This has been a complicated week for Brazil:
Neymar was sold to Barcelona, the Selecao tied England at home, at Maracana 2×2, the economy continues to be on the skids and, I suppose, the bad of the bad: President Dilma had to cozy up with VP Joe Biden.
Topic by topic:
Maracana was made available only at the last minute when a judge’s order had to be overturned so that the unfinished stadium could be released for safe use by spectators. The game was fun and complaints about the lack of completion were pretty much taken in stride. Even FIFA had to acquiesce and accept the fact Brazil will have substantial completion of stadiums and infra-structure on its own terms. By the way, I think a lot of people are hoping to make money with the World Cup but, of course, all of the major tasks have been pretty much allocated.
On to the economy, where Brazil has reversed its interest rate cuts with two quick increases and the SELIC is back to 8% (still historically low by Brazilian standards). The measures were taken by the Central Bank and with Dilma’s apparent blessing as the polls show her numbers declining as inflation goes up. Certainly, inflation has been outside the acceptable band and may now come down again to the target range.
The problem is the effect on consumers and producers. With the cost of money rising, will people continue to consume and will industry recover? So far the signs are not good. The weaker real though may help increase some manufactured products on the export market but the Real is at 2.1 and still significantly overvalued. Brazil’s trade surplus is declining to historic low levels and may even turn into a deficit. Brazil’s Central Bank predicts GNP will show another decline with growth tagged at 2.9% or less for 2013. Personally, I think it is going to be less.
Slow growth had to complimented by Joe Biden’s smile (a bit amarelo) as he made the now obligatory visit to the favela and finally brought Obama’s personal invitation to Dilma to the state dinner. She barely made it in before Putin. I suppose Brazil does still have a better reputation than Russia.
Biden spouted off typical platitudes and hyperbole, saying that trade between Brazil and the US could reach 400 to 500 billion in a couple of years. Good luck. Brazil has potential (eternal potential) but it only traded a little more than 60 billion with the US last year and the US is still protectionist in the agricultural world, the one area where Brazil has shown brightly in the last couple of years in spite of all the infra-structure problems and custo Brasil.
Biden’s security in the favelas looked worried as did the Brazilian special forces. Not sure that is a normal or good sign. Security in Brazil and specifically “na Cidade Maravilhosa” (read: Rio de Janeiro) remains a big concern and the international papers will pick on this issue any time an American woman get raped or a German tourist gets shot as we recently saw.
I don’t want to end on a bad or pessimistic note. Actually, the clouds perhaps presage a bright future and the Confederations Cup will be a great success as Brazil gradually makes progress in its own way and at its own pace. Things really are much better than they were during the military governments (1964-1985). We have a vibrant democracy, a generally free press, economic growth (slow and retarded) and slowly decreasing inequality.