Does Brazil Die and Kill the World?


Anyone that has read my blog over the years knows that I am consistently optimistic about Brazil even in the midst of hard times and bad news.  So, the question is why the pessimistic title?

There are several reasons.  The Brazilian diaspora is taking off again.  People with brains and resources are seeking to migrate to the USA, Canada, Portugal, New Zealand, Australia, England and basically any place with more immediate opportunity.  The economy, in spite of reforms promoted by Paulo Guedes, who is attempting to reduce the size and impact of the public sector, remains stubbornly stagnant.  Brazilians have little confidence in their institutions and investors even less so.  In spite of Bolsonaro’s promises, both corruption and violence make living in Brazil a major challenge.  Inequality and the perverse income maldistribution have worsened with recession and stagnation.  Moreover, this lack of economic growth which should be cyclical is becoming structural and more deeply embedded.  Statistics show Brazilian manufacturing retracting.  The one bright spot in recent times had been Embraer, its supply chain and the export of Brazilian designed and manufactured jets, but with the acquisition by Boeing, Embraer production may move to the US and certainly Brazilians have lost control.  Other manufacturing is caught up in demands for protectionism which only tends to increase the competitive gap with advanced economies.  Instead of increasing complexity in the industrial sector, Brazilian companies are reverting back to the semi-industrialization of products.  Thus, Brazil is successful in pulp but not in paper, iron and not steel, generic pharmaceuticals and not advanced or innovative drugs, old model vehicles instead of first in the class.  Mexico has overtaken Brazil in both quantity and quality of automotive production.  Agricultural and the agroindustrial complex are the current darling, but instead of intensifying production and modernizing infra-structure, Brazil has opted for further expanding the agricultural frontier into the Amazon for soy and cattle.  The mid and long-term impacts lead to a legitimate concern about reaching a tipping point where fires, farms and cattle ranches affect the rain cycle creating droughts and a much dryer savannah or even desert.  Long term, many predict that the environmental impact will lead to massive climate change and apocalyptic consequences on a world scale.

So, Brazil’s involution has major consequences.  If the Amazon region is, in reality, a main determinant in climate change, Brazil can be viewed and, is indeed, criticized for its short-sighted management and goals, under the current government as it opens up mining, logging,  farming and generally invasive activities in protected areas at the expense of native populations and nature itself.  The consequence of this policy and climate change denial may be catastrophic in less than a generation.  Is Brazil setting itself up for an international intervention?  Is the paranoia of the Brazilian military and nationalists justified?  President Bolsonaro has reinforced the claims of sovereignty but will these be respected if the future of the whole world population is convinced that it is threatened by floods, fire, rising oceans and natural disasters related to the compromised Amazon region?

Brazil’s current stagnation is generally blamed on the irresponsible economic policies of the leftist governments of the 21st century, and especially the disastrous administration of Dilma Rousseff.  Now Brazil’s offshore pre-salt oil fields with reserves of over 200 billion barrels should place the country in the very top tier of all oil producing countries.  However, it may be that this wealth could go waste.  Along with the destruction of heat sinks such as the Amazon, fossil fuels today are also viewed as the main culprit in climate change and the tipping to catastrophe.  Interesting the major oil companies want to become energy entities and are listening to a 16-year-old from Sweden (Greta Thunberg) while they consciously pursuing two parallel endeavors.

First, they want to produce and sell as much oil as possible while they still can.  Saudi Arabia’s Aramco is the world’s most valuable company and controls some 20% of the world’s traditional energy.  Aramco’s IPO will raise funds to continue and expand production.  Aramco’s cost per barrel and its level of production can almost dictate the world price of oil affecting directly other oil producers including Brazil and the USA.  While Brazilians are aware of the shrinking horizon for oil production, they lack the resources to quickly and effectively bring their oil reserves to the market.  The auctions this week took place without the participation of the major oil companies and raised a fraction of the resources that were expected.  The result is that Brazil’s production will be further delayed and that the country will have to offer more favorable terms to attract the participation of the majors.  Without them, the oil will stay in the ground and the country may miss this chance for wealth.

Aware of the move to alternative energy, the oil companies have jumped on the bandwagon.  Exxon, Shell, Total and the Chinese companies are all pursuing wind, solar, and other non-fossil fuel sources and not only playing lip service to the youthful protesters that Ms. Thunberg has mobilized.  Europe, American states such as California, the signatories of the Paris agreement have all accepted as inevitable the move away from fossil fuels.

The consequence for Brazil can be dire.  It is faced with a double whammy of the perspective of loss of resources from oil exploration and from possibly becoming a pariah state because of its Amazonian mismanagement and the loss of markets for its primary sector.  The market for red meat will shrink, the market for oil will shrink and Brazil may not even be able to sell its soybeans.  Already the European Community has threatened to put on hold the free trade agreement with Mercosur (mainly Brazil and Argentina) pending Brazil’s response in dealing with indigenous peoples and the treatment of the Amazon.

What are the options?

Mining?  The last years have been a disaster with death and destruction from the collapse of tailing dams.  In addition, with the slowdown in China and elsewhere the price of iron ore has fallen to less than half the high during the commodity boom.

Oil and Gas? Can Brazil adjust fast enough to the demands of the world markets.  I am not optimistic.  More than decade has been lost since Lula declared “self-sufficiency”.  Since then Petrobras has come close to bankruptcy and the legal framework for bringing investment to the sector is proving insufficient.  Changes can be made but oil alone is not Brazil’s salvation.

Manufacturing?  Brazilian industry with few exceptions is not competitive in the world market.  The best companies have already moved abroad.  Those companies that focus on the domestic market have to rely on food, drink and basic consumables.

Banking, finance and IT?  Brazil’s banks have long connived in an oligopolistic fashion.  FinTech’s, based on the IT revolution may have a future but their market share is less than 1% of all financial activity.  Information technology in Brazil plays no innovative or leading role in spite of the presence of Google, Qualcomm, Facebook, Linked In and others.  Unsurprisingly, Brazil’s best IT talents have already moved to the many “silicon valleys” where their talents are justly rewarded.  How many will return to Brazil?  Not many.

Employment and education? For the past 3 to 6 years, some 12 to 14 million working age Brazilians have been unemployed.  Without growth in industry and the increasingly mechanized nature of agriculture, few new jobs are available and most of these are in the service sector with low pay and high turnover.  Educational levels have remained low and the current administration by attacking science and the universities has not gained credibility even though it has promised to improve basic education, where Brazilian primary and secondary students consistently underperform compared to their peers in other countries.

Government? Traditionally, Brazil’s middle class has always wanted a public sector job and the role of politicians has been to provide these.  Now, everyone recognizes that the state no longer has any carrying capacity and as a result access and patronage are shutting down.

Tourism? Brazil is lovely and has many natural wonders and not only beaches.  However, Brazil’s image of corruption, violence and government venality has not helped.  And now, the oil spill in the South Atlantic, plus the lame Brazilian response to the clean-up have further compromised this sector.

Agriculture? Brazil will continue to export its primary products: coffee, orange juice, sugar, cotton, soybeans.  This is not enough to sustain its highly urban population (over 80% in cities of more than 100 thousand).

While none of this is encouraging, Brazilians are resilient.  Perhaps, the long tradition of improvisation may offer a way out.  Certainly, society needs to mobilize in a constructive fashion, but it may be that forthcoming protests (Lula released today) will lead to more tear down before things can be built up again.



E Assim Caminham ou Descaminham as Instituições

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Já estamos na reta final de 2019 e creio que dá para visualizar algo do futuro do Brasil com o não tão novo governo legitimamente eleito do Presidente Bolsonaro. Sabemos que há um movimento pendular na política como há ciclos na economia. A esquerda perdeu porque foi implicada na corrupção e roubalheira. A direita ganhou porque conseguiu isolar Lula. O alento que resta para quem votou a contragosto era que as instituições funcionariam.

No meu otimismo, também andei pensando assim. As eleições seguem o calendário e as pessoas tem liberdade para manifestar. Mas infelizmente, a realidade se impõe.

No final de 2015, escrevi um blog aqui com o titulo: Brasil to the Bottom, with No Bounce, aonde comentava o fracasso da política econômica mas também talvez a chegada ao fundo do poço. Infelizmente, estava equivocado. Os brasileiros continuaram cavando e o buraco ficou maior ainda. Hoje, a estagnação continua e o setor industrial está encolhendo. O produto nacional era acima de 2 trilhões e hoje é menor com menos inovação e complexidade.   As reformas da previdência e do trabalho ainda estão incubados e não surtem efeito. Assim a esperança e confiança que devem acompanhar um novo governo estão sendo desperdiçadas e não há previsibilidade de dias melhores na economia a curto prazo. Apesar dos juros mais baixos na historia do Banco Central, os bancos comerciais continuam com os spreads tradicionais que beiram a extorsão. Só os mais ousados arriscam por a mão do bolso onde ninguém tem confiança. Os tradicionais agentes de desenvolvimento como BNDES, Petrobras, as grandes construtoras, e outros campeões nacionais ainda não se recuperaram do desmonte provocado pela corrupção e administração de compadres dos governos anteriores.

Até este ano, tinha a expectativa que a justiça brasileira havia atingido um ponto de inflexão e que haviam reais mudanças de comportamento já que a operação Lava Jato conseguiu a façanha de prender elementos da elite que antes tidos como intocáveis. Era uma instituição pelo menos na parte liderado pelo Juiz Sergio Moro tido como exemplar. Infelizmente, no novo governo, estamos assistindo uma realidade, não inesperada, mas incomoda. Toda a operação da Lava Jato agora sofre ameaças e o juiz herói já perdeu seu lustre como um ministro num governo que não convence como idôneo e responsável. O segmento da população que mais apóia o Presidente está desconfiado do Supremo Tribunal Federal e a maioria de seus membros. Ironicamente, os “inimigos” togados principais – Gilmar Mendes e Dias Toffoli – suspenderam as investigações contra Flavio Bolsonaro e seu assessor Queiroz. Agora será que vão escapar da ira?

Embora o Ministro da Justiça divulgue a queda parcial do numero de homicídios, ao mesmo tempo cresce a violência e truculência por parte da policia, evidenciada pela morte de inocentes, inclusive crianças e jovens.

