Qualcomm and Brazil: Semiconductors in Sao Paulo

Screen Shot 2018-02-12 at 16.59.24Qualcomm is San Diego’s claim to fame in high tech.  The company was founded by Irwin Jacobs and held naming rights to our major stadium until the Chargers decamped to Los Angeles last year.  Currently, the company faces a hostile take over bid from its competitor Broadcomm.  It is not clear, at this point, if the Broadcomm will have success but Qualcomm has also faced litigation with Apple over patents and royalty payments

In the larger scope of Qualcomm”s endeavors, Brazil has not been that significant although the company has had a presence there at least since the 1990’s with its Omnitrac system, which the corporation sold several years ago.

Qualcomm now has just announced plans for an important joint venture to build a major semi-conductor module  factory in Sao Paulo.  Investe Sao Paulo, which has also worked with All Abroad Consulting has provided significant support to Qualcomm and their Chinese joint venture partner ASE.  My friend, Sergio Rodrigues Costa, the Managing Director at Investe Sao Paulo stated: “The implementation of this project has the support from Investe São Paulo, the investment promotion agency of the state government, which is advising Qualcomm and USI on site location, environmental, infrastructure and tax matters. We are proud of serving this investment, offering strategic information key to the success of the project,”  More information can be found at http://www.investesp.org.br

Here is the press release from Qualcomm and ASE:

Qualcomm and USI Enter Agreement to Form Joint Venture for Semiconductor Module Factory in Brazil FEB 5, 2018SAO PAULO Qualcomm products mentioned within this press release are offered by Qualcomm Technologies, Inc. and/or its subsidiaries. In São Paulo today Qualcomm Technologies, Inc., a subsidiary of Qualcomm Incorporated, and Universal Scientific Industrial (Shanghai) Co., Ltd. (USI), a subsidiary of Advanced Semiconductor Engineering, Inc. (ASE), signed an agreement to form a joint venture. This joint venture, which remains subject to various closing conditions, would focus on an installation of a semiconductor module facility in São Paulo dedicated to the design, development and fabrication of modules and components for smartphones and IoT devices in Brazil. The agreement formalizes the non-binding memorandum of understanding signed by the two parties in March 2017 with the Ministry of Science, Technology, Innovation and Communications (MCTIC), the Ministry of Industry, Foreign Trade and Services (MIDC) and Investe Sao Paulo, representing the Sao Paulo State government. The agreement to form the joint venture is a result of ongoing collaboration among Qualcomm Technologies, USI and the government entities who have been working together to lay the foundation and foster the growth of the semiconductor industry in Brazil, as well as set the conditions for the possible creation of this joint venture. Building on the heritage and industry leading Qualcomm® technologies, the flagship products of the joint venture will be a line of system in package modules powered by Qualcomm® chipsets and the modules include, in a single component, the radio frequency and digital components for smartphones and IoT devices. These products are designed to help dramatically simplify the device engineering and manufacturing processes, and should also provide cost and development time savings to OEMs and IoT device manufacturers. Manufacturing these components in Brazil may also assist in the reduction of the import deficit of integrated circuits, by expanding and diversifying the Brazilian production of semiconductors. “The platforms and solutions of Qualcomm Technologies continue to support and accelerate the mobile industry and beyond,” said Cristiano Amon, president, Qualcomm Incorporated. “The collaboration between Qualcomm Technologies and USI aims to develop best-in-class solutions for smartphones and IoT system platforms by offering connectivity, security and accessibility that customers need to create innovative products and better user experiences.” “This project should help foster the adoption of IoT in Brazil, as some of the technology platforms being supported by this joint venture will be designed with an eye towards helping to facilitate the development and manufacturing of connected devices beyond smartphones across the country,” said Rafael Steinhauser, senior vice president and president, Qualcomm Latin America. “USI has been at the forefront of miniaturization technology for more than 15 years. Our track record and experience make us an ideal collaborator for the manufacturing of highly integrated multi-component modules used in smartphones and IoT devices,” said Mr. C. Y. Wei, president of USI. “Brazil is the largest economy in Latin America with a significant growth potential for integrated modules. USI will be utilizing the technological competence of its parent company, ASE, to help build up the semiconductor cluster in Brazil and Latin America. We are excited to be a part of this joint venture that could help boost local employment in the next five years,” he added. “The creation of this joint venture by world class companies is a major step towards the insertion of Brazil into the global semiconductor chain, accelerating the development of high technology products and creating important competencies in our country by bringing highly specialized jobs to Brazil in the areas of design and manufacturing of semiconductor modules”, says the Minister of Science, Technology, Innovations and Communications, Gilberto Kassab. The joint venture is likely to be set up in the state of Sao Paulo as a result of the effort and collaboration between the State of Sao Paulo, USI and Qualcomm Technologies. Assuming successful formation, the joint venture is expected to start manufacturing in 2020. About Qualcomm Qualcomm’s technologies powered the smartphone revolution and connected billions of people. We pioneered 3G and 4G – and now we are leading the way to 5G and a new era of intelligent, connected devices. Our products are revolutionizing industries, including automotive, computing, IoT, healthcare and data center, and are allowing millions of devices to connect with each other in ways never before imagined. Qualcomm Incorporated includes our licensing business, QTL, and the vast majority of our patent portfolio. Qualcomm Technologies, Inc., a subsidiary of Qualcomm Incorporated, operates, along with its subsidiaries, all of our engineering, research and development functions, and all of our products and services businesses, including, our QCT semiconductor business. For more information, visit Qualcomm’s website, OnQ blog, Twitter and Facebook pages. About the ASE Group The ASE Group is among the main independent suppliers of semiconductor manufacturing services in mounting, testing and conception of materials and design fabrication. As a global leader, it meets the growing demands and necessities of the industry for more performance in faster and smaller chipsets by developing and offering an ample portfolio of solutions and technologies that include design of integrated circuit test programing, front-end engineering tests, wafer probes, flip chips, systems in package, final test services and manufacturing of electronics through Universal Scientific Industrial Co., Ltd. and its subsidiaries, members of the ASE Group. For more information, visit the website www.aseglobal.com. About USI USI is a global ODM/EMS leading company providing design, miniaturization, material sourcing, manufacturing, logistics, and after services of electronic devices/modules for brand owners. USI is a member of ASE Group and has been listed in Shanghai Stock Exchange in 2012. It has many years of experience in the electronics manufacturing services industry and leverages the industry-leading technology of ASE Group, which enables USI to offer customer diversify product in the sectors of wireless communication, computer and storage, consumer, industrial, and automotive electronics worldwide. Through the sales service network in North America, Europe, Japan, China, Taiwan, and manufacturing sites in China, Taiwan and Mexico. USI has about 15,000 people worldwide. For more information, please visit the website www.usish.com.

