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Guest Post: The Bloom Has Fallen Off The Brazilian Rose
Submitted by Lucas Jackson,
“Don’t cry because it’s over. Smile because it happened.”
-Dr. Seuss
There have been a number of things that have happened in Brazil over the last year or so that could have sparked some to say that the good times experienced during the Lula years were officially over.
Perhaps it was the way the government handled the Petrobras gas price increase. Perhaps it was the way the government pressured the banks to lower fees. Perhaps it was the way the government pressured the telephone companies. Or perhaps it was the way the government decided to handle the renewal of certain utility contracts. All of this, and other issues to be sure, had the feeling of the left-leaning populist governments of the past, not the forward looking socialism Lula and Dilma have been championing.
But while these events may have been off-putting for investors, they were ostensibly for the benefit of the lower/emerging classes. With headline inflation running perniciously high, Dilma obviously felt it was necessary to try and micromanage lower prices where she could, sacred cows be damned.
So with Dilma seemingly working hard to limit inflation on the emerging classes, why have these same people decided to protest over the increase of bus fares in Sao Paulo by R$.20? Hint, it’s more than just inflation.
Something to Lose
First things first, the media loves to tout the statistic that Lula and to some degree Dilma helped bring over 40mm Brazilians out of poverty and into the ranks of the middle class (they like to give them the full credit, deservedly or not, and conveniently ignore President Cardoso and the Plano Real). If this number is indeed true, it means over 20% of the country now has something significant to lose for the first time in their history. More Brazilians than ever have access to credit, better housing, better education and more plentiful jobs. This is the good news.
The bad news is, much of what has brought these gains has come from foreign money. What makes me say this? Let’s look at Brazil today and Brazil in 2002.
(source Estadão)
Financialization – Hot Money Comes In, Hot Money Goes Out
I remember quite clearly what happened when Lula was elected in October, 2002 – investors panicked! Don’t believe me, check out the chart on the BRL.
So what were some of the issues facing Lula and Brazil that investors were so worried about in 2002?
- Corruption
- Inefficient government – lack of basic services
- Inefficient/unfair tax system
- High inflation
- Low education standards
- High level of wealth inequality
And what, pray tell, are the issues the protestors are upset about in 2013?
- Corruption
- Inefficient government – lack of basic services
- Inefficient/unfair tax system
- High inflation
- Low education standards
- High level of wealth inequality
So what changed to give Brazil the luster of almost-developed world status? When the powers that be decided to draw a line in the sand in Brazil to fight the Thai Crisis in 1998/1999, Brazil began to look like a country that mattered on the world stage. By late 2002/early 2003, the conservative fiscal effects of the Plano Real made the Brazilian government look less risky than ever before.
All of this combined to make Brazil a destination for foreign capital. Like never before.
And boy oh boy did the money roll in!
Equity IPOs boomed from 2003 until 2007 or so. Yields on government debt fell and foreigners bought more Brazilian debt than ever in the country’s history. The net effect of this was that a lot of people got rich and the credit tap – turned off for decades – was suddenly turned on. More than this, it was turned on for the maids as well as the homeowners.
Credit cards suddenly became something almost anyone could have. Plentiful jobs brought about by growing exports and rising domestic sales meant paychecks could be used to secure more credit. Government programs designed to encourage low-income home purchases (Minha Casa Minha Vida) were introduced as a way to get folks out of the favella and into the formal economy.
Almost overnight, the fast money was everywhere and people were using it. The domestic consumer was shopping like never before. Real estate prices were rising by unsustainable levels (and still are in some areas). The government was spending more money on the poor than ever before. In short, the country was booming – not because of the discipline of the Plano Real, more productivity, more efficient government or significant improvements in education (in fairness, progress was made in all these areas, but not enough to account for the spectacular growth seen in the IBOV - from 10,000 when Lula was elected to over 74,000 at the peak in 2008). Brazil was booming because the country was finally invited into the globalized party of growth via credit creation.
