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Mostrando postagens com marcador Brazil economy. Mostrar todas as postagens
Mostrando postagens com marcador Brazil economy. Mostrar todas as postagens

quinta-feira, 10 de dezembro de 2015

A Economist sintetiza a situação brasileira num simples gráfico

PIB em baixa, inflação em alta:

Brazil’s annual rate of inflation rose to 10.5% in November, the highest it has been in 12 years. In a further blow to the embattled government Moody’s downgraded all its ratings for Petrobras, the country’s state-owned oil company, which is at the centre of a corruption scandal, and warned Brazil’s sovereign rating was at risk because of the country’s “worsening governability”.

sexta-feira, 27 de fevereiro de 2015

Brasil na Economist: problemas economicos, liberais em ascensao, etc

The Economist, 28 Feb/3 Mar, 2015

The downgrading of Petrobras’s credit rating to junk status by Moody’s sent shivers through Brazilian markets. The state-controlled oil company is mired in a corruption scandal involving politicians from Brazil’s ruling Workers’ Party, preventing Petrobras from undertaking a proper financial audit.

Brazil - In a quagmire
Latin America’s erstwhile star is in its worst mess since the early 1990s

CAMPAIGNING for a second term as Brazil’s president in an election last October, Dilma Rousseff painted a rosy picture of the world’s seventh-biggest economy. Full employment, rising wages and social benefits were threatened only by the nefarious neoliberal plans of her opponents, she claimed. Just two months into her new term, Brazilians are realising that they were sold a false prospectus.
Brazil’s economy is in a mess, with far bigger problems than the government will admit or investors seem to register. The torpid stagnation into which it fell in 2013 is becoming a full-blown—and probably prolonged—recession, as high inflation squeezes wages and consumers’ debt payments rise (see page 71). Investment, already down by 8% from a year ago, could fall much further. A vast corruption scandal at Petrobras, the state-controlled oil giant, has ensnared several of the country’s biggest construction firms and paralysed capital spending in swathes of the economy, at least until the prosecutors and auditors have done their work. The real has fallen by 30% against the dollar since May 2013: a necessary shift, but one that adds to the burden of the $40 billion in foreign debt owed by Brazilian companies that falls due this year.
Escaping this quagmire would be hard even with strong political leadership. Ms Rousseff, however, is weak. She won the election by the narrowest of margins. Already, her political base is crumbling. According to Datafolha, a pollster, her approval rating fell from 42% in December to 23% this month. She has been hurt both by the deteriorating economy and by the Petrobras scandal, which involves allegations of kickbacks of at least $1 billion, funnelled to politicians in her Workers’ Party (PT) and its coalition partners. For much of the relevant period Ms Rousseff chaired Petrobras’s board. If Brazil is to salvage some benefits from her second term, then she needs to take the country in an entirely new direction.
Levy to the rescue?
Brazil’s problems are largely self-inflicted. In her first term Ms Rousseff espoused a tropical state-capitalism that involved fiscal laxity, opaque public accounts, competitiveness-sapping industrial policy (see Schumpeter) and presidential meddling in monetary policy. Last year her re-election campaign saw a doubling of the fiscal deficit, to 6.75% of GDP.
To her credit, Ms Rousseff has at least recognised that Brazil needs more business-friendly policies if it is to retain its investment-grade credit rating and return to growth. This realisation is personified by her new finance minister, Joaquim Levy, a Chicago-trained economist and banker and one of the country’s rare economic liberals (see article). However, Brazil’s past failure to deal promptly with macroeconomic distortions has left Mr Levy to grapple with a recessionary trap.
To stabilise gross public debt, he has promised a whopping fiscal squeeze of almost two percentage points of GDP this year. Part of this is coming from the removal of an electricity subsidy and the reimposition of fuel duty. Both measures have helped to push inflation to 7.4%. He also plans to curb subsidised lending by public banks to favoured sectors and firms.
Ideally, Brazil would offset this fiscal squeeze with looser monetary policy. But because of the country’s hyperinflationary past, as well as more recent mistakes—the Central Bank bent to the president’s will, ignored its inflation target and foolishly slashed its benchmark rate in 2011-12—the room for manoeuvre today is limited. With inflation still above its target, the Central Bank cannot cut its benchmark rate from today’s level of 12.25% without risking further loss of credibility and sapping investor confidence. A fiscal squeeze and high interest rates spell pain for Brazilian firms and households and a slower return to growth. What makes this adjustment perilous is the political fragility of Ms Rousseff herself. On paper she won a comfortable, though reduced, legislative majority in the October election. Yet the PT is already grumbling about Mr Levy’s fiscal policies—partly because the campaign did not lay the ground for them. Ms Rousseff suffered a crushing defeat on February 1st in an election for the politically powerful post of head of the lower house of Congress. Eduardo Cunha, who vanquished the PT’s man, will pursue his own agenda, not hers. Not for the first time, Brazil may be in for a period of semi-parliamentary government.
The country thus faces its biggest test since the early 1990s. The risks are clear. Recession and falling tax revenue may undermine Mr Levy’s adjustment. Any backsliding may in turn prompt a run on the real and a downgrade in Brazil’s credit rating, raising the cost of financing for government and companies alike. Were Brazil to see a repeat of the mass demonstrations of 2013 against corruption and poor public services, Ms Rousseff might be doomed.
From weakness, opportunity
Yet the president’s weakness is also an opportunity—and for Mr Levy in particular. He is now indispensable. He should build bridges to Mr Cunha, while making it clear that if Congress tries to extract a budgetary price for its support, that will lead to cuts elsewhere. The recovery of fiscal responsibility must be lasting for business confidence and investment to return. But the sooner the fiscal adjustment sticks, the sooner the Central Bank can start cutting interest rates.
More is needed for Brazil to return to rapid and sustained growth. It may be too much to expect Ms Rousseff to overhaul the archaic labour laws that have helped to throttle productivity, but she should at least try to simplify taxes and cut mindless red tape. There are tentative signs that the government will scale back industrial policy and encourage more international trade in what remains an over-protected economy.
Brazil is not the only member of the BRICS quintet of large emerging economies to be in trouble. Russia’s economy, in particular, has been battered by war, sanctions and dependence on oil. For all its problems, Brazil is not in as big a mess as Russia. It has a large and diversified private sector and robust democratic institutions. But its woes go deeper than many realise. The time to put them right is now.

