This page has been archived and commenting is disabled.

Brazil's Flaws Are Clear...

Tyler Durden's picture




 

While Eike Batista's collapse from grace may be the poster child for the country, this deep dive into the Latin American economy concludes Brazil’s flaws are clear. Commodity prices have been volatile; global growth has been weak and inconsistent. Brazil can no longer depend on these factors for growth. A closer look reveals that internal conditions are progressively becoming Brazil’s main economic foe. Ironically this is good news as the country is increasingly in a position to take control of its destiny. What is needed is decisive leadership and effective solutions to the long-term problems plaguing the country. Short-term stimulus measures and even supply-side measures such as reduced taxes have clearly not stimulated the economy. Brazil must invest in its own future.

Via Rodrigo Serrano of RCS Investments,

Brazil’s emergence as a significant economic force over the past decade generated noteworthy investor enthusiasm. From 2003 to 2008, an amalgamation of principal factors such as: macroeconomic stability stemming from prior reforms in the country, a recovering U.S. economy from its 2001 recession, historically low global interest rates, appreciating commodity prices, and rising demand from China set the stage for a sustained period of solid economic growth in Brazil.

While most of the aforementioned tailwinds provided a sound incubator for solid economic growth across all BRIC nations during the same period; Russia, India, and China averaged 7.1%, 8.0%, and 11.3% respectably; it was Brazil that more than doubled its rate of growth from 2.0% during 1997-2002 to 4.2% from 2003-2008 according to the World Bank. This improvement was the best among the BRIC nations.

As the 2008 financial crisis approached, many prominent investors and academics, fond of the bullish long-term prospects of the BRIC nations, entertained the decoupling thesis. From the Economist: “Yet recent data suggest decoupling is no myth. Indeed, it may yet save the world economy. Decoupling does not mean that an American recession will have no impact on developing countries… The point is that their GDP-growth rates will slow by much less than in previous American downturns” (Economist: The decoupling debate).

While the American downturn and subsequent financial crisis did precipitate a global recession largely debunking the idea that BRIC nations could step in and save the world economy, investor interest in Brazil only intensified when the event seemed like it would be little more than a slight bump in the road in terms of economic growth. Brazil’s economy registered a scant contraction of 0.3% in 2009, which was then followed the following year by the strongest pace of annual growth in 25 years at 7.5%. Furthermore, Brazil’s Bovespa index rocketed higher from the nadir of its stock market crash in late 2008 by roughly 129% by the end of 2009, the second best performance among BRIC nations over that period after Russia’s MICEX index.

Despite these impressive performance statistics, since peaking in 2010, economic growth has been widely lackluster, souring investor sentiment and bringing into the spotlight the panoply of structural problems facing Latin America’s largest economy. This extensive report covers a brief economic history of Brazil, a focus on the country’s current economic impediments, and steps for positive future development.

Full report below:

RCS Investments: Brazil Special Report

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sat, 10/26/2013 - 17:53 | 4093911 BaBaBouy
BaBaBouy's picture

BRIC A$$es ...

Sat, 10/26/2013 - 18:21 | 4093990 Bindar Dundat
Bindar Dundat's picture

A nasty crack!

Sat, 10/26/2013 - 18:31 | 4094002 SafelyGraze
SafelyGraze's picture

for some reason I keep coming back to this article

again and again

 

Sat, 10/26/2013 - 19:28 | 4094065 Fredo Corleone
Fredo Corleone's picture

Bunda grande.

Sat, 10/26/2013 - 19:41 | 4094080 iDealMeat
iDealMeat's picture

Can't click on that thumbnail pic...   FAIL  ZH...

Sat, 10/26/2013 - 20:57 | 4094174 NidStyles
NidStyles's picture

I saw no flaws in it, I need a closer inspection. Perhaps a larger version is needed?

Sun, 10/27/2013 - 12:30 | 4095206 prains
prains's picture

womens beach volleyball, is there a better sport?

Sat, 10/26/2013 - 20:43 | 4094159 Harbanger
Harbanger's picture

Brazil needs a black president.

Sat, 10/26/2013 - 18:30 | 4094000 NIHILIST CIPHER
NIHILIST CIPHER's picture

Or maybe BRIC shithouse

Sat, 10/26/2013 - 19:33 | 4094069 Tippoo Sultan
Tippoo Sultan's picture

Always diggin' old school Commodores.