But looking at the market today, one would be forgiven for thinking the hot money is decidedly heading for the exits.
The IBOV recently dipped below 50,000 which represents about a 33% fall from the post-2008 highs. Bond yields have recently been on a steady march north. And despite the government’s best efforts to contain the move via the swaps market, the BRL keeps leaking lower – currently trading at 2.17 having been as high as 1.94 this past March.
Enjoy the Ride While It Lasts – ‘Cause It Never Does
Which brings us to the protestors currently taking to the streets all over Brazil. With better access to credit, housing, jobs and overall standard of living than probably anyone in their family has ever experienced, you would think that the average Brazilian would have little reason to hit the streets.
And yet, they are.
While the credit-fueled boom has been great and looks likely to continue for at least a little while longer, the reality of a government that has made little real progress improving the overall standard of living is becoming all too obvious.
The protestors are frustrated. Frustrated with persistent inflation – that hits them much harder than the upper classes who in many ways benefit from it. Frustrated with corruption – while the Brazilian congress tries to pass a law that would limit the number of corruption cases that can be brought. Frustrated with inefficient government – the infrastructure development for the World Cup and Olympics is already running up against cost overruns with projects of questionable long-term value. But mostly frustrated that due to all of this incompetence, they could lose all of the gains they made since 2002.
Dilma faces a reelection in 2014. Adding more access to credit probably won’t help her chances of reelection at this point. Inflation is already running too high. If she is to reverse her recent decline in popularity and address the concerns of the protestors, she will have to make real progress in changing the Brazilian political landscape writ-large.
She still has the popularity, time and executive skills to make a big effort in this regard.
However, changing the nature of any nation’s political system is difficult, to say the least.
Changing Brazil’s well-established rich/poor, connected/unconnected, boom/bust political and financial system will be difficult in the extreme.
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Is that an infectious desease? Could it spread here?
https://www.facebook.com/photo.php?fbid=10201042725857566&set=a.27281502... I am doing my best. Sao Paulo yesterday and today. Rio tomorrow and a general strike on the 26th. What do we do? Nada. So far.
http://www.rollingstone.com/politics/news/michael-hastings-rolling-stone...
What's better than a Brazilian Rose on a piano?
Tulips on an organ.
I had to dig to get any desciption of the actual circumstances of the single car accident:
"at approximately 4:25 a.m. in Hollywood... the vehicle crossed the median, slammed into a tree and burst into flames; the driver was pronounced dead at the scene. According to KTLA , coroner’s officials said the body was too badly burned to make an immediate identification."
Photo:
http://www.latimes.com/local/lanow/la-me-ln-melrose-collision-20130618,0,7080273.story
WTF was he doing on the road at 4:25 am?
Hitting a tree?
There are trees in Hollywood??
It would be the best thing to ever happen to the US. We need a depression to save us morally plus it would help solve the obesity problem! http://tinyurl.com/mem7o7x
"Could it spread here?"
Good question if you mean the U.S. when you say here. Americans have become complacent, fat, lazy and proudly ignorant. Most all still have that temporarily embarrassed millionaire mindset that keeps them obedient to their owners. Sure, they will grumble a lot on boards like this, but most have this "run off to my doomstead and shoot at strangers" mentality instead of a get into the street and take on the owner's minions mindset. That will make it easier for the owners to keep the U.S. cattle compliant.
Plus, the cattle in the U.S. are very hierarchical. As long as there is a class just a little lower than themselves they are quite happy to look down upon those folks and see themselves as much better than them. So, if the lowest of classes starts protesting in the streets, those folks who see themselves as making $1000 more a year, and therefore so uch better than the poor trash out there protesting, will side with the owners instead of the poorer folks. That also works in reverse, like when protesters burn and destroy locally owned businesses in their own neighborhoods instead of going to the neighborhoods of their owners. That goes back to the fat, lazy and proudly ignorant problem.So, I have no true answer to your question, but unlikely is is the likely answer.
