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A Day In The Life Of A Falling BRIC

Tyler Durden's picture




 

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

It’s not that long ago, in 2001, that Jim O’Neill, then still with Goldman Sachs, coined the term BRICs, for the fast emerging markets of Brazil, Russia, India and China. O’Neill saw a global power shift from the west to these four nations happening. Fast forward to today, and we see Russia under multiple attacks, including economic ones, from the west, as India just announced the second rate cut this year and China is attempting controlled demolition of the possibly biggest financial bubble in the history of the world.

And Brazil? If anything, it’s falling even faster off its pedestal than the other three nations. And in Brazil, it’s as much corruption scandals as it is the financial crisis and the plunge in oil revenues that take center stage. The stories have long been simmering, but they all came together in the media yesterday.

First, a seemingly minor one. Eike Batista was once the richest man in Brazil, and one of the 10 richest men on the planet, having made a fortune in gold mining and later oil. Then he went on to become probably the one man to lose the most money in the shortest time, going from $32 billion in early 2013 to minus $5 billion or so a little over a year later, impossible to pin down exactly for numerous reasons, but spectacular for sure.

Yesterday Mr. Batista made the news when the judge in a case against him for insider trading, was taken off that case for driving one of Batista’s luxury cars to his own home. He claimed the police had no place to store the vehicle…

Brazilian Court Upholds Removal of Judge From Eike Batista Trial

An appeals court on Tuesday upheld a decision to remove the judge presiding over the trial of Brazilian businessman Eike Batista , throwing out many of the judge’s rulings, according to a spokeswoman for the court in Rio de Janeiro. Later Tuesday, the court said it granted the judge— Flávio Roberto de Souza —a medical leave until April 8th. A separate appeals court had ordered last week that Federal Judge de Souza be removed from the case after he allegedly drove one of the cars he had ordered seized from Mr. Batista. Tuesday’s ruling was on a motion filed in December by Mr. Batista’s lawyers to have Judge de Souza removed from the case, claiming he had given a number of news interviews in which he used language demonstrating bias against Mr. Batista.

 

Judge de Souza has denied being partial. His removal will delay the case, which could be assigned to a new judge as early as Tuesday, the spokeswoman said. Mr. Batista is on trial for market manipulation and insider trading, charges he has denied. The judges who ruled on Tuesday overturned all of Judge de Souza’s actions during the trial until another judge can decide how to continue the case. The freeze on Mr. Batista’s assets ordered by Judge de Souza remains in place, however.

 

Police in February seized 11 vehicles, including a Porsche Cayenne the judge allegedly drove, as well as a Lamborghini Aventador, from Mr. Batista’s homes. They also took jewelry, a grand piano and a fake Fabergé egg as guarantees to repay investors in the event the entrepreneur is found guilty. The cars were to be sold at auction and the proceeds placed into escrow until the conclusion of the trial, an action allowed under Brazilian law. The piano, which was being kept at the apartment of one of Judge de Souza’s neighbors, along with one of the seized cars have been returned to Mr. Batista…

Then, on the same day, Brazil’s top prosecutor asked the country’s Supreme Court to start 28 separate investigations against 54 individuals, mostly politicians, in the Petrobras kickback scandal (‘under Brazilian law, politicians and cabinet members can only be tried by the Supreme Court.’) I don’t know how many politicians Brazil has, but it would seem 54 is a solid haircut. And, of course, current president Dilma Rousseff was herself head of Petrobras from 2003-2010, the period in which the kickbacks took place. She’s probably not among the 54 to be investigated, however.

Petrobras did Batista one better. Its market capitalization was a reported $310 billion in May 2008. It has since lost $270 billion of that. According to the BBC, $100 billion was lost just since last September.

Petrobras Scandal Takes Politicians To Court

Prosecutor-General Rodrigo Janot’s office did not release the names of the politicians, but plea bargain testimony by defendants in the case leaked to local media indicate that most are members of the ruling Workers’ Party and coalition allies in Congress. O Estado de S. Paulo and other newspapers said the list includes Senate President Renan Calheiros and Speaker of the Chamber of Deputies Eduardo Cunha, both the top leaders of Congress and members of the PMDB party, the largest ally in Rousseff’s ruling coalition. The judge in charge of the case must decide whether to lift a secrecy provision and release the names and plea bargain statements.

 

The politicians were named by a former senior manager at Petrobras and a black market currency dealer whose arrest last March triggered an investigation into the funnelling of money from overpriced infrastructure contracts into the pockets of corrupt executives and politicians. Some of that money, prosecutors say, may have helped finance election campaigns for political parties, including Rousseff’s Workers’ Party and other members of her governing coalition.

 

The corruption probe known as “Operation Car Wash” has so far led to 40 indictments on racketeering, bribery and money laundering charges. Officials have indicted two former senior managers at Petroleo Brasileiro as the company is formally called and 23 executives from six of Brazil’s leading construction and engineering firms. The scandal threatens to have a ripple effect on Brazil’s already weak economy, prompting Petrobras to halt or cancel several investment projects.

 

Prosecutors are seeking the return from construction firms of about $1.6 billion siphoned off Petrobras contracts and are investigating Swiss bank accounts where funds were transferred and in some case laundered through off-shore front companies. The investigation and possible trial of politicians by the Supreme Court could take years. Brazil’s largest political corruption case to date, involving monthly payments to lawmakers in return for support in Congress for the Workers’ Party, took seven years before it went to trial in 2012.

 

Rousseff has denied knowing about the scheme during those years and has vowed to respect the Judiciary’s independence. A recent opinion poll, however, showed three in four Brazilians believe Rousseff knew about the scam. … even opposition leaders believe that recent calls for her impeachment will go nowhere.

Sabrina Valle and Anna Edgerton, writing for Bloomberg, must have seen this coming. They have a very long article on Rousseff and her power politics, very much worth reading. Some excerpts:

Petrobras CEO Lost Job Over a $30 Billion Disagreement

As the kickback and money-laundering scandal engulfing state-run oil giant Petrobras escalated in late January, Brazilian President Dilma Rousseff got calls from two of her top appointees. They were in the midst of a marathon board meeting and they heatedly disagreed. The first was from her former finance minister and current Petrobras chairman, warning her that the board was discussing the release of a potentially embarrassing number: a $30 billion writedown that company auditors were saying was partially tied to scandal-related losses. The chairman left in the middle of the meeting to call his political benefactor to discuss releasing it – believing it was a bad number conjured up by faulty methodology. Rousseff agreed.

 

The second call, later in the same evening, came from Maria das Gracas Foster, the Petrobras chief executive officer whom Rousseff had appointed three years earlier. She expressed the opinion that under Brazilian law the $30 billion figure, whether faulty or not, had to be released because if the board now knew the number, the market had a right to know as well. Foster was aware Rousseff preferred the number not be released and hoped her close friend the president would understand her position..

 

After a dramatic ten-hour boardroom showdown, the number would in fact be included in a note to Petrobras’s overdue third-quarter earnings but it would be costly to Foster. On Feb. 6, Rousseff replaced her with Aldemir Bendine, CEO of state-run Banco do Brasil – a government executive popular with Rousseff’s leftist Workers’ Party. The appointment sent the shares of the company formally known as Petroleo Brasileiro down 6.9% that day.

 

Rousseff’s replacement of Foster also has ruptured the long-held bond of loyalty the two forged over more than a decade as business and political allies rising up in the ranks among a sea of powerful men. Foster’s departure further helps to isolate Rousseff as Foster joins a cadre of onetime close supporters who have been swept aside in various government dust-ups.

 

For Brazil and millions of ordinary Brazilians, Petrobras has become both an embarrassment and a source of anger even as they hope for a rebound. Only five years ago, the company was the darling of the global energy world, able to raise a staggering $70 billion at a share sale because of deep-water oil and natural gas finds so huge that they were expected to propel Brazil to decades of growth.

 

The first allegations of Petrobras corruption came in March of last year [..] Foster, however, seemed to be weathering the storm until October, when video tapes published online by a federal judge in a Parana, Brazil, court showed that same executive confessing to investigators that Petrobras had long been compromised – that for at least nine years he and others siphoned millions in kickbacks from companies to whom Petrobras awarded inflated construction contracts.

 

As allegations of wrongdoing escalated, the public became more outraged and investors continued to dump Petrobras shares; the hard-charging Foster found the political weather turning foul. [..] Throughout the ordeal, Foster had offered to resign several times. Rousseff wasn’t having it..

 

But the scandal kept escalating. A growing list of former executives started cooperating with investigators, hoping for reduced sentences. Cash deliverymen went by flamboyant nicknames such as Big Tiger, Watermelon and Eucalyptus, according to testimony before the Parana court. One former Petrobras manager admitted to taking as much as $100 million in kickbacks as part of a plea bargain deal.

 

As the drama unfolded, the one constant was Rousseff’s support for Foster, the woman she met in the early 2000s when she was an energy secretary for a southern state of Brazil and Foster was Petrobras’s representative for a gas pipeline to Bolivia. This trust began to unravel in December, when Foster decided to ban 23 construction companies caught up in the probe from doing business with Petrobras, according to a person familiar with the situation. Rousseff’s public position was that corrupt individuals — not the companies that employed millions of Brazilians and worked on strategic infrastructure projects — should be held accountable.

 

Then came the contentious Jan. 27 board meeting. Foster found herself at odds with Guido Mantega, the Italian-born, left-leaning Petrobras chairman. Foster knew that a fight with Mantega was a fight with Rousseff. But at some point, with the back and forth exhausted, Foster signaled to her management team and declared “enough, huh?” according to people who were in the room.

 

A week later, on Feb. 3, Foster was summoned by Rousseff to the presidential palace about 465 miles away in Brasilia. After two hours of candid discussion, the two came to terms. Foster and her executive team would be replaced by month’s end while a search for successors proceeded… Foster then boarded a commercial flight back to Rio de Janeiro and was booed by other passengers. There was no relief back home. Dozens of protesters greeted her at her Copacabana apartment, banging pots and pans outside her door, demanding she resign.

 

The CEO was still willing to stay on until Rousseff named a replacement but in a conference call from Brasilia with her five-member executive staff they declined to continue as lame ducks. Since Foster had said publicly she would never serve without her team, she had no choice but to go. The announcement came on the morning of Feb. 4 in a one-line regulatory filing that took the market by surprise.[..]

 

Petrobras continues to face huge challenges. With its market value shrunken, its debt ratings in the tank and its global image tarnished, it desperately needs to get back to basics. Over the past decade, its oil and gas production has lagged the company’s own projections — due to equipment delivery delays, maintenance issues and faster-than-expected declines in its older fields – even though that is starting to change.

 

Starting in 2007, stupendous deepwater offshore finds in an area known as the pre-salt had exponentially raised its reserves. Those discoveries still afford Petrobras plenty of potential upside assuming they are managed properly, analysts say. The most productive of its pre-salt wells pumps 35,000 barrels of crude a day. At the Bakken shale formation in North Dakota it takes more than 300 wells to pump that much. That’s in the top 1% for “all oil wells on the planet,” said Cleveland Jones, a geologist and researcher at Rio de Janeiro State University.

