Institute of the Americas: Rio Roundtable on Gas and Energy in Brazil – Disruption in a Disruptive Setting

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The Institute of the Americas held a high-level meeting on Nov. 8, 2017 in Rio de Janeiro to discuss Brazil’s energy sector with a focus on gas as a “disruptor”. Brazil’s offshore pre-salt production has been well publicized and Brazil currently surpasses Venezuela in oil supply. The gas sector, on the other hand, has not received as much attention. It represents a new resource for Brazil’s energy matrix and Brazil’s growing role in the global energy market.

Natural gas as a disruptor links closely to oil production in Brazil’s offshore fields. Officials are increasingly recognizing the need for more market friendly policies in line with the international oil industry. In essence, the policy direction is to open the fields to international investment requirements, promote competition and reduce state intervention. Petrobras, the national oil company, will continue to participate and own production. But Brazil’s oil and gas sector will increasingly be partnering with private companies for the exploration, production and distribution of gas and oil. This shift has attracted attention to the renewed rounds of oil and gas field auctions.

Decio Oddone, Director of Brazil’s Petroleum Regulatory Agency (ANP), summarized the current state of gas production from the Presalt formation. Almost 80 percent of the 114 million cubic meters of gas produced a day comes from off-shore wells. Currently, a substantial percentage of this production is reinjected, burned off or not used due to insufficient pipelines and infrastructure to bring the gas to the market. The objective of the “Gas for Growth” program is to radically change this scenario by making the product available at a competitive price. According to ANP, Brazil has over 600 billion cubic meters of gas in proven reserves with probably over twice as much in as-yet-to-be explored fields. Brazil has abundant energy, which can be used effectively in the midterm given sufficient investment and adequate management.

The production and market challenges include ramping up production to reduce unit costs, improving delivery infrastructure and reducing the marketing strictures. Currently Bolivia is Brazil’s main source of natural gas with sporadic imports from other countries on the spot market. James Story, the United State Consul General in Rio, noted in his presentation that the US has exported LNG to Brazil six times during the past year.

Brazil expects to develop a new gas market through a step-by-step process that has already started. It should be completed within the next 4 to 5 years.

Melissa Mathias of ANP listed these major steps:

  • Implementation of best international practices
  • Attract investors
  • Recruit a wider range of participants and agents
  • Promote access to information and a dynamic investment environment
  • Participate with those now in the sector
  • Promote and open up competition in the supply of natural gas
  • Adhere to contracts

Looking at the production and supply chain, the movement is away from the state monopoly held by Petrobras. Petrobras has overseen production, transportation, distribution and price regulation for the wholesale market. Brazil’s oil and gas industry will eventually provide access to other companies at all levels from production to delivery to the end user.

The proposed liberalization represents a major shift in the ongoing evolution of Petrobras and Brazil’s strategy.   Presently, there are only 3 LNG terminals located in Pecem (north/northeast), Salvador (northeast) and Sao Paulo (southeast). Some 9409 kilometers of gas pipelines are currently tightly regulated by ANP and Petrobras. The new proposal would open this system of storage and transportation and attract investment funds for new infrastructure. Companies would compete in a more transparent market. This will certainly include major building of infrastructure for production, storage, transportation and end user delivery with an increasing focus on electricity from gas.

“Gas to wire” is becoming more important for electricity generation. As is well known, Brazil’s power costs are among the highest in the world even though hydroelectric plants generate more than 70% of the nation’s electricity. However, draughts, changing weather patterns, increasing demand and frequent fluctuations in hydroelectric supply open an immense field for gas and other alternative forms of energy.

Additionally, there is consensus among all productive sectors that “custo Brasil” has created an unacceptable drag on economic growth. Thus, “Gas for Growth” should help Brazil recoup industrial production and advance in the global market, through deregulation, opening and making competitive an underused energy source.

Nearly all of the 20-plus speakers at Institute of Americas’ Rio event were positive about Brazil’s economic and energy outlook. Statements ranged from Brazil being “back on track” to “making up for lost time.” Many were also optimistic about the enthusiastic participation of major oil producing companies in the recent rounds of auctions. Exxon Mobil, Shell, Total, Sinopec and others paid significant premiums for exploration rights. On the other hand, several speakers brought a dose of moderation to the proceedings. Concerns included the need to view gas as closely tied to oil production. There has long been a standing nationalistic view that Petrobras to safeguard Brazil’s oil. This “oil is ours” (O petroleo é nosso) mentality could thwart efforts to open up Brazil’s oil and gas sectors to others. There’s also worry about exactly how Brazil will open up its oil and gas sectors. Brazil is notorious for promoting policies that later get bogged down in execution. Much of this is due to preexisting laws and regulations that inhibit the movement of enterprise and the factors of production. For example, even as ANP has promoted the opening and competition of these sectors, it has also controlled and intervened, possibly defeating its own best intentions. Mauro Storino from Fitch, a rating agency, spoke of an important topic for financial markets. Brazil’s fiscal crisis has led to the loss of investment grade status. Further downgrades could come if Brazil fails to implement major spending reforms. Given that 2018 brings a presidential and general election, politicians are wont to give up their strong hold on Brazil’s pork barrel projects. This likely will make international financing for the gas sector more competitive and harder to achieve.

At the end of the day, knowledgeable people recognize the many contradiction inherent in Brazil’s erratic modernization. Certain sectors lead and then lag. Petrobras for instance is at the forefront in the development of deep-sea oil exploration and production. At the same time that the company developed this technology, it also almost succumbed to the most rampant and extensive multi billion dollar corruption scandal in history. Brazil’s has had two presidents in the last four years. Dilma Rousseff fell, officially, for fairly minor but illegal budget maneuvers. In reality she was brought down by her own political incompetence and radicalism. Her successor, Michel Temer, is a better and more experienced political manager. But he and his administration are much more deeply tainted by outright thievery, favoritism and connivance among a small yet dominant group of elite politicians. Even so, Temer has received some business backing because of his willingness to at least battle to reform the archaic labor code and the highly unequal social security system. The system protects a caste of public sector employees who enjoy benefits totally out of proportion with the vast majority of the private sector. Such are the contradictions in the system.

Many of the fiscal problems will be pushed onto the next administration. The smart money seems to favor a center right successor to Temer. Meanwhile, Lula, the popular, populist leftist former president, awaits a chance to run for president again. This will depend on the success of his appeal to corruption-related charges.

In Brazil, there can be significant uncoupling of political and economic activities. Today, for example, the agricultural sector is thriving and driving Brazil in spite of the general economic malaise. Petrobras and the oil and gas sector also seem to have uncoupled and it is likely that a market friendly outlook in the sector will prevail even if a left leaning candidate wins the election. Once in power, politicians act pragmatically in following the money. Also, given the oil sector’s recent past of malfeasance, there is a strong inclination that the company has survived the poison. However, like a recovering alcoholic, there is a chance that it might fall off the wagon, but the pressure for sobriety is strong.

Gas for growth can be a disruptor but it remains to be seen if Brazil’s disruptive politics will prevail and inhibit progress.

 

Here is the link to the program with a list of the speakers and as well as access to presentations: https://www.iamericas.org/en/events-sp-1138149363/2299-brazil-energy-roundtable-gas-power-and-disruptors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Optimism (in California) about Brazil: A Paradox – BayBrazil and 4th US-Brazil Innovation Summit

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Margarise Correa and Innovative Friends at BayBrazil Annual Conference Sept. 21, 2017 Photo by author.

 

While President Temer says Brazil is turning the corner and as Finance Minister Henrique Meirelles jockeys for a possible run for President in 2018 bragging in international meetings that Brazil has its lowest inflation in years and the economy is starting to grow after almost 3 straight years of recession. Indeed, the Brazilian BOVESPA is at record highs and the international investment community is beginning to see opportunity all over. With a broken economy, there are attractive valuations and the post-PT government is breaking down the national populist restrictions on oil and other natural resources. Still on the ground, things are bleak. Unemployment has barely budged. The state has resources only for political bargaining to guarantee that Temer finishes his mandate and all social and economic projects that were suppose to help the less fortunate have lost resources or are being dismantled.

