Tragic Events and Business as Usually Unusual in Brazil

Passividade e acomodacao diante da repeticao da tragedia!

allabroadconsulting

November finds continued confusion in Brazil. In spite of ample evidence of undeclared monies from corrupt activities, Eduardo Cunha carries on as President of the House of Representatives and Congress is stalled and unproductive. Meanwhile, Judge Sergio Moro continues to hold a large group of Brazil’s business elite in jail on related charges including the Petrobras scandal. President Dilma appears perturbed, yet aloof.

On November 5, the Samarco disaster in Mariana, literally muddied everything from my home state of Minas Gerais east to the Atlantic Ocean. On Friday the 13th, the jihadists killed and injured hundreds in Paris in another act of wanton, but purposeful, violence.

Mariana and Paris serve as symbols of public victimization and impotence.

In Brazil, the President paid little attention to the mounting death toll and environmental catastrophe in Mariana and Minas Gerais. She only visited the locale a week after the tailing dam ruptured. Meanwhile…

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Brazil Predictions – 2019

Handwritten text showing word 2019 Predictions. Business concept writing Forecast Predictive Written on sticky note paper, wooden background with space office view with folded yellow paper

After reviewing and grading my predictions for last year (https://allabroadconsulting.wordpress.com/2019/01/10/2018-e-as-previsoes-passadas/), I want to put forth a new set for 2019 before the month of January comes to an end.

This year, to me at least, seems particularly convoluted and difficult.  President Bolsonaro is trying to get a grip as are the members of his cabinet.  Thus far, things have been following a zig zag course with the Bolsonaro sons suspected of corruption and nepotism or perhaps just doing business as usual in spite of the moralistic tones that helped the president get elected.  Because people have bought into the Bolsonaro presidency with their emotions, they will accept and rationalize pretty much anything for the time being.  However, it seems likely that the exposure of corrupt actions by Bolsonaro family members and associates will show that honesty and uprightness were only a campaign façade and that the clan is part of the cheating that has long been considered normal among politicians, especially in Rio.

People will also have some forbearance with cabinet members such as Ernesto Araujo in the Foreign Ministry and Judge Sergio Moro in Justice.  In the long run, Moro, in particular, must show that he can deal with official corruption and organized crime.  This is a big order as he no longer occupies a judgeship but instead has become a political appointee subject to whims and pressures.  By trading up, he has lost authority.

Araujo too, has declared that he wants to help rid Brazil of globalism, socialism and cultural Marxism through an affirmation of Christian values.  This is another immense challenge. He has set up straw men to destroy but his work most likely will be futile.

So let’s start our predictions here, beginning with the political:

  1. While Araujo may survive one year as Foreign Minister, his crusade against the “plot” of globalized economic growth will enter into shock with the Finance Ministry policies and either he will change his tune or he will not last at the top of Itamaraty. Furthermore, it is less and less likely that Brazil will actually move its Embassy to Jerusalem, in spite the President’s declarations and Nethanyahu’s presence at his inauguration.  Also, Araujo’s admiration of Trump will look less and less favorable legal difficulties increase and the threat of impeachment hovers.
  2. Justice Minister Sergio Moro will step down to preserve his standing as a possible presidential candidate and because he will not be able to escape the corrupt actions of the Bolsonaro clan and his government. He will not be able to tolerate such cognitive dissonance if he is honest with himself.
  3. Finance Minister Guedes will continue preeminent and will push through some social security reform still in 2019. However, if this reform does not go through or seems too little, Guedes will be fired or will resign.
  4. The Social Security reform itself will be approved but only in a weakened form that preserves the perks and benefits of the military, judges, politicians and other high level public servants. Congress continues subject to the pressure of these entrenched castes.
  5. Some analysts on the left have suggested that Bolsonaro will not finish his term. I disagree and predict that he will not be removed from office before the end of his term.
  6. Vice-President, retired General Mourao, will not be the President of Brazil except as permitted by the Constitution. Although he has been a loose cannon, his objective is not to be President, nor do his military colleagues seek this.  They prefer the current situation with a President favorable to their interests without having all the burdens of power, which have heavily strained the military during the dictatorship (1964-1985).

The Economy

  1. With some pension reform and the natural upswing of the economic cycle, Brazil will grow at 2.2% (plus or minus 0.2).  This rate is not spectacular but an improvement over last year and should set the stage for higher growth in 2020 and 2021.  It most likely will not be higher because the government will not discretionary funds to invest.
  2. Last year, I expected inflation to rise to 8% and according to official data, I was wrong. The Central Bank’s Focus prediction for 2019 is slightly above 4%.  My guess is something above 6% as the economy improves.  New Central Bank President, Roberto Campos Neto will be under pressure not to inhibit growth.
  3. The Selic interest rate is currently at 6.5% and should rise to 8% by the end of the year. This will be needed to help keep inflation in check.  It remains to be seen how much independence the Central Bank will maintain.
  4. Foreign direct investment will continue above 60 billion dollars per year with new investments from China in spite of Bolsonaro’s stated objection that the Chinese are buying everything. New US investors will remain wary and have other options.
  5. Under Bolsonaro and Guedes, inequality will increase as measured by the Gini index.