The proposed investment is reported at approximately 200 million US dollars with funding coming from the BNDES, Qualcomm and ASE Group.  It is also important to note that this announcement was first made in March of 2017 and hopefully with Investe SP and the new announcements, the project is ready to move forward.  On the positive side, it definitely shows that Qualcomm has a long term commitment to Brazil, while the downside could be a change if the Broadcomm acquisition goes through and leads to a change of plans.  Semiconductor plants and their functioning depend on the rapid evolution of technology and production processes.  Such plants can quickly become obsolete if the technology is not continually upgraded.  It is unlikely, in my opinion, that Qualcomm will be making the latest versions of its Snapdragon chips.  Nevertheless, the project represents technology transfer and the creation of high tech opportunities which Brazil needs and welcomes.

 

 

 

 

 

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Lula: Estou Triste

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A condenação do Lula por unanimidade certamente é um marco na historia recente.  Talvez não seja surpresa, mas ainda assim mexa com as emoções.

Pessoalmente, o que me deixa triste e frustrado é aquilo que talvez podia ser sido e não foi.  Me lembro muito bem das eleições de 1989: Lula contra Fernando Collor.  Embora o Collor apareceu do nada como algo modernizante num Brasil saindo das trevas da ditadura, Lula tinha mais historia e oferecia uma narrativa de justiça muito mais atraente do que o garoto dourado que de repente galgou toda a simpatia da mídia tradicional.

Na época, Lula ainda tinha as origens de pobreza.  Ele ainda não tinha o transito fácil entre as elites.  Ele pregava uma mensagem de mudança e de esperança baseado na sua historia de migrante nordestino, de militância sindical, na sua luta contra os governos militares pelo menos desde Geisel e na personificação de uma mudança radical que prometia mais igualdade, diminuição das diferenças, libertação de jovens e mulheres e todo um projeto de busca de modernização à parte das oligarquias tradicionais.

Não tinha jeito e Collor foi eleito.  Somente, depois de uma nova passagem de construção e evolução com Fernando Henrique Cardoso, o plano Real, e a crise econômica do inicio do século, que Luís Ignácio finalmente conseguiu com todo direito e todas as honras sua eleição como presidente batendo nitidamente o candidato Tucano, Geraldo Alckmin em 2002.

Lula, eleito inicialmente criou um ambiente de incerteza, mas logo, logo com a indicação de Antônio Palocci e a carta ao povo brasileiro, Lula acabou tranquilizando o mercado financeiro e assim eliminou uma grande e potencial fonte de instabilidade.  Apaziguado o mercado, Lula galgou a simpatia não só de sua base tradicional, mas também das elites diante de sua atuação em prol das politicas econômicas tradicionais.  Prometeu e deu continuidade a politica econômica de seu antecessor.   O ambiente externo favorável puxou o crescimento e Lula soube administrar a expansão no sentido de corrigir de uma forma mais acentuada o salario mínimo e também ampliar o programa fome zero para bolsa família.  Como Presidente, ele continuou e melhorou as medidas de correção já iniciadas.