Se a justiça oferecia um alento institucional que agora se esvazia, a situação de outros setores parecem ainda mais preocupantes. O Presidente e o Ministro de Meio Ambiente negam a existência de incêndios anormais na Amazônia e, ao mesmo tempo, culpam sem provas ONGs (não identificadas) como culpados pelos fogos.

O Chanceler, Ernesto Araujo, lidera, enfrentando resistência interna de diplomatas de carreira, sua cruzada anti globalista questionando o consenso cientifico a respeito do clima. Entretanto, seus esforços não convencem e nem oferecem retorno positivo. Sua postura somada a “defesa da soberania” sobre a Amazônia ameaça a implementação de acordos importantes como o Mercosur-Uniao Européia. A briga infantil com ofensas a primeira dama de um pais amigo subtraem a legitimidade do Ministério para defender os interesses do Brasil.

Na educação, ha um Ministro cuja competência é questionada por seu currículo e erros de português. Mas o mais importante parece ser sua briga com as universidades federais. A disputa parece ser de apenas natureza política-ideologica que não leva a nada. Suas sugestões de favorecer a educação de base podem ser bem vindas mas até agora o que se tem de noticia é o estabelecimento de colégios voltados para a formação e disciplina militar.   Nada contra na medida apropriada mas isso não é uma política educacional para as necessidade do mercado no Século XXI.

Na questão de infra-estrutura, parece que ha índices positivos com privatizações que devem promover a expansão de serviços e eficiência. Toda privatização, entretanto, esbarra na estrutura estatal que para os políticos e para o publico representa oportunidade de recursos e empregos. O pessoal (políticos e publico) não quer abrir a mão. Assim, em pleno 2019, o pais continua com a pobreza básica de 50% da população sem uma conexão a rede de esgoto. Isso tem claras ramificações para a saúde publica e o meio ambiente.

E falando sobre a instituição da Presidência, ainda em estilo de campanha política de rua, o Capitão Bolsonaro mantém sua forma franca e muitas vezes desbocada e agressiva de se expressar. É obvio que as palavras tem peso e muitas vezes a fala do Presidente retira algo da dignidade que as pessoas imaginam que o cargo deve ter. Por outro lado, precisa-se entender que o Presidente na assinatura e na escrita aparenta ser mais ponderado ou controlado.

Brasil está passando por um período de transição. O pais ainda é jovem e a democracia mais nova ainda. Os retrocessos nítidos estão em curso mas espera-se que não sejam nem permanentes e nem irreversíveis. Argentina, por exemplo, está continuando um declino secular e não tem encontrado um caminho político econômico. O vizinho do norte, Venezuela, está um caos, tendo experimentado riqueza relativa do petróleo e agora a crise sem fim de um pais de um só produto principal, que não conseguiu criar instituições duradouras. O Brasil tem mais potencial, mais recursos, mais diversidade, maior complexidade e mais pessoas que os países vizinhos, mas senão encontrar um modelo institucional que não seja apenas formal mas de substancia real, o pais continuará sendo apenas a promessa vaga de um futuro melhor, que não chegará nunca.

Quando se fala que as instituições estão funcionando, refere-se a realização das eleições de 2020 e 2022 e a independência e liberdade da imprensa. Mas as eleições e os meios de comunicação não vão resolver sozinhos os problemas. Se não aparecer um consenso maior que acabe em reformar e reforçar novas e boas regras do jogo, será difícil o pais alcançar o progresso desejado.



Jair Bolsonaro: Um Tipo Típico

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Foto:TudoAki Noticias


Na mídia social, facilmente se observa entre os opositores do Presidente Bolsonaro, sua rejeição por posturas extremistas e radicais.  Muitas postagens e tweets representam horror, estarrecimento e estranhes. As declarações publicas do Presidente são consideradas atípicas,  e totalmente fora de um padrão presidencial.  Entretanto, argumento aqui que a forma de agir do Presidente é simplemente típica e representativa de amplas camadas da população.  Embora comentários racistas, sexistas, anti ecológicas, anti esquerda e anti democráticos sejam repugnantes, eles representam pensamento e linguajar comum no Brasil. Não há novidade.

Claro que há muitos tipos de brasileiros, e o Presidente é um tipo bem típico.  A grosso modo é do subúrbio carioca, gosta de samba, toma cerveja e cachaça, raramente whisky, torce por um time de futebol, ama a seleção, mas vai pouco ao campo, nacionalista ate em baixo d’água, gosta de ver e paquerar as mulheres, é gozador, tolera homossexuais, mas não as quer na família, é bem racista mas acha que não é porque sabe que também tem a pele escura e ainda tem amigos negros.  Ele tem preguiça igual Macunaíma e sua instrução parou talvez no segundo grau. Suas informações vêm da TV, da igreja, e cada vez mais de mídia social tipo WhatsApp.  O homem assume a chefia da família, mas o divorcio e separação também são comuns.  Os filhos são criados para o trabalho e a rede de primos, irmãos e amigos na maioria das vezes representa o caminho do emprego.  As moças são para casar, mas a “liberdade” de hoje vem complicando a tradição.  A faculdade, embora remota ainda serve como meio de ascensão se conseguir chegar ate lá.