Social Policies:

  1. Bolsonaro’s policy of loosening firearm regulations will not reduce violence in Brazil and again there will be over 60 thousand homicides and over 5000 killings by police forces. Violence will not diminish.
  2. President Bolsonaro has started his term by putting at risk the preservation of Indian and Quilombola lands but will be forced to backtrack by pressure from civil society and international organizations. This prediction will be difficult to measure but it may be ironic that Bolsonaro’s policies actually help indigenous and minority communities better define their resistance, goals and means.
  3. Brazil will not withdraw from the Paris Agreement as has been threatened.
  4. Social mobilization and opposition with civil society will grow as Bolsonaro’s flaws and lack of political skills become apparent and this will lead to the decline of his popularity. His latest approval ratings are above 75% and will fall to less than 50%.
  5. The pendulum has swung from left to right in Brazil and it will swing back again and eventually become more centered as Brazil slowly develops its institutions and democratic process. This will be shown in the 2020 mayoral elections.
  6. Brazil’s infrastructure, especially basic provision of water and sewage, will improve, if for no other reason that it makes economic sense. Currently, almost 50% of Brazil’s population is not connected to sewer system. This has to get better.
  7. Brazil’s evangelicals will continue to increase their numbers in the so called Bancada da Biblia (Bible caucus) but aside from espousing anti-corruption, anti-abortion, anti-secular and critical of homosexual behavior, there will be an increase in violence with the rejection of identity politics. This increase will be noted in the press and evangelical leader Damares Alves, the Minister of Women, the Family and Human Rights will be replaced.

Steven Pinker, the forward thinking optimist and Harvard profesors states that “knowledge, prosperity, connectivity will not go into reverse” and that a “richer world can better afford to protect the environment, police its gangs, strengthen it social safety-nets and teach and heal its citizens.”  Brazil’s leadership and its most selfish elites will try to prove him wrong by bucking world trends.  They will not be successful in the long term.

My friend Benicio Schmitt, a political scientist from the University of Brasilia recently quoted Francis Fukuyama, who wrote, “Our present world is simultaneously moving toward the opposing dystopias of hypercentralization and endless fragmentation…”  Indeed, Bolsonaro would like a strong central government but given Brazil’s size, its democracy and the federal system, the institutional framework is not there to support this desire.

Social fragmentation is present and an ever increasing individuation exists as people engage in the freedom and restraints of the modern world.  But in spite alienation and anomie, Brazilian society will not break down like Venezuela nor will it revert to a right wing military dictatorship.

So maybe outside of Brazil, the perception of dystopia will prevail but Brazilians themselves still have their elected change of leadership, the tropical land of sun, beaches, beer and beauty, and they can say “carnaval” is coming and we have “futebol” so screw the rest and let us muddle through.

 

 

 

2018 e As Previsões Passadas

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Todo ano, gosto de fazer um blog com previsões.  E depois gosto de voltar e avaliar o que acertamos e o que erramos.  O ano passado quando escrevi o blog, achei que as previsões de anos anteriores eram frouxas e então tentei fazer previsões passiveis de conferir.  No blog de 10 de janeiro de 2018,(https://allabroadconsulting.wordpress.com/2018/01/10/predictions-and-evaluations-2017-and-2018/), fiz 10 “profecias” (será que a palavra ficará na moda no novo governo?).  Aqui são:

  1. Lula will not win the presidency either because he will be condemned in his appeal or he will lose outright to a more centrist politician.
  2. Barring a health issue, Temer will finish his term and seek to define his successor and his party and the PMDB will continue to have weighty and oligarchic influence.
  3. The economy will grow in 2018 between 1 and 2 percent. This is less than the consensus prediction by Brazil’s central bank.  Poor but an improvement.
  4. There will be little renewal in Congress. While Brazilians claim to hate their politicians, they are re-elected and the campaign finance/electoral reform passed in 2017 favors those currently in elected positions.  Furthermore, pension reform will be kicked down the road to 2019.
  5. Inflation will pick up with money being spent to influence the election as well as kitchen gas, gasoline, electricity and health costs all running ahead of official inflation numbers.
  6. The Selic interest rate will once again go to 8% or more from the current record lows.
  7. Brazil will continue to be a country at war with itself. There will be over 60 thousand homicides and another similar number of traffic deaths.
  8. The World Cup in Russia will be a great distraction and Brazil will finish in the top 4 but will fall short of winning the Cup for the sixth time.
  9. The military will not intervene and Bolsonaro’s presidential candidacy will fail. Alternative candidates such as Joaquim Barbosa, Marina Silva, Henique Meirelles, Ciro Gomes, Luciano Hulk or Joao Doria will also fizzle.
  10. Geraldo Alckmin of Sao Paulo will win the presidency much to everyone’s consternation.