Entretanto, o grande desapontamento foi que a partir do discurso de maior igualdade, o Presidente Lula acabou aceitando e elevando uma proposta para firmar o PT no poder.  E assim começou a ampliação do poder através de medidas cooptativas e de compra aberta de votos e aliados não com o intuito de redistribuir, mas com o objetivo de criar uma base de poder assentada no controle da maquina publica usando a em favor de um projeto de acomodar aqueles que trocavam apoio politico pelo acesso aos recursos da administração publica.  Lula usou e abusou o sistema, expandindo sem preocupação, os postos de trabalho na maquina publica.

A politica de cooptação através do uso do estado a nível nacional, estadual e local funcionou até certo ponto.  Mas foi uma expansão aonde o PT e os partidos aliados não se preocuparam tanto com a boa administração, mas muito mais com o acesso aos recursos e seu uso “liberal”.  Lambuzaram-se no poder.

Infelizmente, Lula não usou educação e cultura para melhorar a aprendizagem e escolaridade.  Embora foram criadas escolas técnicas e universidades, perdeu-se em qualidade e recursos produtivos. Infelizmente, educação não foi seu enfoque.   As taxas de aproveitamento escolar não melhoraram e a baita diferença de qualidade entre a escolas publicas e privadas permaneceu.  De forma semelhante, aconteceu o mesmo com a saúde e reformas no setor primário.  Lula foi tolerante ou conivente com o MST, mas na realidade não fez nenhuma reforma agraria com assentamentos e reais inovações na oferta de recursos para trabalhadores sem terra.  Em vez disso, os supostos trabalhadores viraram apenas massa de manobra na luta politica com objetivos limitados que pouco tinham a ver com produção rural.  Durante o governo Lula e do PT expandiu-se a fronteira agrícola de mãos dadas com os latifundiários que tiveram basicamente mão livre nos cerrados e na Amazônia.  O mesmo ocorreu com a aliança desenvolvimentista do governo e os empreiteiros na construção das barragens e obras antiecológicas.  Bel Monte começou com Lula e foi em frente com sua agressão antropológica e ambiental no governo Dilma.

Enfim, Lula aprimorou um discurso baseado na sua narrativa de nordestino, trabalhador, engajado, progressista, consciente e reformista.  As boas intenções revolucionarias de mudar a distribuição de renda funcionaram enquanto os ambientes internos e externos proviam recursos suficientes num ciclo positivo.  No entanto, quando reverteu como sempre reverte, não havia uma base de sustentação.  Lula não criou nada solido no sentido de oferecer alternativas reais para os desfavorecidos.  Como sempre, a educação foi insuficiente e de baixa qualidade, a saúde também e até a mobilização politica das pessoas foi feita em troca de favores em vez de objetivos reais de mudança e participação politica.

Infelizmente, o sistema absorveu Lula e ele ofereceu pouca resistência.  Acabou aceitando um projeto de poder para favorecer, em primeiro lugar, um circulo pequeno de sicofantas, em segundo lugar um grupo de oportunistas coniventes de ocasião e em terceiro lugar aqueles que já se apoderavam da maquina publica e continuaram aproveitando de forma conivente com um governo que ficou ideologicamente cego.

Pode-se culpar Lula.  Pode-se chama-lo de grande chefe do esquema criminoso, mas é mais acertado ver Lula como quem chegou e acabou acomodando aos sistemas tradicionais do poder e distribuição de favores.  Ele chegou ao topo do sistema, mas o sistema foi maior do que ele como individuo e ele acomodou na aceitação e administração de demandas.  Assim, ele se confirmou como um populista de esquerda nos moldes do Getúlio da década de 50.

É triste porque, em principio, Lula poderia ter sido mais.  Ele poderia ter liderado a costura de um acordo nacional mais sustentável e favorável às novas classes que emergiram com a estabilidade da moeda (Plano Real e controle da inflação).  Em vez disso, ele optou por um caminho de reformas fáceis e de alcance limitado, e que hoje estão sendo revertidas.

Esta primeira condenação (com apelo) do Lula não será a ultima.  Mas o pior é que Lula se perde hoje na falta de autocritica, não admitindo nenhum erro.  Ele se acha a alma mais honesta, além de ser a própria encarnação o povo.  O que é um auto definição sem base e sem fundo.  Não houve um caminho de construção nem no sentido politico e menos ainda no sentido de um modelo econômico funcional.  Se Lula voltar, é só com as mesmas e cansadas fórmulas anti-mercado, anti-capital e anti-investimento que nunca funcionam.  Definir um modelo sustentável a longo prazo num pais com a tradição escravocrata que o Brasil tem não é fácil, mas está mais do que claro que o estado lotado e capturado por um partido, aliados e/ou castas estatais, se tornou um grande empecilho ao desenvolvimento e redistribuição.  Lula tinha em mãos a forca politica para promover alterações importantes, mas no final do dia isto não aconteceu e ficamos hoje com sua condenação, decepcionados com ele, frustrados e sem projetos.

