L’etat c’est moi – Elites & State in Brazil


Brazil has gone from colony to empire to republic to authoritarian rule and now to a young, unstable and messy democracy.  While each stage has had its own historical uniqueness, each stage has seen the disproportionate weight of the state and related bureaucracy.  The extractive nature of the colonial economy, the centuries of slavery and the frustrated attempts at industrialization in the 19th century and the geo-political dependency of the country in the 20th century all reinforced the preponderance of the state over civil society as Brazil’s elites jockeyed more to preserve privilege instead of creating a vision or even a plan for the country.

Slavery, poverty, lack of education, lack of leadership, and an insular and insecure elite contribute to the weakness of Brazilian civil society.  By controlling the state, different governments have tended to the left or right but have been universal in using the state apparatus to co-opt and anticipate popular demands.  By providing a basic minimum of services and a narrative of hope to meet expectations, this top-heavy system has survived and grown.

The “worker” governments led by Lula, Rouseff and the PT (Workers’ Party) started with the ideal of  “capturing” the state apparatus to bring equality and a change in the relationship between the elites and the masses and between workers and owners.  Initially well intentioned, the PT succumbed to an ideology of taking power at any cost and to the Brazilian culture where power corrupts and absolute power corrupts absolutely.  With the PT in control of the government, the already oversized apparatus became more bloated.  And while Lula’s signature program was Bolsa Familia, his major achievement was growing the economy while reducing inequality. Though Lula takes credit, much of the progress was due more to reaping the rewards of a stable currency and a favorable foreign trade scenario driven by China’s imports.   Lula was lucky for a while. But “Economic Take off” under the PT policies proved unsustainable.  Government expenses went through the ceiling as party expediency expanded state bureaus and allowed corruption to drive tremendous inefficiencies, while lining the pockets of a newly arrived elite.

In Brazil, as long as the economy can generate enough surplus to keep the state working and growing, no one complains.  Everyone is used to going to some state agency to seek or defend a right, a benefit, and a favor.  This habit is reflected in the “jeitinho” and the cordiality of society.  Access through friends, associates, godfathers, patrons, and “senhores de bem” has long smoothed and compensated conflicts and inequalities.  Unfortunately perhaps, as Brazil grew in size and economic activity, cordiality had to decline.  With a population of 200 million and a $2 trillion economy, access to the state apparatus through patronage and cordiality outstrips the capacity for providing sinecures.   Basic services in education, infra-structure, security and public health decline as a bloated bureaucracy becomes inefficient and hurts the workings of the market place through misallocation of capital, land and labor.  The state weighs down the economy.

Although the current recession was partially driven by the slow down in China and the drop of commodity prices, it is mainly the result of a lack of savings and productive investment by both the private and public sectors.  The public sector cannot afford to invest after paying pension and basic expenses, which are constitutionally set.  The private sector is in turn strangled by high interest rates driven by instability, risk and government borrowing.  Moreover, the government’s lack of resources further drives the increase of an already disproportionate tax burden that hits the poorest harder than the rich.  In the last generation or so, cordiality became promiscuous. Concupiscence was ultimately reflected in the corruption of construction companies and government interacting in what can be described, without exaggeration as a “swingers club bacchanal”.

To criticize the state in Brazil invites condemnation as being a neo-liberal, the infamous moniker hung upon the PSDB and other parties to Brazil’s center and right.  But these parties themselves are no strangers to corrupt comingling.  The problem is really in the origin, reinforcement and enhancement over the successive governmental orderings of the state. Corruption and the statist mentality thus touches all groups left, right and center.

If everyone depends on the state, this stunts civil society and negatively impacts the role of the citizen.  It is interesting to witness that “grass roots” social movements such as the MST and MBL depend not on individuals for support but rather NGO’s that are supported by the government, international coalitions and/or elite party machinery.  Since access to the patron is reduced or increasingly limited, those who benefit seek to protect themselves typically as a caste and lobby entrenched in the state.  The current struggle over pension reform exemplifies the problem.  Those in the military, the federal bureaucracy, and the state administrations understand that they have “acquired rights” and argue that these rights are untouchable through constitutional protection.

Cristiano Romero recently described the situation: “Nobody should doubt the strength of public-sector special interests in Brazil. Many civil servants do not see the government as the representation of a politically organized society; they, the workers, are the state. It belongs to them. Like at many other state-run companies, employees think they “own” them.” (Valor Econômico 27 Mar 2017)

It would be nice to believe that new technologies such as social media unlock a greater role for action independent of the state.  Still interaction on social media will be insufficient if it is not associated with a material base.  Private and individual initiative (with state support?) in the market must generate value and surplus, which in turn can be partially redirected to reforming the political structure.  The problem is overcoming the structure currently in place and those who maintain the status quo.  From this perspective, the problem is not just the current government.  Instead, the problem goes much deeper than “Fora Temer” and is, perhaps, unsolvable in the short term.