"36-24-36 -- that's a winning hand !"

Sat, 10/26/2013 - 18:52 | 4094021 wchild
wchild's picture

Totally distracting...  I almost follow the link, in a trance, I guess you could say

Sat, 10/26/2013 - 19:25 | 4094057 Bangin7GramRocks
Bangin7GramRocks's picture

Sorry, were you saying something? I got a little distracted.

Sat, 10/26/2013 - 20:21 | 4094125 SAT 800
SAT 800's picture

After a spectacular performance you have to expect a plateau; it's only reasonable. It's a hell of a country with tremendous potential. I would buy an serious corrections.; with a five year outlook.

Sun, 10/27/2013 - 00:27 | 4094477 Scarlett
Scarlett's picture

1. Good energy matrix

2. Zero serious ethnic problems 

3. Food everywhere

 

BUT

 

Communism & socialism for the people, profit for the politicians model.  

Sun, 10/27/2013 - 08:34 | 4094810 Wahooo
Wahooo's picture

That's the never-ending story of the third world. And we're getting close to that as well.

Sun, 10/27/2013 - 10:43 | 4095015 Seahorse
Seahorse's picture

MDB is that you?

Sat, 10/26/2013 - 23:27 | 4094407 hunglow
hunglow's picture

I need to spank...

Sat, 10/26/2013 - 17:42 | 4093915 Cognitive Dissonance
Cognitive Dissonance's picture

"Short-term stimulus measures and even supply-side measures such as reduced taxes have clearly not stimulated the economy. Brazil must invest in its own future."

The world's central bankers won't ever let Brazil get away to live the good life. Brazil's flaws are an asset as far as CB's are concerned. Keeps them chained to the ball.

Sat, 10/26/2013 - 18:01 | 4093952 SWRichmond
SWRichmond's picture

As with China, the key to long term growth is a strong internal market and a stable middle class.  This is inconsistent with neofeudalism.

Banksters dont want a middle class...they get ideas.

Sat, 10/26/2013 - 18:25 | 4093992 resurger
resurger's picture

Yup.. either Super Rich or a Slave.

Sat, 10/26/2013 - 18:29 | 4093997 Gon2Marz
Gon2Marz's picture

It was a bright cold day in April and the clocks were striking thirteen...

Sat, 10/26/2013 - 20:25 | 4094132 SAT 800
SAT 800's picture

The staement that reduced taxes have not stimulated the economy is flawed; not enough time has been alllowed to ascertain this. It's always possible to steer clear of the dominant central bankers; if you have a leadership that is patriotic and knows something about its business; lacking greed and credulity, a country like Brazil, although there really isn't another country like Brazil, can steer clear of entanglements with central bank manipulations.

Sat, 10/26/2013 - 20:40 | 4094153 Terminus C
Terminus C's picture

Sure it can, but then it gets lumped in the 'Axis of Evil' group.

You made me laugh though... when you were talking about patriotic and selfless leaders... how quaint.

Sun, 10/27/2013 - 00:30 | 4094480 Scarlett
Scarlett's picture

yes, the naïvete of that talk reminds me of happy children preserved from reality

Sat, 10/26/2013 - 17:43 | 4093920 0b1knob
0b1knob's picture

Le Brésil n’est pas un pays [sérieux]. (Brazil is not a [serious] country.)

Attributed to Charles DeGaulle.

Sun, 10/27/2013 - 14:52 | 4095555 TBT or not TBT
TBT or not TBT's picture

"Brazil is the country of the future, and always will be" is the de Gaulle quote you may be looking for here.

Sat, 10/26/2013 - 17:44 | 4093923 debtor of last ...
debtor of last resort's picture

Brick nations are invented to deliver stones to the developed world.

Sat, 10/26/2013 - 17:45 | 4093924 JustPrintMoreDuh
JustPrintMoreDuh's picture

Flaws?  A little cellulite never looked so good.

Sat, 10/26/2013 - 17:47 | 4093926 cbxer55
cbxer55's picture

I clicked the link hoping to see a larger version of the picture that is on the home page. And it ain't here. Rats!

Waste of a couple minutes. Cause other than nice ass, I don't give a flip about brazil.