Há gente feliz, dizendo que as instituições funcionaram.  Não é a verdade completa.  A justiça também anda capenga como a sociedade.  A construção vai ser lenta e resta saber se há um projeto no Brasil que ultrapasse Lula populista ou as elites eternamente enraizadas.

 

 

Brazil: Muddy Waters, Green Shoots, No Flowers

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Everyone pretty much agrees that Brazil is going through another major crisis.  There is less agreement as to if and when the crisis will achieve some sort of resolution.  Personally in my experience in Brazil since the early 60’s, I cannot remember a time when Brazil was not in crisis.  We have an ongoing process of ebbs and flows dating back to discovery.  There are many explanations ranging from bureaucratic fatalism associated with the Portuguese crown, the geopolitical one derived from Brazil’s less favorable locational aspects, the racial one that blames Brazil’s underdevelopment on its ethnic mix, the political explanation derived from the lack of tradition in participation and voting, the economics due to lack of savings and investment, the educational narrative that notes the lack of functional literacy or the historic one that combines all of the above and more.  Each of these brings something to understanding but still the crises are never resolved and only change a bit in players and personalities.

With all of this, Brazilians remain generally optimistic, happy and compare their country in favorable terms to other places.  For most, Brazil remains the best place to be born and to live.  Even those that participate in the diaspora want to eventually return when things improve.  So how do we reconcile this contradiction?  In spite of violence, mayhem, disorganization, gross inequality, open thievery and poverty, Brazilians still affirm that life is good.  In spite of the recession, now extending to year 3 from 2015 to possibly 2018, Brazil still ranks in the top 10 economies worldwide as measured by GDP having dropped from 6 to 9 in the ranking.  Even so  wealth and wealth creating potential abound.

Amazingly to some, back some 30 plus years, Brazil was in a similar situation.  Jose Sarney (PMDB) was president, supported by Congressman Temer and his colleagues.  Formal unemployment was around 17%, the direct elections movement has lost its chance in 1985 but achieved the open elections of 1989 resulting in Fernando Collor’s election and Lula’s first presidential defeat.  Inflation was higher than that Venezuela’s is now topping 1000% per year.  Like Temer, Collor was called to the carpet on accusations of gross corruption.  Unlike Temer, Collor had no base in Congress and was impeached.  Although Collor had more charisma than Temer, he also failed on the economic front and his different attempts at controlling inflation are remembered with contempt and derision.  Collor’s impeachment in 1992 placed his VP Itamar Franco in the presidency and led to Fernando Henrique Cardoso (FHC) becoming Finance Minister and the implementation of the Plano Real.

In the subsequent elections, FHC trounced Lula two times.  But Cardoso’s second term was made possible by satisfying the venality of Congress (it had to vote a Constitutional amendment allowing a second term).  While the Congressional penchant for the buy off had long existed and had been condoned by the military governments and greatly enhanced by Sarney, FHC also drank from the tainted cup of expediency and now stands accused of having committed the original sin.  In this Cardoso just followed the long tradition of what he has described as “A Arte da Politica” but it is really the dirty business of sausage making, (now “nobly” carried on by JBS, the world’s largest meat processor, thanks to the generosity of Lula, Dilma and the national champion policy which started back with the military governments.)

Things change but remain the same. What goes around comes around.  Can Brazil break the cycle of miracle years followed by crisis.  Can it the country go beyond boom and bust?  My answer is an optimistic yes.  And here is my prediction, no matter how foolhardy.  Today’s Congressional vote allows Temer to survive until the 2018 elections.  The field in 2018 will include the new and the old.  Most likely, the old will win.  It could be Lula if he is not in jail or it could even be the rightist Bolsonaro the messianic ex-military Congressman who sings the praises the military and disdains minorities.  It really does not matter in the long run.  The important fact is to hold the election, gradually renew Congress, put up with whoever is elected and gradually reconstruct civil society based on meeting basic social demands in education, health, and basic sanitation.

This Congress has decided to protect itself by protecting Temer.  The President, in turn, has promised reforms and continues with in their pursuit to maintain a bit of legitimacy bestowed by the market, if no one else.  Given the horse trading that has taken place in order to keep power, it is likely that any further reforms will be more symbolic than real.  The government has already gone beyond its spending cap for this year and now is raising taxes.  Temer will end his mandate as one of Brazil’s most unpopular figures.  Clearly he desires power, is venal and shameless in his own perpetuation.  Still, there no immediate obvious better alternative.  Dilma’s impeachment solved nothing and further surrendered power to corrupt politicians.  Her one virtue was that she allowed and did not block investigations.  Temer has less personal virtue but certainly is a better political wheeler and dealer.  On the positive side though his administration at least opened space for social security, labor and spending reforms.  To all but the most obtuse, there is recognition for this need.  Delfim Neto, now the ranking academic conservative economist is not optimistic but suggests that the “least bad solution” is to let Temer “end his mission and postpone the proceedings” until there is a new administration in place on Jan. 1, 2019.