From Merco Press on Venezuela

Resultado do Imperialismo ou falta de compreensao de como promover um projeto de “esquerda”?

Maduro Desperately Selling Assets to Pay US$ 3.7bn in Debts

March 24, 2017

Source: MercoPress

In an effort to handle its overdue debts, Venezuela is all but giving away oil assets. President Nicolás Maduro is reportedly so desperate to pay the US$ 3.7 billion in debts that he is selling off the assets to Russia.

They offered to sell Russia a share of PetroPiar, which is 30% owned by Chevron and which PDVSA has a 70% stake in. It also expropriated ConocoPhillips’ 40% shareholdings, which has not been paid yet.

Likewise, PDVSA offered Rosneft 10% of a project developed to extract the extra-heavy oil from the Orinoco Oil Belt.

If the transactions go through, Chevron would be affected negatively, as it would be associating with Rosneft, a company that faces sanctions imposed by the United States.

Venezuela has also reportedly been talking to a Japanese investment bank to try to obtain fresh funds.

Venezuela managed to pay US$ 725 million in overdue debt last month, but with difficulty, as it came 30 days late.

Tags: assets, debt, latam, maduro, oil and gas, venezuela
Posted in LatAm, Macro Economics, Macro Economics


O Impasse Entre o Povo e Poder

ManifestacaoRua2016Depois de ter passado quase um mês no Brasil, vale tentar algumas reflexões que seguem na forma de 25 pontos mais ou menos interconectados:

  1. O pais enfrenta vários dilemas. O principal tem a ver com a falta de coerência politica e as contradições socioeconômicas inerentes.
  2. O dilema político gira em torno de como construir a democracia num pais de extrema desigualdade e de tradição autoritária.
  3. O problema econômico tem a ver com o papel do Estado e até que ponto que devesse ter um “mercado livre”.
  4. Decorrente da estrutura econômica, tem-se o problema social de acesso aos bens tradicionalmente públicos: educação, saúde, segurança, saneamento básico.
  5. A interpretação e a proposta de soluções para os dilemas infelizmente não são objetivas, mas passam por um filtro ideológico que pode ser descrito a grosso modo direita x esquerda.
  6. A esquerda enfatiza desigualdade, redistribuição e luta de classe.
  7. A direita enfoca a ineficiência de um estado burocrático e corrupto e intervencionista.
  8. Os demônios da esquerda são os grandes capitalistas principalmente do setor financeiro.
  9. Os demônios da direita são os corruptos e aqueles que querem ampliar a presença do estado e que questionam a propriedade privada.
  10. Há uma grande separação entre os políticos e o publico ou a sociedade civil.
  11. Apesar da separação os mesmos políticos são tradicionalmente reconduzidos para os mesmos postos eleição após eleição.
  12. O governo Temer é uma aberração e falta legitimidade. Apenas uma minoria que votou na chapa Dilma/Temer estava pensando na possibilidade sucessória.
  13. Apesar de sua falta de popularidade nas ruas, o Presidente Temer esta conseguindo êxito no Congresso onde já passou uma emenda constitucional que limita os gastos do governo e existe a possibilidade de passar uma reforma na previdência.
  14. Ciente do “disconnect” entre a presidência e a população, Temer e o grupo de elite de seu entorno, conseguem desprezar o “povo” possibilitando a manipulação das investigações do Lava Jato e semelhantes.
  15. A mobilização e manifestações de rua são importantes, mas insuficientes para mudar o quadro de impasse politico e econômico por que a luta contra corrupção ataca apenas os sintomas e não as causas.
  16. As eleições são fundamentais para o processo de aprendizagem democrática, mas sem uma reforma politica visando redução do numero de partidos, voto distrital, e reorganização do financiamento politico o processo de construção será sempre lento e incompleto.
  17. As reformas necessárias não interessam a classe politica.
  18. Tanto a direita quanto a esquerda reclamam que o povo não sabe votar mas perpetua-se o sistema propositalmente através pauperização do ensino básico e através da falta de outros serviços básicos para a população pobre ou seja a grande maioria dos eleitores.
  19. Enfim, o Brasil permanece um pais para as elites apesar dos passos construtivos.
  20. A antecipação de demandas sociais e econômicas como forma cooptacao é uma herança histórica que criou privilégios e benefícios que quando defendidos acabam pesando e atrasando o progresso social que supostamente representam.
  21. A “esquerda” no poder (2002-2016) perdeu o rumo num projeto de se perpetuar no poder.
  22. A volta da “direita” ao poder não significa necessariamente a derrota do popular, mas, em vez disso, um retorno ao passado populista com falsos acenos, estagnação e inflação.
  23. Se o Brasil não resolver o problema politico do papel do Estado é possível e até provável que o pais não crescera economicamente e a crise social acabara perdurando por longos anos.
  24. Falta no Brasil novas lideranças e novas ideias que possam libertar as forcas produtivas inerentes num pais extremamente rico em todo tipo de recurso naturais e humanos.
  25. As novas ideias terão que levar em conta algum tipo de novo equilíbrio entre o estado e o mercado provavelmente com ampliação da participação politica através de partidos políticos mais ideológicos e coerentes. Falta muito a construir.

10 Pontos – De Volta ao Futuro

É sempre interessante quando retornamos ao pais depois de algum tempo.  A imagem do Brasil no exterior não é boa e ao nível superficial as noticias não são animadoras.  Desde o inicio do ano, assistimos basicamente coisas negativas do tipo das chacinas prisionais, números pouco animadores na economia como vendas no varejo e desemprego e ainda manobras políticas que podem atrapalhar as tentativas de tolher a corrupção ainda sem freio.

Com isso, fiz uma lista de 10 pontos que vem a cabeça e oferecem algo para debate ou reflexão.

  • Lava Jato tem sido muito salutar e a Republica de Curitiba talvez consegue institucionalizar alguns avanços. Entretanto no quadro geral representa uma exceção e talvez esteja chegando a um ponto de “diminishing returns”.
  • Como exceção, Lava Jato só sobrevive com respaldo popular e o interesse principal da população no momento é a economia. Na medida que a economia melhore (estamos talvez no final do ciclo recessivo depois de mais de 2 anos) a retomada de crescimento e a necessidade de criar trabalho tendem a tomar o espaço das investigações.
  • O Presidente Temer apresenta uma estratégia que está funcionando no Congresso no sentido de trocar reformas importantes como controle fiscal, previdência, e impostos em troca de proteção para os políticos corruptos.
  • As reformas têm um cunho antipopular, mas não há mobilização e consciência popular de densidade suficiente para fazer frente ao governo que oferece uma perspectiva de melhoria econômica. No quadro de acomodação, que é típica no Brasil, talvez basta apenas a promessa.
  • Traçando uma linha por Brasília no sentido Leste-Oeste divide-se o pais norte-sul. A composição do Congresso e especialmente do Senado favorece os setores mais tradicionais e conservadores.  Assim o Presidente cerca-se de coronéis, conseguindo o apoio político dos elementos mais retrógados do norte e nordeste, praticamente todos eles citados nas delações premiadas.
  • Temer não e só hábil nas suas relações com os políticos tradicionais mas acaba ganhando também respaldo do PT que o apóia em troca da diminuição da eficiência da Lava Jato.
  • A equipe econômica do Meirelles vem ganhando a confiança do setor financeiro e dos grandes grupos econômicos. Os empresários tendem a reconhecer a necessidade das reformas, especialmente a redução da carga tributaria e presença do Estado. As chamadas “forcas produtivas” tem um peso.
  • A pinguela é estreita mas não há alternativa a não ser atravessar com o sem Temer. E a alternativa de tirar o atual presidente não é de fácil digestão já que as alternativas são talvez piores.
  • É obvio que o governo não tem popularidade e enfrenta crises constantes mas isto é nada mais do que a situação típico e tradicional do Brasil, principalmente em época de vacas magras.
  • Ha uma colisão em curso entre a necessidade de modernizar e a resistência do tradicional e retrogrado. O comentarista Vinicius Torres Freire escreveu na Folha de São Paulo em 10 de fevereiro: “Enquanto houver ‘reformas’, os donos do dinheiro grosso e seus porta-vozes aprovam tácita ou explicitamente o acórdão.” Se “eles” aprovam, as camadas da sociedade com menos poder político/econômico, de apenas relativo poder de mobilização e sem visão de alternativas, acaba acomodando.  Então paciência, pelo menos ate as eleições de 2018.  E aí quem sabe que o Brasil consegue escapar do populismo a lá Trump ou dos evangélicos tipos IURD ou não.  Nota-se de passagem e levando em consideração populismo, Lula e o candidato mais popular e esta prometendo “to make Brazil great again.”maxresdefault

Vou deixar para os outros dizer: “Estamos perdidos

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

Reader Comments and Temer x Trump



A Facebook friend and reader, Innocent A. Nweze, wrote to alert that my 2017 prediction blog (https://allabroadconsulting.wordpress.com/2017/01/04/2017-predictions-for-brazil-happy-new-year/) was more a rehash of 2016 then a forecast for the New Year. I answered Innocent with something to the effect that 2016 has not yet ended in Brazil and it is, as we say in futbol, only the prorogacao or added time. (As many acknowledge, nothing happens until the end of summer and Carnaval so still waiting for 2017 to begin around March 1.)