Os brasileiros do tipo Bolsonaro têm pouco acesso e menos interesse por bens culturais como teatro, museus e concertos mais sofisticados.  Acabam sendo limitados a plateias das novelas, do cinema do tipo Disney, filmes estrangeiros de aventura, e até pornochanchadas nacionais. Na musica tendem para o sertanejo e pagode.  Os homens gostam de assistir futebol na TV e podem jogar uma pelada num fim de semana.  Gostam de arroz com feijão, um bom churrasco, uma caipirinha e a cerveja nacional.  Muitas vezes o horizonte cultural se encerra dentro desses limites por questões financeiras, mas também pelos preconceitos e barreiras culturais invisíveis.  Sociologicamente, poderíamos classificar este grupo de pessoas como de classe media baixa, que vislumbra a educação como meio de ascensão, mas que muitas vezes encontram dificuldades de tempo e financeiras, além da distancia cultural.   A possibilidade de uma carreira militar, na policia ou no corpo dos bombeiros se torna uma alternativa atraente.

Nessa camada, o machismo reina naturalmente.  Os homens gostam de mulher e a atração para mais de uma é corriqueira.   As mulheres batalham muito mas reconhecem e as vezes apreciam o machismo como fator protetor numa sociedade onde as mulheres tem menos oportunidade e são mais frágeis.  São apreciadoras do lar, da família, da religião e podem ser bastante conservadoras nos costumes principalmente depois de serem mães.  A frase da campanha: “Brasil Acima de Tudo, e Deus Acima de Todos” resume bem o sentimento sem precisar entrar em detalhes ou questionar de forma mais profunda.  Não há enfim maior complexidade moral.

Nessa camada social, as igrejas evangélicas têm sido bem-sucedidas, porque apresentam uma alternativa de aproximação a Deus e costumes bem mais compatíveis, diferente da Igreja Católica que ainda é distante e burocrática.

As pessoas amam muito o Brasil, são nacionalistas e defensores naturais dos governantes que representam o Brasil.  Apreciam especialmente políticos que prometem intermediar entre o individuo e as instituições, já que tradicionalmente as instituições não funcionam bem para aqueles que não tem um contato pessoal ou um padrinho.

E de certa forma, toda política requer simplificação e o Presidente, na sua campanha encontrou, a formula vencedora de respeito à de combate ao crime e à corrupção onde o PT e o Presidente Lula acabaram sendo alvos fáceis.  Quem não tem muito tempo e nem muito interesse pode acabar seduzido pela narrativa moralizante baseada em princípios simples e ate bíblicos.  Ou seja, não se deve roubar, matar e invejar o outro, defender o aborto ou promover homossexualismo com “kits gay”.  É possível que a corrupção tenha realmente atingido um ápice nos governos PT, mas ao mesmo tempo, creio que é provável que os processos iniciados pela Lava Jato tenham atingido principalmente os grupos e pessoas que se associaram ao PT, sem necessariamente serem do partido.  Embora sendo um político tradicional e com um passado não tão imaculado, o candidato Bolsonaro apresentou-se como um “outsider” e um evangélico cheio de moral.  Assim ele incorporou a roupa do justo e a facada que levou em Juiz de Fora apenas reforçou a ideia que ele seria o grande guerreiro contra o mal.  Para ele e muitos outros, as regras são simples e quem as ferem deve ser punido.

E como o Brasil ainda se interessa pela ideia messiânica, o Messias (literalmente) também pode e deve usar o sistema para se beneficiar quando oportuno, e marginalizar aqueles que não comungam de sua visão.  Assim assistimos a ideia de nomear um filho como embaixador e aparelhar a administração usando um critério de lealdade e não de competência técnica.

Dessa perspectiva, o desconforto do Ministro da Justiça exemplifica as contradições que não podem deixar de aparecer.  Sergio Moro era o paladino na luta contra os malfeitores, mas agora não consegue ou não quer ver os casos bastante questionáveis dentro da administração e ate no seio da família do Presidente.

Se ha um tipo de brasileiro que aprecia autoridade e pulso firme com base em princípios tradicionais, o apoio do Presidente também depende de um outro grupo que talvez seja mais sofisticado e certamente mais bem aquinhoado em termos financeiros.  A política econômica incompetente da Presidente Dilma levou o Brasil para seu pior retrocesso econômico.  E Bolsonaro foi extremamente perspicaz em recrutar Paulo Guedes, com sua postura a favor do mercado para comandar a economia.  Guedes, como Moro, teria carta branca para implantar uma guinada de 180 graus na política econômica usando um modelo “liberal” e privatizante.  Com isso, o mercado tolera e perdoa as extravagancias no comportamento do presidente desde que promova medidas favoráveis ao “livre” funcionamento do mercado.

Mas aqui também a simplificação acaba na complexidade.  As medidas “ziguezague” com relação a Amazônia demonstram bem.  Bolsonaro nunca foi simpático as reservas indígenas e nem favorável a proteção da natureza.  Na visão dele o Brasil não deveria participar do Acordo de Paris e deveria incrementar a mineração e complexo agroindustrial na região.  A reação mundial e ate grupos econômicos preocupados em não virar parias frearam as ideias mais simplórias.  Hoje, a população esta dividida, com muitos brasileiros achando que bom bandido é bandido morto e boa arvore e aquela que produz uma sombra, mas sem atrapalhar o “desenvolvimento”.  Me parece relevante que o Ministro da Economia não tenha pronunciado sobre os incêndios sabendo que o campo esta minado.  O crescimento econômico prometido ainda não apareceu de forma convincente e então não faz sentido arriscar.  E como Moro, Guedes poderá ser eventualmente colocado de lado, se o quadro econômico não mudar ate 2020 ou 2021.