I think it might be wise to question the real reserves in those ‘stupendous’ finds. And in any case, the deeply inbred culture of corruption could easily waste all of it even if they are indeed so huge. With Lula as president, things seemed to go well, though he might have just been lucky to be at the right place at the right time. Rousseff has no such luck. And she doesn’t seem able to cope with the power she has, either. But it doesn’t look like she’ll have to bother with that for much longer:

Brazil’s Senate Resists Rousseff’s Austerity Push

Brazil’s Senate on Tuesday threw out a presidential decree that reduces payroll tax breaks for businesses, in a political setback for President Dilma Rousseff’s new fiscal austerity crusade. The Senate’s president Renan Calheiros said the matter was not urgent and should be presented to Congress in a bill rather than a temporary decree that bypasses lawmakers. Rousseff immediately responded by sending Congress a legislative proposal to trim the tax breaks, saying the change does not hamper the government’s fiscal savings plan.

 

In an action applauded by financial markets, Rousseff on Friday moved to pare back tax breaks on payrolls and export revenues to save the government up to 7 billion reais ($2.39 billion) this year and reduce its widening budget deficit. The new-found fiscal rigor threatens to tip the Brazilian economy into a deep recession, raising opposition from lawmakers and even senior members of her own Workers’ Party who want to water down the savings measures.

 

Since her narrow re-election win in October, Rousseff has made a dramatic U-turn in economic policy to regain the trust of investors worried with the financial health of an economy that until recently was one of the world’s most dynamic. Calheiros, a member of Rousseff’s main ally in Congress, the PMDB party, said her government was trampling on the constitutional right of Congress to legislate on important matters that affect Brazilians, such as raising taxes.

 

Opposition leaders praised Calheiros’ decision to assert the independence of the Senate, which will make it harder for Rousseff to push through belt-tightening legislation needed to avoid a credit rating downgrade. The surprise move by Calheiros, who has been a loyal ally to Rousseff during her first term, comes at a time of tension in Congress where politicians are worried that they will be implicated in a corruption scandal engulfing state-run oil company Petrobras.

One of other measures under fire includes a controversial decree that trims unemployment and pension benefits to save state coffers about 18 billion reais this year.

If the Petrobras affair doesn’t bring Rousseff down, her decisions will. You have to be an exceptional politician to survive the kind of huge economic downturn that Brazil finds itself in. Rousseff is no such exceptional politician. And of course most ‘leaders’ are not (that makes the few exceptional). That in turn means we will see increasing numbers of leadership changes as economies go downhill. Argentina went through 5 presidents in less than 3.5 years at the beginning of the century. Don’t be surprised if Brazil goes down that path too. And many other countries.

 

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Thu, 03/05/2015 - 14:15 | 5858163 Bunghole
Bunghole's picture

Click bait pic.

Thu, 03/05/2015 - 14:16 | 5858167 cifo
cifo's picture

Like yours :)

Thu, 03/05/2015 - 14:25 | 5858206 Thirst Mutilator
Thirst Mutilator's picture

rimjobbers... fall in line! [Not YOU 'Miffed' ~ Instead, you win a special edition version of Bull Durham]...

Thu, 03/05/2015 - 14:27 | 5858219 Publicus
Publicus's picture

China will take over management and all will be fine.

Thu, 03/05/2015 - 14:44 | 5858273 ParkAveFlasher
ParkAveFlasher's picture

China...uh yeah...LOOK AT THAT ASS

Thu, 03/05/2015 - 14:59 | 5858335 SWRichmond
SWRichmond's picture

+1.  Clicked on this article...less politics, more ass please.

Thu, 03/05/2015 - 15:06 | 5858357 Herd Redirectio...
Herd Redirection Committee's picture

Then you've got South Africa... Which is currently having regularly scheduled 'power outages', uuh, I mean 'loadshedding'.  While at the same time EXPORTING electricity to neighboring countries!

Thu, 03/05/2015 - 15:26 | 5858413 Thirst Mutilator
Thirst Mutilator's picture

@SWRichmond

 

I guess you haven't noticed...

 

The ZION controlled:

 

- MSM

- political activism

- banking

- jurispridence

 

agenda

 

Sees to it that you are supplied with 'ASS' 24/7

 

https://www.youtube.com/watch?v=gGlJgU9x8tM

 

In another world they'd be kneading bagel dough, & perhaps doing something useful like making tasty deli sandwiches. Butsomewhere, somehow, the SCRIPT changed and they turned into money counterfeitting THIEVES who worship an ancestry where, once opon a time, after being steadfast 'monotheist' cohorts for generations, finally obtained their FREEDOM one day... escaped to the desert... & promptly tossed aside monothesim, & instead started worshiping GOLDEN CALVES...

 

I think they wrote a BOOK about it too... 2nd chapter [if I recall]...

Thu, 03/05/2015 - 15:59 | 5858569 svayambhu108
svayambhu108's picture

> more ass please.

Not enough ass but a lot of assholes.

Thu, 03/05/2015 - 22:02 | 5859751 HolyfieldsOtherEar
HolyfieldsOtherEar's picture

I read the whole story but I didn't see anything about that ass. I don't think Dilma is that buff.

Thu, 03/05/2015 - 17:34 | 5858918 August
August's picture

All in the spirit of Pan-African Solidarity.

Once the last of the Whites and Indians are driven out, things should improve.

Thu, 03/05/2015 - 15:46 | 5858528 e_goldstein
e_goldstein's picture

Some days I miss robotrader (and his excellent selection of soft porn).

Thu, 03/05/2015 - 14:18 | 5858179 smlbizman
smlbizman's picture

just like my dad and his playboys...i am only here for the articles.....

