Brazil: The eternal question….What the heck are we doing and where are we going?

January has been an interesting month for Brazil.  Hot, humid summer rains and floods, but so far less devastating than in years past.

2014 is an important year for Brazil not only because it will host the World Soccer Cup but also because of the upcoming presidential elections in the fall.

Brazil already is attracting much more international attention. The spotlight will become brighter once the Winter Olympics end in Russia on Feb. 23.  Dilma and Manteiga have been drilled at Davos and the journalists and curious keep probing.

So where is Brazil headed?

There are a bunch of immediate economic issues and these include the declining balance of payments, a fall for the first time in a decade of Brazil’s international reserves, rising interest rates, slow growth, industrial decline, inflation and the threats of a loss of investment status.  While all these threats are real,  none are new.  The threats are challenging. But they can all be addressed. Since it is an election year and Brazil still needs to finish preparations for the World Cup and the Olympics, it is highly unlikely that the government will be able to reverse any of the negative trends this year.  It is more likely to be “belly pushing” (empurrando com a barriga) until the end of the year.  On Dec. 31, 2014, people will be wishing Happy 2016 as 2015 will be a very tough year of adjustments.

Ok that is a lot the negative and/or challenging stuff.  Let’s look at the other side.

It is highly unlikely that the credit agencies will risk a downgrade of Brazil in an election year with Dilma’s victory almost certain.  The agencies, in my opinion, do not have the grit or chutzpah to make such a move.  Foreign capital continues to look at Brazil in the long term and while the political parties and institutions are weak, the political system, the press and civil society are all vibrant.  The new middle class is finding its way to the shopping centers still and eventually the shopping center owners will recognize that those weird people (a sort pseudo nouveau riche) actually do have some spending power and they will be welcomed in shopping centers once reserved for the old elite.   In the meantime, Brazil’s upper and middle classes will find more and more ways to separate themselves so as to maintain their peculiar need for status.

The constant drumbeat to improve public services and reduce corruption and the need to meet, in some fashion, the demand for basic needs is slowly and gradually leading to some improvement.

Witness Rio. Security in Rio, in spite of recent set backs, has improved significantly from say 2005.  Much needs to be done and Brazil’s annual murder rate still equals the number of U.S. servicemen who lost their lives in Vietnam, i.e 40000 plus violent deaths.

It is well known that the PAC (economic acceleration programs) have not achieved their goals, but some improvements are under way.  It is just how things work in Brazil.  It is unfortunate that the opposition, mainly the PSDB, cannot find a coherent discourse.  The only thing they say is that country needs to be less corrupt and more efficient.  Since the Tucanos have their scandals and their administrations have not been notably more efficient than the PT (Lula’s Workers Party), they don’t stand a chance in the presidential election.  While Dilma has little charisma, neither do the opposition candidates.  So the wait is until 2018, when there will be a real election and maybe even the possible return of Lula.

So basically, people are going to keep working, investors are going to keep investing (especially foreigners with vision) and hopefully the low levels of unemployment will continue, not so much through job creation in manufacturing, but through micro and mini entrepreneurship.  Some manifestation of this is the rapid spread of all type of franchising, numerous beauty salons, the proliferation of massagistas and “personal” services, the rapid spread of lots of information (much of it bad, but some good) through the internet and the inherent optimism (tempered by corresponding pessimism) that drives the Brazilian psyche.

God is a Brazilian, but we are a devil of a people.

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