Devemos reconhecer que a construção da democracia no Brasil nunca foi fácil.  Num pais aonde mais de 50% das habitações não tem acesso a rede de esgoto e nem a uma escola que ensina a ler e escrever de forma funcional, talvez a democracia seja um luxo.  Assim as pesquisas demonstram que pessoas semelhantes a Bolsonaro, se desencantaram com a política, o sistema de partidos, o Congresso e o processo eleitoral.  E, como se não bastasse, Bolsonaro sarcasticamente sugere que as pessoas literalmente devem evacuar em dias alternados, e aqueles que o apoiam ate encampam a ideia.  Soluções simples como proibir desfile gay, censurar a livre expressão, acabar com noticias “fake”, intimidar os inimigos e favorecer os amigos são cogitadas e implementadas.

Felizmente, a realidade não se enquadra facilmente no básico e simplório.  Brasil é uma sociedade complexa e as pessoas, na medida em que são forçadas a pensar, acabam reconhecendo que a situação é mais complicada.  Consequentemente, as pessoas também buscam a informação e a educação como meio de progresso individual.

Reconhecendo a complexidade não elimina imediatamente o simplório, e de fato, o Brasil pode reverter muitas vezes, ate enxergar os valores da liberdade individual, da educação permanente, e do raciocínio cientifico, como coisas que não eliminam a simplicidade moral, mas que complementam e transformam a moralidade retrograda em algo de maior valor.

Enfim, o Brasil tem um presidente nacionalista, populista, meio bronco, meio grosseiro, simplório e arretado.  E ele não destoa de uma parcela ampla da população que está desesperada e frustrada com a roubalheira atribuída as administrações passadas e que querem soluções que o Presidente promete.  Mas talvez o problema seja que o Brasil não tem solução, pelo menos a curto prazo.  A ver.

Talvez o Presidente não representa o melhor do Brasil, mas ele representa os brasileiros.  Negar isso equivale a negar a realidade.


Bolsonaro: The Good and The Bad


It is not easy to build and sustain democracy.  The process requires commitment, resource mobilization and participation.  Brazil’s democracy has not yet matured, nor can it be taken for granted.  Still since the end of military governments in 1985 and direct elections, the movement has been halting but generally in the right direction.  From 1994 to 2018, elected Presidents were either from the left of center (some say “neo-liberal”) or from the left leaning PT (Worker’s Party).

Jair Bolsonaro, a long term Congressman, with a history of switching parties and a limited record, broke this cycle on an anti-crime, anti-corruption campaign which demonized the left and the prior administrations.  The basic question that the new president’s election raises is the durability of Brazil’s nascent democracy.  Bolsonaro has a military background, favored dictatorship, openly supported torture and has never been friendly or open to identity type politics advocating support for minorities whether they be racial, ethnic or identity related.  Many say he threatens Brazilian democracy.

The 57 million people who voted for Bolsonaro were willing to run this risk and accept his conservative and authoritarian nature based mainly on his promise to reduce crime and end corruption. So what are the good things and the bad things that have transpired under his watch and can Brazil’s institutions brake bad tendencies and survive?

Let’s start with the good.

  • Bolsonaro is gradually recognizing that he cannot dictate as much as he would like to. Thus, he is having to negotiate and, even horse trade, with Congress.  This is typical and happens in democracies even though the President might call this “fake news”.
  • The Ministry of Infra-structure is making progress through the use of PPPs in the construction of roads and ports.
  • The Mercosur-EU trade agreement has been signed after over 20 years of negotiations but it still has to ratified.
  • Against strong odds and opposition, the pension reform has passed the lower House of Congress and is likely to be ratified by the Senate.
  • Bolsonaro promised a reduction in criminality and homicide rates have apparently fallen at least in Rio.
  • The President reduced the number of Ministries from 29 to 22 and thousands of contracts have been rescinded.
  • Bolsonaro has reduced or eliminated the mandatory contributions in support of unions.
  • Visas are no longer required for tourists coming from the US, Canada, Japan and Australia.
  • The current administration approved the 13th month payment for Bolsa Familia, Brazil’s main income transfer program.
  • The President has voiced support for joining the OECD and received a verbal pat from President Trump, however the process will take a minimum of 5 to 6 years.
  • Bolsonaro has managed to keep Paulo Guedes in place as his Super Minister of Finance and the Bovespa has reached recorded highs.
  • Brazil’s energy sector continues to expand production offshore and Bolsonaro generally supports privatization in distribution favoring more foreign investment which Brazil needs to expeditiously exploit oil and gas.

Now let’s take a look at the bad.