The Braziians and their enthusiasm. They always say they love Brazil as they tell you they are an illegal alien. Go back there and "fix it."
They also endlessly brag about their football/soccer talents but they cannot beat the Dutch, Italians, Germans or Spaniards in the World Cup. Sad because they want MOAR govt.
The people want less wealth inequality.
Their mistake is believing the government will address that problem on their behalf.
Ignorance and naivete, a potent combination. But at least they can feel something is very very wrong!
They can feel something is wrong, but through ignorance, naïveté, jealousy, etc., they are only going to make it worse - by begging the government to fix it, fix it, fix it.
A Chilean friend of mine thinks a revolution is in the works, just not quite yet. I'm not so sure, I think, more likely, a palace coup which changes nothing, but manages to pacify the masses a while longer, a la Egypt. What's surreal is that none of these problems are new at all, Brazil has had them for decades, but only now are they reaching the populist revolt phase. Surreal, but hardly abnormal, I suppose.
Fuck you Bernancke
It's tough, even for the Bernank, to print a 'BRAZILLION DOLLARS'...
Good one Francis. I truly appreciated the Brazilian grandmother's link...
BraSil not Brazil. Doubt it, look at their currency issued by Banco do Brasil. With a Z is our spelling not the Brasillians. Picky, picky but if you go to Brasil you will get corrected. Very proud of THEIR language. Milestones
And what are America's problems today?
and...
While the credit-fueled boom has been great and looks likely to continue for at least a little while longer, the reality of a government that has made little real progress improving the overall standard of living is becoming all too obvious.
Low education standards help to create reliable compulsive consumers.
The slave owners want the cattle dumb, stupid and proudly ignorant. It better serves their interests, especially when the cattle think they are free they can get another app for their phone that they can stare at all day instead of looking up and seeing what's going on.
"The slave owners want the cattle dumb, stupid and proudly ignorant."
In the US it's called the Democrat Plantation. They've been in charge of Educating our children into a slave mentality for 3 generations.
Uh...yeah, right. The Rethugs have their own plantation method too. They just prefer to use religion instead of the state to keep the slaves in line. Different means, same outcome.
Is the Govt forcing you to go to church you dimwit? In fact we no longer have freedom of religion in the US when a govt forces on churches something which is inherently against their religious beliefs.
Try running for any office in the country as a self-proclaimed atheist....
Whats the last time you remember hearing a religious leader criticize the War on Terrorism, the Military Industrial Complex, or American Empire?
Never???
Not true, not even the pope. I can give you 100's of other examples but you already seem to have your mindset established.
?? Whats not true?
That religious leaders didn't criticize the War on Terrorism, the Military Industrial Complex, or American Empire. I'm answering "your" question.
"Try running for any office in the country as a self-proclaimed atheist...."
Ever hear of Jesse Ventura?
or Peter Stark D-CA, or Kysten Sinema D-AZ?
Probably not because there already have been many self-proclaimed atheists in office.
Great, 3 examples out of 585 positions, sounds like a winning strategy...
Research the rest yourself, there are many. We don't need more atheists in office we need less statists. Whether you're an atheist or not I know your a lib from previous conservations. Why do you guys only like democracy when it suits your purpose?, like voting for bigger Govt. Same with the Constitution.
And you have demonstrated that you are intellectually bankrupt asshat from our earlier conversations...
You have a remarkable ability to puts words in other peoples mouths...
As for researching atheists, go ahead, you are the one that challenged my assertion that run as an atheist is political suicide by and large...
Correction: Low education standards help to create a reliable compulsive voting block. They only consume what the Govt gives them.
Plus iStuff. What's good for Apple is good for America.
Part of the slave mentality is never blaming the enabler or giver of "free" stuff.
From the hand of America to the hand of Apple.
Who's compelling you to buy a product? Unless maybe it's part of Obamacare in which case the govt is compelling you.
