hide $9 million in cash in a monastery. Ryan preferred tolaugh that story off.
As regular AQ readers know, the negative headlines about Brazil result from a positive process – the independent prosecutors who have uncovered evidence of systemic graft and fraud, and sent some of the country’s most powerful people to jail. This does not mean Brazil is South America’s most corrupt country – it may mean, instead, that it has its healthiest (or most active) legal system. But the mistake Ryan made is surprisingly common, and it provides a golden opportunity for investors who are savvy enough to see the truth.
Paulo Trevisani – The Wall Street Journal, 06/13/2016
BRASÍLIA—Brazil’s central bank Monday inaugurated a new leader to deal with an old challenge: taming stubborn inflation amid a shaky economy and political chaos.
Private-sector economist Ilan Goldfajn took over the post from Alexandre Tombini in an hour-long ceremony at the bank’s imposing building here. An appointee of Brazil’s suspended President Dilma Rousseff, Mr. Tombini had held the job since January 2011. On his watch, Brazil never met its 4.5% annual inflation target, as the figure stayed significantly above that level even as the economy ground to a halt in the past few years.
Mr. Goldfajn, 50 years old, was appointed by acting President Michel Temer, who will serve out Ms. Rousseff’s term if she is ousted. Mr. Goldfajn—a U.S.-educated economist who for the past decade led the economic-research department at Itaú Unibanco, Brazil’s largest private-sector bank—has pledged to meet the nation’s inflation target, without giving a time frame, even as prices are rising at a 9.3% pace, as of May.