Thu, 03/05/2015 - 14:30 | 5858216 SethDealer
SethDealer's picture

That's a helluva picture, hope they Export pussy

Thu, 03/05/2015 - 15:31 | 5858461 Augustus
Augustus's picture

.

Thu, 03/05/2015 - 19:01 | 5859219 ronron
ronron's picture

i would have paid an ounce of silver if she used my hand.

Thu, 03/05/2015 - 14:38 | 5858255 Maplehood
Maplehood's picture

it worked on me too

Thu, 03/05/2015 - 15:07 | 5858356 hoist the bs flag
hoist the bs flag's picture

funny story...i click your avatar in hopes i will see a bigger picture.  damn if I am not disappointed every time. 

Thu, 03/05/2015 - 15:14 | 5858395 Max Steel
Max Steel's picture

too bad you cant have a scratch and sniff 

Thu, 03/05/2015 - 14:16 | 5858165 cifo
cifo's picture

I'm here because I clicked on the photo, hoping...

Thu, 03/05/2015 - 14:19 | 5858186 Element
Element's picture

I'm here because WWIII!!!!! will start in Brazil!!!! This time for sure!!!!

Thu, 03/05/2015 - 14:25 | 5858215 Oldwood
Oldwood's picture

Waiting for the BRICS to hit the fan

Thu, 03/05/2015 - 15:15 | 5858401 Augustus
Augustus's picture

Brazil should not have any financial or funding problems.  Isn't it joining that new currency club with Russia, Greece, and Kazakhstan?  Reading reports on ZH that all countries joining will soon have surpluses and money to loan out.

Thu, 03/05/2015 - 17:39 | 5858940 Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

The problem with Brazil (and S.Africa) is that their wealth only comes from natural resources, not mfg or brains. Combined with a culture of blatant corruption and you can count on the fact that not much will improve in the long run. 

Thu, 03/05/2015 - 23:08 | 5859959 willwork4food
willwork4food's picture

Didn't Ford just send many of their F150 assembly plants down to Brazil a few years ago? Took hundreds of jobs from our plant here when they closed it. Hear it's state of the art too.

Thu, 03/05/2015 - 14:36 | 5858246 Thirtyseven
Thirtyseven's picture

Alright, lets hear it.

Are you suggesting Brazil will attack Paraguay, Uruguay and Argentina at the same time?

Thu, 03/05/2015 - 15:09 | 5858363 Element
Element's picture

ALL OF THEM!!!!!   AND EKWADOOR!!!

WORLD WAR!!!  WOOOORLDD!!!   IT'S ON !!!

Thu, 03/05/2015 - 16:57 | 5858788 NoPension
NoPension's picture

And don't they use almost 100% biofuels? I understand exports, but why not use this oil at home?

Thu, 03/05/2015 - 14:42 | 5858266 Creepy A. Cracker
Creepy A. Cracker's picture

The title and photo can be misleading.  Is she dropping a brick out of her bikini bottom?  Is that the relation?

Thu, 03/05/2015 - 14:17 | 5858175 steveharless
steveharless's picture

thats good marketing!

www.ViewLasVegasRealEstate.com

Thu, 03/05/2015 - 14:18 | 5858180 KnuckleDragger-X
KnuckleDragger-X's picture

Government honesty and efficiency on parade and won't it be wonderful when we all live under such fine upstanding leaders who only care about doing their job so honestly and frugally.

Thu, 03/05/2015 - 14:18 | 5858181 Philo Beddoe
Philo Beddoe's picture

Good thing they spent all that money on the World Cup.  What...no positive economic impacts? 

Thu, 03/05/2015 - 14:19 | 5858184 Lmo Mutton
Lmo Mutton's picture

Thread pix is misleading.  FAIL.

Thu, 03/05/2015 - 14:24 | 5858210 Bill of Rights
Bill of Rights's picture

Sweet ass...

Thu, 03/05/2015 - 14:27 | 5858222 Snoopy the Economist
Snoopy the Economist's picture

Terrible corruption. Now let's compare it to US politicians...

Thu, 03/05/2015 - 14:40 | 5858260 DrNybble
DrNybble's picture

Aparrently, US politicians are much better at it - - and not being caught.

Thu, 03/05/2015 - 14:34 | 5858242 Thirtyseven
Thirtyseven's picture

Just wait until South Africa goes black.

Of course I'm referring to their power outages and brownouts caused by mismanagement of their infrastructure and the innability to properly care for it....same with every other African country although the decay has been rather slow for this one.

Thu, 03/05/2015 - 14:36 | 5858248 papaswamp
papaswamp's picture

Uhhhhh Brazilian bootay..... Im sorry was there an article attached to the pic?

Thu, 03/05/2015 - 14:39 | 5858256 youngman
youngman's picture

When I was there UNICEF gave 10 million to help the poor children....it was all stolen...nothing wias built or done....lol..Corruption is blatent there..every Friday I was stoped on the highway for a safety check..of course my truck was legal..but the police would find something and you had to pay him off...he just needed a little extra cash for the weekend.....did you know you can not drive in flip flops in Brazil....and they live in those down there...they are 20 cents a pair....great music and food...and yes the womens butts are to die for...and many have....

Thu, 03/05/2015 - 14:41 | 5858264 youngman
youngman's picture

to bad you cant have a scratch and sniff on the internet??????

Thu, 03/05/2015 - 14:48 | 5858289 papaswamp
papaswamp's picture

Matrix isnt quite finished yet.... But its close

Thu, 03/05/2015 - 19:16 | 5859269 Diet Coke and F...
Diet Coke and Floozies's picture

Around Y2K their was talk of a "Direct Smell API" for video games. Never took off. It had 3 base smells (Like RGB in video) that when mixed could make any smell a programmer wanted.