What does Apple want: consumers who ask questions, or consumers who reflexively buy?
I know, you just can't help yourself. Why don't you worry about what your elected officials want from you instead. They make the laws.
Let me see if I'm understanding your logic:
1) Either a a poorly educated American citizenry benefits the state or it benefits capital.
2) A poorly educated American citizenry benefits the state.
3) Therefore, a poorly educated American citizenry does not benefit capital.
Is that right?
Oh goodie! A syllogism! Can I play?
Of course!
You inadvertantly told us what you view as the problem, Capitalism. Which is what you were indoctrinated into believing by the leftist "educators" of the 60's. Don't keep responding to me, I don't want to take over the thread.
No, I'm just trying to understand your logic. Was I correct?
Commercial advertising first attempts to invoke an emotion in you, and then, it promises to sell you that emotion in the form of a product.
Want to be a 'sexy' guy? You have to buy a motorcycle and wear Ax body spray (apparently).
Since we are in a borderline fascist state, I think its safe to say Corporate and Govt goals are highly aligned.
Yes - I would simply disagree with the premise in my constructed argument.
Yes, selling a "product" is the sole purpose of any marketeer and there's nothing wrong with that. Whether he's standing on a box on an intersection or it's aired on TV to 300 million people. The problem is when your govt limits your choices by creating a false market or compells you to buy something that's not in your best interest.
Is deception in marketing wrong? You still haven't responded to my last question.
Deception from a marketeer is to be expected. Do you believe every pizza box that claims to be "the best"?
Then a marketer benefits from consumers less able to perceive deception?
If you look at other current global examples of fascist states you see that neither their govts or businesses benefit in the long run. Socialism has a long history of failures. The present US system of big govt. is failing only because we've become what everyone else already has been.
Well - I see that we don't disagree on the beneficiaries (however short term) of poor public education. Thanks for the pleasant intellectual diversion.
Replace "corporate" with "cartel"/"monopoly" and you've got a tautology. The interests of capital in the Marxist pejorative sense always align with those of the state. The state is the monopolists'/cartelists' best friend, seeing as it has the legal monopoly on force and law/justice, it alone has the power to maintain the monopoly/cartel status of a company/industry/group. Picking winners, it's called. Regulation serves this purpose, first and foremost.
Just as democracy can never last, financialized state capitalism can never last. The system is inherently disposed to degenerating into a (possibly inverted) totalitarian tyrannical nightmare.
The key is competition, or the suppression thereof. It really never changes.
Yes - aptly stated.
That's because N. America is becoming a little more like S. America with every passing day.
It does seem like the end game. Is that part of the plan or not?
Of course it's been planned, but so was every other socialist failure.
If Brazil collapses, will we have to call BRIC another name, RIC.
Actually you can add at T to your acronym...Turkey is now a developing country.
TRIC
Paraguay: PRIC
Korea: PRICK
I thought it was 'Pakistan'...
~~~
Which means the 'developing world' consists of a gang of CRIP's...
The statistical markers used to measure the 'health' or 'wealth' of nation states are laughably inappropriate to the pretended purpose...
unless one is a practitioner of the 'voodoo science' of eCONomics. In which case... repeated incantations of the usual mumbojumbo.... GDP to debt... etc. etc., serves the same function as chicken blood or cow entrails for practitioners of santeria or other archaic ritualistic formulae. This article stands or falls on one declaration:
and only one. This process of seeking fresh blood through the introduction of usury\interest banking into commodity-rich\ labor cheap countries and milking it for all it's 'worth' is the formula by which the GoldmanSachs\Obama/Bush\Barrick ascendancy reached it's high tide...
and when the affected peoples realize their newly-minted religion of hyper-materialist consumerism is a tawdry bauble in comparison to what they gave up to join the ranks of pseudo-first world hyper-materialist consumerism... they start to protest... much too late... about the false gods in their midst, that the uber-State of globalist gift-wrapped mind control has swapped for the countries to which they thought they had belonged as citizens...
instead of the 'bagholders' that they be. Religion, race, co-ordinates in space...Brazil\Turkey\Indonesia\India... makes no difference no more... it's all one big crony capitalist shell game with the best puppets that money can buy fronting for the usual suspects. Best get used to it neo-serfs! Nobody seems to know what united action based pon common interest means any more!
A peeple divided... will always be defeated!
Good stuff J, always enjoy your comments. Keep up the good work.
Do you have an office adjacent to falak pema?
the pleasure[of interacting with this astute assembly of interlocutors] is all mine sir!
Do you have an office adjacent to falak pema?...
err... no. But I once went on a funhouse ride which left me with a wealth of insight into our continental confreres' mind and method...
By the way... he's actually written some pretty good historical novels!
I am both disturbed that I understand this and amazed that I agree.
" united action based pon common interest"
Nonsense! I heard the labor unions are joining the action in Brazil!
/s
<deleted>
Olympics = "ringing bell at top moment"
long brazilian asses
Oh, and in case anyone was thinking that Brazil would be rushing to solve our oil problems:
http://www.theoildrum.com/node/10029
(scroll down to the third figure)
PS Figure 2 should be telling you that the UK is doomed....
What if Brazillian domestic demand could be crushed somehow?
Alright, so demand is crushed by 50% and the sub-salt fields yield 1 mmpbd in 10 years....
Result is Brazil is able to export about 1,5 mmbd, hardly earth shattering given the two very big IFS
Shit. OK. What if all domestic FF demand oustside of the US could be crushed? We would be fine!
Don't give up so easy, it's un-American.
Brazillian demand for oil could be crushed by killing half the populace.
Always an option. And just about the only way to reduce oil consumption by huge amounts, though it's a non linear thing. If a grocery truck carries 1/2 the food, it still has to come to the store and burn fuel to do so. But the general concept is if you want to burn less oil, you will have less economy.
Flakdood has this dead on. The ballyhooed oil output from Brazil's hyper deep offshore fields ISN'T HAPPENING. Economics is largely a bullshit cloak wrapped around the physics of the joules expended in the activities of life.
Pinch the fuel line and the engine sputters, regardless of interest rates or any other silliness.
Here's another way to reduce energy consumption, and the economy won't even notice - unless you care about that irrelevant 'GDP' nonsense designed to make debt, consumption, and gov spending look "productive", rather than destructive:
Disband the world's militaries.
Simple, effective, I know. And I don't even demand payment for this idea, it's on the house.
Here's another: go long pack-mules and horses.
Butt they have the Miss Bumbum contest! That ain't bad
https://www.google.com/search?q=brazil+miss+bumbum&client=firefox-a&hs=j...
Don't forget the Brazilian 'grandmothers' contest...
~~~
http://www.omg.mk/index.php/omg/item/119-miss-brazilian-grandmas-2012
Damn!!! Where do I sign up for Brazillian Portugese lessons ??? I'd like to talk to Marta...and Roseana...and of course, Samanta !!!
IBEU on the Copacabana :-)
May I spend the night at Grandma's house?
Good Lord how am I supposed to get any work done now??
Fruit for thought...
Peaceful protests are useless!
An excellent article I believe.
The only comment I might add is that the newly empowered credit generation that's emerged since Lula let the brakes off (and Rousseff has continued) are finding it increasingly difficult to meet their financial commitments on a monthly basis, due to rising inflation etc. IOW they're up to their necks in debt.
Depending on how Rousseff handles that issue will determine whether it becomes a crises. Or not.
The poster's analysis is unfortunately rather superficial. Brasil also has numerous points, starting with demographics, that will be very friendly to future growth.
A clearer analysis, more in-depth as well as lucid, would be welcome. In any event, attention will soon be diverted back to the Eurozone, Japan and the Middle East.