Brazil’s liberals - Niche no longer
Thatcherism is winning adherents

AMONG the buskers on Avenida Paulista, São Paulo’s main thoroughfare, one act stood out on a recent Friday afternoon. A live rock band played spiffy renditions of “Blue Suede Shoes” and other 1950s classics; between numbers, six panellists sang the praises of competition and fielded questions from 100-odd onlookers about such issues as transport prices. The event was organised by the Free Brazil Movement (MBL), a group founded last year to promote free-market answers to the country’s problems. The al fresco concert-cum-colloquium was a riposte to demonstrators who took to the streets a half-dozen times in January to demand free bus transport. A better idea would be to open bus services to competition among private firms, which would improve quality and lower costs, the MBL-ers claimed.
Although Brazil thinks of itself as a “tropical Sweden”, advocates of freer markets and a less intrusive state are making headway. Of the 50 organisations that belong to the Liberty Network, an umbrella group, all but a handful were founded in the past three years. A “liberty forum” in April is expected to draw some 5,000 South American freedom-lovers to Porto Alegre, a southern city. This year’s theme, inspired by the Charlie Hebdo murders, is freedom of expression.
Soon such folk will have a new political party to represent them. Called simply Novo (“new”), the party stands unabashedly for free markets, a minimal state, low taxes and individual liberties. This would extend Brazil’s narrow political spectrum. The Workers’ Party of the president, Dilma Rousseff, is decidedly left-wing. The main opposition party, the Party of Brazilian Social Democracy (PSDB), is friendlier to markets but, as its name suggests, it is by no means Thatcherite.
Novo sounds like it will be. Its president, a banker called João Amoêdo, calls for privatisation of state-controlled enterprises such as Petrobras, an oil giant in the midst of a corruption scandal. The fledgling party has submitted the 492,000 notarised signatures needed to register with the electoral authority. Mr Amoêdo hopes for approval in March; it plans to field candidates in next year’s local elections. A new liberal force could provide fresh answers to the country’s increasingly difficult economic plight (see article).
Novo’s brassy brand of liberalism is still a minority taste. Many Brazilians associate the liberal reforms enacted when the PSDB was in power in the 1990s with the short-term pain they caused rather than the long-term stability they secured. At the University of São Paulo, the loftiest of Brazil’s ivory towers, microeconomics courses dwell on market imperfections while neglecting government failures, laments Fabio Barbieri, who teaches the subject.
The social-science section of Livraria Cultura, a famous bookshop on Avenida Paulista, displays freshly printed copies of Karl Marx’s “Capital” but carries nothing by John Stuart Mill, his great liberal contemporary. After the military coup of 1964 “we were all deformed by revolutionary Marxism”, says Eduardo Giannetti, a liberal economist (his 29-year-old son was among the Paulista panellists). For decades a cartelised capitalism, protected by the state, kept products shoddy and prices high, which did not help the private sector win friends.
But opinion may be shifting. Brazilians have long been open-minded about gay rights and immigration (but not legalisation of drugs). A poll by Datafolha, a research firm, published in September found that 30% are sceptical about state intervention and tax-and-spend policies, up from 26% a year earlier. In October’s presidential election Ms Rousseff defeated her challenger, the pro-business candidate of the PSDB, only narrowly. These are hopeful signs for liberals. But it will be some time before “let’s introduce competition into public transport” drums up the same enthusiasm as “free tickets”.

Schumpeter - Brazil’s business Belindia
Why the country produces fewer world-class companies than it should