Brazil continues it herky-jerky halting progress.  In spite of the poor governance, things will gradually improve but the rate will depend heavily on how and if people decide to get involved.  The opportunities are many in civil society and even in the political realm as Temer and cohorts eventually die off.

 

Institute of the Americas: XXVI La Jolla Energy Conference

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Since the early nineties, the Institute of the Americas at the University of California, San Diego campus has promoted an energy dialog bringing together top level executives, academics, consultants, hands on practitioners and journalists.  The exchange of information is always enlightening and the President and the staff of the Institute, especially Jeremy Martin, deserve kudos for promoting and organizing this important two-day meeting.

Here is the link to the event with the list of topics and of the distinguished speakers and panelists: https://www.iamericas.org/lajolla/

This year’s meeting could hardly have taken place at a better time.  The political economic crisis in Venezuela is ongoing, Brazil is in the midst of its second impeachment or presidential change in less than a year, Argentina’s new administration is seeking a more open and market oriented path for the use of its extensive oil/gas resources and suddenly, the small and often neglected Guyana is facing a surfeit of riches with the recent discovery of major offshore reserves.

The picture at the beginning of this text is of the panel: Brazil’s Energy Reset. On the left is Paulo Sotero, a journalist by trade and the Director of the Brazil Institute at the Woodrow Wilson International Center in Washington, D.C.  Seated with him are Rafael Ferreira of the state sponsored Energy Research Office and Andre Regra of Brazil’s regulatory ANP (Agencia Nacional do Petroleo).  Jay Thorseth, a Latin American Director for British Petroleum is between Andre and Rafael.

The perspectives from Brazil panel were quite representative of the other discussion at the Conference.  While each country has its particularities, representatives of the public sector, the private sector and academia or journalists showed unique perspectives.  Both Andre and Ricardo, for example, emphasized the reset of Brazil’s energy sector and hued pretty much to the government narrative.  Implicit in their presentations was the shift from a nationalistic PT (Brazilian Labor Party) perspective to greater market openness.  Both noted Brazil’s resumption of oil field auctions and the reduction of local content requirement that had previously put off many international investors and oil companies.  Jay Thorseth of BP, while polite and diplomatic, presented the private sector’s perspective, emphasizing the need for market realism.  Thorseth said governments need to favor foreign companies to be competitive and to access to capital, technology, knowledge and skills.  Auction and participation terms need to take into account Brazil’s need to be an attractive destination world-wide in terms of cost, profit and royalty payments.  If there are better deals elsewhere, then it is likely that the big oil companies or the so-called majors will favor these over a restricted Brazilian market.

Paulo Sotero started by remembering his previous writing on the major crisis and downfall of Brazil’s economic and political system.  This reminder, while obvious, became something of the elephant in the room.  Presenters with government ties were loath to recognize that their initiatives toward opening the energy sector depend not only on technocratic criteria but also on politics.  Thus, when Brazil’s President Temer departs, his replacement will reorder the chairs in the oil sector and in public companies like Petrobras and others in energy production and distribution.  Likewise in Mexico, President Pena Neto is in the last year of his term and essentially a lame duck.  If AMLO (Andres Manuel Lopez Obrador), a popular figure on Mexico’s left, is elected, Mexico’s energy reset will also certainly have a different orientation.   Representatives from Mexico’s public companies emphasized change in legislation in the hope of ongoing modernization and expansion of both oil and gas exploration and distribution in partnership with the private sector.  Optimistically speaking, resource nationalism is seemingly buried, but in Latin America it often rises phoenix like.  Private sector players must always be worried about institutional weakness as regulations and norms or the lack thereof thwart intentions.  Governments and businesses want to mobilize Latin America’s ample energy resources but this depends on the modernization, increased transparency, and durability of the rules of the game.  And these rules, in spite of promised advances, are still being negotiated.

The Conference provided a lot of detail on resources, processes, government action and private company plans.  The major discovery of oil in Guyana certainly will impact markets and already directly affects Venezuela and Brazil.

Finally, the presenters noted that even for traditional oil and gas players, alternative energy is now mainstream and has great significance and unlimited potential for development.  Nevertheless, petroleum and its derivatives will be the major source of energy for their economies for at least another generation.

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Foreign Direct Investment in Brazil

Below is a short article published today (Jan 25, 2017)in the international edition of Valor. Some of the questions that come to mind are:

What sectors are receiving the largest inflows?  I would think most likely petroleum exploration with the loosening of restrictions.  The primary sector also is important with the growth of soybeans and large investments in eucaliptus for the pulp industry.

Where are these flows coming from?  China promised 10 billion but the Chinese are notoriously slow in fulfilling their promises.  What companies and countries are the source?  The US has the largest stock of accumulated FDI

Finally, as noted in the article, FDI in Brazil, in spite of uncertainty, recession, political crisis, disease, accidents, death and decline, keeps growing.  Someone must be thinking long term.

FDI reaches record 4.4% of GDP despite recession and political crisis

Recession, impeachment, political crisis, and corruption scandals have not affected the flow of foreign direct investment into the country, which ended 2016 at $78.9 billion, or the record level of 4.37% of GDP. The investment inflow, spread across various sectors of the economy, financed easily the current account deficit, which stood at $23.5 billion, or 1.3 percent of GDP. “This shows that direct investments have specific characteristics, linked to long-term decision and could be maintained even in years of weak economic activity,” said Fernando Rocha, head of Central Bank’s Economic Department. For 2017, the forecast is of $75 billion in FDI, or 3.82% of GDP. 

Article from Valor International Edition, Jan. 25, 2017

Grading my Brazil Predictions for 2016

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Optimistic Dilma in 2016 – Photo by Roberto Stuckert Filho

 

Some readers have followed, not necessarily religiously, this blog since it went public in January of 2013. Comments have generally been gracious and insightful.

As long-time readers know, I do a New Year’s prediction for how Brazil will fare over the coming 12 months. As part of this, it’s only fair to go back and assess what I got right and wrong. I’m giving my 2016 predictions a gentlemanly B-. Here, for verification, is the link to those year-old predictions: https://allabroadconsulting.wordpress.com/2016/01/01/brazil-predictions-for-2016/

My biggest 2016 prediction mistake was stating outright that President Dilma would not be impeached. I sincerely believed that she could and would marshal the political forces necessary for her survival. Instead, she went down with hardly a whimper and with little or no political or economic support. . A worsening recession, growing unemployment and above all, her indecisiveness in the economic sphere and her disconnect from Congress ultimately doomed her. Her incompetence and distance even from her own party showed her lack of political skill and desire to save her presidency.

While I missed on Dilma, I predicted correctly Cunha’s (former President of House and the main force in Congress behind the impeachment) ouster and Renan Calheiro’s survival (as the President of the Senate). Mr. Calheiros has indeed prevailed but notably weakened and will soon lose the presidency of the Senate. The new President, Michel Temer, has kept his distance from Calheiros preferring other cronies instead. In my predictions, I did not mention Temer (as I did not think he would actually take over) and I should have looked at his ambitions more closely.

On the economy, like most everyone, I correctly anticipated the continued recession but also expected the cycle to reach bottom by the end of the year and naturally perk up from there. It now appears that the upswing may not begin until the second or third quarter of 2017. The recession, the major increase in unemployment and the consequent lack of demand has kept inflation relatively low. I had expected inflation (again with Dilma) to hit or top 10% due to her maneuvering to please supporters. President Temer has pushed a cap on spending through Congress and this along with lack of demand has held inflation to around 6.5% in 2017 with a current tendency to fall. Brazil’s Central Bank is predicting inflation of less than 5% in 2017. While the official numbers appear reasonable, the impact of price increases certainly feels higher and more worrisome on the street.

Speaking of worrisome, Brazil is mastering the art of year-end crises. It used to be mudslides with summer rains creating havoc. These were largely man made catastrophes because of unregulated and uncontrolled development of unsafe areas. Because the deadly slides were associated with the seasonal downpours, they could be blamed on nature. Similarly, Zika was the New Year concern from 2015 to 16 when thousands of cases appeared and hundreds of babies were born with microcephaly. In this case, nature again was blamed but Brazilians also know that mosquitoes breed and propagate due to a lack of basic infrastructure and sanitation. By August and the Olympics, the pandemic was no longer an international threat and Brazil, as I predicted, successfully held the Games. Of course, the major beneficiaries were not the people of Rio but instead NBC and the Olympic Committee. Rio is now bankrupt and many of the so-called Olympics improvements are rapidly falling into disrepair. This 2017 New Year disaster cannot be blamed on nature but must be laid at the heart of the contradictions inherent in Brazil’s barbaric inequality and violent past. Prison riots in the first days of the year have caused well over 100 deaths and the government seems paralyzed in how to address the gangs that control the prisons, their historically abhorrent (mis)management, and the Justice system itself that operates willy-nilly and condemns the poor, black and powerless. The rebellions and deaths show the bankruptcy of the government and paradoxically the strength for those who have nothing to lose and know that life is cheap. The gangs rule in the absence of any other intervening power.

Last year, I also mentioned the continuity of the corruption investigations and, especially the Lava Jato (Car Wash) with its revelations of unprecedented bribery and the chummy network of exchanges between construction companies, politicians and political nominees positioned to take bribes and distribute contracts favoring the “empreiteiras” (construction companies) and their political allies.   Again, thinking that Dilma would hold on to power, I imagined the extension of the investigations to other areas such as the National Development Bank (BNDES) and more specific projects like the transposition of the San Francisco River. Indeed, there has been mention in this direction but no action. Instead, the Temer government sought to quietly dismantle the main investigations and it has only been through strong public pressure within Brazil and from abroad including the US Department of Justice that the prosecutions actually survive.