Thu, 03/05/2015 - 14:42 | 5858267 TheAntiProgressive
TheAntiProgressive's picture

Strong Dollar Weak Reais = Fun times in Rio.  Air will probably be a deal also.  Stay out of the Favellas.

Thu, 03/05/2015 - 14:53 | 5858307 youngman
youngman's picture

When I was there the Real was 4.5 to the dollar..and this was before the gold rush....even if it gets back to that...Brazil will be espensive because they have raised prices so much...

Thu, 03/05/2015 - 14:45 | 5858278 falconflight
falconflight's picture

I can't tell which side is the ZWO.  Help

Thu, 03/05/2015 - 14:53 | 5858306 Bastiat
Bastiat's picture

Those unfortunates who borrowed USD are being crushed -- crushing people, corporations, countries is the purpose of fiat lendings - the ultimate purpose is enslavement.

Thu, 03/05/2015 - 15:11 | 5858381 Escrava Isaura
Escrava Isaura's picture

 

 

Thanks Bastiat.

 

Thu, 03/05/2015 - 15:19 | 5858414 Augustus
Augustus's picture

Those unfortunates who have fallen victim to the currency debasement of their governments are being crushed.

The debasement problem results from theft by their government.  Generally that is the ultimate purpose of those entering government.

Thu, 03/05/2015 - 15:53 | 5858542 Escrava Isaura
Escrava Isaura's picture

 

 

Augustus

Wrong.

That is not the way the FX market, and being a colony works.

 

Let me show you how couple examples:

 

1) By Don Stewart, of OFW.

The US solution is always to offer credit, usually only good for buying stuff made in the US. Take Cuba. What do you think the conversation is like?

US…we will extend billions in credit, to purchase US goods
Cuba…and then how do we repay the debts?
US…we will make the debt a balloon payment due in 25 years (like California school districts)
Cuba…but what about our children paying off the balloon note?
US…We will have incinerated the world in a nuclear war long before then 

http://ourfiniteworld.com/2015/02/25/role-of-wages-of-the-common-worker-in-oil-prices-collapse/#comment-54269

 

2) By Dean Henderson, at Left Hook:

Canada, Australia and New Zealand are still part of the Crown. The Commonwealth – which is comprised of 53 nations including India, South Africa and the above three nations – is an Orwellian misnomer which serves the Crown via cheap resources, while most nations within the Commonwealth (Bangladesh, Nigeria, Papua New Guinea, et al) remain hopelessly poor.

https://hendersonlefthook.wordpress.com/2015/02/28/nemtsov-the-end-of-the-british-empire/

 

Thu, 03/05/2015 - 15:08 | 5858370 Salah
Salah's picture

Brazil is the pussy capital of Planet Earth, but it's equally as corrupt

Thu, 03/05/2015 - 15:16 | 5858398 Chuck Knoblauch
Chuck Knoblauch's picture

The US excels at propaganda, gossip, and jealousy.

Look at the American Indians.

Thu, 03/05/2015 - 15:22 | 5858428 Augustus
Augustus's picture

The US government stopped those American Indians from trading captive slaves.

Wonder what the average lifespan is now.  Not long ago it was about 25 yrs.

Thu, 03/05/2015 - 15:27 | 5858441 Jack Burton
Jack Burton's picture

Australia, Canada, Brazil will all feel the blowback from a >3% growth rate in China. All three resource nations experienced commodity bubble prices for minerals during the last two deades of exponential China growth. A drop to a normal growth rate between 1-5% for China will dry up many contracts for the resource producers. Two of them have massive housing bubbles, maybe even parts of Brazil. The glory days oare over, Austraila has already sidelined some coal and Iron Ore projects.

Thu, 03/05/2015 - 15:26 | 5858442 gcjohns1971
gcjohns1971's picture

This silent elephant in the room in this story is the effect of the Reserve Currency.

If anything the analysis herein deftly skates around the causes of BRICS boom and bust naming all sorts of criminals in the mix, while explicitly giving a FALSE impression of the causes of the boom and bust.

This article gives the impression that the BOOM was caused by increasing personal virtue amongst the people and businesses of the BRICS countries.  It attributes the BUST to 'attacks', without specifying their nature.

So, let me tell you their nature.

The US FED through the primary dealers, and the largest banks is responsible for both BOOM and BUST.

In response to the 1987 crash, Alan Greenspan responded to the Fed's owner-banks by printing money...throughout the 1990's...an unprecedented wave of cash.  As you may know, printing money redistributes wealth from those who save to those who receive the newly printed money.  The reason is because the first recipients of the new money can spend it before the new cash bids up prices in the market.

In the euphoria following the collapse of the USSR, the printing continued...right until the "irrational exuberance" speach in 1996, and through the NASDAQ boom and crash in 1999-2000.  The response to this investment bubble caused by excessive credit creation due to excessive monetary expansion was to... further expand money printing, and create replacement bubbles. 

So that tidal wave of money could not have failed to bid up prices, but which prices isn't always predictable.  There was EXPLICIT POLICY from the Federal Government driving much of that money into housing through demands to loan money to people who would never repay it.   But MOST of the money drove up prices in the things that primary dealers, and their first tier clients like to buy...RESOURCES and COMMODITIES.

Because the $ is the reserve currency, the monetary expansion bids up prices in things that the oligarchs buy from developing economies.  This creates large dollar reserves in these countries, expanded reserves that exist SOLELY due to monetary inflation in the United States.  Those dollar reserves filter through the foreign nation's central bank into its banking system, where loans are created at fractional reserve multiples, wildly expanding the local money supply. 

Reserve Currency money-printing exports inflation.  That is the point to remember.

Yes, many projects are started.  But they are started purely because inflation made the projects possible, not because there existed a real market.

