A young Frenchwoman, Gwendoline de Ganay, recently published an insightful and popular piece in the Pulse section of Linked In. Her article was quite balanced and sober about Brazil recognizing the depth of the crisis but also expressing optimism in Brazil’s youth, the amplitude and impact of social media, the growing environmental awareness, an openness to new technologies and the presence of a strong entrepreneurial dynamic. Commentators on her article also picked up on the theme and further noted Brazil’s openness to foreigners and the skills that they sometimes bring and can apply in Brazil.
This got me thinking about why I live abroad, why I moved from Brazil, why I still do business there and whether I want my children and grandchildren to live there. I confess that I am old enough to collect my Brazilian INSS (social security) and thus my experience (which comes partially with time) is perhaps a bit more extensive than Ms. de Ganay’s. I believe she is in her 20’s and thus in the “sweet spot” for taking advantage of much of what Brazil has to offer on many levels. I imagine that she may be single and childless. Moreover, since she has a consultancy in Brazil, she has successfully navigated the immigration system and has gotten either her Brazilian permanent residency or citizenship. Armed with the right spirit, great ideas and even a relatively small savings many opportunities can be found. In other words, the optimism and energy of youth run counter position to the “been there done that” cynicism of age.
Again, I really like her article and optimism but let’s look a bit more closely at some of the points that she raises:
- The crisis in real, as Ganay states, but there is no end in sight because the crisis is more political in nature than economic. The problem is not Finance Minister Levy, but one of not having enough political leadership and support to legitimize any option that is taken. The best macro alternative at this point seems to be putting up with Dilma and the PT by hoping to “muddle through” until the 2018 presidential election. On the level of business, the only alternative is to batten down the hatches and keep working as creatively as possible. Taxes and inflation will go up and interest rates will too. So it is a long and hard challenge.
- Ganay and many commentators point out the positive advance in Brazil’s justice system and the Federal Police. Supporters of the PT note that Brazil has never pursued corruption investigations so effectively and persistently. This is true but it does not really mean much in terms of the day to day functioning of the justice system on an individual level. The system is still very creaky and sluggish and subject to pressures of all types. I personally find it somewhat perplexing that individuals such as Marcelo Odebrecht and other top business leaders have been effectively denied habeus corpus. While there may be ample justification based on evidence, I find the precedent unnerving. The Ministry of Justice can pretty much arbitrarily deny release from prison based on prosecutorial opinion before judgment in court. Is that really an advance?
- Ganay points to Brazil’s young population that is eager to learn and adapt. Indeed, she is correct but Brazil’s population is aging quickly and the demographic bonus will be gone in a generation. Brazil’s current fiscal crisis is due in great part to the social security system and especially the built in advantages for federal government employees. Constitutionally protected mandates allow protected federal employees to retire early and with incomes of over 20 thousand reais. Brazil cannot afford this and the aging population will increase the demands in the private sector as well; even though the INSS payments are capped at perhaps only 20% of the retirement benefits of those most fortunate federal employees. As to learning and adaptation, Brazilians do indeed see education as the major means for advancement but it is often more in the direction of having a formal degree rather than actually knowing and performing. Formalism prevails in spite of some advances in non-traditional learning via the Internet.
- Brazilians are receptive to new technologies and are using social media for commerce. Internet business is indeed growing by leaps and bounds but it is still restricted to those who can afford to actually make purchases. The credit-based expansion cycle of the economy is over and currently something like 40% of the population is in arrears with their accounts. This will become a vicious cycle until the economy improves.
- Ganay briefly mentions that Brazilians have an entrepreneurial mindset. I would love to agree with this and do see some indications of its emergence but only on a limited scale. My generation grew up aspiring to work in Brazil’s public sector and the present ratio of candidates to spaces in the public “concursos” proves the continuity of this old mentality. I have written elsewhere that the Brazilian state no longer has capacity for absorption so people need to fend for themselves. I question her statistic on the 75% survival rate of new enterprises. Although she does not cite a source, I imagine this comes from the relatively new statutes on micro-enterprise. It may reflect failure to close a “micro-empresa” rather than successfully operating one.
- Brazilians are responsive to new business models. Yes, the middle class loves to imitate and emulate the USA and Europe. Thus UBER, AirBnB and similar “sharing” start-ups enjoy initial success. However they soon butt up against the “Brazilian reality” and the reaction of entrenched interests. In my hometown (Belo Horizonte), there have already been cases where taxi drivers have beaten up UBER passengers. And AirBnB landlords pretty much want to have foreign visitors as they do not trust fellow Brazilians.
- Ganay affirms that many sectors still perform well and she lists hospitality, food, cosmetics, musical instruments and pet and vet products. I think she is largely correct. Fundamentally, Brazil’s rigid and status conscious system favors any endeavor that allows for class or status confirmation and ascent. Thus kinky haired women purchase straightening, pivetes will strip middle class kids of their Nikes and while there might not be enough good food at home, it always nice to be seen consuming something in the bar or restaurant of the moment even if it is the cheapest thing on the menu.
- Finally Ganay notes the greening of Brazil and openness to sustainable development. So plastic bags are banned in Sao Paulo but has Brazil become cleaner? What does Ipanema look like after Carnaval? Didn’t Rio City Hall come up with the exquisite idea of allowing people to pee on the streets behind a “discreet” barricade? Yes, Brazil has amazing resources for green energy just as did the Pro-Alcool program. Unfortunately, parochial political interests and short-sighted policy have failed to adequately develop the potential. Good programs start, falter and move ahead only haltingly.
I too am optimistic about Brazil. I know how to live there. I know the street language and have some ginga, but I am concerned about my American grandchildren born to their Brazilian parents but still totally innocent about where their roots may be. Is the option of living in a gated community in a walled Brazilian metropolis and going to private, elitist school better than public school and the suburbs in the US? Is it better to be brought up in the “shopping” or is it better to be in the heart of the beast of production and consumption in the USA? Do I worry about young people, gangs, drugs, violence and war more in the US? These are all tough questions for me.
In my 20’s, Brazil was wonderful with its exuberance of touching and embracing, its wealth of opportunity, its openness to those with a bit of competence. How does this change with age and with experience?
Unfortunately, Brazilians and their money are flowing once again to Miami. I resent this as a failure of my generation but can I condemn it?
Here is the link to Ms. Ganay’s post: