Posts Tagged ‘Brazil’

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my $.02 on Rio2016

Monday 22 August, 2016

Now that the Rio2016 Olympics are done & the Olympians & fans are heading home, it’s time to reflect on how it worked out for Rio de Janeiro. When I arrived in Rio a year ago, the prognostications were not good. The Globo newspaper media empire spelled out 5 Grand (large) Obstacles:

  1. Metro/subway-the new subway line which was being built to provide transportation to & from the Olympic park was planned for completion only a month before the games were to begin, a small window to correct problems, if required. Then a few months ago, that window was further reduced to just 5 days before the Olympics start, making any last minute changes of any consequence impossible. Remarkably, the subway opened, took passengers to the events, & was little problem @ all.
  2. H2O-much has been made of the quality of the water in the lagoon and Guanabarra Bay where the rowing & sailing events were held, respectively. The goal was to clean 80% of the water by the time the games begin, but sanitation only advanced to clean 50% of the waste being dumped into the water supply. That’s much more than was in the past, but short of the goal of 80%. I only read of 1 Belgian Olympic sailor who became ill after falling in & possibly ingesting some water, hardly an epidemic, & arguably within statistical norms. While the water quality is still @ an unacceptable level, it didn’t result in any calamities @ the Olympics.
  3. 4, & 5 Stadia for cycling, rowing, & track & field: were behind schedule, but completed on time without incident.

Since that article was published, a few other issues arose which impacted Rio2016 significantly:

  • zika virus: despite not rising to the levels of recent past epidemics & being out-of-season by the time the Olympics arrived, zika was deemed a threat to the health of all who dared to come to Brazil to watch the games live. There was no outbreak & zika seemed to be a non-issue during the games.
  • political crisis: President Dilma Rousseff was impeached, which created lots of political stability & the threat of uprisings, etc. during the Olympics. While Brazil will continue to be in a holding pattern until a new president is elected in 2018, there have been no major repercussions from this calamity.
  • economic crisis: as a result of the political crisis, Brazil’s economy has taken a nose dive, as indicated by a fall in the currency, the Real, of 30% in 6 months, from R$3.2/US$ to R$4.1/$US. investment has fallen, & unemployment has spiked. This made financing the completion of the projects for the games questionable, but again, all venues were completed on time.

True to form, the Brazilians pulled it off, by cramming @ the last minute, but they got it done.  The question is “What will be the long-term outcome of the Rio2016 Olympic games?”  Will Rio become another economic success propelled by the Olympics, like Barcelona & Seoul, or create a lot of white elephants, as in Beijing or Montreal, or even worse, lead to an economic downfall, as has been hypothesized about Athens, Greece.  London took the Olympic opportunity to rehabilitate an underdeveloped part of town to rejuvenate it & make that area a desirable place to live.  When I lived in Munich, they left the Olympic housing as residences for college students.  Rio will leave a different legacy.  While the subway extension & rejuvenation of the Praca Maua port area will benefit all of the population, the Olympic village is being converted into luxury condominiums for sale to the highest bidder.  Many of the venues were temporary structures, probably being deconstructed already as we speak.  The economic development organization of the Rio city government, Rio Negocios, held a series of events highlighting different industries in & around Rio, but I think they were probably disappointed with the international level of interest in their events.  The aftermath of the 2014 World Cup does not bode well.  New stadia now stand empty & a number of infrastructure projects were never completed, in some cases creating risks with what does remain.

I enjoyed being in Rio while the games were taking place: see pix:

…& I hope that Rio recognizes many positive benefits as a result of hosting the games.  I’m just skeptical that enough change will have taken place for the rest of the world to appreciate what a beautiful place this can be.

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BRICS Business Forum in South Africa

Tuesday 9 April, 2013

I slipped into the BRICS Business Forum in Durban, South Africa (SA) the day before the momentous signing day of the BRICS Summit.  The business forum obviously had much more of a business focus than the ceremonial summit, so that was time much better spent for me.  It looked like there were about 2500 attendees, which was supposedly ½ of those attending all BRICS events.