Sat, 10/26/2013 - 17:56 | 4093948 Real Estate Geek
Real Estate Geek's picture

Best ass in Brazil is on Keyra Augustina.  Case closed.

http://www.putalocura.com/sexo/sexo-anal/15387/keyra-agustina.html

 

 

Sat, 10/26/2013 - 18:17 | 4093983 autofixer
autofixer's picture

Muito legal!

Sat, 10/26/2013 - 19:19 | 4094049 Ignatius
Ignatius's picture

"Plucked, waxed and buffed.  You can't stop looking at it, can you?" -- Dana Carvey

Sat, 10/26/2013 - 18:54 | 4094026 shovelhead
shovelhead's picture

Yipes!

She could crack walnuts with those cheeks.

Sat, 10/26/2013 - 19:52 | 4094092 Z_End
Z_End's picture

Então, muito bom!

Sat, 10/26/2013 - 18:27 | 4093993 Urban Redneck
Urban Redneck's picture

I'm wondering how Sacrilege hacked into my computer to get a picture of my wife's ass...

As to Brazil's flaws-

TAXES, RED TAPE & CORRUPTION
The authors did not repeat the tax thing often enough in the report. They touched on the red tape, and they appear to have completely missed the corruption which is rampant from low-level .gov officials to the phat PIIGS conglomerates with huge .gov contracts and concessions.

As to the rest, a study in contradictions

Infrastructure- A few years ago I wanted a topo/survey map of a specific area in Brazil, and I was told that it had never been mapped... On the other hand Brazil is currently building more roads than the US is.

Education- spending isn't the issue, they can get huge mileage (ROI) out of their linux and hardware investments, but they don't reach potential because of the red tape.

Banking- As nightmarish as it is (capital flows/controls, NPLs, et al) I can't think of any country whose banking shit doesn't stink right now...

Sat, 10/26/2013 - 20:31 | 4094138 SAT 800
SAT 800's picture

Capital flow controls are often necessary in the history of nation building. Think of it as a firewall for foreign fiscal intervention. The outstanding case is Korea.

Sun, 10/27/2013 - 04:19 | 4094646 Urban Redneck
Urban Redneck's picture

Here's a case study (read Marketing shite) that makes the contradictions (failure to achieve true potential through mismanagement) glaringly obvious, if you read between the lines-

Instead of buying-
500k Computers, 500k Monitors, and 500k Bill Gates Bitchcoins
The Brazilians bought-
100k Computers, 500k Monitors, and 500k FREE copies of Linux

And they only saved 60% in up-front costs...

And no, the "extra" money didn't "trickle down" to the guys who got paid to plug monitors into computers, it flowed to the Brazilian equivalent of the "Friends of Wookie Fund"... But the Brazilians have working computers and kids learning Linux, and the Americans don't even have a single functioning website to show for their billion dollar boondoggle and over a year of "effort".

Brazilian Ministry of Education - World's Largest Virtual Desktop Deployment - 523,400 Stations

Sat, 10/26/2013 - 17:47 | 4093930 Wyatt Junker
Wyatt Junker's picture

Dislodging sand from one's gash is the Brazilian national anthem.

Sat, 10/26/2013 - 18:04 | 4093957 kaiserhoff
kaiserhoff's picture

If you drink beer on the nude beach,

  you might get sand in your Schlitz.

Sat, 10/26/2013 - 18:10 | 4093974 Yen Cross
Yen Cross's picture

     I wish my father hadn't given away all those old "Schlitz Malt Liquor" signs.

Sat, 10/26/2013 - 21:15 | 4094202 Ain't No Sunshine
Ain't No Sunshine's picture

Damn, Wyatt...where have you been?  I miss reading your comments on Seeking Alpha...

Sat, 10/26/2013 - 17:51 | 4093938 ebworthen
ebworthen's picture

Central banker hegemony = no decoupling.

Sat, 10/26/2013 - 18:05 | 4093961 nonclaim
nonclaim's picture

"What is needed is decisive leadership and effective solutions to the long-term problems plaguing the country."

While this applies to every country it is beyond me why anybody still believe this crap ... it never delivers.

Sat, 10/26/2013 - 18:08 | 4093968 Sudden Debt
Sudden Debt's picture

Brasil is energy independent and has enormous amounts of natural resources.
They'll be fine.
And the weather is fine also.

