A Bit More on Growth and Unemployment in Brazil

Here is a link to an interview in English, on Chinese television, with Paulo Sotero, the Director of the Brazil Institute at Princeton University.

http://english.cntv.cn/program/bizasiaamerica/20130201/103648.shtml

Sotero raises the same question that I did in my previous blog.  He affirms that unemployment is low in Brazil because Brazilians are optimistic, the service sector is booming, and because it is hard and expensive to fire people.  As a result, employers are keeping people on their payroll.  As the interviewer notes, this squeezes profit margins.  Sotero fails to address this point.  He is also more optimistic in stating that Brazil should grow between 3 and 4 percent in 2013.  The question is where will the investment capital for growth come from.  He expects to come from abroad, but if investors look at the performance of Petrobras, Brazil’s largest company, they certainly will not see much to be optimistic about.  Indeed, Brazil continues to need infra-structure investments and theoretically these investments can provide a high return.  However much of Brazil’s infra-structure is tied up with the state and either needs special dispensations or total privatization.  This is the case with seaports and airports.  Some airport operations have been privatized with Brazilian and foreign groups taking over the operations and improvements.  Still it remains to be seen how successful the new players will be.

Just as a side note, on the day that the new operators took over the airport in Brasilia, the baggage loaders went on strike and my flight was delayed.  So as we say in Brasil: eh complicado!

 

 

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