I arrived a few minutes late to a talk being given by SA’s Minister of Trade & Industry, Rob Davis.  He emphasized how much SA must industrialize & encourage development of a  services-based economy, including information technology services.  Davis pointed out that despite that fact that SA does not have the large domestic markets the other BRICS countries do, SA offers access to many other countries in Africa, partially through it’s membership in trade blocs, SAFTA, SADC, & EAC, which are supposedly doing more than just reducing tariff barriers.  SA is seeking partnerships to strengthen its production activities.

The Brazilian Minister of Foreign Trade let us know that Brazil will host the BRICS summit again next year & that Brazil has the largest population of Africans outside of Africa.

Russia’s economic minister spoke, but it was in Russian & my simultaneous translation device was not working correctly.

The Chairman of India’s Chamber of Commerce & Industry, a very influential organization in India, & minister of commerce & industry, Annan Sharma was up next.  He noted the connections between India & SA by making us aware of Mahatma Gandhi’s travels to Durban & Peitermaritzburg.  India is working on a pan-African e-network project which is linking key universities & hospitals.  The project is a gift from the government of India.  To contribute to institution & capacity building, India has welcomed 50K students into its schools. It is forming 17 institutions in Africa, including the Indian-African Institute of Foreign Trade, which will institutionalize the framework for trade & investment.

China’s vice-minister of commerce spoke in Chinese with a bad simultaneous translator again, but I was able to decipher that he made 4 propositions:

  1. Strengthen the international trade & economic order with macroeconomic policies, complete the Doha round of negotiations of the WTO, & safeguard developmental rights.
  2. Direct & focus on cooperation among BRICS countries to maximize their competitive advantages
  3. Intensify investment & promotion
  4. Promote finance, IT, the environment, & SME’s.

BRICS-Africa panel with panelists from Brazil, India, & SA.  SA led off by informing us that SA has the world’s largest radio telescope, which is probing the outer edges of the universe.  It can undo 3k 15” satellite dishes & is 50X more sensitive than it’s nearest competitor.  This provides opportunities in research of high-level technologies & in construction of satellite dishes in SA.  China & India are already members of this 10 member-country international project.

Brazil has been investing in biofuels for 40 years & has the most flexible-fuel cars.  Agrobusiness is huge in Brazil & Brazil leads in the trade of ethanol.  Sudan has implemented Brazilian technology in this area.  This is an example of a positive approach to international cooperation.  The Brazil space agency has experience in working with the Chinese & is offering imaging technologies to SA.  They suggest the way to keep fuel prices low is to focus on clean fuel, simplify complex tax structures, & keep the price of ethanol below that of oil.

India seeks deeper engagement with BRICS countries & believes the key to success is the transfer of technologies.  African countries hold 50% of the world’s resources (I’m not sure which 1’s) & an environment with a free flow of people, goods, & services needs to be created.  India has the workers with construction skills & training-it’s industrialization level is 42%.

CNBC hosted a debate, but it might not have aired yet-here is all I could find  http://www.cnbc.com/id/15840232/?video=3000157571&play=1

The afternoon was completed by an infrastructure breakout panel & the signing of a number of Memoranda of Understanding.  The panel jumped right in to explain how BRICS can help the rest of the continent of Africa.  They’ve invested 4 trillion South African Rand, are working on a World Economic Forum project in Ethiopia, & encourage a focus on localization.

LinkAfrica hired consultants from the US, Terabit consulting, to do a study on fiber optics & the last mile terrestrial connections in Africa.  They signed an MOU with other BRICS countries for foreign trade to create communications on a south-south basis with no northern hubs.  This gets access for BRICS countries to 21 countries in Africa.  Their plan is to build data centers with access to the cloud in Africa.

Brazil’s representative indicated they’ve been in Africa since 1983 & are now active in 14 countries on the continent.  His take was we need to improve the infrastructure network to feed the world.  They are doing that by investing $445B by 2015.

Russia’s Renwa Group has been working in South Africa for 7 years.  Their constraint is in infrastructure in ports.  Their costs double when they must ship their goods 200km from Port Elizabeth to Durban’s port; transportation costs are double their extraction costs.  South Africa’s electricity monopoly is ineffective because electricity costs have risen to 12% of their Gross Margin, & forecasted to become 16% in the next 5 years.

India’s representative indicated that South Africa is India’s 4th largest trading partner.  The Delhi-Mumbai corridor will have $100B invested in it in the next 20 years as 400M people will be moving there in the same time frame.  They are investing $1Trillion in the next 5 years. & seeking $500B from investors right  now.  They privatized their airports 10 years ago, & now they are some of the best in the world.  They are investing in infrastructure funds in a big way.

China’s representative from ZTE was hindered by bad simultaneous translation again.

Pardon the lack of detail in specifics on the speakers, etc.  I tried to snag a program with an agenda but couldn’t pull it off.  I asked the organizers but the bureaucrats have been unresponsive.

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the growing middle classes in the B(R?)IC countries

Thursday 9 June, 2011

The University of Chicago hosted a conference focused on the BRIC (Brazil, Russia, India, China) countries called BRIC in 2020 which I was only able to attend for the 1st day, which focused on the emerging middle classes in those countries.  You’ll find many of the presentations on the website.  Dipesh Chakrabarty of UC’s dept. of history opened with a quick summary of today’s global middle class, in families cut across borders.  As the older middle class rode a wave of prosperity, today’s growth brings environmental & inequality problems along with it.  As there is more economic growth & “globility”, there is also more conflict.

Marcelo Neri’s presentation on Brazil is here or here:  brazilsmiddleclass

Harley Balzer of the dept. of government @ Georgetown addressed the middle class in China & Russia by 1st acknowledging that Russia really doesn’t share the growth characteristics of the other BRIC countries.  It doesn’t have the historical links or geographical proximity that the others do.  It’s not a member of the WTO & hasn’t diversified it’s economy off of oil, plus Russia is losing it’s educational & science/technology role.  Russia’s middle class is richer, but a smaller % of the population, the same as in 1995.  There are mostly private, & very few public goods.  There are also big security & mobility issues there.

In both Russia & China, higher education enrollment is increasing, but neither is expanding faculty.  The political role of the middle class is ambiguous because a sizable middle class is necessary but not sufficient for democracy.  Typically the professionals provide leadership & lead revolutions & they’re just not doing that.  Their welfare states are under pressure & demographics & income disparities are becoming problems.  The middle class is vulnerable to housing bubbles & food & energy price shocks, while governments are cutting services & jobs.

The number & wealth of China’s middle class is growing, but more education is not leading to better prospects, so China might not be changing fast enough.  It’s growth curve is leveling off.  Western companies have experienced consumer market failures like Best Buy Home Depot because of intense price competition & the focus on consumption is pernicious.

Devesh Kapur of the Center for the Advanced Study of India @ Penn addressed 4 topics:

  1. fractured coherence/cohesiveness-15-20% of the Indian population still lives on $2/day while the number of taxpayers has risen to 30M households, 1/6 of the population.  50M or 15% of the population, have college degrees but their incomes are still less than in the west.
  2. characteristics-in the 1990’s, jobs were linked to state employment, which is now flat.  The middle class has grown from self-employment & entrepreneurship, although less Anglicized & moving from major metropolitan areas to smaller cities.
  3. attitudes-Pew global surveys indicate India is an outlier in that middle class attitudes are similar to those of the poor with no gap, & rate their past lives low & are optimistic & not nostalgic.  That they’ve become consumerists is no surprise.  The professions won’t play the same role as in the past.  They can be crusaders against corruption, but many self-governing bodies are corrupt themselves.  The media is corrupt too, so they don’t report on corruption.  Ultimately there is no vanguard for change.
  4. political roles-the middle class is the base of power but are disenfranchised & dislike the democratic process.  The Right to Information Act was a result of middle class activism.  Whereas the old left looked to the state, the new left is skeptical of everything, the state, markets, etc.  2M non-governmental organizations (ngo’s), of which many are great & many are crooks, have substituted for the state, which parallel the for-profit sector.

Panel Q&A highlights

Brazil’s universal health care & public services provide poor quality, but it’s population wants a big state role.  Brazil’s diverse but integrated culture helps so they can take a middle path.  It has a relatively closed economy, but that has internal advantages.  Brazil is targeting OECD levels of education by 2020, which is the #2 priority now, up from #7.  They are learning from the Chinese in “working the plan.”

Russia’s Putin closed their 1990’s trajectory & discredited democracy where corruption has blocked globalization, which will all take a generation to change.  As they view the outside world, they may demand changes.  A Russian bubble would be tied to oil, but a petro-carbon-based economy can’t last.  Their future now depends on the price of oil & their budgets are in trouble.

India’s middle class is exiting from the state’s education & health sectors because they paid taxes but got little in return, but there is rapid growth in taxpayers.  The fastest rising asset class is student loans, debt & mortgages are rising, leading to supply & demand imbalances.  The poor still favor democracy as a fundamental right, while it’s extremely heterogeneous population has both positives & negatives.  Despite many communists losing elections recently, there are still photos of Stalin in every office.

China has reestablished the intrusion of the state into life.  Housing & food price bubbles could pop up because their economic history dictates that their current growth rates are not sustainable.  Their large & integrated domestic market leads them to be optimistic, similar to the US in the 19th century.  Chinese savings are a result of a lack of valid pension schemes, so the government is concerned about inflation.

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lunching with the brazilian ambassador

Monday 23 May, 2011

Had lunch with Mauro Vieira, Ambassador of Brazil to the United States & other members of the Chicago Council on Global Affairs @ BRAZIL AND THE UNITED STATES: BILATERAL PARTNERSHIP AND GLOBAL PERSPECTIVES where he shed some light on Brazil’s perspective on inter-American relations.  Pres. Barack Obama stressed on his recent trip to Brazil, the country’s rise to 7th largest GDP ($2.1TR) in the world with 7.5% growth, & recognized that our partnership has become deep & intense.   The U.S. is Brazil’s #2 trading partner with $58B of $383B in international trade.  Brazil received $10B of it’s $48B in foreign direct investment (fdi) from the U.S., while Brazil has a total stock of $16B of fdi in the U.S., $3.9B of which came last year.  Exports to Brazil support 250K jobs in the U.S., while exports to the U.S. support 120K jobs in Brazil.  Brazil grew so much the last 15 years as a result of the imposition of social justice, which created 14B jobs & raised wages 42%.  24M were lifted out of poverty as 30M joined the middle class as GDP/per capita rose 80%.   The 2008 financial crisis was a turning point which caused the emergence of closer involvement of the emerging markets.  Obama supports an expansion of the UN  Security Council (I assume to include Brazil), & Brazil is now producing oil, of which Obama wants the U.S. to become 1 of Brazil’s best customers.  Brazil & the U.S. have come to many agreements on trade & economic cooperation, aviation-open skies, & cooperation on education & innovation.   They signed a peaceful use of outer space agreement which will allow the U.S. to launch space ships from northern Brazil.  Dilma Roussef wants more Brazilian students studying the hard sciences in the U.S. while Barack promised to increase the number of Latin American students to 100K in the U.S.  Earlier that day a US-Midwest Brazil Business group was launched.

Q&A

  • The middle class has grown to become 53% of Brazil’s population.
  • Lula & Turkey built confidence with those who weren’t talking to Iran.  Dilma stands ready to contribute in the future.
  • Brazil has lots of legislation, programs, & multilateral fora to fight violence, police excess, & human rights violations.  They favor general overview actions rather than specifics in fighting these problems.
  • Trade is important (exports=25% of GDP) to Brazil.  China is their #1 trading partner.  Bureaucracy & corruption are not impediments to foreign trade, as there is no pattern to discern in either.  They want better regulations & legislative control.
  • Hillary Clinton was interested in the bilateral agreement against racism 3-4 years ago, which it is assumed will be discussed @ an upcoming meeting in Minas Gerais in June.
  • Brazil thrived during the financial crisis because the government took quick action on stimulative VAT consumption taxes, which were reduced to 0 for popular cars & home appliances.  The President went on T.V. & said “Continue to work & spend.”  The government also built houses.
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railroad opportunities in Brazil

Friday 14 January, 2011

I was invited to attend this business briefing: Opportunities in Brazil’s Rail Sector: A Business Briefing for U.S. Companies, organized by TERA International Group & sponsored by the U.S. Trade and Development AgencyHere‘s a link to a similar earlier project on which they worked.  After Steve Winkates of TERA welcomed everyone, Gabrielle Mandel of the USTDA gave an overview of their services.  Next Martin Claessens of the US Commercial Service referred people to their website to see what they do & promoted Obama’s National Export Initiative goal of doubling exports in the next 5 years to create 2M jobs.

The meat of the presentations started Britto Rajkumar, of the Transportation Technology Center, Inc., who provided the results of a USTDA-funded Railway Integration Technical Assistance Project (RITAP).  Brazil’s railroad system grew 100% in the last 10 years & is expected to grow 100% again in the next 10 years.  The focus today is on track standards for certification & safety, & so that they can be integrated across the country.  There is a 2 year pilot project & 5 year comprehensive plan to guide privatized railways to meet growing demand.  They are building 60K km in Brazil, of which 700 km are in/around Sao Paulo.  For comparison, the US has 300km of track nationwide.

Brazil’s International Affairs Advisor to the Ministerio dos Transportes, Francisco Luis Da Costa, then described Brazil’s logistical infrastructure.  The 2008 financial crisis has had little impact on Brazil’s economy, & actually increased public investment.  Foreign direct investment is up, & foreign reserves are up.  Their focus is more on internal market growth than export.  They are trying to plot a sustainable growth path:  infrastructure investment has increased 20% in 2010.  Brazil has agreed with the IMF in that infrastructure requires different fiscal treatment than other investments.   Currently Brazil depends more on roads & highways than rail, especially compared with other countries.  Their Plan for Logistics & Transport plans to change the matrix of rail & waterways directly to production areas.  Their focus is on energy efficiency, & reducing fuel consumption & emissions.  Rail is a priority, emphasized by expansion to create a modern integrated high capacity system to optimize:

  • existing network capacity
  • multimodal
  • high speed
  • North-south backbone
  • connect production areas to ports which are served by trucks now

Brazil is converting from large 1.6m gauge to more narrow 1.0m gauge & creating urban bypasses & beltways.

Other association presentations were given by:

Other visiting Brazilian delegate presentations were made by:

  • Antonio Carlos Modesto de Oliveira, Legal & Corporate Affaris Director of Ferrovia Tereza Cristina (FTC)
  • Elvira M B Cavalcanti, CFO & Thiago Rosa Moraes, Procurement Specialist of MRS Logistica SA
  • Flaviana Crus Coelho, Director General of Innovation & Railway Development & Jose Osvaldo Cruz, Office of Institutional Relations for Vale
  • Marcello Barreto Marques, Commercial Executive Officer & Miguel Angelo Barroso Andrade, General Business Development Manager of Transnordestina

I had to leave this event early due to another commitment.  If you want more information, just let me know & I’ll see if I can go back to the sources.

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Brazil according to Baker McKenzie

Monday 15 November, 2010

I had breakfast with the attorneys @ Baker & McKenzie to attend BRAZIL TAKES OFF: OPPORTUNITIES AND STRATEGIES FOR SUCCESS They opened with the Consul General from Brazil in Chicago, who was most proud of Brazil’s recently completed online elections.  They had the results of their election by 6:00 p.m. & the politicians were making their speeches by 7:00 p.m.

re: investment :

  • politically stable
  • investment ratings positive
  • Brazil was LIFO in the financial crisis, last in & first out
  • the economy is growing faster than the average of even emerging economies
  • foreign direct investment is expected to grow until 2014
  • the Real has gained 6.3% vs. the $US in the last 3 months
  • inflation is under control

re: the 2014 World Cup & 2016 Olympics set deadlines which must be met

  • Sao Paulo is getting $20B investment, which is about equal for the rest of the country, for the World Cup
  • opportunities are in building arenas, airports, hotels, &  urban mobility ($22B in trains, subways, highways)
  • tax incentives are being granted to ensure completion

Target industries are oil & gas, power, real estate, mining, steel, stock exchange.

re: real estate & infrastructure, major projects are in power plants & transmission, pipelines, water.

  • the real estate market is stimulated by growth of the middle class & an increase in credit offers
  • there is a national deficit of almost 8M houses in Brazil
  • the government is investing & providing incentives to reduce the housing deficit
  • shopping malls are growing 10+%/year in gross sales

The Brazilian stock & derivatives markets are the largest in Latin America & the Omega Project seeks to become 1 of the world’s largest in 5 years

re: taxes, Brazil’s system is complex @ federal, state, & municipal levels with indirect (VAT), & overlapping taxes

re: managing the workforce, labor rights are defined by law & collective bargaining, & may not be waived

  • labor contracts/job offers are of indefinite duration for 8 hours/day, 44 hours/week
  • remuneration must include annual inflation adjustments, bonus rights can not be withdrawn
  • employees can be terminated with & without cause without & with severance, respectively
  • all employees are represented by a union, including top management, with mandatory contributions, depending on jurisdiction
  • common disputes include:  overtime, outsourcing, liability, harassment, damages, pay equality, asset seizures

re: environmental protection, polluters pay, for preventive measures too.

  • information provided to public authorities is public
  • natural resources must be sustainable & not exhausted
  • trends include increased identification of contaminated areas, climate change laws at all levels, Superfunds, mandatory self-disclosure, Forestry code modifications for enforcement

Baker McKenzie’s new Chairman of their Executive Committee, Eduardo C. Leite, hails from Brazil, where the firm has 4 offices.

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world trade (center?) illinois is back & another new chamber in town

Friday 20 August, 2010

Last night I attended this Global Business Card Exchange hosted by a rejuvenated World Trade (Center?) Illinois & new Brazilian American Chamber of Commerce of Illinois at the Brazilian steakhouse Brazzaz.  Other sponsors included The law firm of Sandler, Travis & Rosenberg, P.A.Argentine-American Midwest Chamber of Commerce, The Latin American Chamber of Commerce, Korean Trade and Investment Promotion Agency, and The Peruvian Professionals of Chicago.  The event attracted a crowd of 50-60+ from all over the world, so their inaugural event kicked off with a good start.  There were a few other speakers, but without a microphone, we weren’t able to hear them well.

I’m glad they’re back, but on its website, there’s no indication that the World Trade (Center?) Illinois is a member of the World Trade Centers Association.  This means members of the WTC Illinois might not be able to take advantage of the benefits of being able to utilize the services of other WTC’s throughout the world when traveling to different corners of the globe.  In the past I’ve mentioned my concern with the value associated with the membership dues that its predecessor organization charged.  I discussed this briefly with the new leadership, but it appears as if they cling to the same value relationship.  It’s good that there’s another organization like the WTC back in the Chicagoland area & they appear to offer some valuable services, but it’s important to know what you get for your investment in the organization.  If any WTCI members read this & disagree, feel free to click on the comment button to voice your opinion.

It’s also encouraging that there is now a chamber of commerce focused on Brazil.  Given the country’s growth & potential, there should be enough business & sponsors to support it.  It was also good to see other organizations supporting this event as well.  I think South American business is underrepresented here in Chicago, so seeing Argentina & Peru contributing helps too.  I didn’t see any representatives from Korea at the event, but it’s possible that they arrived after I left to check out some jazz in Millennium Park.  They have a few glitches to work out for their next event, but should be able to learn from the problems they encountered last night to improve them the next time.