BRAZILIANS make up almost 3% of the planet’s population and produce about 3% of its output. Yet of the firms in Fortune magazine’s 2014 “Global 500” ranking of the biggest companies by revenue only seven, or 1.4%, were from Brazil, down from eight in 2013. And on Forbes’s list of the 2,000 most highly valued firms worldwide just 25, or 1.3%, were Brazilian. The country’s biggest corporate “star”, Petrobras, is mired in scandals, its debt downgraded to junk status. In 1974 Edmar Bacha, an economist, described its economy as “Belindia”, a Belgium-sized island of prosperity in a sea of India-like poverty. Since then Brazil has done far better than India in alleviating poverty, but in business terms it still has a Belindia problem: a handful of world-class enterprises in a sea of poorly run ones.
Brazilian businesses face a litany of obstacles: bureaucracy, complex tax rules, shoddy infrastructure and a shortage of skilled workers—to say nothing of a stagnant economy (see article). But a big reason for Brazilian firms’ underperformance is less well rehearsed: poor management. Since 2004 John van Reenen of the London School of Economics and his colleagues have surveyed 11,300 midsized firms in 34 countries, grading them on a five-point scale based on how well they monitor their operations, set targets and reward performance. Brazilian firms’ average score, at 2.7, is similar to that of China’s and a bit above that of India’s. But Brazil ranks below Chile (2.8) and Mexico (2.9); America leads the pack with 3.3. The best Brazilian firms score as well as the best American ones, but its long tail of badly run ones is fatter.
Part of the explanation is that medium and large firms tend to be better-organised than small ones, and not only because well-run ones are likelier to grow. Brazil offers incentives aplenty to stay bitty, such as preferential tax treatment for firms with a turnover of no more than 3.6m reais ($1.3m). As they expand, many firms split rather than face increased scrutiny from the taxman. According to the World Bank, a midsized Brazilian firm spends 2,600 hours filing taxes each year. In Mexico, it is 330 hours.
Ownership patterns play a part too. Many Brazilian concerns are controlled by an individual shareholder, or one or two families. Two-thirds of those with sales of more than $1 billion a year are family-owned, notes Heinz-Peter Elstrodt of McKinsey, a consulting firm. That is less than in Mexico (96%) or South Korea (84%) but more than in America or Europe. Mr Van Reenen’s research shows that where family owners plump for outside chief executives, their firms do no worse than similarly sized ones with more diverse shareholders. But all too often they pick kin over professional managers—and performance suffers. This is particularly true in “low-trust” societies like Brazil, where bosses hire relatives instead of better-qualified strangers to avoid being robbed or sued for falling foul of overly worker-friendly labour laws.
Decades of economic turmoil—which ended when hyperinflation was vanquished in 1994—meant that companies were managed from crisis to crisis. This forced Brazilian firms to be nimble. But it also encouraged short-termism, which management consultants and academics finger as Brazilian managers’ number-one sin. Faced with a record drought in 2014, and a subsequent spike in energy prices in a hydropower-dependent country, Usiminas, a steelmaker, stopped smelting and started selling power it had bought on cheap long-term contracts. Energy sales made up most of its operating profits that year. Such short-term stunts are hardly the path to long-term greatness.
Worse, crisis management all too often consists of going cap in hand to the government. Brazilian bosses continue to waste hours in meetings with politicians that could be better spent improving their businesses. In January 2014, as vehicle sales flagged, the automotive industry’s reflex reaction was to descend on the capital, Brasília, and demand an extension of its costly tax breaks. Thanks to lifelines cast by the state, feeble firms stay afloat rather than sink and make room for more agile competitors. Shielded from competition by tariffs, subsidies and local-content rules, they have little reason to innovate. A locally invented gizmo which lets cars run on both petrol and biodiesel is nifty. But, asks Marcos Lisboa of Insper, a business school, does that really justify six decades of public support for the motor industry?
The dead hand of government
Indeed, a glance at the “Belgian” end of Brazil’s corporate landscape suggests that successful firms cluster in sectors the state has not tried desperately to help, such as retail or finance. Bradesco, a big lender, is internationally praised as a pioneer of automated banking. Each month Arezzo creates 1,000 new models of women’s shoes, and picks 170-odd to sell in its shops.
Brazil’s other world-beaters are in industries like agriculture and aerospace, which are free to compete at home and abroad, and in which the government sticks to its proper role. In 1990 farms were allowed to consolidate and to buy foreign machines, pesticides and fertiliser. Efforts by Brazil’s trade negotiators opened up export markets. JBS, a meat giant, can slaughter 100,000 head of cattle a day, selling more beef than any rival worldwide. Thanks in part to Embrapa, the national agriculture-research agency, Brazilian farms have been raising productivity by about 4% a year for two decades. Similarly, a supply of skilled engineers and know-how from the government’s Technological Institute of Aeronautics has helped turn Embraer, privatised in 1994, into one of the world’s most successful aircraft-makers.
The success of businesses such as these offers a lesson for the state. The best way to make Brazil’s underperforming firms more competitive would be to make them compete more. Coddling by the state can be more a curse than a blessing. Ronald Reagan’s dictum that the nine most terrifying words in the English language are, “I’m from the government and I’m here to help,” translates well into Flemish, Hindi and Brazilian Portuguese.

Brazil’s coming recession - The crash of a titan
Brazil’s fiscal and monetary levers are jammed. As a result, it risks getting stuck in an economic rut

IT IS easy for a visitor to Rio to feel that nothing is amiss in Brazil. The middle classes certainly know how to live: with Copacabana and Ipanema just minutes from the main business districts a game of volleyball or a surf starts the day. Hedge-fund offices look out over botanical gardens and up to verdant mountains. But stray from comfortable districts and the sheen fades quickly. Favelas plagued by poverty and violence cling to the foothills. So it is with Brazil’s economy: the harder you stare, the worse it looks. 
Brazil has seen sharp ups and downs in the past 25 years. In the early 1990s inflation rose above 2,000%; it was only banished when a new currency was introduced in 1994. By the turn of the century Brazil’s deficits had mired it in debt, forcing an IMF rescue in 2002. But then the woes vanished. Brazil became a titan of growth, expanding at 4% a year between 2002 and 2008 as exports of iron, oil and sugar boomed and domestic consumption gave an additional kick. Now Brazil is back in trouble. Growth has averaged just 1.3% over the past four years. A poll of 100 economists conducted by the Central Bank of Brazil suggests a 0.5% contraction this year followed by 1.5% growth in 2016.
Economic indicators
Both elements of that prediction—the mild downturn and the quick rebound—look optimistic. The prospects for private consumption, which accounted for around 50% of GDP growth over the past ten years, are rotten. With inflation above 7%, shoppers’ purchasing power is being eroded. Hefty price rises will continue. Brazil is facing an acute water shortage; since three-quarters of its electricity comes from hydroelectric dams, this is sapping it of energy. To avoid blackouts the government plans to deter use by raising prices: rates will increase by up to 30% this year. With the real losing 10% of its value against the dollar in the past month alone, rising import prices will bring more inflation.
There is little hope of disposable income keeping pace. One reason is that Brazilian workers’ productivity does not justify further rises. In the past ten years wages in the private sector have grown faster than GDP; cosseted public-sector workers have done even better (see chart 1). Since Brazil’s minimum wage is indexed to GDP and inflation, a recession will freeze real pay for the millions who earn it.
Austerity will bite, too, as Brazil’s new finance minister, Joaquim Levy, tries to balance the books. Higher taxes on fuel are being phased in, a blow for a car-loving country. If Mr Levy reforms the generous state pension, the incomes of older Brazilians will stall.
Debt payments add to the woes. Total credit to the private sector has jumped from 25% of GDP to 55% in the past ten years. With total household debt at around 46% of disposable income, Brazilian households are much less indebted than those in Italy or Japan. Yet the price of this borrowing is sky-high. Four-fifths of it is punishingly costly consumer credit (the average rate on new lending is 27%, according to the Central Bank). Once hefty principal payments are added in, debt service takes up 21% of disposable income. With the economy slowing and the Central Bank reluctant to cut interest rates because of high inflation, consumers will feel the pinch, says Arthur Carvalho of Morgan Stanley. On February 25th a survey put consumer confidence at a ten-year low.
There are few compensating sources of demand. Investment, which rose in eight of the ten years to 2013, often substantially, will sink in 2015. Petrobras, the partially state-owned oil giant that is Brazil’s largest investor, is mired in a corruption scandal that has paralysed spending: the affair may cost up to 1% of GDP in forgone investment. On February 24th Moody’s, a credit-rating agency, cut its debt to junk status; if Petrobras fails to publish audited results soon it may be unable to borrow at all.
Exporting is no answer, despite the falling real. Five countries—China, America, Argentina, the Netherlands and Germany—buy 45% of Brazil’s exports. Ten years ago these economies’ average GDP growth, weighted by their heft in Brazilian trade, was 12%; this year 5% would be good.
Yet the biggest worry is not that Brazil has a bad year, but that its broken policy levers mean that it gets stuck in a rut. Brazil spent 311.4 billion reais (6% of GDP) on interest payments in 2014, a 25% increase on 2013. This means that even if Mr Levy’s fiscal drive works—he is aiming for a primary surplus of 1.2% of GDP—Brazil will be nowhere near the black. The state’s outgoings have proved hard to control, with benefits payments rising despite falling unemployment. In a recession it will be harder still.
Brazil’s parlous finances leave no room for debt-financed stimulus. At 66% of GDP its gross public debt is the highest of the BRIC countries. Its bonds yield 13%—more than Russia’s. Rates could rise further. Fitch, a credit-rating agency, puts Brazil one notch above junk, but it has more debt, bigger deficits and higher interest rates than most countries in that category. If growth evaporates, a downgrade would be a certainty, raising debt costs even more.
Such predicaments are not uncommon, but Brazil’s monetary problems are. The governor of the Central Bank, Alexandre Tombini, must choose between two nasty paths. The first is a hard-money approach: keeping interest rates high despite the weak economy. This would prop up the real and boost the bank’s inflation-bashing credentials. But it is not just households that are hurt by high rates; firms are, too. In aggregate the big Brazilian firms Fitch rates have had negative cashflow since 2010. They have plugged the gap by running down savings and issuing debt. Borrowing is up by 23% in five years. With the risk of default rising, a fifth of these firms face a downgrade, in many cases imminent.
In reality, a tough monetary stance would have to be softened by an extension of Brazil’s lavish financial subsidies. State-owned banks like BNDES, a development bank, and Caixa Econômica Federal, a retail one, made 35% of loans in 2009. Today their share is 55%. Since many Brazilian firms cannot pay private market rates (the average rate for new corporate loans is 16%) BNDES lends at a concessionary rate, currently 5.5%. That makes banking in Brazil a fiscal operation, says Mansueto Almeida, an expert on the public finances. The funding comes from the state, which borrows at a much higher rate than firms pay. The difference, a loss, is borne by taxpayers.
The alternative path for Mr Tombini to go down is to cut rates despite rising inflation—a daring move given Brazil’s history. The cause of price increases, after all, is not an overheating economy, but the real’s fall, rising taxes and the drought. The textbook response would be to “see through”—ie, ignore—this inflation.
But soft money would hurt, too. It would cause the real to fall further, and thus accelerate increases in the prices of imported goods. Foreign debts, which Brazilian firms and local governments have accumulated due to the lower interest rates on offer, would become harder to bear. Data collected by the Bank for International Settlements show dollar debts rising from $100 billion to $250 billion over the past five years. But the burden in local-currency terms has jumped much more, from around 210 billion reais to 655 billion reais (see chart 2). The state lends a hand here too, with the central bank offering swap contracts to insure firms against a falling real. The scheme cost the bank 38 billion reais in the second half of last year alone.
Faced with these poisonous options, a middle path is most likely. Interest rates will be too high for households and firms, so subsidised funding will grow. But they will be too low to protect the real, so swap costs will rise, too. Both subsidies put extra pressure on the government’s finances. By mixing monetary and fiscal policy in this way, Brazil is slowly rendering both ineffective. In an economy heading for recession, that is not a good place to be.

terça-feira, 4 de junho de 2013

O fim do "modelo economico" brasileiro (The Telegraph): mas houve algum modelo, alguma vez?

Acho que este articulista, do respeitável jornal inglês The Telegraph, se engana conceitualmente.
Desde 2003 o Brasil não tem qualquer modelo, nenhum, necas de pitibiribas, zero...
Os companheiros primeiro adotaram, sem dizer, todos os grandes mecanismos e ferramentas da política econômica anterior, desavergonhadamente (mas acertadamente, graças ao Palocci, é preciso reconhecer). Roubaram o software dos tucanos, como já disse José Carlos Mendonça de Barros, sem pagar royalties, nenhum direito autoral, e isso mesmo acusando uma "herança maldita" que eles mesmos tinham criado com suas receitas esquizofrênicas de política econômica aprovadas no congresso de Olinda (dezembro de 2001) do seu partido companheiro (e felizmente nunca aplicadas inteiramente).
Depois que o companheiro neoliberal se foi, por outras patifarias que tem mais a ver com seus costumes e vícios degradados do que com a política econômica, esta começou a se deteriorar lentamente, sob as mãos e as patas dos novos responsáveis econômicos, keynesianos de botequim e provavelmente nem isso, pois nunca tiveram uma educação econômica razoável, se contentando com o software alheio e o temor de fazer errado.
Como o Brasil surfou na bonança mundial, e chinesa, tudo andou bem durante algum tempo.
Agora os maus tempos chegaram, e junto a consequência de sua inação irracional em preparar o Brasil para esse fim de bonança: os companheiros não sabem o que fazer e ficam improvisando no puxadinho setorial, sem qualquer ação coerente sobre o conjunto ou no contexto adequado. Uma redução de impostos para os amigos da corte aqui, uma proteção tarifária ali, este crédito subsidiado para os nossos amigos, aquela concessão enviesada acolá, enfim, uma panóplia de medidas desconectadas que só poderiam dar no que deu: em nada.
No final de tudo, as empresas ficam onde estavam: sem horizonte seguro para investir, e com a mesma alta carga tributária de sempre, pois os companheiros são incapazes de fazer uma verdadeira reforma fiscal que desonere a produção e estimule o investimento.
Eles simplesmente não conseguem se libertar de seu vício fundamental que é amar o Estado sobre todas as coisas. Vão ficar com um Estado moribundo e nós, trabalhadores e consumidores, no pior dos mundos possíveis.
Paulo Roberto de Almeida

Brazil faces 1970s stagflation as resource boom wilts
The Telegraph,  30 May 2013

Brazil has been forced to tighten monetary policy to curb inflation despite a slump in growth and a manufacturing crisis, raising fears that the country’s economic model is breaking down.