  • President Bolsonaro has not delivered economic growth or significantly reduced employment.
  • The current administration has dismantled or neglected mechanisms for protecting the Amazon. Indeed, Bolsonaro rejects the preservation and extension of land reserves and parks for native population, favoring instead the opening of lands to mining and farming.  Deforestation has once again increased in rate and scope while the government has imposed controls on the release of information.
  • Bolsonaro has substantially reduced investments in education and health. Federal universities have been targeted as ideological hotbeds of leftism and left with stagnant or declining budgets.
  • Brazil’s foreign policy establishment has been redirected to alignment with the US and has given up on an “independent” and South – South alignment that the previous administrations sought to create. It remains to be seen if Brazil will benefit by alienating China, its largest trading partner.
  • The Ministry of Agriculture has eliminated or reversed its policy on restricting or reducing the use of insecticides and toxic products so Brazilians are concerned that their food chain is increasingly contaminated.
  • Bolsonaro and his immediate family participate in and avidly promote nationalistic and nativist policies. The President intends to nominate his son, Eduardo, a staunch supporter of Trump, as Ambassador to the US although he has no diplomatic experience or background.
  • The President, in his speech and public activities is a loose cannon. He has posted a pornographic video, made many likely illegal statements and vile accusations and generally has reduced the dignity of the presidency.
  • Under the new administration, the police forces have gained “carte blanche” and the number of executions and assassinations by men in uniform have increased dramatically. At the same time, informal militias which reportedly are associated with the Bolsonaros continue to expand the scope of their activities.  Gang related violence in prison once again erupted just this week nearly 60 executions in a riot at a prison in the Amazon region.
  • President Bolsonaro exudes self-righteous intolerance to any and all who would disagree or contest his positions thus setting an adversarial tone that is detrimental to dialog and exchange. His approach has fostered increasing polarization, making it difficult for anyone seeking middle ground.
  • Although Bolsonaro campaigned and was elected on his anti-corruption promises, he, his family, and members of his administration have been ensnared in nefarious activities large and small. The faces have changed but the corruption prevails.
  • Bolsonaro’s choice for Minister of Justice, Sergio Moro, was a national hero for his role as the judge who confronted corruption and jailed the elite including for President Lula. Now Moro is tainted by purloined hacks of his unethical and perhaps illegal communications with prosecutors.  This connivance certainly puts the tarnish on a once super hero and mainstay of the Bolsonaro administration.
  • Bolsonaro has threatened investigative journalist Glenn Greenwald with “a little jail time here” for his release of the compromising communications between Moro and prosecutors. By extension, the President is threatening press freedom and the right to information and open communication.
  • Like Trump, Bolsonaro uses social media extensively to express his contempt, dislikes and prejudices as well as promote his policies and inclinations. Unlike Trump, he does not have a docile political party with a majority in the Senate.  Bolsonaro’s political party (PSL) is a loose coalition of self-interested individuals seeking advantage from proximity to power.  To date, Bolsonaro has been ineffective in controlling his own party, and, much less, the whole Congress.

This Santa Claus listing of deeds and misdeeds could be more extensive and detailed.  However, the major concern must be can Brazil continue to develop its institutions?  This is more crucial than the question: Can Brazil’s economy grow?  Confidence in the rules of the game and predictability are minimum requirements for investment which, in turn, is essential for growth.  Bolsonaro is a transitory phenomenon and while, his administration undoubtedly impacts public administration and the economy, the deeper issue is the resiliency of Brazilian civil society and how people either acquiesce or come to demand their basic needs in terms of education, health, sanitation, security and employment.

For years Captain Bolsonaro was an outlier, so much so that he was judged a “bad soldier” and ousted from the military.  In the age of Trump, Boris Johnson, Orlan, Dutarte and others, there is a risk of normalization of poor behavior.  However, my expectation and hope is that the pendulum will gradually swing back just because the extremes are economically inept in the long run.  And Brazil can ill afford another decade of stagnation and decline.  We will see.


Brazil: The Long Run


It is curious how we demand answers, service and satisfaction.  In the US, things are fast paced and fairly efficient.  In Brazil and particularly in the daily news and in the social media, things too are immediate.  People want solutions but the cascade of events, some random and some predictable, always brings new problems before the old ones are remediated.  Looking back over the past year, we see a choppy ocean with froth and white caps.  It seems that the surface may never calm.  If we look below the surface, however, we might see a slower and less agitated situation.  Everything changes and nothing changes.

The basic problems of economic stagnation, inequality, an ineffective educational system and basic institutional weakness continue to hold the country back.  The question is why can’t Brazil address these fundamentals?  Since civilians wrested power back from the military in 1985, the country has had a rural oligarch (Sarney), a right wing populist (Collor), a left leaning moderate (Itamar Franco), a Social-Democrat (Fernando Henrique Cardoso), a Socialist (Lula), a leftist technocrat (Dilma), a traditional center-right politician (Temer) and finally a right-wing retired Army Captain (Bolsonaro) as Presidents.  All promised change and, undeniably, there has been some progress.  The 1988 Constitution came under Sarney.  Collor promoted an economic opening.  Itamar and Fernando Henrique stabilized the currency ending hyperinflation.  Lula benefited from a favorable expansion in foreign trade (mainly with China), economic growth and some improvement in distribution.  Dilma and Temer, while political opposites, inherited and worsened a declining economy and a political and moral crisis resulting in the election of Bolsonaro who channeled discontent into votes but thus far has failed to deliver growth or maintain popularity.