In this scenario, it is curious and a bit paradoxical to partake in events that reflect favorably and show optimism for Brazil. I have attended all but one of the Bay Brazil Conferences that have been held in Silicon Valley over the past six years. Margarise Correa, the founder and catalyst for many a Brazil-Silicon Valley connection, and her staff, consistently put together an excellent event with an A list of speakers that always have strong and sometimes surprising connections to Brazil. Many are aware that Facebook’s Eduardo Saverin is from Brazil, but did you know Instagram founder Michael Krieger also grew up in Sao Paulo? This year’s speaker lineup was not an exception, as can be seen from the program: http://www.baybrazilconference.org/#agenda

Silicon Valley nests venture capital and while Brazil is always a challenge, VC firms seek talent, innovation, entrepreneurship and marketing that will lead to profits. In this search, there is no correlation between growth of GDP, political stability, and democracy and VC investment. So Brazil’s macro level crisis is of little import and money will flow where investors find a deal no matter the political economic situation.   This year’s event once again showed deals in Brazil and a growing maturity of Brazil’s VC environment. Since the early 2000’s, Brazil has completed numerous cycles of VC funding and the infrastructure for VC investment is favorable. We find a thriving VC community, accelerators, service providers, mentorship organizations, cloud services, corporate support and perhaps most important investors and success stories.

Fintech (High Tech Finance) was this year’s standout sector at Bay Brazil. The basic idea behind FINTECH is that the Brazilian banking and financial market while powerful; it is also replete with inefficiencies and therefore ripe for challenges and changes. The sector is notoriously concentrated and even oligopolistic with high spreads on some of the world’s highest interest rate and outstanding profit margins. The Fintech sector recognizes inefficiencies in the banks and is entering the sector offering major reductions in the cost of credit or funds by taking advantage of the Internet, reliable databases, robust platforms and the ability to evaluate potential clients in an expedited fashion that banks cannot match. Fintechs have found a niche in Brazil (reportedly the world’s second largest lending market) by offering money at a much lower cost and more quickly than the banks. The bank reaction has involved stages ranging from rejection, awareness, engagement, and finally collaboration and acquisition. Along this line, it is perhaps worthwhile to note that Christine LaGarde, the IMF General Director, recently questioned the future of banks with the emergence of electronic currencies and fintech endeavors. So Brazilian banks need to be aware that they also face the tech redefinition that has hit many other industries, i.e. hotels, taxis, travel agencies, newspapers, books and manufacturing, etc.

Bay Brazil and Silicon Valley thrive on innovation and by rare coincidence, the US based Council on Competiveness together with Brazil’s Confederacao Nacional de Industria and the University of California San Diego held their 4th US-Brazil Innovation Summit in San Diego. (www.compete.org/programs/compete-global/26-us-brazil-summit)

Inevitably, there was overlap between the two events. The Innovation Summit like BayBrazil emphasized the positive synergy between Brazil and the USA at government, institutional, entrepreneurial and individual levels. Like BayBrazil, the Innovation Summit served to catalyze interactions between innovators, entrepreneurs and the business of making products for national and international markets. Both forums provided excellent opportunities for sharing ideas and showing positive initiatives, incentives and exchanges in both countries. The forums projected positive developments in the Brazilian economy in spite of the political economic crisis and lack of governmental legitimacy in the eyes of the population.

The optimism and, at times boosterish nature inherent in business events seemed a bit as we might say in Brazil “fora da realidade” or “too good to be true.” While promotion can be healthy it is also a bit illogical given all the negativity and pessimism that surrounds anything governmental and business in today’s Brazil. At Bay Brazil, I raised the question of crime, corruption and complacency affecting Brazil’s development. The optimistic response was that corruption was being addressed through the ongoing and unique progress in the Lava Jato investigations. The Federal Police have been strengthened and, different from the past, bureaucrats and businessmen have been arrested and convicted. On the other hand, shoulders shrugged at the mention of complacency, perhaps indicating that Brazilians continue to be content in a land blessed by sun, beaches and beauty and thus able to shrug off the evils of underdevelopment and even a possible return to the authoritarianism that characterized Brazil’s military governments between 1964 and 1985. In spite of optimism and corners to be turned, Brazil must still face the question as to the correlation between effective democracy, citizen participation and balanced economic development for all. Another question is the role innovation and venture capital will play in this process.DKQ0w8-VwAErJaw

Participants at 4th Annual US-Brazil Innovation Summit, San Diego, CA, Sept. 21, 2017. Photo from Twitter @chadevans1019

 

 

Esgoto e Corrupção: Rotina do Brasil

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No dia a dia da política, esta difícil ver alguma solução para o Brasil. Ha uma forte tendência para fuga, alienação e desespero. Parece que falta iniciativa em todos os níveis. Convive se diariamente com alto custo de vida, falta de segurança, tiros, assaltos, falta de saúde, educação e saneamento. E os problemas não são de hoje mas são perenes e parecem que estão agravando pela falta dos recursos que foram drenados pela corrupção e má administração. Os centros de excelência de todo tipo encolheram.

Ha um paralelo entre corrupção e esgoto. Mais do que 50% da população não tem conexão a rede de esgoto e as águas usadas e os detritos poluem todos os cursos de água desde a Bahia da Guanabara ate as praias de Salvador e ainda passando pelo Rios Tiete e Arrudas em São Paulo e Belo Horizonte. Todas as obras por onde vazou dinheiro foram superfaturadas numa proporção também inaceitável. Assim ha uma ineficiência esmagadora na administração publica.

Embora o Brasil tenha resolvido o problema da fome, o pais nunca abordou com seriedade a questão do esgoto.   Sabe-se, ha muito, da necessidade de uma solução para os resíduos, da mesma forma que ha um clamor para o fim da corrupção. O problema e a desconexão entre a esfera de política, políticas publicas e a sociedade civil. O Congresso é corrupto, o estado quebrado, não há recursos para execução de obras básicas e a sociedade esta acomodada.

No Brasil, normalmente o sentimento esta sempre oscilando entre a tristeza / resignação e euforia / carnaval. A descoberta do pré-sal junto com o futebol da Copa e a conquista das Olimpíadas gerou um período de folia e ao mesmo tempo arrebentou os limites da corrupção. Na farra da expectativa da jorra do dinheiro, esqueceu se do básico da limpeza e saneamento. E com tempo a corrupção manchou a imagem do Brasil da mesma forma que as praias, as ruas e ruelas são sujas, emporcalhadas pelas fezes e detritos.

Um efeito, talvez inesperado, da redução da fome foi o aumento da obesidade. O Brasil corrompeu os corpos com a fast food industrializada da mesma forma que a industrialização da corrupção atacou o corpo do estado. As instituições já sujeitas a pressão e lógica de grandes grupos midiáticos, industriais e financeiros acabaram sucumbindo e, como disse um ex governador baiano, se lambuzaram no mel ou na fatura que se antecipava.

O que existe hoje é o povo gordo mas mal nutrido, mal educado e sem ter onde canalizar o que evacua dos excessos. Enquanto a Lava-Jato procura sanear o sistema de evasão de dinheiro, os de abaixo continuam sem segurança, sem escola e sem saneamento. Enfim, as “cagadas” continuam.

Em principio, as soluções nestas três áreas são aparentes e factíveis, mas enquanto o pais oscila entre o “não adianta” e as “coisas estão ótimas”, ninguém clama pelas nem por esgoto, escola ou polícia. As escolas publicas são abandonadas, os professores tem baixa remuneração, isto é, quando recebem e quem pode manda os filhos para a rede privada? A segurança não existe a não ser no setor privado, com alarmes, grades, cercas e “body-guards.” O que o corpo elimina continua descendo as ladeiras e chega medonho no asfalto. O Congresso por sua vez se protege e finge que o problema não é com eles. O povo sem instrução, por sua vez continua, elegendo aqueles mesmos que tem nome ou que “aparecem” na TV como do “povo” ou como os salvadores da pátria.

Talvez, algum sucesso na limpeza do mundo corporativo, as estatais, e na política poderá servir de exemplo para a limpeza sanitária. Dai, quem sabe os condenados por atos de formação de quadrilha, evasão de rendas, e roubo do dinheiro publico poderão ser condenados a prestar serviços públicos na construção e canalização daquilo que comeram e que conseqüentemente evacuaram em excesso. Não seria exemplar o ex-governador do Rio trabalhando de “picareta” ou um Senador ladrão cavando uma fossa?

Seja como for, enquanto os problemas institucionais fundamentais não são resolvidos talvez com uma nova safra de políticos e uma nova postura de seriedade e zelo pelo bem publico, o país continuará nadando literalmente no esgoto e na corrupção em que se encontra atualmente. Acorda, Brasil!

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Brazil: Muddy Waters, Green Shoots, No Flowers

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Everyone pretty much agrees that Brazil is going through another major crisis.  There is less agreement as to if and when the crisis will achieve some sort of resolution.  Personally in my experience in Brazil since the early 60’s, I cannot remember a time when Brazil was not in crisis.  We have an ongoing process of ebbs and flows dating back to discovery.  There are many explanations ranging from bureaucratic fatalism associated with the Portuguese crown, the geopolitical one derived from Brazil’s less favorable locational aspects, the racial one that blames Brazil’s underdevelopment on its ethnic mix, the political explanation derived from the lack of tradition in participation and voting, the economics due to lack of savings and investment, the educational narrative that notes the lack of functional literacy or the historic one that combines all of the above and more.  Each of these brings something to understanding but still the crises are never resolved and only change a bit in players and personalities.

With all of this, Brazilians remain generally optimistic, happy and compare their country in favorable terms to other places.  For most, Brazil remains the best place to be born and to live.  Even those that participate in the diaspora want to eventually return when things improve.  So how do we reconcile this contradiction?  In spite of violence, mayhem, disorganization, gross inequality, open thievery and poverty, Brazilians still affirm that life is good.  In spite of the recession, now extending to year 3 from 2015 to possibly 2018, Brazil still ranks in the top 10 economies worldwide as measured by GDP having dropped from 6 to 9 in the ranking.  Even so  wealth and wealth creating potential abound.

Amazingly to some, back some 30 plus years, Brazil was in a similar situation.  Jose Sarney (PMDB) was president, supported by Congressman Temer and his colleagues.  Formal unemployment was around 17%, the direct elections movement has lost its chance in 1985 but achieved the open elections of 1989 resulting in Fernando Collor’s election and Lula’s first presidential defeat.  Inflation was higher than that Venezuela’s is now topping 1000% per year.  Like Temer, Collor was called to the carpet on accusations of gross corruption.  Unlike Temer, Collor had no base in Congress and was impeached.  Although Collor had more charisma than Temer, he also failed on the economic front and his different attempts at controlling inflation are remembered with contempt and derision.  Collor’s impeachment in 1992 placed his VP Itamar Franco in the presidency and led to Fernando Henrique Cardoso (FHC) becoming Finance Minister and the implementation of the Plano Real.

In the subsequent elections, FHC trounced Lula two times.  But Cardoso’s second term was made possible by satisfying the venality of Congress (it had to vote a Constitutional amendment allowing a second term).  While the Congressional penchant for the buy off had long existed and had been condoned by the military governments and greatly enhanced by Sarney, FHC also drank from the tainted cup of expediency and now stands accused of having committed the original sin.  In this Cardoso just followed the long tradition of what he has described as “A Arte da Politica” but it is really the dirty business of sausage making, (now “nobly” carried on by JBS, the world’s largest meat processor, thanks to the generosity of Lula, Dilma and the national champion policy which started back with the military governments.)

Things change but remain the same. What goes around comes around.  Can Brazil break the cycle of miracle years followed by crisis.  Can it the country go beyond boom and bust?  My answer is an optimistic yes.  And here is my prediction, no matter how foolhardy.  Today’s Congressional vote allows Temer to survive until the 2018 elections.  The field in 2018 will include the new and the old.  Most likely, the old will win.  It could be Lula if he is not in jail or it could even be the rightist Bolsonaro the messianic ex-military Congressman who sings the praises the military and disdains minorities.  It really does not matter in the long run.  The important fact is to hold the election, gradually renew Congress, put up with whoever is elected and gradually reconstruct civil society based on meeting basic social demands in education, health, and basic sanitation.

This Congress has decided to protect itself by protecting Temer.  The President, in turn, has promised reforms and continues with in their pursuit to maintain a bit of legitimacy bestowed by the market, if no one else.  Given the horse trading that has taken place in order to keep power, it is likely that any further reforms will be more symbolic than real.  The government has already gone beyond its spending cap for this year and now is raising taxes.  Temer will end his mandate as one of Brazil’s most unpopular figures.  Clearly he desires power, is venal and shameless in his own perpetuation.  Still, there no immediate obvious better alternative.  Dilma’s impeachment solved nothing and further surrendered power to corrupt politicians.  Her one virtue was that she allowed and did not block investigations.  Temer has less personal virtue but certainly is a better political wheeler and dealer.  On the positive side though his administration at least opened space for social security, labor and spending reforms.  To all but the most obtuse, there is recognition for this need.  Delfim Neto, now the ranking academic conservative economist is not optimistic but suggests that the “least bad solution” is to let Temer “end his mission and postpone the proceedings” until there is a new administration in place on Jan. 1, 2019.

Brazil continues it herky-jerky halting progress.  In spite of the poor governance, things will gradually improve but the rate will depend heavily on how and if people decide to get involved.  The opportunities are many in civil society and even in the political realm as Temer and cohorts eventually die off.

 

Brazil: Down But Not Out

The following article is by Octavio Aronis and originally published at http://www.aronisadvogados.com.br  It is republished here with Octavios permission.

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By Octávio Aronis, Attorney

As a Brazilian collection attorney, a glance at the international news over recent months would seem to suggest a dire economic situation in Brazil.

For example, public corruption is the norm, crime in the streets is well documented and the country is struggling to recover from a two year economic recession. If circumstances are truly that bad there would be no reason to believe in our economic future, but the reality is that there are reasons for hope. From my perspective, politically speaking, positives may be presently difficult to locate, with the current president indicted on bribery charges and the previous one impeached, and this is just for starters. But with so much attention being paid to these issues, they are being dealt with and discouraged on a national level, and will hopefully lead to a stronger system.

In addition, proponents claim that economic success is independent of the turmoil enveloping the president and, what would seem to support this assertion is that the central bank reported a positive initial quarter of 2017, the first since the start of the recession in 2015. And news of the presidential indictment did not discourage investors in the marketplace, as most still view the economy encouragingly. This suggests a trend in the right direction at last for the world’s ninth largest economy.

The recession has created opportunities for investment and money is pouring into the economy from outside investors who are betting on an economic recovery. With the economic downturn bringing about chances to buy in low, financiers are bringing foreign resources into Brazil, some simply because the country is too large and important on a regional and worldwide scale to ignore. With the efforts to cleanse corruption ongoing, the influx of investment is timely and should spell growth for the future.

Allow me to emphasize that Brazil still boasts many natural resources within its borders and will use them to recover from the recent hardships, along with the industries that have succeeded during this period. It is still a regional, or greater, power in agriculture and forestry and other industries which make for a good base from which to build. Companies and industries that were able to survive over recent years will find themselves adept and competitive when circumstances improve, and will lend further credence to an improving economy.

Finally, we Brazilians have reason to have hope in the country’s fortunes. We have lived through many recent problems and are realizing that change needs to happen. Some issues are systemic and improvement will come slowly. Although many of us may be uncertain about where our country is headed at this point, most of us understand that the current course cannot continue and are prepared to make the modifications necessary to ensure a strong and successful nation in the future.

Unsurprisingly, the headlines of the world do not tell the full story of our country and its economic outlook. There are many challenges to confront, but they are being confronted and are not the sum of all Brazil’s many parts and resources. If our country is willing to embrace the changes that must be made to its systems, then it will still find itself positioned to be successful in the future.

For any questions or comments, please contact Octávio Aronis at octavio@aronisadvogados.com.br.

This article has been edited by Steven Gan of Stellar Risk Management Services, Inc.

All Rights Reserved

Trump is Absurd. Our Best Response is Laughter – Karl E. Scheibe, Wesleyan University*

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Photo from Getty Images found on Internet

 

“Credo quia absurdum”  —  I believe because it is absurd; – Tertullian

This ancient Latin phrase might itself be considered absurd—but it was used to justify Christian faith—not to be achieved by the use of sweet reason.  It is apt in these days, for it can help us understand why such an unreasonable candidate as Donald Trump somehow earned the faith of enough of our citizens to be elected President.  How can we account for this attraction to absurdity in our lives?

First we must recognize that absurdity is all around us—an everlasting presence.  Conscious life is itself a deep mystery, not to be explained by any reasonable account.  And death looms as a more conspicuous absurdity, to which we are often forced out of all reason as the times age and as we age in time.  We attempt to defend ourselves against the absurd by searching for meaning in events and in our own lives.  In this we are aided by social institutions—such as church, family, community, corporation or occupation that can give us stable coordinates—ways of determining North from South, Right from Wrong.  But from time to time, we as a people can get lost in a sea of absurdity—as families, jobs, religions, and political institutions are shaken and seem unstable.  Even little things can be upsetting, as when a TSA agent in an airport orders someone to take off their shoes and belt, to assume silly postures, and finally to surrender a forgotten corkscrew.  Above all, we must not protest at being subjected to such absurd procedures—themselves of doubtful value in achieving safety.  We have learned to accept ubiquitous absurdity.

Regulations, orders, commands, rules—these things produce a pool of resentment in us as reasonable citizens—making us vulnerable to an absurd presence, such as Mr. Trump, who seems to exude contempt for any established order.  He is manifestly neither good nor kind.  He has crude manners and a grotesque appearance—and acts out of impulse rather than reason.  He does not calculate, he cares not for evidence nor for scientific analysis.  He contradicts himself and yet retains the allegiance of a strong and stubborn minority of people who seem to believe him because he is absurd.

We search for meaning, as the famous psychiatrist Victor Frankl observed, emerging from the absurdity of the Holocaust.  But if you are an out-of-work coal miner in West Virginia, whose family has depended for generations on the stability of the mine, you do not have easy search for meaning ahead of you.  Never mind that the promise made by Mr. Trump about starting the mines again is absurd.  It is believed because it is absurd.  It is as if Mr. Trump is giving the middle finger to all of those abiding forces in our world that must be responsible for this conviction that we are being screwed over.  It makes no difference that he makes no sense.  “Stop making sense” is a line with appeal.

“If I laugh at any mortal thing, ’tis that I may not weep.” – Byron

But Mr. Trump is more than absurd.  He is also a fool—and the more remarkable a fool because he does not acknowledge his foolishness.  It is a puzzle to know how to react to Donald Trump as President of the United States.  Should we be afraid?  Fear gives too much credit to the Devil, is unpleasant to experience, and accomplishes nothing.  Should we be angry?  Anger tends to be blinding, and reduces our capacity to act sensibly, as opposed to lashing out.  Lashing out is likely to hurt others, not Mr. Trump.  Should we be remote, withdrawn, in denial?  This might at least enhance survival in the short run.  But isolation simply will not do in the long run–for one may not ignore or be indifferent to a presence so large, so incongruous, so full of novelty and danger.  This leaves us the options of either weeping or laughing.  We might cry as we submit to the specter of the utter defeat of humanity and civilization as we have known them.  Or we might laugh!  Laughter is, I submit, beyond compare the best of all possible responses to Donald Trump.

Consider the delicious word, ‘ridicule’.  It derives from the Latin verb ‘rire’.  It produces the adjectives ‘ridiculous’ and the less common ‘risible’–words that are most apt as descriptive of Mr. Trump’s appearance, utterances, or actions.  This is also the root of the word ‘derision’ and the verb ‘deride’ –handy tools in our verbal kit bag.

Mr. Trump is a fool.  He does not have, as my grandmother used to say, the common sense that God gave to little green apples.  I don’t see him as particularly malicious, even as he is capable of malice in his impulsive churning about.  I see humor as the immediate and most natural response to Mr. Trump.  I recall the image of Jon Stewart clasping his hands and proclaiming his glee at the news that Donald Trump might actually be the Republican nominee.  If you are a professional comedian, always looking for material, then the emergence of Mr. Trump onto the main stage must have seemed like manna from heaven.  Other commentators such as David Brooks were much more reserved in their reception of this startling news, and seemed mostly discomfited, not amused, by this untoward development.

The humor that emerges from beholding Mr Trump is multi-layered.  He characterizes himself as smart and omni-competent, even as he makes conspicuous display of his ignorance and poor judgement.  He talks fluently, to be sure.  But he displays a reduced vocabulary with a preference for absolutes and extremes–words like “great” and “terrible”, “disaster” and “terrific”.  He frequently exhorts his audience to, “Believe me, trust me,” and usually repeats this command several times.  I, for one, am not likely to fall in line behind one who is constantly exhorting me to fall in line.

There is a respectable “theater of the absurd”—with Beckett and Ianesco and Pirandello and even Albee and Shepard guiding us to hone our appreciation of the absurd in life.  Dadaism and Dali in art and John Cage in music have understood that “The absurd” has a prominent place in our lives.  And so it has—even a place of honor.  But it is perilous to allow an absurd fool to take a dominant position in our lives.  Mr. Trump should be laughed off the stage.

Karl  E. Scheibe is Professor of Psychology, Emeritus at Wesleyan University

He has written extensively on psychology and theater.

kscheibe@wesleyan.edu;  860 514 4728

*While Steve Scheibe authors most of the material on the allabroadconsulting blog, this text was written by my brother Karl and is used here with his permission.