Still, here are his points in italics.

(1) Some sort of self-reexamination. A kind of “cleansing” if you like. Cleansing of the old, but are not certain what to replace the old. So what could be the impact of this sort of transition for Brazilians in 2017. Maybe the general impact on Latin America.

(2) Will there be a transformation of the Political System in 2017? Will there be a convergence of the political parties or will they remain splintered as is currently? Will the transformation be gradual or sudden and quick in 2017? What should we expect?

(3) Brazilian infrastructure and institutions. Good and bad, what is to be expected in 2017? Post 2017 too. Advanced Agriculture, deep expertise in deep sea drilling technologies, manufacturing, poverty alleviation for which Brazilian recently gained recognition, no matter how perfunctory. What should we expect in 2017, even in the near term?

(4) Politics and corruption and impact on the economy in 2017.

Point by point:

  • Certainly Brazil is going through self-examination, but how deep this goes is a question. If people are not educated and informed and capable of critical reflection, it is hard to go beyond the surface. Brazil has made tremendous quantitative strides since 1960 in expanding education and reducing illiteracy. However, the quality of education is not there. Information is also a major problem. Although Rede Globo is not as dominant as it used to be, it is still the most important media vehicle and, overall, does not make people think as much as making them think in one direction. And Globo is just the prominent tip of this iceberg. It is nice to suppose that access to social networking is breaking down this monopoly, but usage needs to further expand and important economic and media groups control the most popular sites.
  • Transformation of Brazil’s political situation is halting and slow. Temer’s major challenge, an area where he has made some important initiatives, is the economy. As I mentioned in the 2017 predictions, the PMDB and allies threaten the corruption investigations and seek the status quo where they receive a lion’s share of benefits. I don’t see party reform on the 2017/2018 agenda, as it is not in the personal interest of the politicians in Congress.
  • Brazil’s infrastructure is notoriously deficient. Some improvements are made through privatizing. But each privatization diminishes power politicians have to appoint and control so again they are not readily favorable. In addition, the country has been in recession and the government is bloated and fails to provide social and economic benefits. The recent administrations have overtaxed and spent poorly creating a black hole so there is little or no money for investments. Yes, there are areas of excellence such as the deep-sea extraction technology. But this technology is part of a larger system of worldwide petroleum production and political/economic management at Petrobras. Brazil needs to define where its national interest lie in the oil fields and how to best exploit them either in conjunction with multinationals or by itself. Alone, at the moment, Petrobras does not have the resources or even access to the funds necessary to take advantage of what it knows. So in the end, expect increases in poverty with rises in unemployment and only moderate or no gains at all in manufacturing. Even if Bolsa Familia (a good program) remains, it is not a solution to the basic problem of employment and production. Agriculture is increasingly important but hampered by lack of infrastructure and affected by fluctuations in demand and the weather.
  • Politics and corruption provides an interesting bridge to connect Temer and Trump and the international milieu. Temer and his cohorts threaten the progress of corruption investigations in Brazil. Trump, in his lack of transparency and given his past business dealing does not appear to be a paragon of moral rectitude. He has asked for the resignation of all ambassadors by his inauguration on Jan. 20. It will be a bit ironic if Liliana Ayalde, who the left views as a coup monger is replaced by someone more overtly favorable to US corporations and with a blind eye toward malfeasance whether it be by the oil companies, the NSA, or the CIA. So Ms. Ayalde may actually be missed. Apart from that Trump appears to have little interest in Brazil as a nation. He may praise Doria or Bolsonaro or even the developers of Trump Rio, but in the end he will do what is good for his own interests and those of his allies such as the presumptive Secretary of State Mr. Tillerson (formerly Exxon). Brazil and Temer may put up a stiff upper lip and smile but they should be disabused of the idea that Trump will do them any favors.

In the end, we can hope for gradual improvements just because people in Brazil are generally positive and are gradually coming to recognize that their dependence on a paternal state is not productive and no longer tenable. Young people are unleashing a tremendous amount of entrepreneurial talent and given Brazil’s size and the wealth that already exists will eventually find a way to more equality and prosperity. It may take a hundred years and there are no guarantees but we need to have faith and hope.

Grading my Brazil Predictions for 2016


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.