Interestingly as predicted, Brazil continues to receive massive amounts of FDI (Foreign Direct Investment) some 69 billion in 2016. Some of this money is going into the primary sector for land purchases, soybean and pulp plantations. Other sectors are less clear, with industry in decline, the money is likely going to opportunistic acquisitions in manufacturing or processing (i.e. the Petrobras sale of the notorious costly refinery in Pernambuco negotiated recently for 10 cents to the dollar. Other investments are going into education, services, distribution and logistics. Still these have not sufficed to revive the economy. More money is starting to come from China but the Chinese still lack confidence in how to deal with Brazil.

Unfortunately, Dilma’s ouster is still yielding negative returns for Brazil’s institutions. While she was bad, her replacement has not improved the economic situation, slowed the firings, enhanced productive investments or inspired confidence. Dilma, though apparently personally honest, could or would not govern.   President Temer’s rectitude is perhaps less certain. His government is corrupt and weak but more politically adept in dealing with the venal politicians in Congress. Hopefully, the electoral court will not have time to disqualify the Dilma/Temer slate, which would force Temer out and the indirect election of a new interim president who would have filler role to the elections of 2018. If this happens, it will further confuse the public and inhibit the possible emergence of candidates not tied to corrupt schemes or past malfeasance.

Pulling off the Olympics and winning the missing gold medal for the first time in futbol* were the high points, and now Brazil continues to flounder but such is the world in 2017.

*The Olympic gold medal was only major soccer title that Brazil had never won.

Como matar a borboleta-azul: Uma crônica da era Dilma de Monica Baumgarten de Bolle, Comentarios de All Abroad Consulting-Steve Scheibe

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Acabo de ler o novo livro de Monica de Bolle.  Monica é pesquisadora senior do Peterson Institute for International Economics vinculado a John Hopkins University.  Ela também traduziu a edição brasileira do livro Capital de Thomas Piketty.  Ademais escreve blogs e colunas, enfim uma economista que publica bastante, sendo bem visível na mídia social.  Enfim, a autora reúne experiência e competência.  Recentemente, surgiram comentários na mídia que ela poderia integrar o Ministério (Planejamento?) do Presidente Temer.

Borboleta é um resumo dos anos Dilma, principalmente os erros econômicos (e em menor grau) políticos do segundo mandato.  Como uma pessoa muito bem lida, Monica conta a historia usando analogias e paralelos literários.  Assim a destruição da borboleta azul [1] representa a metáfora do período final do governo PT no poder.

Como Monica de Bolle vem acompanhando de perto (mesmo em Washington) a economia brasileira, ela usou blogs e artigos publicados como a espinha dorsal do livro.  Olhando a sequencia dos artigos que ela integra bem no livro, pode-se ver que ela já enxergava onde a economia iria chegar e as consequências politicas para a Presidente Dilma.  Um desastre pré-anunciado.

A autora enfatiza que Borboleta não é um tratado econômico “repleto de gráficos”, mas sua apresentação de uma historia cujo determinante fundamental foi a insistência da governante em não reconhecer seus erros e falhas inerentes em sua visão econômica e também politica.  Enfim, de acordo com a autora, a Presidente Dilma não foi inteligente e insistia em executar as regras da estupidez humana, na expectativa de obter um resultado diferente através repetição insistente das mesmas medidas que estavam dando errado.

Às vezes, para o leigo, e difícil distinguir com precisão as escolas e as matrizes que guiam um economista acadêmico como Monica de Bolle.  Creio, contudo, que se a grosso modo separamos ortodoxos e heterodoxos, Monica se situa no campo do liberalismo tradicional onde o mercado deve ser o determinante principal e não o estado intervencionista.  A Presidente Dilma, é claro, está no lado fazendo parte daqueles que desconfiam do mercado principalmente na situação de um pais em desenvolvimento e com um elevado grau de dependência de fatores externos.  Então, a grosso modo, Monica insiste em criticar Dilma por suas intervenções equivocadas enquanto que Dilma diz que está (ou estava) defendendo o pais e os menos favorecidos e marginalizados, que conquistaram um novo espaço com as medidas econômicas e sociais implementadas pelo governo do Lula e continuadas por ela.  Crise na opinião dela não seria por sua culpa, mas provocados pelas forcas retrogradas no Brasil, principalmente os financistas e rentistas e também pela crise do capitalismo mundo a fora.

Assim enquanto os ortodoxos pregavam austeridade, Dilma, Manteiga, e Nelson Barbosa promoviam a nova Matriz Econômica que visava a implementação de medidas anticíclicas de origem, a meu ver, Keynesiana.  Monica de Bolle não perdoa o que ela vê como prepotência da Presidenta.  Dilma depois de reeleita e mesmo com um Joaquim Levy na Fazenda insiste em uma politica fiscal insustentável e que resulta nas “pedaladas” fiscais, que eventualmente foram a justificativa, prima face, de sua degola.