Item um: Acertei. Lula, embora tenha sido o grande favorito nas pesquisas, não ganhou a presidência já que estava preso e foi impedido de candidatar-se.

Item dois: Acertei que Temer terminaria seu mandato, mas errei quanto a influencia do seu partido o MDB (antigo PMDB).  Na Câmara o numero de deputados caiu praticamente pela metade (66 em 2014 para 34 eleitos em 2018).  No Senado, o partido do Temer caiu de 14 para 7 Senadores, mas mesmo assim ainda tem a maior bancada entre os 21 partidos representados.

Item quatro: A terceira previsão também estava corretíssima entre 1 e 2%.  Enquanto o Relatório Focus do Banco Central, esperava um crescimento de 2 a 3 por cento, o resultado real foi de apenas 1.3% do produto interno bruto.  Enfim, apesar do fim da recessão o Brasil continua empobrecendo já que a população tem crescimento maior do que a expansão econômica.

Item quatro: Um erro e um acerto.  O acerto é que a reforma da previdência não saiu em 2018.  O erro é que houve uma surpreendente renovação no Congresso: Cerca de metade dos políticos com mandato não foram reeleitos.  Um fenômeno de renovação.  Entretanto, é preciso analisar melhor quem são os novatos e como foram eleitos.  O partido do PSL do Presidente Bolsonaro ficou com o segundo numero maior de deputados e representa um terço de toda a renovação.  Com certeza, o efeito Bolsonaro foi amplo.

Item cinco:  A inflação oficial de 2017 foi de 2.95% enquanto a inflação (IPCA) de 2018 foi de 3.69%, conforme eu havia previsto, exceto que achava que seria ainda maior.  Acredito que a população sentiu ainda mais nos aumentos dos preços do botijão de gás, gasolina, saúde e educação.

Item seis: Minha previsão foi de mais de 8% na taxa SELIC e na realidade o Banco Central manteve a taxa de 6.5% que foi ainda mais baixa do que a taxa anual de 7.1% em 2017. Então minha estimativa estava equivocada.  Ainda assim, os bancos ganharam um bom dinheiro mantendo o spread.

Item sete: Outro acerto fácil.  O Brasil matou mais de 65 mil estabelecendo um novo recorde.  E as mortes de transito em 2017 foi em torno de 47 mil pessoas sendo que os dados para 2018 ainda não foram confirmadas.  Um alento e que parece que as mortes de transito estão diminuindo ao longo da ultima década.

Item oito: A previsão do resultado da Copa foi triste já que os Belgas eliminaram o Brasil nas quartas de finais, ficando o Brasil em sexto lugar na Copa 2018.  O resultado não foi ruim, mas refletiu a qualidade do futebol europeu que vive um momento bem superior ao futebol sul Americano.

Item nove:    . Enquanto os militares não promoveram nenhum golpe, Bolsonaro derrotou Haddad por quase 10 ponto percentuais.  Nenhum outro candidato chegou perto embora Ciro Gomes especula ate hoje, que ele teria vencido Bolsonaro.

E finalmente item dez: O meu maior erro foi a falta de clareza na minha bola de cristal.  Previ que o Alckmin seria eleito. Alas! Ele nem chegou a repetir a façanha de 2006 quando no segundo turno ganhou menos votos do que no primeiro.  Desta vez, não chegou nem perto do segundo turno, dando fim a sua carreira politica e levando junto seu partido, o PSDB.  Afinal, o Brasil optou por uma saída de messias, ou seja, Jair Messias Bolsonaro.  Previ que a população ficaria consternada com o ex-governador de São Paulo, mas por enquanto, o novo presidente está em lua de mel com altos níveis de popularidade.  É provável que o desapontamento e constrangimento aparecerão no futuro, mas por enquanto cerca de dois terços da população acha que a economia vai melhorar e a aprovação do Presidente esta acima de 70% atingindo então níveis Lulistas.  Vamos ver ate quando.

Ao final de contas, me daria uma nota de 7.  Não é perfeição e vamos tentar aprimorar junto com o Brasil em 2019.  Será?