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quarta-feira, 15 de agosto de 2012

Capitalismo? De Estado? Certamente... - Financial Times

Financial Times, July 9, 2012 7:33 pm

Brazil: After the carnival

Brazilians are starting the debate on whether to embrace a state-led economic model
Drought in Amazon, Brazil, November 2010. The Amazon region faces a dry season every year, but the 2010 drought was the worst in over a century.©Eyevine
A hard walk: while many Brazilians rely on river ferries, much infrastructure of the same vintage is rickety and needs a massive overhaul
Chen Zhizhao, the newest addition to Brazil’s champion football club, Corinthians, already seems at home at the team’s training ground on the edge of São Paulo.
Recruited this year from a club in Guangzhou, southern China, the young footballer has quickly started speaking some Portuguese.





“Everything is good, the food and the air, the weather is good here,” he says.
Although the club claims he was recruited purely for his talent, most suspect the real role of Mr Chen, the first Chinese player to join a major Brazilian team, is to lift the club’s profile in China so that it can sell its distinctive black-and-white team merchandise there.
Corinthians may not realise it but, through its canny use of an area in which Brazil has a natural competitive edge – football – to tap the Chinese market, the club in its own small way is providing a pointer for a country whose economy suddenly seems to have lost direction.
Elsewhere, exporting success from such kinds of innovation has proved elusive. Over the past decade, Brazil has largely relied on exports of commodities such as soy and iron ore to fuel spectacular economic growth, which peaked at 7.5 per cent in 2010.
But this growth has slowed to a crawl and the world’s second-largest emerging market is expected to expand only 2 per cent this year. Much of its industry, in spite of a seemingly endless series of stimulus measures, has become globally uncompetitive. Only the consumer seems to be holding the fort but even here, there are signs of fatigue. Despite surging growth and investment, infrastructure and education have lagged behind and their weakness has prevented the country from realising its full potential.
“This is where you’ve got to navigate without a lighthouse,” says Raghuram Rajan of the University of Chicago and a former chief economist of the International Monetary Fund. The challenge, he says, will be for countries to take what has been learnt in the west without “abandoning the western model totally”. “How do you get the good side of markets without being exposed to the underside?”
Much of Brazil’s remarkable run of prosperity was characterised as the “Lula model” of development, named after former President Luiz Inácio Lula da Silva. During his two terms between 2003 and 2010, he saw the size of Brazil’s middle class increase by more than 30m people through welfare transfers, rising salaries and increased consumer credit.

As growth slows focus shifts to the home front

As in Brazil, so in other emerging economies: growth is slowing, and as it slows it is raising serious questions about the economic future of the developing world, writes Stefan Wagstyl. Growth in emerging markets’ gross domestic product will slow this year to 5.7 per cent, from 6.3 per cent in 2011, according to the International Monetary Fund.
That is well above the 1.4 per cent increase forecast for the developed world. But it is a hefty discount to the 8 per cent recorded up to 2008. The decreases are driven mainly by a slowdown in the developed world, principally Europe.
Commodity exporters, headed by Russia, have profited mightily from the price boom that followed the 2008-9 economic crisis. But the recent price fall is starting to hit their economies.
Developing countries also face growing domestic difficulties, however.
In India, for example, decades-old bottlenecks in infrastructure and labour supplies have kept inflation high, forcing the central bank to maintain high interest rates even at the cost of hurting investment. Elsewhere, notably China, Brazil and Turkey, there are concerns that recent loan growth – fuelled by sustained low credit flows from the west – has generated unproductive investments and will trigger rising bad debts.
Policy makers have contained these threats – so far. But slowing growth increases the dangers. Even a slight slowdown can exert a disproportionate impact on sensitive credit-fuelled sectors. Once a few investors run scared, others can quickly follow.
In the long run, the rise of the emerging economies is likely to continue. Investment flows to countries where it can achieve the best returns – and these are still to be found in the developing world with opportunities for low-cost exports and for local domestic market growth.
The developing world’s growing middle classes will not want to be denied their desire for western-level living standards. The pace of emerging market growth is likely to be slower than 8 per cent, however. It will also, most likely, depend less on exports to the rich world and more on emerging-world demand, both within countries and in expanding south-south trade.
However, the adjustment could be hard, especially for countries with poor reform records, not least Russia. Much will also depend on the availability of cross-border credit and investment. The bigger the financial shocks from the eurozone and other as-yet-unexploded financial bombs, the harder the transition will be.
Helped by the windfall of rising commodity prices, the country also tamed its old enemy, inflation, and reaped the benefits of macroeconomic stability, accumulating reserves of more than $370bn. It survived the 2009 economic crisis with gusto, posting the highest gross domestic product growth in decades in 2010.
Furthermore, this year President Dilma Rousseff, a taciturn technocrat compared with Mr Lula da Silva’s rough-edged unionist charisma, pushed unemployment down to record lows of below 6 per cent and increased the minimum salary. This has rewarded her with a staggering personal approval rating of 77 per cent.
But the Lula model, skewed towards state-led consumption, also lacked an effective strategy to increase the capacity of the country’s infrastructure or education systems to handle the surge in growth. Inflation, the nation’s longstanding curse, which hit 2,477 per cent in 1993, began to return, forcing the central bank last year to increase interest rates to levels that brought the party to an abrupt halt.
Brazil’s strong currency also squeezed industry, sending it into recession. Auto companies have begun suspending or laying off workers, while private banks are holding back on lending after defaults hit a record high during May.
“We are exactly in this turning point,” says Mr Goldfajn. “There was a need to decelerate the economy, so wages continued to rise but prices could not follow and that meant margins got squeezed.”
The slowdown, which is being worsened by softening commodity prices and the eurozone crisis, has reopened a debate about why Brazil seems unable to grow faster than its long-term trend growth of about 4 per cent before inflation kicks in.
Perhaps most disturbing is an astonishing lack of international competitiveness of many Brazilian industries, even in sectors that should enjoy a natural advantage.
Gerdau, Latin America’s largest steelmaker, blamed weak profit growth in its latest results on an increase in raw material prices – iron ore, mineral coal and scrap. This is even though Gerdau is based in a country that is one of the world’s biggest exporters of quality iron ore.
The company spoke of the “deindustrialisation” of the steel supply chain in Brazil, as cheap imports from Asia undercut its products. Indeed,Carlos Ghosn, chief executive of Nissan-Renault, complained last year that it was cheaper for him to import steel made in South Korea from Brazilian iron ore, than to buy local products.
Most critics also point to infrastructure, particularly Brazil’s roads and ports, as another impediment. The cost of exporting a container from Brazil is $900, more than double the price from China and 1.5 times that from India. Meanwhile, importing costs are almost triple that of China and nearly double that of India, according to the World Bank.
“It is a disaster, ships sometimes have to stop for 90 days,” Eike Batista, Brazilian oil and logistics billionaire, told an investor meeting this year.
The other huge bottleneck in Brazil is skilled and semi-skilled labour. In the global “Pisa” test measuring average reading and mathematics scores, Brazil ranks near the bottom of the league tables, behind many other developing countries.
Thanks partly to poor education, productivity in Brazil has increased by only 1.5 per cent a year over the past decade compared with 4 per cent in China, according to Marcos Troyjo, of Columbia University.
A shortage of local professionals is now affecting growth industries. Ricardo Guedes, head of recruiter Michael Page in Rio de Janeiro, says some clients in the booming oil industry have been so desperate to fill positions they will pay almost anything. “For a couple of positions, we don’t even mention salary.”
Many of Brazil’s problems, however, are not bad ones to have. They often stem from rapid economic growth, preferable to the stagnation afflicting Europe, the US and Japan.
Indeed, the crisis has cemented a consensus in Brazil about the need for greater investment. At current levels of about 19 per cent of GDP, investment is short of the 22 per cent Brazil needs to expand its economy at about 4 per cent a year.
The government’s response to this issue has been more constructive than in 2009, when it unleashed massive state lending, analysts say. This time it has encouraged the central bank to lower Brazil’s extraordinarily high benchmark interest rate – a legacy of its history of runaway inflation. This has fallen to a record low of 8.5 per cent and is expected to drop further this week.
Lower interest rates will help to foster greater investment in infrastructure. Until now, investors were able to earn such high returns from short-term deposits they had little incentive to invest in riskier, long-term infrastructure projects. In addition, companies could not afford to borrow long term because rates were too high.
“There is a clear perception we need to get the investment going, the difficulty is how,” Itaú’s Mr Goldfajn says.
Among the challenges are an unwieldy government bureaucracy and tax system– even when the funds are available for investment, projects often get stuck because of red tape. Vale, the country’s largest miner, for instance, complains that it takes more than three years to get environmental clearances for its mines.
There is also the problem of a lack of savings. Brazilians only save 16 per cent of GDP, a fraction of the levels in China and India. The Brazilian government is a big part of the problem – it taxes like a European government yet wastes most of it on salaries, pensions and interest payments. Brazilian public revenue is equal to about 36-38 per cent of GDP compared with about 25 per cent in South Korea.
But shrinking government will be hard. As analysts point out, big government is a choice the Brazilian voter has made. Even faced with the decline of the European economies, the average Brazilian is still more likely to opt for a state-led model, such as China, than pure US-style, free-market capitalism.
“It used to be that all of Latin America looked to Europe as its ideal model, and that one day Brazil, Argentina and Colombia would become a Portugal, Italy, Greece or Spain, if it was lucky. But now, given the eurozone crisis, that is no longer the case. And, increasingly, China is becoming a more attractive or plausible model,” says a Brazilian diplomat.
To fill the investment gap, therefore, Brazil must attract foreign capital. Foreign direct investment hit a record $66.7bn last year, up from $48.5bn in 2010, but outsiders will demand adequate returns to continue coming. In the long run, these returns can only come from improvements in productivity. Brazilians and Brazilian companies will need to work smarter and become more innovative.
Private sector initiatives, such as that on display at Corinthians, offer hope. Even here, however, some of the comments from Mr Chen on the differences he has noticed between Brazil and China say much about why South America will not be another Asia anytime soon.
“In China, not much people [are] interested in football. The children are studying too much.”
With additional reporting by John Paul Rathbone and Jonathan Wheatley in London

terça-feira, 14 de agosto de 2012

Brasil: um pais que volta ao passado? - Susan Kaufman Purcell

Brazil creates its own economic woes
The Miami Herald, Thu, Aug. 02, 2012

Brazil’s economic future does not look nearly as bright as its recent past. Since 2010, when the country registered GDP growth of 7.5 percent, its economy has slowed dramatically. Last year, the country’s GDP growth reached only 2.7 percent. Brazil’s central bank expects growth for 2012 to reach only 1.9 percent, while Credit Suisse projects only 1.5 percent growth.
The most obvious cause of Brazil’s poor economic outlook is the collapse of the commodities boom, which had greatly benefited Brazil — a major exporter of energy, raw materials and food. The boom had been driven by China’s increasing demand for these commodities as a result of a decade of annual GDP growth of 9-11 percent. Brazil became a major exporter to China. Unfortunately, the U.S. recession reduced U.S. demand for Chinese exports, which in turn caused the Chinese economy to contract. Europe’s economic meltdown exacerbated China’s problem. As a result, Brazil’s exports to China decreased by more than half during the first six months of 2012.
New breakthroughs in energy technology also have begun to raise questions about Brazil’s ability to become an energy superstar, despite the country’s discovery of billions of barrels of offshore “pre-salt” oil and gas reserves. For years, energy experts have known that vast quantities of oil and gas were trapped between the layers of shale rock deposits. A process called horizontal drilling has brought down the cost of recovery from between the layers of shale.
As a result of horizontal drilling and a process called “fracking,” whereby large amounts of water and chemicals are injected under pressure into the shale, the recovery costs have dramatically decreased.
The estimated cost of producing a barrel of oil from shale is $70. This currently is less than the cost of producing a barrel of oil from Brazil’s pre-salt reserves, which some analysts have placed at over $100 per barrel.
Furthermore, shale exists in abundance. The largest deposits are in the United States, whose production of crude oil has increased 15 percent since 2008, making it the world’s fastest-growing oil and natural gas producer. The U.S. Energy Department projects that the daily U.S. output of oil could reach almost seven million barrels per day by 2020.
Others think that it could ultimately hit 10 million barrels per day, which would place the United States in the same league as Saudi Arabia. Brazil currently produces about 2.5 million barrels per day of oil.
The accessibility of oil from shale means that there will be abundant oil for years to come. This also means that world oil prices will continue to decline. Given this situation, Brazil needs to quickly begin reducing the cost of producing its pre-salt oil. Unfortunately, Brazil is going in the wrong direction, as the government continues to insist on demanding a high percentage of local content in the production of ships, drills and other assets needed to exploit its pre-salt reserves.
Growing Brazilian protectionism is also making Brazilian products increasingly less competitive. Brazil recently backed away from an automotive agreement with Mexico, forcing Mexico to limit the number of cars it exports to Brazil. The reason — Brazilian cars could not compete successfully with those produced in Mexico because of higher Brazilian costs, despite the cost of transportation and delivery from Mexico.
In addition, Brazil remains locked in Mercosur, a dysfunctional and increasingly protectionist common market in which political criteria take precedence over economic ones regarding trade decisions within the bloc. Compare this with the recent decision by Chile, Peru, Colombia and Mexico to form a “Pacific Alliance” to reduce trade barriers among themselves while trying to increase their trade with Asia.
Some of Brazil’s economic problems have external causes. Nevertheless, Brazil’s growing economic protectionism and its failure to adapt more quickly to a changed global economic environment are problems that Brazil could and should solve.
An obvious place to start is to reverse its protectionist policies and instead implement the long-delayed labor, tax and education reforms in order to reduce the cost of doing business in Brazil and increase the country’s international competitiveness.

Susan Kaufman Purcell is the director of the Center for Hemispheric Policy at the University of Miami.

domingo, 4 de dezembro de 2011

National Public Radio on Brazil -

Uma entrevista com um jornalista do New York Times, Anand Giridharadas, sobre a economia brasileira: http://www.npr.org/templates/story/story.php?storyId=142943026 