This rapid economic expansion tends to change the balance of power.  Specifically, political power is based on distributing wealth outside of market channels.  Those who are becoming richer because of inflation are not just becoming richer.  They are becoming richer while everyone else gets poorer...because inflation itself is a transfer of wealth from savers to recipients of the new money.

So...the upper echelons of society stay in the upper echelons by going along.  And those who are the most connected to the money printing rise the fastest.

I'll say it again:

RESERVE CURRENCY INFLATION RAISES THE POLITICAL AND SOCIAL BOATS OF THOSE WHO ARE MOST CONNECTED AND ON-BOARD WITH IT TO THE DEGREE THEY ARE CONNECTED AND ON-BOARD WITH IT, both at home and abroad.

But what of the devastating losses?

The devastating losses in the BRICS countries show to what degree those economies and businesses' were dependent on monetary expansion.

They are not necessarily 'UNDER ATTACK'.  They've simply been removed from the monetary TEAT, and are now wailing like any children so removed.

Notice I do not say that those who sent the teat to suckle other markets are good.  They are not good.  Their monetary teat expresses only stolen wealth. 

Notice I do not say that those who received that monetary largesse are good.  They are not good.  They explicitly benefited to the degree of their immoral behavior, at the expense of everyone else in their economies.  I am saying they are thieves too.  Simply less successful than the thieves who formerly fed them.

So what else is going on?   Well the FED is afraid that QE has undermined the confidence which forms the basis of the US Dollar.  So, they've slowed the monetary pumping somewhat, though QE is not really dead or we'd be in a free-fall collapse, and they've redirected the beneficiaries to hide the pumping that is going on.

What does this do?

It removes a giant teat from one set of immoral sucklers and gives a somewhat smaller teat to another set.

While the Fed is still doing QE, it appears that there is some mild deflation going on.

Just as reserve currency inflation exports inflation, so reserve currency deflation exports deflation.

That's what you are seeing.

That, plus jockeying for energy markets explains all the large geopolitical issues in the world right now.

The devil must be laughing.

Because no one is actually fighting for a noble cause.

Instead they are alternately fighting over the opportunities for theft, to receive stolen goods, or for the right to arbitrarily choose life or death in regions - fighting to have the privilege of murder.

So before you put a 'Devil' before me whether Batista or Rousseff, please explicitly state how they got where they are.  Did they rise to power before or after the BRICS inflation wave?  Secondly, compare that to those who accuse them.  I think you'll find they are all bad people, but I may be wrong in a few cases.

Secondly, before you put a 'Savior' before me.  Show me how his rise to power was not correlated or caused by the exported inflation, that he is not connected to, and friends with known gangsters and unsavory, immoral people.  Show me that his 'Brave Stand' is not just a shallow temper tantrum that the teat has moved on.

I might come to agree with you.

But once I understood how the banks, reserve currency, worked and interlace with politics and resources I came to the conclusion that the rise of a moral figure amongst them is harder than forcing a camel through the eye of a needle.   It is not that it couldn't happen.  It could, it is just very unlikely.

Thu, 03/05/2015 - 16:05 | 5858590 Escrava Isaura
Escrava Isaura's picture

 

 

gcjohns1971

Too wordy, unfortunately, because there are some good things in your post.

 

Short Version

Living way beyond our means.

America's exorbitant privilege (Charles de Gaulle) as it resulted in an asymmetric financial system where foreigners (Bretton Woods and Petrodollar) see themselves supporting American living standards and subsidizing American multinationals.

Now, because we live in a finite planet, most of these nations don’t have enough for their survival anymore; even when these nations consume a fraction ‘per-capita’ compare to Americans.

 

 

 

Thu, 03/05/2015 - 16:29 | 5858677 gcjohns1971
gcjohns1971's picture

No.

Short version is this:

Reserve currency inflation caused BRICS expansion...into unsustainable businesses which subsequently collapse when the inflation is withdrwawn.

The degree of the rise is the degree to which they were given a monetary teat of wealth stolen from the rest of the world through inflation.

The degree of the subsequent fall is the degree to which those businesses were unsustainable in the absence of the monetary teat.

The process of the inflationary expansion is politically and socially corrupting in the most fundamental and widespread way, with each benefiting to the extent of his immorality, and each suffering to the extent of his morality.

And a key point is this:

ABSOLUTELY EVERYONE IN POWER WENT ALONG TO VARYING DEGREES...OR THEY WOULD HAVE LONG AGO BEEN FORCED FROM POWER.

 

Thu, 03/05/2015 - 16:59 | 5858799 Escrava Isaura
Escrava Isaura's picture

 

 

I am not disagreeing with you at all.

 

As  MEFOBILLS keeps telling us: “Never let you debt pointing outside of your law .”

 

And Mr. Ford:

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning" - Henry Ford – “New York World” newspaper, 1920 

 

Thu, 03/05/2015 - 18:03 | 5859018 gcjohns1971
gcjohns1971's picture

Didn't say you were.

I was just correcting the impression that the corruption was solely on the part of 'greedy' americans sucking the wealth from the world.

 

No, the wealth-suckers are everywhere.  Those yelling loudest about it now were complicit earlier...very damaging to their status... so they hide behind denials, false narratives, and lies generally.

The story isn't about a greedy set of Americans, or even greedy bankers.

It is about how international bankers and international politicians together built a theft-machine, and fight with each other over access to the loot...using the victims of the theft as cannon-fodder.

Thu, 03/05/2015 - 16:31 | 5858608 El Hosel
El Hosel's picture

Brazil is screwed because they are rich in natural resources? .... Having to rely on "Risky" and "Volatile" Real Assets in the new normal, ouch.