Monica mostra passo a passo ao longo dos capítulos os anos 2011 até o impeachment em 2016, onde a triste figura de uma “Presidenta” se perde a partir da crise americana e europeia de 2008, que segundo Lula, tratava-se de uma “marolinha” no Brasil.  Ela e seu fiel escudeiro Ministro Mantega procuraram utilizar todas as alavancas para lidar com o fim do modelo Lulista, e também dos impactos do QE (quantitative easing) americano, do impacto na inflação, dos juros, das reservas, dos investimentos/poupança e da politica fiscal.  Mexe aqui, mexe ali e a economia continua encolhendo ate chegar a atual recessão e o quase inevitável impeachment.  De acordo com a avaliação no seu livro, Dilma, Mantega, Trombini e por Nelson Barbosa não acertaram nenhuma.

Embora o livro de Monica seja para o publico geral, não achei a leitura assim tão fácil já que ela introduz termos técnicos como dominância fiscal, erros de macro prudência e razoes de variação cambial.  Não são exatamente termos de fácil compreensão principalmente na forma que inter-relacionam.

As criticas à Dilma e seus (des) governos são diretas e sempre com embasamento nos resultados produzidos.   O governo da Dilma não teve uma politica econômica coerente e faltou habilidade em lidar com o Congresso e partidos políticos.  Ela interviu demais, descontrolando os indicadores e sinais do mercado. Por isto, ela acabou inspirando desconfiança, e como politica, foi antipática e teimosa, conseguindo desagradar gregos e troianos inclusive no seu PT.

Ate aí, tudo bem e representa o consenso pôs impeachment.  Mas a questão que emerge e que precisa de resposta é a seguinte:

Além do receituário liberal (austeridade, controle de gastos, menor intervenção, menos burocracia), o que faltou? No Brasil, o peso da cultura e do estado gigantesco nunca deixou os liberais a vontade.   Está surgindo no Brasil um vetor libertário, mas é´ algo meio estranho no contexto.  O Movimento Brasil Livre (MBL) e afins parecem mais uma minoria contestadora, querendo acabar com a corrupção, do que um movimento a favor do livre mercado.  Estes grupos parecem mais modismos vindos de fora, e não constituem um partido e/ou forma durável de representação.

Sucesso politico no Brasil depende tradicionalmente de populismo, e com políticos populistas no poder é praticamente impossível adotar as soluções de mercado que os ortodoxos como a Monica advogam.  O problema de desenvolvimento no Brasil acaba sendo não um problema de soltar o mercado e seus mecanismos, mas em resolver o quebra cabeça politico para poder soltar as chamadas forcas produtivas.  Mas as instituições são fracas, os partidos são veículos de promoção individual, ou apenas agrupamentos que buscam ganhos próprios e individuais ao modo do PMDB.  O PT em seus documentos e cartas seria um belo partido socialista, mas as ações individuais de seus principais membros denunciam qualquer feição socialista em nome do avanço individual encoberto em uma retorica social.

Mas a questão não é só´ político-econômica.  Recentemente, um outro economista, Alexandre Rands Barros, lançou o livro Roots of Brazilian Economic Backwardness (Elsevier, 2016) publicado em inglês.  Este sim é um tratado cheio de gráficos e tabelas, podendo assustar até os experts.  Mas basicamente Barros argumenta, diferente de Monica, que o atraso relativo do Brasil vem do problema histórico de formação de capital humano.  Quer dizer que mesmo se o Brasil operasse de acordo com as expectativas de economistas ortodoxos, ainda assim estaria atrasado.

Creio que o argumento de Barros não é novo e estudiosos como Claudio de Moura Castro e Simon Schwartzman, entre outros, tem pautado no mesmo sentido.

Sem entrar nos méritos acadêmicos, o que me parece interessante e misterioso no Brasil, é tentar entender como uma sociedade, com a herança de escravidão, racismo, corrupção, desigualdade, ignorância cultivada, elites distantes e arrogantes e um povo sofrido ainda consegue existir.  Como é que o Brasil ainda não entrou numa guerra civil aberta?  O que é o super-bond que segura?  Apesar do estado e sociedade em situação de falência, o Brasil ainda possui uma atração como um lugar que encanta pela beleza do povo, pela cultura, pelo potencial e até, pasmem, pela cordialidade.  O povo ainda se declara otimista e feliz.  Como? Por que?

Monica de Bolle, economista ilustre e excelente contadora de casos talvez esteja trabalhando numa historia ou conto, com final feliz, que venha a ajudar esclarecer o mistério.  Assim espero.

[1] Quando cheguei ao Brasil no inicio da década de 60, a bandeja com as asas encrustadas era um “souvenir” de praxe e demonstrava a abundancia do “exótico”.