What The U.S. Can Learn From Upbeat Brazil

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November 30, 2011
I'm Michel Martin and this is TELL ME MORE from NPR News. Coming up, we'll talk about that tweet sent by a Kansas high school senior that was heard, well, not quite around the world but in the Kansas governor's office. It set off a controversy about free speech and manners in the digital age. We will talk to the student who sent it in just a few minutes. But first, we want to talk about the economy.
At this point most of us are painfully aware of the gridlock in Washington over economic issues. In fact, earlier this week Fitch Ratings Agency changed it's outlook for the U.S. from stable to negative because of the failure of the congressional supercommittee to come up with a deficit reduction plan. And Europe's difficulties in coming up with a coherent recovery and currency strategy is also dominating the headlines. But what has not been getting so much attention is how far some other countries have come in getting their economic houses in order.
And now, some analysts are wondering if these countries might have a thing or two to teach the U.S. about getting our economic priorities straight. One example some are pointing to right now is Brazil. During the last decade Brazil has gone from experiencing a debt crisis with spiraling inflation and unemployment to becoming an economic powerhouse. New York Times columnist Anand Giridharadas covers this. He covers developing countries. He recently returned from a reporting trip to Brazil and he's going to tell us more about it.
Welcome back. Thanks so much for joining us once again.
ANAND GIRIDHARADAS: It's great to be with you.
MARTIN: So now, Anand, Brazil is one of the so called brick countries: Brazil, Russia, India and China that are considered sort of the leading edge of the developing world. What drew you to Brazil and to write about their economic recovery?
GIRIDHARADAS: I think what fascinated me - I spent about a week there and, well, just talking to a lot of people about how Brazil has gone in a very kind of short blink of history from being this country that Charles de Gaulle famously called the country of the future that always will be, to being very much a country of the present. The economy is booming. Business is booming. There's private equity in hedge funds and all of that stuff, but inequality which is terrible in Brazil, is actually going down at the same time.
And so, they, you know, at least from the outside seem to have a bit of it all right now and I spent time asking people how did this happen. And what really struck me and then began to depress me about my return flight home was that they were very much in the same situation we were in. They had a very bad kind of funked-out economy and they had really serious ideological divisions. The people who believed in the free market and the people who believed in kind of unions and government regulation and action for the poor didn't speak to each other and took turns kind of pushing one extreme policy to the other and then they all got over themselves.
They had first President Cardoso and then Lula who was a trade union...
MARTIN: President Luiz Inacio Lula da Silva, who everybody calls President Lula.
GIRIDHARADAS: ...who was a militant union leader, further to the left than anybody in the American congress who said, you know what? I still have those commitments to helping the poor but I'm going to add to them a new commitment to accept the market to make the world easier for business because there is no justice without growth also, and he was in a way just a leading edge of a lot of Brazilians from every side, saying, you know what? Let's get ourselves.
Let's make facts more important than principles and let's start to rebuild an economy simply based on the ideology of whatever works.
MARTIN: You make the point in your piece that, you know, the kinds of divisions that we have had in this country and, you know, pro business policies versus the idea of reducing inequality that Brazil did both at the same time. Now one of the things you said is that everybody decided to get over themselves. How did they decide to get over themselves? What made them get over themselves?
GIRIDHARADAS: I think there are a few elements and this is not just in Brazil. You see this in India, you saw this in China; which is, that in a way they all had crisis moments. In Brazil it was just this prolonged slog of unemployment, inflation; people were literally having to go to the bank everyday. And I think that kind of walking up to the brink convinced people to get over themselves. But it was also leadership and it was also, you know, in logic they call it an argument against interest. The most persuasive argument someone could make is an argument against their own interest because you say wow, that person must really mean what they're saying.
And you have leaders in all of these cases who made profound arguments against interest, whether it's a union leader saying the market is good, or I met a lot of business people in Brazil who said equality is our problem too. If we have rampant inequality in this country we won't have enough customers. We'll have 20 million customers instead of 200 million. We will be living in fortresses afraid of crime and this country will never be a great country.
You need people to make argument against interest and to say you know what? I'm over here, but I like a little bit of what's being said over there and I accept it.
MARTIN: You saying your piece of the numbers tell the story that according to the World Bank gross domestic product or GDP growth last year was 7.5 percent. According to the planning ministry, estimated growth this year will be around 3.5 percent, which is, you know, something that's being experienced around the world. How are Brazilians feeling about their lives? I mean, sometimes that, you know, the numbers say one thing but people feel another thing. Do Brazilians feel better about their country?
Do they feel optimistic about their futures that they're kind of in this in it together?
GIRIDHARADAS: It is when I landed from the moment I landed I was struck by the fact that the kind of emotional atmosphere was exactly the ying-yang opposite of what you feel in this country right now. Just as in this country the kind of fundamentals and the numbers lead to a kind of culture, an emotional environment that we feel in the air. So, it is there but the opposite. It feels to be honest younger than the U.S. and it is demographically younger.
Half the population under thirty or something like that. You know, not very long ago when inflation was in the 1,000's of percentage points it was not a country where it was easy to believe in the future. Now, they really believe in the future - at the very moment when this country is losing it's belief in the future.
MARTIN: If you're just joining us you're listening to TELL ME MORE from NPR News. We're speaking with New York Times columnist Anand Giridharadas. He's talking about what the U.S. might be able to learn from developing countries particularly Brazil where he just returned from a reporting trip. In the time we have left Anand talk a little bit if you would about India and China. You know, Brazil and India are both democracies and it requires the kind of, you know, what you're talking about requires people from different political parties, different ideologies to figure out a way to agree and move forward together.
China has a very different system of governance. So, tell me a little bit if you would about India and China, which are both such big players on the economic stage right now.
GIRIDHARADAS: I think what you're pointing to is actually something that's very important that doesn't get talked through enough. I think a lot of these countries - and China's a slightly different case because of the authoritarian system, but certainly India and Brazil and to an extent China - are doing something fundamentally different from what the West did, because you have to remember when the West was going through the changes that India and China and Brazil are going through in terms of moving from rural to urban, fostering development, building capitalism, building a regulatory state, most people in the West, in Western countries, could not vote.
Women couldn't vote. A lot of minority groups couldn't vote. There were land qualifications. And so these very big difficult reengineering to the society in the West, a lot of it was done before you had to ask everybody's permission. What's now happening in Brazil and India is you're doing those same things that we did maybe a 100 years ago but you have to do it with everybody voting and that actually leads perhaps to a different model of development in which this idea of inclusive growth as the Indian leadership calls it, is actually baked in from the beginning and is not a slogan.
But it's the idea that, when you try to do the construction of a capitalist market economy with 100 percent voting rights, it fundamentally looks different and, in some ways, it makes us think that we're at a disadvantage.
MARTIN: Well, before you go, Anand, the implicit message of your piece is that there are lessons to be learned, particularly by the U.S. from the example set by, particularly, Brazil, which has had a lot of these factors. I mean, we didn't talk about race, but you know, racial division is certainly a part of life in Brazil, you know, grotesque economic inequality, sluggish growth, you know, debt and so forth.
And you talked about the need for people to sort of move past their ideologies and embrace different points of view and be pragmatic and fact driven about the economy and there's an implicit criticism here of the U.S. that, you know, the U.S. should do this.
You know, President Obama said during the campaign, famously, in this exchange with - you remember Joe the plumber. He said, look, I think things work best when we spread the wealth around a little bit and then that became something that his political opponents used to bludgeon him with. He's still trying to kind of maintain this point of view in kind of reaching out across the aisle to the point where members of his own political party are criticizing him.
What do you think, based on your reporting, not just in Brazil, but also in India - what does it take to break that gridlock? Is it a powerful personality? Is it, what, people from the business community reaching out? What is it? Is it people outside of government demanding that they do so? What is it?
GIRIDHARADAS: Let me take a moment to kind of make the implicit point explicit and you could talk about what leaders need to do, but I'm going to skip that because I don't really have much hope in them right, at least.
Let's take a moment to ask your listeners, who are educated, thoughtful people, to pause the blame on Washington, who deserves to be blamed, but let's just put that on pause and ask each of ourselves in what way we might need to get over ourselves.
What can each of us do to get out of this hole? What ideas that we've clung onto for 40 years can we accept are no longer valid in light of new realities? What principles can we let go of? What idea from the other side, even within our own family debates, can we say have some sense?
And we need to look around and say, whether it's by working harder; whether it's by being better parents who, you know, unplug the video games; whether it's any number of things that actually the government has no control over; whether we are living up to what we need to do to get this country out of what is a very, very deep hole right now.
MARTIN: OK. So I'm going to put the question to you. What are you doing to get over yourself?
GIRIDHARADAS: That's a great question. I'm, you know, sitting on NPR. No. I think, for me, it's a question of - I've spent a lot of time this year traveling to parts of this country. You know, I live on the East Coast. I live in places where, although I don't take public stands, I'm surrounded by liberals and I've spent a lot of time in this country talking to people who have very different views than the people I live around and trying to see kind of what's in common beneath those conversations.
And you know what? There's a lot in common. It requires some intelligent reframing to make people see commonalities that they don't otherwise see. To me, the Tea Party and the Occupy movement are, in many ways, saying the same thing, but it requires a bit of imagination to get people to see that.
MARTIN: Anand Giridharadas is a columnist for the New York Times. He's the author of the book, "India Calling." He reports on developing countries around the world and he was kind enough to join us today from the studios at Harvard University.
Anand, thank you so much for speaking with us.