Thu, 03/05/2015 - 23:55 | 5860102 Karaio
Karaio's picture

Melhor não falar sobre a minha terra.

Se eu digo que a coisa está bem, muitos norte-americanos virão.

Se digo que está ruim, os caras ficam felizes acima do Equador.

Melhor deixar sem comentários.

hehe.

Thu, 03/05/2015 - 15:31 | 5858464 Captain Willard
Captain Willard's picture

If we have any ZHers down in Brasil, it would be a great if they could give us a perspective on living conditions down there now. Our friends tell us that food and rent prices have gone nuts and that they've raised bus fares too.

If what I'm told is correct, I cannot believe Dilma will get out of this mess without going to jail.

Thu, 03/05/2015 - 16:25 | 5858660 Parafuso
Parafuso's picture

Yeah, I'm here. I'll give you the long version later. Dna. Dilma will suffer nothing. Prices are a mixed bag. Food is always cheap this why there is never social unrest. Rents ant real estate generally are flat or declining as the bubble they've been in deflates. Energy in any form is very expensive and will not ease as we will be soaked in lame attempts to de zombie PBR and these won't work. That outfit has been pillaged way worse than anyone will admit public. Way, way worse. ..... And just where the fuck is all this supposed oil anyway?

Long version later......

Thu, 03/05/2015 - 16:51 | 5858767 smacker
smacker's picture

Yeah I'm here too, arrived today.

I can only say what's been said before: Brazil is the most or one of the most protected economies in the world. When that runs thru the economy, it means v/high prices for imported goods or often they simply aren't available because foreign firms don't bother setting up distributors for their products. This means that domestic suppliers charge outrageous prices for their 2nd quality goods, just so long as they are slightly cheaper than the imported stuff. It also means they don't invest in R&D because there's little competition to worry about.

Dilma & Co must be happy about import taxes because keeping foreign goods out means more jobs for Brazilians and (presumably) more brown envelopes for her from Brazilian corporate industrialists.

Apart from that, inflation is rising and on a PPP basis the R$ is still overvalued despite its recent fall in value. Energy prices have risen sharply, somebody has to pay for the Petrobras scandal (!)

I see Parafuso is down here too and he's gonna fill you in with some more details.

Thu, 03/05/2015 - 16:07 | 5858601 alexcojones
alexcojones's picture

Brazil didnt seem broke when I was there a year ago.

Dollar hardly bought a good time. 

You needed a lot more dollars for that.

Down And Out In Rio: What To Expect At The World Cup ... www.zerohedge.com/
Thu, 03/05/2015 - 16:24 | 5858652 Escrava Isaura
Escrava Isaura's picture

 

 

alexcojones

Brasil didn’t seen broke to you because you spent your time around the elites in Brasil.

 

Most Brazilians are either poor, or about to go bankrupted. What you saw there was an illusion.

 

Brasil will barely makes through 2016 Olympics before the financial and social breakdown.

 

The US and Europe about a year thereafter.  

 

 

Thu, 03/05/2015 - 16:48 | 5858749 Stumpy4516
Stumpy4516's picture

But I thought the BRICS along with their new BRICS bank were going to kick the US and the dollar off it's throne. /s

Some countries in SA and other places are attacked by the jmafia bankers throught fiscal means.  Others waste their opportunity to build a solid foundation during their boom time through home grown corruption.  Then when the downturn comes their economy is founded on a weak foundation or founded on foreign interests and hard times come.  (Others here disagree but I strongly include Russia in that group.)  Sadly, the common good people pay the price while the elite still find ways to get what they want.

Thu, 03/05/2015 - 17:11 | 5858845 Escrava Isaura
Escrava Isaura's picture

 

 

“The BRIC’S Bank is anti Petrodollar, not anti Money Power” -- Anthony Migchels

 

Brazilian bank cartel is a racket worse than the Mafia, KGB, and Cosa Nostra put together.

 

Thu, 03/05/2015 - 16:16 | 5858635 Greenspazm
Greenspazm's picture

Who the fuck is the author?

Thu, 03/05/2015 - 16:28 | 5858670 Oldrepublic
Oldrepublic's picture

Brazil, the so called fallen BRIC is only the 6th largest economy in the world having overtaken the UK in 2012

Thu, 03/05/2015 - 16:46 | 5858731 Parafuso
Parafuso's picture

In Brasil it's spread rrrrrreeeeeeaaaaaalllll thinly and 20% of all people have 94% of everything. These people with stuff, irrespective of scale, operate to maintain a stasis as any alternative risks competition for their slice, and this is culturally anathema, particularly above Sampa and close to the coast. In the north one could argue that quasi feudal dynastic arrangements are if not the norm they are certainly completely normal. Although I guess the British are more explicit by having a queen and such. Anyway, Brasil in its congenital muddle underperforms and keeps risky. A bagunça é Nossa! Deal with it.

Thu, 03/05/2015 - 16:32 | 5858685 gcjohns1971
gcjohns1971's picture

Short version of below post is this - for explanations of key points see the long version below:

Reserve currency inflation caused BRICS expansion...into unsustainable businesses which had to subsequently collapse when the inflation was withdrwawn.

The degree of the rise was the degree to which they were given a monetary teat of wealth stolen from the rest of the world through inflation.

The degree of the subsequent fall is the degree to which those businesses were unsustainable in the absence of the monetary teat.

The process of the inflationary expansion is politically and socially corrupting in the most fundamental and widespread way, with each benefiting to the extent of his immorality, and each suffering to the extent of his morality.

And a key point is this:

ABSOLUTELY EVERYONE IN POWER WENT ALONG TO VARYING DEGREES...OR THEY WOULD HAVE LONG AGO BEEN FORCED FROM POWER...BY THEIR MORE IMMORAL COMPETITORS.

