The United States and Brazil: On Reaping What You Sow

March 6, 2015

Jan Knippers Black – NACLA, 3/6/2015

It was often said in Latin America in the early 1960s that when the United States sneezed, Latin America caught pneumonia. In fact, it was repeated year after year until the fall of 2008, when the United States caught pneumonia and Latin America sneezed.

Brazil, in particular, after a short spell of sneezing, rebounded to its pattern of robust economic growth, grounded in sophisticated research and development, diversified products and trading partners. Through years both of boom and, more recently, slump, redistributive domestic programs, like Bolsa Familia, and higher minimum wages have enabled Workers’ Party (PT) governments to narrow the country’s income gap. Meanwhile, the U.S. sinks deeply into debt to China and the domestic income gap continues to grow. The one percent are thriving; not so the 99.

The changing relationship between the United States and Brazil over the last couple of decades responds in large part to changes in the global power game and to how each of the countries has played the game. Currently undergirded by socially responsible civilian leadership and the legendary diplomatic skills of Itamaraty, the foreign ministry, Brazil can expect to be taken into account on issues of global import; moreover, its collaborative outreach has served to strengthen national self-confidence elsewhere in Latin America. Does that mean that the United States can be counted upon now to treat Brazil, and Latin America in general, with respect, like good neighbors rather than subservient and potentially subversive clients? Apparently not.

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5 reasons why the impeachment of Dilma is improbable, according to Brazilianists

March 3, 2015

Alessandra Corrêa – BBC Brasil, 3/2/2015

A series of problems confronted by President Dilma Rousseff in the start of her second mandate was already indicated by some as a signal of a threat to her government.

In response to the Financial Times blog post published last week on ten reasons why Dilma should be impeached, BBC Brasil offers five reasons why this likely will not happen. These reasons include the lack of solid grounds for impeachment and the absence of evidence proving the involvement of Dilma in the Petrobras scandal. Brazil Institute Fellow Matthew Taylor states, “Until now, there is still no evidence that Dilma is guilty of anything other than bad management (in the case of Petrobras).” Taylor also goes on to show why the opposition parties are not interested in having Dilma go through the impeachment process, observing, “I don’t think that the PSDB would have much to gain. Furthermore, they would need the support of the PMDB and other parties in the government’s coalition. And frankly, none of these parties would like to see Dilma suffering an impeachment.”

The article continues with evidence showing that Dilma’s support in congress is still much higher and stronger than that of former president Fernando Collor de Mello, who was impeached in 1992. Another reason for the unlikelihood of impeachment is that the current problems in Brazil are not rare for the region. Brazil is not alone in the lack of investor confidence and therefore unlikely to stand out by themselves by inciting an impeachment process. Taylor concludes by noting that the Petrobras scandal has left the country “warily optimistic.”

For full article [IN PORTUGUESE], click here.

Translation and summary by Brazil Institute intern Erica Kliment.


Brazil’s scandalous boom to bust story

February 19, 2015

Patrick Gillespie – CNN Money, 2/19/2015

Five years ago its economy grew three times faster than the United States. In 2011 its economic size surpassed Great Britain’s. Millions of Brazilians moved from poverty to the middle class, and the president at the time, Luiz Inácio Lula da Silva, had an 83% approval rating.

Eike Batista, once Brazil’s richest person, told “60 Minutes” that his nation was realizing its potential.

“Brazil has put its act together,” Batista told 60 minutes in 2010. “We’re walking into a phase of almost full employment…It’s unbelievable.” It certainly was unbelievable.

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Brazil’s ruling party wonders how it lost its populist touch

February 12, 2015

Dom Phillips – The Washington Post, 2/12/2015

The chant went up from the Workers’ Party faithful: “Lula, warrior of the Brazilian people!” Brazil’s popular former president, Luiz Inácio Lula da Silva, was getting up on the stage here to cap the celebration of his party’s 35 years of existence.

Flanked by his successor, Dilma Rousseff, and Uruguay’s outgoing president José Mujica, Lula should have been reveling in the party’s electoral success, as it begins an unprecedented fourth consecutive term in government.

Instead, Brazil’s worsening “Big Oil” scandal — in which prosecutors allege hundreds of millions of dollars were siphoned off contracts from the state-controlled oil company, Petrobras — hung like a big black cloud over the celebrations.

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Petrobras Graft Probe Jolts Brazil’s Ruling Party

February 6, 2015

Paul Kiernan – The Wall Street Journal, 2/5/2015

A corruption investigation at Brazil’s state oil company Petróleo Brasileiro SA shook the country anew on Thursday, as Federal Police questioned a top party official and opposition lawmakers opened a congressional probe into the alleged scheme.

João Vaccari Neto, treasurer of President Dilma Rousseff ’s Workers’ Party, was the first major party official to be questioned in the massive, ongoing investigation into an alleged bribery and kickback scheme involving Petrobras, its contractors and Brazilian politicians.

The sheer scale of the alleged fraud also emerged on Thursday when the judge in charge of the case unsealed charges alleging that Mr. Vaccari received, on behalf of the Workers’ Party, an estimated $150 million to $200 million in kickbacks from some 90 Petrobras contracts between 2003 and 2013.

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Brazil FinMin Levy An ‘Island In Sea Of Mediocrity’

January 27, 2015

Kenneth Rapoza – Forbes, 1/24/2015

Brazil’s new Finance Minister Joaquim Levy is an island in a sea of mediocrity, says ex-Central Banker Arminio Fraga in an interview this weekend with Brazilian daily Estado de Sao Paulo. The FinMin job almost belonged to Fraga. But his chosen horse didn’t win the race in October. Instead, beleaguered Workers’ Party president Dilma Rousseff won in a squeaker and replaced Guido Mantega, not a market favorite during his tenure as Finance Minister, with Levy, who is already a market favorite.

Levy, an ex-Treasury secretary under Dilma’s predecessor, Luiz Inacio Lula da Silva, is taking an sledgehammer to Dilma’s populist policies of the last four years.

Investors like life on Levy Island, but sea great white shark fins everywhere. This is no day at the beach for the Brazilian economy. High interest rates (12.25%) and high inflation (6.41%) have turned off investors. The iShares MSCI Brazil (EWZ) exchange traded fund, which basically tracks the iBovespa stock index in São Paulo, is underperforming the MSCI Emerging Markets Index year to date. Even sanctioned Russia’s equity market is doing better than Brazil.

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Greece Can Learn from Brazil and Argentina

January 15, 2015

Mohamed A. El-Erian – Bloomberg View, 1/13/2015

The possibility of an untested and extreme-talking left-wing party coming to power in the next elections sparks a sell-off in the markets. Creditors become nervous about the country’s prospects, particularly its exchange-rate stability and ability to service its debt. The leader of the party reacts by trying to paint a more reassuring picture of the future under a new government. But his attempts fall on deaf ears, risking self-fueling economic and financial dislocations.

Greece in 2015? No. That was the situation in Brazil before the October 2002 presidential elections, when Luiz Inacio Lula da Silva took a lead in the polls that ultimately translated into an outright win for his Workers’ Party. For many years until then, Lula had flirted publicly and privately with an alternative economic approach that would have involved large-scale debt restructurings and heavy reliance on statism to drive growth.

Expecting such an outcome, markets priced in a very high likelihood of a debt default. As bond prices plummeted, yields were driven to very high levels and Brazil’s market access almost disappeared. Bank deposits also came under pressure and the currency fell precipitously, placing further pressure on the country’s economic and financial stability. Steadily, Brazil approached a market-induced liquidity crisis that could turn into a solvency crisis that would derail the economy for many years.

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