For years, there was a saying in Brazil which got brushed aside 2000 when the economy boomed:
" O Brasil, o pais do futuro e sempre será "
Translated: " Brazil, the country of the future and always will be ".
I'll leave it to others to decide if it's relevant today...
Socialism is an ideological AID virus.
My, now that was witty...
More like cancer, I think. You don't need to have intimate relations with a communist country to get it; on a long enough timeline, it seems every country develops socialism all on its own, and it converts more and more of the populace over the longer it is present.
Igor Shafarevich wrote extensively about the "Socialist Phenomenon". His conclusions are worth taking a look at; "Socialism in Our Past and Future" is here:
http://www.savageleft.com/poli/hoc.html
The protesters are demanding more government. More socialism on top of the failed socialism that got them in this situation. A decade from now they will have the same results.
Thats because they don't know what they want.
They don't truly understand that wealth inequality lies at the heart of their problems. But you can't blame them, really, for thinking government is the best way to address that problem. The only problem is the naivety to trust their government, who is (like all governments) acting on behalf of the Oligarchs (hence the wealthiest).
At least they protest against government spending in useless infrastructures (olympics, world cup). They seem to know that they will have to pay for them in the future.
We in the Eurozone just found out that we have to pay those same useless infrastructures (olympics, world cup) that made us proud some 4-8 years ago.
Yep, who makes mad cash from the construction of these stadia, thats the real question.
In South Africa they were promised new roads,fresh water wells, hospitals, schools. They got... Roads. Leading to the Stadia. The rest was overpromised and underdelivered.
The article mentions Dilma is up for elections in 2014 and talks about her options. They actually have REAL elections in Brazil? Shocking. Tell me of these "elections."
The USA does not have real elections.
Everyone in the country is registered and given a voter ID, assigned to a voting district. Every two years people go to a little machine in that district and press a few numbers. The numbers represent the approved candidates available, you press 21 for the candidate from party A or 15 for the candidate from party B. The little machine then magically computes all the votes and tells us who won. Are these real elections? Only the people in charge of the network of machines know. As long as you manage expectations by controlling the media (start by forcing TV stations to show party propaganda and make sure their polls fall reasonably in line with intended results, at least towards the end), there would be no way of knowing what kind of fraud did or did not happen. And unlike traditional electoral fraud, which is an open opportunity business for all sides, this ensures fraud is firmly in the hands of whoever controls the electronic ballot box.
Stalin would have an orgasm if he ever got the chance to hold an election using electronic Diebold voting machines!
You don't wanna know. Being in Brazil during an election campaign period is like living thru a nightmare.
They must have copied the US.
Well, yes, maybe.
But there are only so many ways that lies, bollix and utter bullsh1t can be presented.
It's a global thing ...EZ Money for the past 8 or so years...it has not stopped in some places...there are still many location sin the USA where they are handing out zero down loans still....and each location reacts differently when the Partee ends.
"The problem with socialism is that you eventually run out of other people's money."
My own little corollary:
The problem with fiat currency is that the central bankers never seem to run out of ink and paper.
"Changing Brazil’s well-established rich/poor, connected/unconnected, boom/bust political and financial system will be difficult in the extreme."
It is especially difficult give you don't even name the root of their political and financial problems: culture. Brazilians, like many others around the world, believe that family ought to help family. And in certain ways, it should.
But that help should not extend to practicing/accepting/defending nepotism.
Nepotism is corruption. It is every bit as damaging as bribes or kickbacks. Nepotism perpetuates/accentuates income inequality. And most of all, nepotism is the basis of oligarchy, and oligarchy will short-circuit development, stunt the middle class, keep a poor nation poor, and drag a rich nation down better than anything else you could name.
A nation that complains about corruption yet excuses nepotism is just wasting its time.
So every few decades, Brazil makes a run at the first world. Things go swimmingly for a while, but just as the brass ring comes into sight, it all falls apart. Same old story. Same old Brazil.