Sat, 10/26/2013 - 18:28 | 4093996 CrashisOptimistic
CrashisOptimistic's picture

Sigh.

http://mazamascience.com/OilExport/

Select Brazil from the dropdown.  They import 1 million barrels per day because the ballyhooed deep water oil isn't panning out.  Look at the recent decline in production.

There is no such recent decline in consumption.

Importing 1/3 of your oil consumption does not bespeak energy independence.

Sat, 10/26/2013 - 18:45 | 4094014 Yen Cross
Yen Cross's picture

  @ CrashisOptimistic 

   You seem to have some background in the oil/natgas business. How self sufficient is Brazil, with respect to renewable resources?

 Thanks

Sat, 10/26/2013 - 19:33 | 4094058 Broomer
Broomer's picture

Brazilian here.

Between 1992-2010, it is within a 38% to 47% range.

Source: IBGE (Brazilian equivalent of USGS).

ftp://geoftp.ibge.gov.br/documentos/recursos_naturais/indicadores_desenv...

It's the first graphic on page 239.

Edit:

The next page shows more detail on sources. Blue is hydro, green is sugar cane (this is actually a derivate of fossil fuels used in modern agriculture, it doesn't count), orange is wood (you can bet your ass this is not extracted in a sustainable way) and purple is other renewable sources. So, the situation is not as good as it looks at first glance.

Sat, 10/26/2013 - 19:36 | 4094075 Yen Cross
Yen Cross's picture

 @ Broomer   Thank You. ¡gracias ;-)

Sat, 10/26/2013 - 23:04 | 4094381 disabledvet
disabledvet's picture

i thought it was "con muchos gracias!"? or is it "Viva Pablo Escobar!"? in any case "at least they're not Venezuela." If it wasn't for Texas, North Dakota and Sweden i'd have some serious doubts about Western Civilization right now. I mean "el dude de la Venezuela"...you have the most oil reserves in the world! You should be the richest place on earth right now. And the rumors of the 'mericans being "tight with the Columbians" remains ever present. Brazil is huge...and i've been told that if you've still got Texas cattleman in you...you go to Brazil. PBR is a disaster however. Oil, natural gas, renewables...the latter is the USA, Denmark and maybe the Netherlands...all things are pointing to an outright sell on the Canadian dollar right now. talk about a cheap source for pretty much every commodity on earth.

Sat, 10/26/2013 - 19:40 | 4094074 CrashisOptimistic
CrashisOptimistic's picture

YC, they have the ultimate one, but it's not likely what you're thinking about.

They have the mato grasso.  Southwest part of the country.  Wheat and soybeans and corn as far as the eye can see.  They put Iowa to shame, not because they have superior dirt or technique -- but because they have 2 and sometimes 3 crops per year.  No winter.

You are likely thinking in terms of corn based ethanol, and they tried that for a while, but of course you can't run engines on a mix of gasoline and ethanol that is very high in ethanol.  And they needed to export that corn.

Here's a nice chart that is legit:   http://tinyurl.com/lg64jnb

Not a helluva lot of growth.

This is probably the more important data.  Ethanol = 24 megaJoules/liter.  Gasoline = 38 megaJoules/liter.  About 1/3rd loss of oomph.  

From the chart on the tinyurl you can see Brazil is only flowing about 700K bpd.  They would add that to gasoline at a ratio of maybe 85% gasoline and 15% ethanol.  So they could dilute 4.7 mbpd of oil, which is more than they consume. 

But . . . it's not magic.  Assuming anyone built a 100% ethanol powered John Deere tractor for the Mato Grasso, it would go only 2/3 as far on a gallon of fuel (worse than that given diesel is tractor norm) as a conventional tractor.

The issue of energy reqd to make ethanol is an obstacle, too.  The usual solution is to say it will be solar, but per liter it's a lot of acres of sunshine.  There are lots of agenda laden analyses of stover and corn acres to alcohol processes, and they often presume "sunshine is free", but it's not -- it's a LOT of solar panels.

And so, the question was how does Brazil look for renewable energy?  They can make a lot of calories.  They can't get them shipped without oil, and the oil's not coming out of those deep water wells as hyped.

