Brazil media calls for unity on World Cup

Fuleco, the World Cup's official mascot has not yet
 conquered the national fans, producers of toys said
they are targeting international tourists

It's finally happening. The World Cup starts today after 7 years of (not very good) planning, discussions and protests. In the past year, particularly, the World Cup helped Brazil show its true face to the world. The "football nation" is now an angry emerging middle class nation, that claims for more quality in the public services. It's also a stable democracy nation, which went through massive protests without a single change in its institutions. It is still a struggling nation, that suffers to put investments in due course, but it is learning.

No, we are not the skyrocketing Christ statue The Economist showed back in 2009. In fact in today's Folha de S. Paulo edition, Vinicius Torres Freire, an economics columnist, calls attention to the possibility of a technical recession (two quarters of decrease in the economic activity) in the first half of this year.

But we are not that bad. The fact the country managed to go through the protests maintaining its institutions should not pass unseen. Unlike any other emerging country with recent upheavals (Turkey, Thailand or Egypt, just to name a few) Brazil's democracy has not been questioned by the protests.

The truth (or at least the close we can get to it) lies as usually in the middle. Brazil is a country which is just learning how to invest -- as states another Folha's article, signed by Marceo Miterhof. After decades of crisis and after addressing the more pressing issues of inflation, economic stability and income distribution, the country has just started to focus its attention on the infrastructure problems. Differently than the last big investment decade of the 1970's this time the investments came under the democratic regime with all its checks and balances. It's been a tough learning.

This is why today the Folha's balance of the World Cup infrastructure legacy showed that little over 50% of the 167 planned improvements were completed in time for the games. The rest was either abandoned or postponed to after the games.

As Folha's editorial states today, it's time to bring attention to the event itself and to support the national team. This does not mean forgetting all the criticism, it means remembering the positive aspects that the event also has. I don't think anybody in Brazil believed the World Cup would bring an end to all of the country's problems. It actually contributed to expose the naked reality of a country that has improved recently but still has a long way to go.

As I already mentioned here, I believe the games will occur without any major problem. The main strikes of metro workers and homeless in São Paulo were controlled in the last minute, just in time for the event. It's the Brazilian way, always finding a solution at the last moment.

I'm also curious on what will be the political result of the games. So far, it seems the World Cup has backfired for the Worker's Party. But who knows what can happen after the World Cup nationalist marketing flood. The latest presidential poll published last wednesday showed that for the first time Dilma lost the upper hand when compared to the sum of her two main adversaries. A second round in the elections is now more likely than ever.

The World Cup is around the corner, and the elections too

Brazil is living a huge strike wave days before the World Cup. This week São Paulo came to a halt when bus drivers stopped working. And this friday president Dilma almost couldn't finish her speech in Brasilia due to the protest of public servants in strike. 

Protests during Dilma's speech this friday

It's no surprise that strikes occur at this time of the year, as each union has its own calendar of negotiations. But now organized workers are taking advantage of the World Cup to leverage their negotiation position, as the world's eyes are turned to Brazil. And that's been picked up by the Brazilian press. 

In this saturday's edition, Folha de S. Paulo calls attention to the fact that Dilma is even considering buying a terrain near the Itaquerão stadium in São Paulo to halt homeless protests in the region. The land would be designated to housing projects.

Both Folha and O Globo gave a fairly big space to former football player (now a member of the World Cup committee in Brazil) Ronaldo's quote about being ashamed of the country's lack of organization  -- it was the cover of Folha. Also on the World Cup, O Estado de S. Paulo revealed that the already very ambitious Brazilian project of receiving the World Cup in 12 cities was even more gigantic: it involved 17 cities, according to Fifa.

Elections

This week another survey for the presidential election was released. From Ibope/Nielsen, the results point out to a small recovery from Dilma Rousseff, from 37% to 40% of the vote intentions, but also a greater chance for a second round of elections, as her adversaries grew more. 

To wrap this post up, I just liked to call attention to Aloizio Mercadante's interview to Folha de S, Paulo two weeks ago. There, the current minister of the Civil House admitted the government's price control policy (a very unusual, not to say inefficient, way of halting inflation). He was later unauthorized by the Finance minister Guido Mantega, but my personal opinion is that mr. Mercadante's ideas resonate deeply in the Brazilian government, and are the first honest acknowledgment of the true Brazilian economic policy. (See Mercadante's interview).

Dilma faces turmoils as election agenda gains the media

President Dilma inducted six ministers this Monday,
two of them were nominated to make amends with PMDB

From now on no news on the politics section is unrelated with the election for presidents, governors, deputies and senators on october. Every announcement, every quote from a political personality has now a direct reference to the dispute between Dilma and so far the two other possible candidates (Eduardo Campos from PSB and Aécio Neves from PSDB).

The electoral tone was all over two stories that represented a downturn to Dilma on the last couple of weeks: the mess in the energy sector and the dispute with PMDB, the major allied party of Dilma. In the first case, Rui Falcão, president of PT (Worker's Party, the PT of Dilma) declared that PMDB was only interested in positions in the government and not as much in reaching the greater good for the country. Eduardo Cunha, the leading deputy of PMDB in the Congress started a rebellion and threatened to go against some of the most important projects of the government such as the Marco Civil da Internet (the Civil Landmark of the Internet -- a set of rules for the internet business in the country), due to be voted this week.

Initially Dilma tried to ignore the opposition inside her own allied base. But after realizing the power of the unpleased allies she decided to nominate two of PMDB approved names for the ministrers of Agriculture and Tourism. Ironically the crisis that started with a critic of the PMDB greediness for positions inside the government is being solved by providing PMDB with positions in the government.

Another setback for Dilma was in the energy area. Briefly put, the government decided to anticipate the end of some of the energy contracts last year (this way provoking a cut in the energy prices for the end consumer, that would represent a discount of 28% for residential users). The project backfired as it stimulated energy consumption in a time of the year where the hydroelectric dams were not getting as much rain as in the previous years. This forced the electric system to turn on the thermoelectric plants that are more expensive. In order to keep its promise of a cheaper energy, the government decided to subsidize the energy bill by putting billions to pay the extra cost of thermoelectric energy. After denying for several weeks that that was a crisis in the sector, the government decided to acknowledge the problem and promised to not interfere in future contracts at the same time it waved with a tax increase to cover the future costs of the more expensive energy. It was one perfect example of how not to manage a country, given by a president that sold an image of a great manager in the energy department.

Both situations show how bad the current government, and I would dare to say the current president, deal with this sort of conflicts. When faced with a situation where there is a need for negotiation the government usually try to impose itself first and end up being obliged to step back and offer a much more costly and inefficient solution in the end.

A youth longing for opportunities and an economy needing more qualified workers

Jefferson Luís, creator of one of the "rolezinhos" 

After reading some more about the "rolezinhos" phenomena I have to acknowledge an error in my previous post. As it seems and as some more protests in favor of the initial movements showed throughout this week, the initial events were not intentioned to raise some level of theft. They were instead just meetings from teenagers that long for more spaces of socialization, and that too like the safe and fresh environment of the country's biggest shopping centers.

It is true that Brazil's shoppings often stand out as an immense contradiction even when compared to their surroundings. Particularly on the one shopping in São Paulo (the Shopping Metro Tatuapé) that hosted one of the rolezinhos, there is a considerable contrast between the security inside and outside the building. It is one of the many contradictions that still persist in Brazil as I pointed out during this week. Today O Globo has a story about movements this time made to support the rolezinhos.

Newspapers were also not short of articles trying to understand the phenomena, listed by sociologists heard by O Globo as a protest of an apolitical youth that also want to be included in the consuming society. During the week one of the organizers from the movements, 20 year old Jefferson Luís, was interviewed by O Globo, O Estado de S. Paulo, TV Record, G1  and Vice websites. Working as a full time helper in a company on Guarulhos, on the metropolitan region of São Paulo, Jefferson is a funk singer that has 2.5 thousand Facebook followers and wanted just to have a good time with his friends in a shopping, but things got out of control.  El País Brazil also posted a nice article underlining the meaning of the rolezinhos and how poor young people in Brazil are constantly mistreated.

The three biggest Brazilian newspapers all came with different cover stories this Sunday. O Globo and O Estado de S. Paulo with more economic stories, the first bringing to attention the lack of intermediate qualified workers in Brazil which contradictory as it seems forces industries to hire more qualified technicians and graduated workers to execute simpler tasks and the second showing how the 23 billion tax benefits conceded by the Federal Government for automakers has undermined local governments to pay their expenses.