HENCE, IF THEY ARE IN POWER NOW, AND CAME TO POWER DURING THE EXPANSION, THEY ARE DIRTY.

 

Thu, 03/05/2015 - 18:31 | 5859112 Smiley
Smiley's picture

I clicked on the article in hopes of a better close up of the chick's ass.

I'm sure I wasn't the only one.

Thu, 03/05/2015 - 19:40 | 5859350 Zymurguy
Zymurguy's picture

Okay, enough already, can't someone post a good pic of some Brazilian hottie with a brazillian???  For fuck sake people, it's the end of the day and we've had our daily fill of financial idiocy.... now we wnat pussy!

Fri, 03/06/2015 - 02:06 | 5860347 Ginsengbull
Ginsengbull's picture

Pussy, it's not just for breakfast anymore.

Thu, 03/05/2015 - 20:34 | 5859478 Parafuso
Parafuso's picture

That Petrobras has been pillaged is nothing new or, indeed, unusual. What is different is merely the scale. With the issuance of stock on the NYSE and having assumed pharonic quantities of dollar denomiated debt to lavish, the flux of loot available to steal increased exponentially, and the magnitude of the theft, which merely grew in kind finally became far too large to not notice.

 

The skimming that been exposed só far is chump change. Be clear about that. The .gov.br meme has been that 3% of PBR contract values were skimmed. Bullshit. Perhaps só at the first layer of the onion, but there are many more below, and the real value of diverted funds is likely much closer to 30%. Although who knows because no-one will sign-off on PBRs books.

 

The upside for us, perhaps, is that these obligations were made in the US, and the courts function there. PBR has been sued for fraud in New York, and PBR's debt is subject to review by the the US-based ratings agencies which last week reduced the quality of the debt to junk. In short, it forces a certain amount of transparency that never existed when the company was completely in the hands of the Estado Brasileiro.

Eike.....fucking Eike..... Understand that Eike is a dark-state creature who was given many many $billions by the state “development” bank BNDES. Let's digress. Probably no-one ever got BNDES dough, especially at the scale it was doled to Eike, without various and diverse quid pro quos. For example, buying the concrete from a “friend” of Minister Xs or engineering services, etc. at 2x-3x market price. Further, in making these purchases the Eikeites who could, just the same as at PBR, typically get/got consideration for agreeing to make the purchase. I can say this because I've seen it up close, and who the fuck is kidding whom?

In any case, would someone please toss this useless eater Batista and anyone within 2 degrees of separation of him into the ocean. These morons looted and pissed away $40 billion of other people's money and the probability that anyone will ever be held accountable in Brasil is like that of an asteroid landing on Copacabana. Eike still dwells in very swank digs in Jardim Botânico, Rio when he should be sent to live in the Complexo do Alemão where he more properly belongs ethically, morally and, indeed, financially.

Why doesn't he? He is too intimately insinuated into the política, and these people are dynastic thieves. You know, like the Bush people.

Of course Dilma knew what was going on. She's up the food chain the The Política, and was responsible for approving PBR purchases. Particularly the Pasadena fiasco not mentioned in the article. You look it up.....

Also remember that the dipfuck Lula made sure his kids got Italian passports. Tell me why any respectable former President of a Republic would make sure that his kids had one of those. His son who used to shovel elephant shit at a zoo through his father's reign accumulated enough capital to now be wanderingabout in his own Gulfstream. Yeah.... said like Hiesenberg.

You have no how deep this goes.

Short PBR...... it is by no means over yet.

 

 

Thu, 03/05/2015 - 21:59 | 5859742 Dien Bien Poo
Dien Bien Poo's picture

The really criminal dipshits were those US High Yield Bond funds who bought OGX bonds in the first place. Despite being an EM jurisdiction, 95% of the buyers base was US High Yield, not EM dedicated. 

Eike is many things but top of the list is a promoter. He got away with theft because Wall St let him. He didnt force anyone to buy those deals. The prospectus clearly stated that the reserves under OGX were classified as C3 by the E&P Engineers Davies. C3 is speculative (also known as wild catting risk or equity). Furthermore, if you bothered to read this reserve report in the prospectus, Davies state catergorically that they did no actual work on the reserve estimation, rather they opined on numbers presented to them by OGX. And they still said it was C3. 

You should ask your mutual money manager if he lost money on OGX last year or the year before and if so, can he explain why he invested into a worthless asset at 8.75%? You would be surprised who bought this. And how much they bought. 

Eike is not a thief; he was just a promoter surfing on the greed of Wall St. The real thieves are the money mangers who get paid 2 and 20 to buy shit like this and dont read a fucking prospectus, and the banks that sold this shit knowingly (criminal) or unknowingly (utter dipshits).

Thu, 03/05/2015 - 23:29 | 5860016 hedgiex
hedgiex's picture

The alphabet soup has its days in undergirding snake oils. BRIS combined GNP is less than the C (China). The C is tottering towards a LONG Landing.

This is the Year of Currency Trading where you play with their Central Banks and avoid the bullets from the Currency War. All else in BS with the exception that you get protected by their mafias when you own real assets in these place.

 

Fri, 03/06/2015 - 11:04 | 5861215 Recognizer
Recognizer's picture

Nobody ever said the transition wouldnt be painful.  Overall, BRICs is rising.  And Petrobras... we have the same thing in the US but no one is accountable.  I think they are actually handling it better than we would in the US.

Tue, 03/10/2015 - 02:34 | 5872345 onmail
onmail's picture

It takes time and patience to be perfect.
But I say:
Thumbs Up to BRICS
This is the future
We will rise while you westerners destroy yourselves in another world war.

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