Sat, 10/26/2013 - 19:52 | 4094093 Yen Cross
Yen Cross's picture

@CrashisOptimistic   What a fantastic post! I can't thank you enough!

  If you don't mind? Can I take a few hours before I comment on some of your links and info.?

  Just the shipping and growing schedules are a quandary.

Sat, 10/26/2013 - 19:59 | 4094097 Broomer
Broomer's picture

The program to produce ethanol from sugar cane was started during the oil crises of the seventies.

The military, that was running the country since 1964, went into full "oh shit" mode and started the program in 1975. It is a bit troublesome now, ethanol price is tied to the price of sugar in the international market.

Obnoxious details on it can be found, as always, on Wikipedia.

https://en.wikipedia.org/wiki/History_of_ethanol_fuel_in_Brazil

Sat, 10/26/2013 - 21:04 | 4094180 MrButtoMcFarty
MrButtoMcFarty's picture

Palm Oil - 635 gal oil/acre/year x 70,000,000 arable acres in Brazil = 44,450,000,000 gal oil/yr (100% arable land)

Micro Algae - 5-15K gal oil/acre/year x 70,000,000 aa in Brazil = 350,000,000,000 - 1,050,000,000,000 gal oil/yr (100% arable)

FWIW.

 

Sat, 10/26/2013 - 23:05 | 4094382 CrashisOptimistic
CrashisOptimistic's picture

Without checking the source of your numbers or the numbers themselves, the more meaningful units are barrels/day (only because the world of oil is so calibrated).

Palm oil is light so the usual 42 gallons/barrel is likely invalid (it will be worse) but we'll use it.

44,450,000,000 / 42 = 105.8 million barrels/year / 365 = 290K bpd (which if you follow oil you know is pretty much nothing for a world that consumes 80ish million bpd).  And you took all the arable land in a rather large country to generate . . . pretty much nothing.

As for algae, won't address it because my recall is water requirements for any reasonable number of 1000s of acres exceed the fresh water supply for more or less anywhere.  The Exxon plant in Cali is already making noises about "won't scale".

 

 

 

 

Sat, 10/26/2013 - 23:11 | 4094389 disabledvet
disabledvet's picture

http://seekingalpha.com/symbol/szym?source=search_general&s=szym sucking wind too. BP and DD have just made a huge investment in Minnesota. the transportation system in Brazil is a disaster. that isn't true of Minnesota. http://en.wikipedia.org/wiki/Twin_Ports

Sat, 10/26/2013 - 20:37 | 4094147 SAT 800
SAT 800's picture

Use the other guys first; then finish developing your deep water fields; which I believe they will. It's not overlly attractive at $100/barrel; but at $200/barrel it'l be a lot higher in the priorities.

Sat, 10/26/2013 - 20:33 | 4094142 SAT 800
SAT 800's picture

I also feel strongly supportive of the case for Brazil, my friend, Sudden Debt. Do you still have the Silver in the Trunk of your car? I'll never forget that post. How are things in the little country that can't run it's government; but knows all about running yours; (European Union).?

Sat, 10/26/2013 - 22:54 | 4094356 thestarl
thestarl's picture

The Dutch Disease.

Sat, 10/26/2013 - 18:12 | 4093976 kicksroute66
kicksroute66's picture

The booty brought me here

Sat, 10/26/2013 - 18:37 | 4094008 willwork4food
willwork4food's picture

Fag. We're all edumacated investmint minded here...

 

Sat, 10/26/2013 - 18:13 | 4093979 Teaser
Teaser's picture

Bait and switch!  I clicked the article because of the Bikini Bottom!  Rooked again!

Sat, 10/26/2013 - 18:17 | 4093984 cbxer55
cbxer55's picture

LOL!!   ;-)

That's the same thing I said further up. 

Sat, 10/26/2013 - 20:52 | 4094167 MrButtoMcFarty
MrButtoMcFarty's picture

That's some false assvertising right there!!