Through 8 presidential secessions, 2 impeachments, regular elections at all levels, the doubling of the population from 100 million to over 200 million, some 8 World Cups of which Brazil only won 2 in the period, the country has survived but only with a remnant of satisfaction and a huge growth of frustration and political polarization.  The complaints about crime and corruption continue through all with politicians and the political system receiving the blame.

Undoubtedly corruption is rife.  Street crime and organized criminal enterprises have expanded and violence and thievery comingle with individual politicians and have a foothold in politics and the market.  Over the last 20 years, the population has become increasingly skeptical and distrustful of all things political as the press and social media revealed the ever-increasing scale of malfeasance.  Unfortunately, most fail to recognize that corruption and crime are really symptoms while the real causes are the lack of transparency, uneven acceptance or blatant bending of the rules of the game and selective enforcement of the law by policing authorities.   These three factors collectively portray institutional immaturity and weakness.  While Brazil’s media are dynamic, incisive and investigative, oligopolistic groups also largely control them.  Rede Globo commands the lion’s share of broadcast media.  Similarly, newspapers and magazines are consolidated in the hands of relatively small groups.

As people recognize this concentration, they suspect the promotion of special interests.  Likewise, the Brazilian justice system is notoriously slow, inefficient and generally perceived as favoring the powerful.  The maid of color is condemned to years in prison for stealing a pound of butter while the rich and powerful kill and pillage with impunity.  Similarly, the enforcers or the police are also viewed as suspect and in Rio; for instance, the police and milicianos can barely be distinguished or separated.  Again, this is the breakdown or the lack of institutional maturity.  Without a functioning police power, it is hard to impede petty crime and much more difficult to discover and breakdown organized criminal endeavor embedded in the power structure.

Looking at Brazil from this perspective, it is positive to see the progress that has been made in bringing, over the past 10 to 15 years, major politicians and their accomplices to justice.  Yes, there is institutional improvement but it is slow and disproportionate to the challenges.  And again the enforcement and application of the law appears to be uneven.  Brazilians still believe the old saying: “Para meus amigos tudo, para os inimigos a lei.” (For my friends everything, for my enemies, the law.)

The public clamor in support and then in withdrawing support from “populist saviors” or “salvadores da patria” manifests the weaknesses that sufficiently sharp politicos attempt to use to their advantage.  While President Bolsonaro’s campaign against crime and corruption was sufficient for his election, it is proving to be not enough to guarantee governance or even a coherent program.  To date, albeit it is only 6 months, his accomplishments are meager, fortuitous and contradictory.  Meager as exemplified by the removal of radar from the highways, and fortuitous and contradictory as the closing of the Mercosur – EU agreement reveal.  The European Union deal has been in negotiation for over 20 years and Macri’s Argentine government wanted it and need it more than Brazil.  It also contradicts the philosophical guidance promoted by Itamaraty’s current leader, Ernesto Araujo.  Still it is an achievement.

Just as Trump is constantly plagued by his past of womanizing and abuse, Brazil’s polity and openness also brings comeuppance.  Currently, Brazil’s hero of the day, crusading judge and now Justice Minister Sergio Moro, is being tarnished by leaked or hacked communications which purportedly showing him conniving with prosecutors to guarantee Lula’s imprisonment and even trying to illegally interfere in the affairs of Venezuela.  Lava-Jato (Car Wash) has become Vaza-Jato (Empty Wash) at the risk of reversing the supposed gains against corruption.  While it is apparent from the published purloined messages that the judge overstepped all bounds of propriety, he denies all wrongdoing.  In the end, this new scandal may ultimately strengthen respect for and adherence to judicial procedure, but in the short run, the messages and ongoing debate only generate more polarization.  In Brazil, it is generally accepted that the story is more important than the facts and different competing stories separate those who see Moro as a hero and those who see him as a villain.

As in war, truth is the first casualty in Brazil’s tumultuous and conflicted setting.  It is important to question, to try to be informed, to participate and to be present.  Institutional improvement will come as civil society makes its demands and as these demands crystallize and become more coherent.  Democracy is still young in Brazil and it may not even survive. But Brazil is overdue for improvement and economic growth and the reason the country is not growing is because the people do not have confidence in tomorrow as they have to focus on surviving today.  Turning inward is a private solution that many Brazilians will take.  Enjoy the beach, the beer, the holidays but the seeds for improving are there and when the individual alternatives such as emigration become too onerous, and as people and resources create opportunity, education, equality and access will gradually improve, in spite of the obstacles.  Brasil tem jeito, pelo menos ate provar ao contrario.




Institute of the Americas XXVIII La Jolla Energy Conference – Institutions, Resources, Sustainability


In the world of instant communications, in locus conferences tend toward the arcane and sometimes even extinction. Still in the high tech world, the La Jolla Conference stands out for its relevance, durability and because it successfully attracts decision makers, equity fund executives, energy company honchos and institutions with deep knowledge and very significant investments in Latin America’s energy sector. Face to face interaction and debate uniquely allow the validation of perceptions and interpretations on a level that cannot be matched by web and other virtual contact. The now three day event includes a start off with team building hikes at Torrey Pines, kayaking at La Jolla Cove and ends with beers and competitive corn hole matches, where multinationals may wish to throttle consultants, academics and journalists.