Folha de S. Paulo on the other hand explored the political side of the 2014 World Cup in yet another scandal: a 870 million reals bill that local governments payed for the event, that should, by contract, be paid by the Brazilian Fifa's subsidiary.

Country's economy will be highlighted this week
It will be the first time Dilma will attend Davos as a president. In another effort to reduce the malaise between the government and the rating agencies, the president is supposed to address markets to show the existing opportunities in investing in infrastructure in Brazil. All of this one week after Brazil's Central bank raised interest rates from 10% to 10,5% a year. It seems the government decided to be serious about the economy in the beginning of the electoral year.

2014 predictions and expectations

This year is definitely a big year for Brazil. The country will host the World Cup after 54 years, there is a presidential election coming and a lot of expectations on whether the last year protests are going to repeat or not. I wouldn't say there is a turmoil or volatile environment in the country right now. I'd put it more like a feeling that people are longing for change.

There is surely a notion now widespread that the country lost a lot of opportunities in attracting foreign investment when it was abundant and when Brazil was Latin America's darling. This feeling was long ago vented by more orthodox economists when president Dilma begun to fight the high interest rates. A fight which she has been defeated last year.

Now it seems that the pessimism is a consensus. We should not grow in 2014 more than the expected 2.3% that we should achieve in 2013. The government expenditures are likely to rise in an election year, bringing together the inflation rates. The reforms and changes long needed to attract investment and improve the education, judicial, political and health care systems will be once again delayed and we will be left with more and more demands for the next president or the next Dilma Rousseff's term in power.

The forecasts aren't necessarily gloom but neither they are exciting. It seems the country is running on auto pilot. I believe former president Fernando Henrique Cardoso, in an article for O Globo, captured the right needs for the country right now. It is mandatory that we increase productivity, that we establish new and strategic free trade treaties with countries that are recovering economically, such as the United States, and struggle to maintain Brazil's importance over South America. The Worker's Party ideology played a major role, says Cardoso, in delaying this pragmatic move towards market integration and foreign investment attraction.

I agree with that in general. Brazil is likely to be stuck in the current level of development and income if it doesn't invest in education and improve the tools for private investment. Ideology has been the worst enemy of our economic policy the last few years, this is true. There are somethings, though, that deserve consideration and contextualization.

Personally I believe that the Worker's Party experience through Lula's two consecutive terms as a president gave the impression that the government lost the chance to grow bigger, and to increase the national power of Brazilian companies. The main point at the time was the sense that during the crisis, the country bended once again to the financial markets (mostly responsible for the crisis itself) and increased the interest rates was the wrong move. I heard more than once from economists to politicians that the country, back in 2008, had lost a window of opportunity to slice interest rates to international levels.

This certainly changed with Dilma. The president aimed straight to the interest rates and had the feeling she won the battle. In 2011, the first year of decreases, inflation was kept down, and the financial system survived. There wasn't a huge increase in the families debt and the economy kept running. But when inflation eventually came, the government refused to take a step back and allow for a spike in interest rates. It rather took a different, non-conventional, path, decreasing taxes for specific sectors. This was the first "hubris" mistake I would say Dilma has learned the hardest way last year.

Another thing that changed during Dilma's office was the privatization. Since the privatization of state companies during the Fernando Henrique Cardoso term, there were a lot of opposition against the private initiative in Brazil. This is not at all unjustified. The first auctions of public goods privileged the price the companies would pay for the government instead of the price they would charge their customers for their services. This created a lot of aversion to this model of administration as winning companies charged higher fares for their services. Under the Lula's government some roads were auctioned following the exact opposite model (privileging customer's fares rather than the government prize) but this also had the inconvenience of making it difficult for companies to fulfill their investment commitments (specially under Brazilian bureaucracy) and was also rejected as a model.

Dilma had then the mission to change the model, offering the best of the two worlds: a fair price for the users of the conceded services and the guarantee that the investments were to be made. The word privatization was never again used, after Cardoso's term, and was substituted for concession, which should mean that the government would still have a regulating power and would be ultimately the owner of the public good. A lot of discussion was made on the return that the market required for the investments (considered in the beginning to high on the part of the government and too low on the part of the market). Another topic was the know-how requirement for the companies that would take part on the auctions. After first big airport concession in São Paulo, Brasília and Belo Horizonte, where some of the winners didn't have a lot of experience with busy and huge airports the rules of auctions were also changed.

Making a long story short, all of this contributed for the delays on the auctions. While there were some unpredictable things (considering that the government was also learning from the process), the ideology played also a major role here. If the government had been less tough in her first concern that private companies were demanding too much return for their investment, perhaps the auctions would have occurred during a time Brazil was still attracting foreign investment. The long discussion and the indefinition made the country fold when it had the best hand.

Both the notion that inflation should be a higher concern than low interest rates at all costs, and that there is a serious need to make the private concessions happen are in the speech of Ministry of the Presidential Chief of Staff, Minister Gleisi Hoffmann today on an interview to Folha de S. Paulo.

What to expect, then, from this very busy year? I believe there will be some building up of the Brazilian stock markets (though this is more a hope than a prediction) after the tragedy of 2013 and hopefully the World Cup will happen without major problems, but not without protests (there is a big one already scheduled for january 25th, called "No World Cup"). The doubt is over the presidential election and the next year. If the elections were today, Dilma would win. The big question in this case would be whether she would be committed more to an ideological administration than to the pragmatism that I believe is needed right now for the country.

The general tone around Dilma Rousseff

Nobody yet knows at what extent this year’s protests will have an effect on the next year’s presidential elections. There were those who said it would impede Dilma from being reelected and I certainly believe it was one thing that gave Eduardo Campos and the its party the PSB the final push towards moving out of the government and launching a presidential candidacy for president.

One thing is for sure, the tone of the press around Dilma could certainly be one indicator that preceded the protests. Initially the press was very positive around Dilma. The president got compliments from O Estado de S. Paulo in her first interview. Dilma was somewhat protected by the press during her first year as a president, when she had to cut six ministers accused of corruption.

The honeymoon started to end throughout the second year and definitely ended in the end beginning of this year, when it became clear that the country’s economy stability had been thrown away by the president, in the name of maintaining (artificially) the unemployment low and the president’s popularity high. The main indicator that this was the case was the lost of the grip in inflation, that obliged Dilma to push back one of her main objectives in the economic policy (of bringing the Brazilian interest rates to international levels).

Today, Ricardo Noblat, columnist of O Globo, elevates even more the tone against the president, siding her with two other Brazilian contradictions already unmasked: the former senator Demóstenes Torres (that was a symbol of honesty until he was linked with Carlos Cachoeira, a criminal that run illegal gambling business across the Brazil’s center-west region) and Eike Batista (a Brazilian billionaire, featured as one of the richest men in the world, and now facing bankruptcy). Noblat says Dilma’s contradiction is her fame as a tough manager, highly promoted by Lula. Since none of the big infrastructure improvements were launched due to a lack of managerial and political abilities, Noblat says it is a big contradiction that Dilma still has a chance of being elected for a second term.

This certainly gives another glimpse of what will be the general tone against the president next year, and again can also indicate that the amount of effort, and money, that PT will have to spend for this reelection will be much more than expected two years ago.

Oil and beagles

As predicted, the pre-salt oil auction had just one proposal, from a group headed by Petrobras. The other companies are the Chinese CNPC and Cnook, the anglo-dutch Shell and the French company Total. As Folha de S. Paulo revealed today the major companies ended up all together in the same group and that inhibited other competitors.

Despite lack of bids in the auction, president Dilma celebrated the result and rebuffed the critic to the model that puts a lot of responsibility on Petrobras (that is currently with a constrained budget). According to the president, the model has the merit of guaranteeing that 85% of the revenue from Libra oilfield will remain with the Brazilian state (which has 51% of Petrobras voting shares). The government also announced it will be with watching closely the oil exploration in the pre-salt, after O Globo denounced the subject was not covered by the auction summon.

Beagles

Enough with oil. I would like to comment a piece of news that is trending in the social media among Brazilian users. It’s the invasion of a research laboratory last Friday by a group of animal rights activists. They removed 178 beagles from the institution at dawn on Friday, saying they were victims of maltreatment.

Immediately after the news broke, on the weekend, hundreds of animal lovers shared their thoughts on the cruelty with animals. The scientific community responded saying there are few alternatives for research in some cases and condemned the invasion. Today O Globo says the federal deputy Ricardo Tripoli is holding a couple of beagles in his house and is advising the other 15 to 20 members of the group on legal matters. They will be indicted for the invasion of the laboratory. The police is also investigating the complaint of animal maltreatment.

Folha de S. Paulo, on the other hand is reporting that a beagle dog breeder in São Paulo, that the activists think is the provider of the laboratory’s dogs is in constant fear of having his own property invaded. He has already hired private security to prevent possible protests.

The subject is trending in social networks and generating heated discussions in each post favorable or contrary to the activists. In my point of view, invading a private property is not the way to deal with the subject. The activists themselves told they had inside information about the abuses. The best way then would be to proceed with the formal criminal complaints.

Even though I’m obviously contrary to animal maltreatment I also support experiments in animals, when there are no other alternatives. I mean, if that is what it takes to develop medicine that will save human lives, than it’s all right with me. Humankind has been killing and using animals for survival purposes since ancient times, and that is not likely to change soon.

Economic stability as a big issue on next year's presidential elections

The pre-salt auction has again gained the main pages of Brazilian newspapers today, but I’ll leave the subject for tomorrow’s post. For now, it’s suffice to say that there are occurring some protests and that according to Folha de S. Paulo and Valor Econômico, this probably could be the first and last auction in which Petrobras will be obliged to participate with at least 30% of participation in each area. As mentioned in a previous post in this blog, the state controlled oil company is short on cash, crippled by the government’s policy.

What I would like to call attention to is the interview of Eduardo Giannetti, economic advisor of Marina Silva to Folha, saying that she would stand for a lower state presence in the economy. It does not mean that she will take the liberal path, but probably that she would be more market friendly.

The interview is also another way of saying that the economy is going to be a big topic in next year presidential election. Giannetti praised the last term of Fernando Henrique Cardoso as a president (1999-2002) and the first term of Lula (2003-2006). After that the macroeconomic tripod (fiscal responsibility, inflation control and floating currency) was somewhat abandoned, he said.

Petrobras and the inflation

Expected to be one of the biggest players on the Libra oilfield auction that will take place on Monday, Petrobras is in a difficult position. The state controlled company has been crippled by the government interventions in its management -- from having to invest in areas that are not of its core interest, as ethanol, for example, to being impeded to raise gasoline prices because of the authorities fear of inflation. 

Petrobras is also in a tough position because of the new rules for oil exploration in the pre-salt area. The company is legally obliged to have a minimum share of 30% in all the fields. Since there are a lot of commitments still to be made, analists thing this will slow down the investment on future fields.

For this reason the government is cooking a new legislation to give some fiscal relief to Petrobras, according to Folha de S. Paulo. The company will probably not be taxed for the profits obtained from its foreign subsidiaries in the rent for equipment destined to the oil development in Brazil. There has been also some talk about another gasoline price increase to be allowed this year, but this is stil to be confirmed. 

Introductions

For eight years, I worked at some of the most important Brazilian newspapers, writing business stories. Now, because of a scholarship from Instituto Ling to study a Master in Communication Course in IE School of Communication, in Madrid, I went back to being solely a reader of Brazil’s media.

Since I never liked to read the news without discussing, I decided to open up this blog, sharing some comments on what is on the main news in Brazil. I invite all visitors to join the conversation, post their comments and suggest themes for discussion on this page.

In this brief introduction, I would like to suggest some basic readings to understand Brazil in some depth. There are four classic books that explain the political, cultural and economic history of Brazil that I think give some basics about the country.

The first one of them would be "Roots of Brazil", from Sergio Buarque de Holanda, a Brazilian historian that happens to be the father of the famous Brazilian singer Chico Buarque de Holanda. Here you’ll find some important insights about the difference of the Portuguese and Spanish colonization in America, crucial to understand the differences in the region and also why Brazil has remained an united country while Spanish colonies divided into multiple countries. One of the reasons being the Portuguese directive of miscegenation, since the men were encouraged to marry Indians and their sons were recognized as Portuguese.

The other precious book to give some ground on Brazil is from Caio Prado Junior, called “Formation of contemporary Brazil”, with some more geographical analysis. The author explains, among other things, the difficulty of building ports on Brazil’s shallow shore and the determination of the gaucho culture on the south because of the wild cattle that started to appear there after the colonization, this book is crucial for those who are more interested in economic history.

From one of the most prominent Marxist authors in Brazil, Celso Furtado, we have the book called “The economic growth of Brazil”, another book with a big economic basis that has a great analysis of the importance of coffee production in the beginning of the 20th century. Finally, for those that would like to have some cultural background there is “The Brazilian People” from anthropologist, and a famous defender of the Indian population, Darcy Ribeiro.