Sat, 10/26/2013 - 18:17 | 4093985 Iam Yue2
Iam Yue2's picture

Henderson, Brazil Bulls, note re World Cup;

": 3.6 million people attending 64 matches played in newly-constructed stadia before a cumulative TV audience in excess of 30 billion; 600,000 tourists spending an approximate $2.6bn and 3 million domestic spectators spending $7.9bn; plus a further $13.3bn spent on infrastructure. "

Sun, 10/27/2013 - 09:55 | 4094928 Non Passaran
Non Passaran's picture

And 100,000 locals rioting and demonstrating every day

Sat, 10/26/2013 - 18:35 | 4094005 Dr. Gonzo
Dr. Gonzo's picture

I didn't see any flaws in that ass. I could see a crack in it though. 

Sat, 10/26/2013 - 19:05 | 4094038 shovelhead
shovelhead's picture

Need a Mounds bar for some reason.

Sat, 10/26/2013 - 20:39 | 4094152 jballz
jballz's picture

 

zerihedge doesn't care about brown people.

Sat, 10/26/2013 - 21:07 | 4094186 My Days Are Get...
My Days Are Getting Fewer's picture

This is the third article published on ZH in the past two months bashing Brasil.

 

Ok, Brazil has a lot of problems.  But, no one mentions the biggest one - Government corrupt - in plain terms - bribery.

If you have a problem with any organ of government, you haver to hire a fixer to clear out the obstacle.  The biggest corporations and richest people are all gaming the system, with their monpolies and connections.

Still, despite all of this, Brazil is doing better.  I have only 17 years of experience in day-to-day business dealings there.

You young men, tired of plain looking ladies, who are not loving and somewhat vacuous, I suggest a two week "vacation" to Brazil.  You will ecountear women who have a genuine heart and physical beauty.  There is an old saying in Brazil, which goes pretty much like this:

If God were a woman, she is beautiful and alive and well in Sao Paulo.

 

I will stop writing here.  Brazil is totally misunderstood by those who have only read about it.

"Stay thirsty my friends".  

Sat, 10/26/2013 - 21:17 | 4094203 MrButtoMcFarty
MrButtoMcFarty's picture

Government corruption.....

 

You could say that about EVERY COUNTRY.

Government is NEARLY ALWAYS THE PROBLEM.

Sun, 10/27/2013 - 11:30 | 4095083 Hongcha
Hongcha's picture

My Days; do the ladies have backsides like that?

Sat, 10/26/2013 - 22:43 | 4094341 goldenbuddha454
goldenbuddha454's picture

popo zuda

 

Sat, 10/26/2013 - 23:05 | 4094376 thestarl
thestarl's picture

Talk about capital misallocation hosting the World Cup and the Olympics BS.All those stadiums wonderful productive assets huh.

 

Sat, 10/26/2013 - 23:43 | 4094428 Broomer
Broomer's picture

That was a big part of the Greek debt. And they only hosted the Olympics.

Combined with the huge real estate bubble, when it pops it will make the Americans look like amateurs.

Brazil is going back to the stone age when the bubble pops.

Before a horde of angry Brazilians start saying I don't know Brazil, I am Brazilian too.

Sun, 10/27/2013 - 05:38 | 4094681 SmittyinLA
SmittyinLA's picture

Brazil is toast, the giant humping and exploding Socialist mob will obliterate whatever natural resources they have, Brazil will always be 3rd world.

Within 2 years they'll be in a full swing commie civil war that will never end, they're buying tanks from Russia and Venezuela is arming the leftist criminal gangs that outnumber police 3-1.

The cold war never ended, we just stopped fighting that enemy.

Sun, 10/27/2013 - 07:28 | 4094750 Seer
Seer's picture

Once again ignorant and or deceptive fuckers are writing articles...  They BLOW by the premise that growth is essential and is natural*.  Swallow this and they'll get you to tug on this and that such that THEY can squeeze out more "profits."

* Simple facts and logic disprove this- we're on a FINITE planet, perpetual growth is IMPOSSIBLE.  Yet, here they are, the "experts" who game our senses in order to pad their wallets, telling us that the "problem" is that "others" aren't allowing growth- huh?  TPTB, and all others who live off others, DEMAND growth; what sense is it that they'd opt to cut the very thing that keeps them elevated?  No, it's whiny fuckers who can no longer eek out enough profits to keep their small parlor plays going (they're being eaten by the big fish and crying foul).

FUCK YOU!

Sun, 10/27/2013 - 09:07 | 4094861 1stepcloser
1stepcloser's picture

estamos ferrados

Do NOT follow this link or you will be banned from the site!