I have attended the conference for over 10 years and the most remarkable shift, in my opinion, is the recognition by the majors such as BP, Shell, and state run oil companies that the days of the fossil fuel based economy are indeed limited. Different from the fears of “peak oil” the 70’s and 80’s, the awareness today is that climate change is indeed real and impacted by oil and gas production and use. The general outlook is that there is enough oil and gas in the ground for the next 20 to 30 years with the likelihood of finding more and processing previously non-viable fields. However, the limitation that exists relates to Co2 and climate change. This, in turn, demands the development of alternative and sustainable energy sources. The 16-year-old Swedish climate blogger Greta Thunberg was held up as example of the future energy conscious consumer. If she is truly representative of her generation, the world will use much less non-renewable energy.

Absolutely aware of this shift, Jeremy Martin, the able VP of Energy and Sustainability at the Institute, is forging new alliances in Spain and Europe with companies, funds and institutions vested in Latin American. Jeremy’s program will join the Madrid Initiative building toward a future where the energy industry transitions to clean with limited climate impact by minimizing and mitigating Co2 emissions. It will theoretically avoid “green washing” and promote sustainable growth. The millennial generation does not see the future of energy in oil and the energy companies need to know their customers or fail in the market place. Interestingly, all this is to take place with the blessing of big oil.   Thirty billion dollars have been set aside by majors like Shell, Chevron and 30 other companies to stoke this effort.

While including sustainability, the conference also focused on specific countries and in each case the basic questions were the perpetual ones. How can my company enter in or continue given Latin America’s precarious institutions? Where and what are the major obstacles that energy companies face when they mobilize massive financial resources?   Can investors expect transparency, predictability, integrity and honesty in contractual relationships?

The answers varied. Venezuela represents the current worst-case scenario with the unresolved struggle between the Cuban supported and very corrupt Maduro regime and the questionable legitimacy of upstart Juan Guaido. In spite of the break down and conflict in the country, eyes are still on Venezuela’s massive oil reserves. The feeling is that once Maduro departs, there will be a rush of companies to restart the once productive fields and that Venezuela can gradually recover. There are no guarantees but, with its resources, the industry feels confident in its role.

In the case of Brazil speakers wondered if the energy sector might be more stable than the erratic moves of the Bolsonaro government. Brazil seems to be forging ahead with liberalization, privatization and opening of upstream and downstream sectors but at the same time, it was remembered that the new right wing President Bolsonaro, like leftist Dilma Rousseff before him, recently intervened in the market at a critical point to control fuel price in order to meet special interest demands. This move immediately raised doubts about his liberal market commitment.   So the question remains: can Petrobras really sell a 60% stake in its refineries if the government threatens to control pricing? Can new and old companies participate in the development of the massive pre-salt fields without undue government interference? There are rules but can the institutions actually enforce them or will ad hoc political pressures triumph?

Similar doubts exist in Argentina. President Macri’s government is running out of steam and out of time as new presidential elections approach. Former President Christina Fernandez has decided to run for Vice-President with her former chief of staff leading their populist and left leaning ticket. His more pragmatic views pose a serious threat to Macri’s reelection and the continued market driven movement in oil and gas. In the past, the Fernandez with their Peronist supporters expropriated the holdings of the Spanish oil company Repsol. With inflation running above 40% per year, foreign energy investments are often seen as the low hanging fruits for hard currency income. Again institutional stability and opaque rules of the game come into conflict with companies that have resources and investments.

Colombia has also discovered new fossil fuel sources both on shore and off. Moreover, since the peace agreement with the FARC guerrillas, the country has gone through two presidential cycles with a recently elected conservative government led by Ivan Duque. Still, all is not rosy as Colombia struggles between left and right and is currently taking the brunt of the Venezuelan exodus.   Presenters touted Colombia’s relative advantages but onshore the oil fields are small and offshore other sites such as the Guyana may be more attractive with fewer competitive disadvantages.

Mexico under Andres Manuel Lopes Obrador (AMLO) is also a big question mark. While AMLO has to date respected contracts and agreements of the previous administration which made unprecedented moves toward denationalizing Mexico’s energy sector, AMLO philosophically looks back to the past when PEMEX the national oil company provided a major share of the government budget as well as being a useful niche for providing employment, as well as sinecures. Basically, the business sector lacks trust and Mexico’s economy has reverted to a path of slow growth. In spite of AMLO’s nationalism, San Diego’s Sempra continue to expand and promote its billion-dollar investment in Ensenada as an export terminal for U.S. LNG to the growing Asian market.

Aside from institutional analysis for risks and opportunities, panelists noted that resources and new technologies are more readily available now then even in the recent past. Private Equity funds are apparently ready to cut checks in Latin America starting at 500 million dollars for the right projects with the proper guarantees. New technologies such as the use of DNA in tracking oil flows in fracking promise to recover billions in additional resources. The times are exciting even with Latin America’s uneven institutional progress.

Once again congratulations to the Institute of the Americas and Jeremy Martin for bringing experts, funding and opportunities to the lovely and unbeatable La Jolla setting.

Here is the link to the full conference program: