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| Charismatic leader: Luiz Inácio Lula da Silva, president of Brazil, visits a building project of the government’s accelerated growth programme in Rio de Janeiro |
If any one figure personifies the New Brazil, it is surely Luiz Inácio Lula da Silva, President since January 1 2003 – and whose Presidency will end December 31, 2010.
His childhood journey from rural poverty in Brazil’s hard-scrabble north-east to the industrial rust belt around São Paulo is one that millions of his compatriots have made themselves. His ascendancy from shoeshine boy to lathe operator, from union leader to founder of one of Brazil’s biggest political parties and thence to the presidency, mirrors Brazil’s own extraordinary progress over the past decade and a half.
His charisma and popularity – his support in opinion polls has hardly dipped below 70 per cent during two four-year terms – are the perfect symbol for the exuberance and confidence of Brazil’s rising consumer classes.
But Lula da Silva’s time is almost up. Four months from now, in October, Brazilians must choose a new president.
The FT EDITOR’S CHOICE extends now to four additional articles from that report:
To some, the election makes little difference.
“Sincerely, I really don’t think markets are worried,” says Rogério Schmidt of CLP, a São Paulo political think-tank. “There is a sense that whoever wins, there will be a mix of orthodox and heterodox policies.”
That view is supported by the fact Brazil has enjoyed broad continuity in macroeconomic policies for the past 16 years. The inflation-busting reforms that laid the basis of today’s prosperity were introduced in 1994 by Fernando Henrique Cardoso, then finance minister and subsequently president from 1995 to 2002.
When Lula da Silva was elected to succeed him, Brazil’s borrowing costs soared as investors worried that the former firebrand leftwinger would lose control of public finances and lead Brazil into default.
But Lula da Silva moved quickly to calm such fears, by promising no rupture with the past and by installing trusted pro-market figures at the finance ministry and central bank (the former lost to a corruption scandal in 2006; the latter still in office today). Many observers expect similar or greater continuity when the president hands over to his successor in January.
Others are less sanguine. They worry that investors take too much comfort from the ease of transition last time around and risk becoming complacent about Brazil’s future prospects.
“It worries me that people think this election doesn’t matter,” says Jim O’Neill, chief economist at Goldman Sachs and one of Brazil’s most vocal champions over the past decade. “People are getting carried away.”
He says he has no view on who would make the best presidential successor, as long as that person ensures current macro policies stay in place.
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| Contender for the presidency: José Serra |
The frontrunners in opinion polls are José Serra and Dilma Rousseff. He was governor of São Paulo state (Brazil’s biggest) and she was Lula da Silva’s chief minister until both stood down in April to qualify as candidates.It is often supposed that Serra is the more market-friendly candidate while Rousseff is more inclined to enlarge the role of the public sector in the economy to the detriment of the private sector. Serra was a highly successful health minister under Cardoso who has earned a reputation for managerial efficiency and fiscal austerity, not least as governor of São Paulo. If, as his centrist opposition party, the PSDB, has argued, what Brazil needs most is a dose of good management, he could be the man for the job.
But Rousseff is also billed as a master of management, although with the emphasis on central planning rather than a minimal state.
Lula da Silva calls her “the mother of the PAC [the government’s flagship growth acceleration programme]” and she is closely associated with what Brazilians call “developmentalism” – a drive for growth and income distribution above all else that pays less attention to the need for fiscal reform and an overhaul of Brazil’s tax system and labour laws.
This suggests a broad distinction: Serra more orthodox, Rousseff more populist. Yet this classification does not hold up to much scrutiny. The bastion of orthodoxy in the Lula government has been the central bank, led by Henrique Meirelles, a former head of Bank Boston and a former member of Serra’s PSDB.
Although the bank is not independent by law, it has been given operational independence, adjusting interest rates in pursuit of the government’s annual inflation targets, often in the face of fierce criticism from all sides, both inside and outside government.
Serra – who was moved to health from the planning ministry under Cardoso after disagreements with the finance ministry and central bank – is among the most vocal critics of Brazil’s high interest rates.
It could be argued that he would tackle the fiscal problems that have kept them high for so long. But he has a reputation as an interventionist and in recent interviews has done little to dispel a concern among many economists that he would attempt to reduce interest rates at the stroke of a pen. This, many observers fear, would not only undermine the credibility of monetary policy but also cause a mass walk-out of the central bank’s most competent directors. The impact on investor confidence could be disastrous.
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| Candidate: Dilma Rousseff |
Rousseff has gone out of her way to emphasise that if she wins, the three pillars of stability – inflation targeting, a floating exchange rate and gradual reductions in public debt – will be untouched. She is also close to Meirelles and to Antonio Palocci, the Lula government’s first finance minister who, in terms of economic policy, is probably to the right of Serra.Does this mean that Rousseff is the investor’s choice after all? Perhaps, but perhaps not, for a number of reasons. One is that she is not Lula da Silva, and may lack the political clout to defend the central bank or to hold in check the statist instincts of other leaders of their leftwing party, the PT (and which some commentators say she also shares).
Another is that Serra, while erratic on monetary policy, shows every sign of being far more hawkish on fiscal issues – and a dose of fiscal hawkishness would be to Brazil’s benefit as evidence mounts that the economy is overheating, partly due to the exaggerated presence of the public sector.
Perhaps doubts such as these will be clarified as campaigning starts after the World Cup. But, again, perhaps not. Orthodox economic policies have been good for the Brazilian people but they have rarely gained much popularity, perhaps because of an enduring belief in the beneficial influence of the state.
If the opening salvos in the pre-campaign period have been any guide, the election will come down to a dispute over who is best suited to continue the work of Lula da Silva.
With the most popular president in Brazilian history making it the declared priority of his final year to get her elected as his successor, Rousseff has got to be the one to beat.
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What above article is missing is the candidacy of Marina da Silva, the Candidate of the Green Party and also a friend of President Lula. The issue is that though she does not have the votes it takes to win, she does have enough votes to influence who of the two above does win. It seems safe to accept that she will b part of a government established by whoever among the two front runners does win.
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Our last article on deepwater drilling for oil – http://www.sustainabilitank.info/category/latin-america/brazil/#17264 has obviously as well interest to our readers about Brazil.
Oil groups view the reality of upcoming tougher US rules on drilling. How will Canada, Brazil, the UK, Norway and Australia react? What will ExxonMobil, Chevron, Total, ConocoPhillips and Shell do?
Posted on Sustainabilitank.info on July 22nd, 2010
by Pincas Jawetz ( PJ at SustainabiliTank.com)
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From the two days at the Brazilian-American Chamber of Commerce Inc. I will start with the second say – this was the presentation by Dr. Eduardo Giannetti da Fonseca, a San Paulo based economist of high standing who is also an Economic Advisor to Ms. da Silva’s Presidential Campaign – on a Green Party line.
Mr. da Fonseca is important and, we will not be surprised if Ms da Silva ends up in next government and so Mr. Gianetti da Fonseca.
Marina da Silva’s childhood spent in the rain forest taught her the most valuable lesson anyone can learn: the love for the environment. She says she gets lost in any city in the world, but never in the forest. Already, when she was very young she knew she wanted to save her home, the rainforest, from the destruction by illegal loggers .
2003-08 Minister of Environment Maria Osmarina Marina da Silva Vaz de Lima.
Normally known as Marina Silva, she was elected Senator in 1994. Presidential Candidate for the Green Party in 2010. (b. 1958-).
She has had to fight hard to reduce deforestation in the Amazon by 75 % and because of her, today, Brazil has the strictest environmental laws in the world. She resigned her position as Minister on May 14, 2008 after losing several key battles in her fight to rein in destruction of the Amazon rainforest. Her resignation was a blow to the Lula Government. If the government had any global credibility in environmental issues, it was because of Minister Marina,” Jose Maria Cardoso da Silva, vice president of Conservation International-South America, told Reuters.
She only learned how to read and write when she was 16 years old and moved to the closest town, 70 km away – to Rio Branco. In the forest she was part of rubber trees tappers and worked as a child as there was no school nearby. When she came to Rio Branco she worked all day as a maid, and studied hard at night. She graduated in history in 1985 and soon became involved as a leader in a syndicate, defending workers. She became in 1994 the youngest female senator ever to be elected.
When she resigned from her position of Minister of the Environment it was said that “Brazil is losing the only voice in the government that spoke out for the environment,” Sergio Leitao, director of public policy for Greenpeace in Brazil, was quoted as saying by the Associated Press. “The minister is leaving because the pressure on her for taking the measures she took against deforestation has become unbearable.”
In Brazil, and internationally, she is a recognized hero – small in stature but long in spirit. She has no chance to win in the elections, but is considered a potential coalition member by either of the two front runners. As we understood from Mr. Giannetti, she might be favored more by Mr. Serra for balancing purpose.
Mr. Giannetti himself is not a Paul Krugman, not even a Jeffrey Sachs or Joe Stiglitz. Nevertheless, in the Brazilian context he is is advanced, and we dare to say of exactly the mind-set that put together the Financial Times insert we mentioned above.
Mr. Eduardo Giannetti da Fonseca born in Belo Horizonte, in 1957, studied in Sao Paulo, received his doctorate in economics from the University of Cambridge, where he was also a professor from 1984 to 1987. From 1988 to 2001 he taught at the FEA/USP (School of Economics, Business and Accounting of the University of São Paulo). He is currently a full-time professor at IBMEC (Instituto Brasileiro de Mercado de Capitais) São Paulo. He came through as a basically enlightened conventional economist who has serious criticism of the Brazilian government.
He said that huge part of the private sector relies on protection, subsidies etc. This helps the government to neutralize opposition. Business leaders will thus not speak up against the government in order not to be excluded from the ongoing system. In this respect it is clearly worse then the US State Socialism as here the lobbies fight for the share of public funding but never stop criticizing the government that feds them.
Giannetti has helped shape the intellectual debate in Brazil by pointing at things as I just noted and this is what makes him important in the public discourse. His target is the Brazilian Complacency – and the effects of Growth with Imbalances.
In the 90s Brazil used to be hypersensitive to global shocks – now it absorbed the shock without any major effects. Much of this is credited to the fact that it has $250 billion in foreign reserves insurance – this up from $39 billion in 2003. In 1970 it was about zero.
How did it happen? This was thanks to a very dynamic export sector that led to the big turn around in current accounts. There is a positive balance also for the Public Sector – no debt. There was an increase in minimum vages and improvement of credit to the lower income masses.
The continuity of government public policy and monetary stability – this for 12 years – since the second Cardozo government – created the confidence that things are under control. For Brazil, during the recent crisis – it was a clear first. While the world was in crisis – Brazil reduced interest rates whereas in the past it would have acted the other way around and devalued the currency on top. Now, Brazil has a strong currency – maybe too strong.
Even though the public was buying less, there was an increase in expenditures by the public sector and an aggressive program to keep credit flowing – Brazil had a “good” crisis compared to others. Ergo – his optimism for the future of Brazil.
But not so fast – he wants us to remember that it was the same during the second half of the 50′s under the Juscelino Kubitschek government’s growth of 10% consistently – but that was not sustained! They tripled the monetary base in 5 years to build Brasilia – this could not be sustained.
Similarly – in the mid 70′s, when there was the oil crisis, Brazil was an island of prosperity in a sea of turbulence, but it also turned around This because the external debt that was fueled by OPEC money surplus and it ended in a 80′s-90′s collapse.
He is warning of this series of failed stabilization cycles and we must learn from the errors and he proceeded to talk of the threats and the problems.
He says we (Brazil) must learn from errors. With 7.5% growth per year expectation of inflation is growing. We face now for the first time since 2007 a current account deficit. It can be managed if it is done correctly. The danger is Overheating the economy. The way the government makes money available as implicit subsidy to the public enterprise. The government does not provide consistent figures but the treasury charges a fraction on this debt. This support for business amounts to $8 billion – more then the expenditures on social problems. His criticism of the government is that the expenditures are obscure and he feels not answering democracy and transparency. That is serious criticism and any next government will have to take a long look at it.
On the other hand, the true driving force of growth was consumption. It is by families – this added to private investment and government investment – but we know you cannot do it all at the same time – that causes Overheating and Increased Imports. He went so far as to say that the Brazilian Government is like a brain with two hemispheres not connected – a Fiscal Side part and a Monetary Side part.
Then he moved to education. His complaint that there is no number for measuring human capital build up. His estimate is 1.8% in this area and says 5-6% of GDP are needed for the long run. This creates a distortion in ways of long term business in Brazil.
39% of GDP is mediated by the State and the investment capacity of the private sector is extremely low – there is only 2.1% that comes out of this as capital formation.
OECD countries statistics covering 57 countries, puts Brazil as 54th – and this is because of the human capital deficit.
From her he moved to the Business Environment and pointed out that the Underground Economy in Brazil is 1/3 of the total economy.
This is another big problem. In the World Bank estimates of 1`83 countries Brazil is 129th in the complexity of its tax system causing an absurd situation of the labor market. The government rellies on PAY-ROLL TAXES and 9% of GDP comes from this. The result is that hiring in the labor open market is dangerous to businesses in litigation terms. it takes 2600 hours/year to calculate and collect taxes while similarly outside Brazil it takes 138 hours. These labor and taxation laws become prohibitive and push businesses into the underground economy.
CONCLUSION – In the Short Term Prospects in Brazil are Good – In the Long Term More Difficult.
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The elections:
Marina da Silva, his candidate, only dreams.
Serra – has monetaristic views of the policy. Here, if it gets difficult – interest rates are risen. He thinks the currency is already absurdly overvalued – so you really cannot increase interest rates.
Dilma – here he sees as problem that she will just continue the policy as she gets at the end of the Lula Administration.
Giannetti thinks the State has infrastructure problems and is afraid that Dilma will start from the belief that the State can provide the way to attract private enterprise.
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The chair remarked that there is agreement that the tax system must be overhauled but there is no agreement on how to do it. He also mentioned that labor is ready to go along with elimination of the labor courts – how can these things be helped by change of Presidency?
A. The political consensus can help in the change. All see that there is a clear need to reduce payroll taxes in order to increase hiring – but then he said education and other things are paid for from these taxes. This is thus counterproductive!
You can improve things when you incorporate the informal economy. To achieve this you must mobilize support. The underground economy has no access to credit, to technology – there is need for leadership to reel this all in!
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Question on the structural problems – lack of adequate infrastructure that was answered that the Central Bank has to do changes. The sad thing is that in Brazil – Words replace Acts, and we may have reached a state that a World double-dip helps Brazil. If that is salvation – what is damnation?
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Question on the potential growth rate based on May data.
A. We again rely on external savings and to some extent they are welcome – but this must be done carefully.
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NOW WE HAVE REACHED THE POINT WHERE I WAS ABLE TO PLACE MY OWN QUESTION, AND THIS WILL ALSO EXPLAIN WHY I STARTED MY REPORTING WITH MR. GIANNETTI FIRST:
Based on the presentations of the previous day, where to a question of mine I was told that Brazil need the income from Petroleum in order to pursue things like education, it is that the public in Brazil will not be ready to address the possibility of a blowout like it happened in the Gulf of Mexico. I was left feeling like I was the outside kid who simply said the King is naked.
Clearly, we will get back to the above, but let me say that here I started my question from the idea we heard that EDUCATION IS PAID FOR FROM LABOR TAX-ROLLS and mentioned that though Mr. Giannetti also did not touch even in passing the money-making of PETROBRAS, or the Environment, nevertheless, if the money is not really used for the causes he was talking about, then could we take an honest look at the potential damages from deepwater drilling for petroleum?
A. The idea is for using the oil money in a fund established outside Brazil to fund the development of Brazil. What he is most afraid of for Brazil is that this money falls into the hands of a populist government that gets hold of Brazil – like it happened in other countries of Latin America. It could even turn Brazil to OPEC. In short – he described the well known “curse of oil.”
Giannetti agred with me that the production of oil will become much more expensive in the wake f the Gulf Coast blow-out.
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To another question he answered that there is no clear analysis of the Brazilian economy by private enterprise because of the fact that most are being subsidized by government and they would not want to fall out of line because that would translate in their losing the subsidies – We have a very diligent bureaucracy that enforces its own codes of unanimous opinion-making.
There are 40 million pay checks that go to 120 million people dependent on them – and that is the real governing power in Brazil he implied.
To the idea of increasing savings in order to create funds for investment – he said it must be all voluntary – he dreads compulsory credit and wants voluntary credit.
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June 10, 2008, Mr. Jose Sergio Gabrielli, President and cEO pf Petroleo Brasiliero S.A. – Petrobras - was the speaker at a BACC breakfast at the Mandarin Oriental Hotel in New York City.
His line was then: “While some of the world’s largest oil producers, including Mexico and Iran, are struggling to remain exporters, Brazil is moving in the opposite direction. (?? – he said that.)
A huge underwater oil field discovered late last year has the potential to transform South America’s largest country into a sizable exporter and win it a seat at the table of the world’s oil cartel …” He was optimistic that the company could develop the oil — “We think we can develop the oil faster than we thought at the beginning,” Mr. Gabrielli said then. “We don’t think we have any insurmountable challenge on the technology side.”
At the time it was an oil company CEO making his presentation before a room-full of potential Wall Street investors.
We neither heard there the government of Brazil making a political case, nor any other case of national economic significance.
I remembered this episode when I heard from Professor Giannetti that some in Brazil might contemplate joining OPEC. So, here I found the right reference to Petrobras – a mainly government owned company that is supported fully by the government, though it was known in the past of going against Brazil government policy. On this I make reference to the Petrobras resistance to the original Proalcol – or National fuel-ethanol program.
Above, the Brazilian ethanol issue, has been swallowed up now by Petrobras which sees in it another good avenue for profits, and is in the process of turning ethanol into feed for large tanker-ships to be moved overseas.
Whatever, Petrobras rules by now over Brazilian energy and by its mere size, over the Brazilian economy as well. We are sure that they do not need anymore to come to Wall Street in order to advertise their potential – it is now Wall Street that chases after Petrobras. Nevertheless, it is a bit surprising that speakers on Brazil’s economic and political future manage somehow not to mention Petrobras in their presentations.
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Brazil Update: Tight Race for the Presidency
Mateo Samper and Valeria Cruz
July 29, 2010, http://www.as-coa.org/articles/2566/Brazil_Update:_Tight_Race_for_the_Presidency/
Brazilians head to the polls on Sunday, October 3, to choose a new president who will lead the country for the next four years. The top contenders are Dilma Rousseff of the Worker’s Party (PT) and José Serra of the Brazilian Social Democratic Party (PSDB). A third candidate, Marina Silva of the Green Party (PV), trails third in the polls but could be a key player in the likely scenario that neither of the frontrunners wins the requisite 50 percent of ballots in the first round. If necessary, the runoff would be scheduled for October 31.
Rousseff began closing a 20 percent gap with Serra starting in December.
However, for the past three months, the two have been technically tied in the polls. One recent survey shows Rousseff ahead by eight points, but another places Serra on top by just one percentage point. Marina Silva, who has been gaining ground, polls at 10 percent.
The Candidates in Brief
President Luis Inácio Lula da Silva handpicked Rousseff as his successor. She worked as a member of his cabinet since the beginning of his presidency in 2002, first as minister of Energy and Mines and then as chief of staff starting in 2005. If elected, she will be Brazil’s first female president. Prior to serving in the president’s cabinet, Rousseff worked for the city of Porto Alegre’s Treasury Department and for the state of 
Rio Grande do Sul as state secretary of Energy. She was also active in the restructuring of the center-left Brazilian Labor Party after the end of the military dictatorship in the 1980s.
Rousseff has never been elected to public office, but she now rides high on Lula’s popularity and promises to continue his policies. As she said: “President Lula left me a legacy—to take care of the Brazilian people. I am going to be a mother for all the Brazilian people.” Observers expect her to maintain market friendly economic policies paired with continued federal intervention in the economy.
Internationally, she’s expected to pursue a left-leaning agenda, keeping close ties with Venezuela’s Hugo Chávez and the Castro government in Cuba, as well as to work closely with emerging markets.
Until March 2010, Serra was the governor of the state of São Paulo, the most industrialized state in the country, accounting for over 31 percent of the Brazilian GDP. A U.S.-trained economist with a doctorate, he has been a congressman and a senator, as well as the mayor of São Paulo (2004-2007). He also served as planning minister (1995-1996) and health minister (1998-2002) under President Fernando Henrique Cardoso.
Serra disputed and lost the presidency to Lula in 2002. Considered a center-right pragmatic administrator with pro-market views, the PSDB candidate would continue Lula’s subsidy programs targeting the poor but favors less economic intervention.
Serra has
| Regionally, Serra is stronger in the south and southeast, while Dilma is favored in the northeast, north, and midwest of the country—where Lula is also more popular. |
been stepping up his criticisms against the Lula administration, questioning Brazil’s alignment with countries such as Venezuela and Iran.
Given the state of the economy and the popularity of the current president, Serra could have a difficult time trying to convince voters that he represents a better alternative to Rousseff’s continuity.
Green Party candidate Marina Silva is a former senator and world-renowned environmentalist. Silva, who stepped down as Lula’s environment minister in May 2008, proposes to cut taxes and social security benefits, urging a reform of the country’s costly pension system. The PV candidate also indicated that she would continue many of Lula’s policies, such as poverty reduction programs. Rather than promoting handouts, she has pledged to encourage mobility through better education and more job opportunities.
Lula’s Campaign?
In little over six months, Rousseff has surged in the polls, increasing the chances that the PT will remain in power. There are two explanations behind Rousseff’s rising support: the economy and Lula’s huge popularity, which is now close to 78 percent. Brazil has been steadily growing in recent years while keeping inflation low, allowing 13 million people to rise out of poverty from 1995 to 2008. In the midst of the global economic crisis, the country recorded only a mild slowdown. Its economy is expected to grow at around 7 percent this year, which could lead to the creation of thousands of new jobs. Moreover, expanded subsidy programs for low-income families, particularly in the north of the country, has made President Lula hugely popular and helped Rousseff boost her numbers as she promises to continue Lula’s policies and efforts.
| An Ibope poll shows that, due to Lula’s strong social policies to fight poverty with programs such as Bolsa de familia, Rousseff has an 11 percent advantage over Serra among minimum-wage earners. |
But Lula’s involvement in the presidential race has raised eyebrows. He has used his political influence to promote and openly campaign in favor of his chosen candidate, earning him several fines from the electoral authority. He is now under the investigation of the deputy electoral attorney general, Sandra Cureau, who is studying the possibility of an action before the Brazilian Federal Election Commission against Lula for abuse of political and economic power. In that case, President Lula would garner additional fines and face sanctions, such as the inability to pursue public posts for as many as eight years.
In Brazil, presidents can endorse candidates, but what seems less clear is to what extent. PT lawyer Márcio Luiz Silva argued that the president can campaign when the event is not financed or organized by the federal government. He has also said that, as an affiliated member of the PT, Lula has the right to participate in campaign events in support of his candidate.
What’s Next?
Although television debates and radio commercials do not start until August 17, many of the candidates have begun debating online, as well as hosting campaign rallies. However, Rousseff said she would only participate in four of several planned presidential debates on television, prompting opponents and other analysts to posit that she is ill prepared for debates with Serra and Silva. Rousseff countered that her tight agenda limited her availability for debates and she would be open to interviews in Brasilia.
In spite of the debate dispute, many analysts forecast that, barring a very poor performance in the debates or a major gaffe in what’s left of the campaign, Rousseff will emerge the victor in October.
See more in: Brazil, Democracy & Elections
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Backing now into the July 21, 2010 Seminar on Brazil’s Economic and Political Outlook presented Midyear 2010, but in clear view of the October 3, 2010 Presidential elections, we listened to the following two panels:
A, The Post-Crisis Election Macro Economy: Policy Challenges and Investment Opportunities.
With Marcelo Salomon, Director and Chief Brazil Economist at Barclays Capital
and Marcel Kasumovich, Founding Partner at Woodbine Capital Advisors.
B. The Electoral Landscape, Platforms, Likely Outcomes: Lula’s Legacy and Shadow 2012-2016.
With Christopher Garman, Director and Head of the Latin America Practice Eurasia Group,
and Paulo Sotero Marques, Director Brazil Institute at the Woodrow Wilson Center.
The welcome remarks were by host Michael J. Gilespi, Partner of Debevoise & Plimpton, LLP our hosts.
and the Introductory Remarks by Paulo Vieira da Cunha, Chairman of the Banking and Capital Markets Committee of the
BACC Inc. and Partner & Head of Research – Emerging Markets Tandem Global Partners.
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From the above, we see that all except Paulo Sotero Marques are economists and as this was going on with a Wall Street audience in New York, it became quite clear from the start that this was more about what Wall Street would like to see happen in Brazil, then what is best for Brazil. The point was that if post crisis – The US, China and the EU all grow, Brazil will have to compete in this capital market. Then, if Brazil continues as now, it will have a two tier money lending market and the formal banking system will be more aggressive in order to be able to accommodate growth.
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Kasumovich looked at the young population with good potential for new household formation that will lead to growth. He sees the continuation of Microbased policies to facilitate this. He evaluates the situation as being helped by the crisis in the developed world that helped Brazil to avoid superheating. It regulated the normal cyclic expansion mechanism. POORER COUNTRIES RAISE THEIR STANDARDS AND HELP FINANCE THE US – THAT IS THE TRANSITION IN THE GLOBAL ECONOMY.
THE CURRENCY CRISES OF THE PAST WERE I THE FINANCING OF THE US DEBT. This does not impact the foreign investment in Brazil. The likelihood for a vicious cycle in Brazil is low. The above may change if US troubles go away.
He further said that Petrobras has growth potential and is hampered by management. I cringed thinking what if Petrobras might not want to grow fast? Actually thet are Brazil Government owned and what does the government think? I promis to get back to this point.
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Salomon said the missing link is the challenge of growing with savings. He wants sustainable growth. He finds an excellent monetary policy in Brazil, that eliminated inflation, but does not see the effort to answer: “Where do we get the money for investment.” Will it come from foreign savings only? Internal savings is now 14% but 10% more are needed. He asked: “Where the Wild Things Are? – Who will finance the infrastructure investments for the 2014 World Cup, The 2016 Olympics, the Pre-Salt oil extractive business? —- IS KEYNES REALLY DEAD – OR HE JUST MOVED TO BRAZIL, he asked.”
Fiscal spending is increased by BNDES and he does not see things discussed during the present crisis as part of the election process.
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Garman said there is more at stake: He sees no macroeconomic policy split between Serra and Dilma, but sector specific industrial policy differences. He specifically noted very different views on how to develop Brazil’s oil sector – with repercussion to growth he said. This will influence utilities, telecom, mining as well. He finds that the main difference between Serra and Dilma is in the industrial area. This gave me the clear feeling why the room was rather in Serra’s corner.
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Sotero, as I said earlier, was different. He is a Journalist and had the longest resume of the four speakers.
Paulo Sotero was the Washington correspondent for Estado de S.Paulo, the Gazeta Mercantil, for the last seventeen years. He has been also a regular commentator and analyst for the BBC radio’s Portuguese language service, Radio France Internationale, and the Brazilian Rádio Eldorado.He started He is a native of Sao Paulo, stated his career at the Veja weekly in 1968, held positions in Recife, Paris, Lisbon, Sao Paulo, and Brasilia. He is a frequent lecturer on Brazilian affairs at US universities, and think tanks.
Since 2003 he has been an adjunct lecturer at Georgetown University, both in the Department of Spanish and Portuguese and at the Center for Latin American Studies of the Edmund A. Walsh School of Foreign Service.
Sotero has a BA in history from the Catholic University of Pernambuco, Brazil, and an MA in Journalism and Public Affairs from The American University in Washington, D.C. In 1987, he received the prestigious Maria Moors Cabot Award Special Citation from the Graduate School of Journalism, Columbia University. He is also the recipient of the 1993 Distinguished Visiting Lecturer award from the Foreign Service Institute of the U.S. Department of State. In Brazil, he was awarded the 1978 “Prêmio Abril de Reportagem” for Veja magazine’s cover story on Paraguay and for an investigative report on the assassination of Chilean General Carlos Prats in Buenos Aires, Argentina.
The Woodrow Wilson International Center for Scholars in Washington DC and at Princeton University, September 2006, appointed Sotero , as the director its Brazil Institute.
He is clearly the kind of person that could evaluate not just the US interest in Brazil, but also what the people of Brazil would want to see happen to them.
Dilma is clearly more ideological, and she has Lula’s backing in a country that loves Lula because he leaves the State in much better shape then he found it.
Under her, there will be a clear supervision of exchange rates as her advisors will not want to see the currency appreciate – so the make-up of the Central Bank will be at play. Serra on the other hand will rather watch expenditures.
2010 is a dream year to run on a platform of continuity and Lula’s legacy and shadow will extend to the 2012-2016 years.
It is clear – there is an enormously popular president, a satisfied population, an impressive economic achievements’ record and a prommissing economic outlook.
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At Q&A time, and having heard about the reliance on income from oil as a way to fund development projects, while the oil is indeed of deepwater drilling source, and these being the days of the US BP Gulf disaster I decided to ask if in Brazil people read the papers about what can happen with this sort of oil production?
From Mr. Garman I got a clear answer that it is of no concern to the Brazilians – specially as the economy is based on this income and people want education and education needs money … In this respect please see why I started the review from the following day’s presentation by Mr. Giannetti who said that education is paid from the taxes taken from labor. So – here goes out the argument that Brazil economy is based on that oil.
Further o – Mr. Sotero picked up my question also and said that 25% of all investments in Brazil will go to oil & gas – this is the BNDES (the National Bank) forecast. That would tie down Brazil in many respects.
In effect, the choice is to do it slower in order to develop other sectors of the economy – that will bring gains slower. But I clearly felt that this is more sustainable.
Further, in private, one of the participants told me that the water currents are such that if there is an accident – the oil will go south to Argentina and will not hurt the Brazilian beaches – Well that is nice to know. We hope the Argentinians read this also.
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The bottom line perspective of this end of July report of Brazil going to the October 3, 2010 elections, It seems the future may hold a presidency that will try to continue the achievements of the Lula eight years and it will be led by Ms. Dilma Rousseff with the support of Ms. Marina da Silva.
We hope that this Brazilian Administration will clamp down on Petrobras and hold back somewhat from the development of oil beyond what is best for the Brazilian economy. The best one can hope for is that they continue to do it by themselves, at low speed, and do not look for outside companies that might be more inclined to lead them to disaster. The government will have to supervise the Petrobras accounting and indeed get the income from this that the government needs in order to build up the consumer society to help in Brazil growth as justified by its effort to grow along China and India.
The official campaigning starts August 17th and provided there is no “September surprise” above is our estimate as of today.
pj@sustainabilitank.com
The New Brazil
