New Yorker on Brazil

My favorite magazine has written about my favorite subject! But though it's 14 pages long, the content perhaps isn't that interesting. This is in part because much of the content is basic information that one can find anywhere - explanations of what Bolsa Família is, the basic background of Lula and Dilma... all things one would know if they follow Brazil at all (and not necessarily closely).

But what is interesting is how the different politicians interviewed (the main ones are President Dilma, ex-President Lula, and ex-ex-President Fernando Enrique Cardoso). Both Dilma and Cardoso came off as thoughtful, dignified politicians. Lula, on the other hand, comes off as a man desperate to preserve his legacy. After impressing the journalist by personally serving coffee (rather than having a maid do it), he proceeds to move his chair in close and repeatedly jab his index finger into his interlocutor's leg while stressing how stupid people that are not Lula are.

The two most interesting topics he chose to approach were the legacy of the administration prior to his (that is, Fernando Henrique Cardoso's presidency) and his international diplomacy, including Brazil's nuclear deal with Iran, co-brokered with Turkey. Here's what he says about Cardoso:

"If we had continued the Cardoso policies, Brazil would be bankrupt. [...] Brazil worked out only because we changed his policies. The only thing we kept was fiscal responsibility. One thing - that's all. What happened after conquering inflation? We were very active in international policies. Brazil for many years had no policy for investment. No ability to generate jobs. No policies to redistribute wealth."

This is shameful credit-taking and up-is-down rhetoric. Lula knows that in reality he is vulnerable to the charge that he benefitted enormously from the progress his predecessor made, but instead of acknowledging it he doubles down on his critics. But Lula substantially maintained the policies he inherited from Cardoso. His famous Bolsa Familia was made by renaming a previous policy called Bolsa Escola. Though Lula increased the investment, it's still a patent lie that Brazil had "no policies to redistribute wealth". As for Brazil's "ability to generate jobs", what exactly did Lula do to generate jobs? Why should anyone believe that job creation in recent years in Brazil has been due to Lula, and not, say, to China's phenomenal growth, which has buoyed Brazil's export economy? You won't find an answer in the interview, or anywhere else that I know of. Credit where credit is not due.

As for the Iran deal:

"I traveled to Iran, against the wishes and advice of many friends and presidents, and what happened? They signed hte statement on nuclear proliferation, just as the Security Council wanted them to. But to my surprise they decided to keep sanctions, as a punishment for Iran. Why? Because they weren't the ones to get the deal through? That was the first time I had the feeling that jealousy in politics is a very delicate matter."

This is a preposterous version of events. Iran did not sign a meaningful statement on nuclear proliferation. I'm not going to try to explain what really happened in this diplomatic snafu (you can find a good write up here on Slate), but we can sum up pretty easily - Brazil either got taken for a ride by the Iranians or knowingly tried to push off a seriously deficient agreement with Iran as a breakthrough. In the lead up, there was a lot of press about how this showed that newly powerful players could make a huge diplomatic difference and help emerge from the same old stalemate, so it must have felt pretty bad for Brazilians when everyone started pointing out that the agreement was, at the very best, worthless. And instead of trying to learn a lesson from this, a year and a half later Lula is musing that he is not being lauded for this disaster because other heads of state are too petty to recognize his greatness. This is pathetic.

To be clear, I'm not anti-Lula, but I think it's worth being very skeptical of his view of his own presidency. He has maintained a high approval rating as much by very effectively figuring out how to take credit for everything good and blame others for everything else as much as by any genius for policy.

Another thing that stood out, or rather, utterly baffled me in the article:

While I was in Brasilia, I spoke with an economist named Ricardo Paes de Barros, a Ph.D. from the University of Chicago. He is the undersecretary of a new government agency that is charged with long-term planning, called the Secretariat for Strategic Affairs. He was organizing a workshop, at which the President was scheduled to give the opening remarks, on the politics of the new Brazilian middle class. "This new middle class, they talk a lot about meritocracy," he said, disapprovingly. "They forget that a lot of their success was based on solidarity. Suddenly, now I'm not so concerned about inequality. They start talking about merit. Wow, it's a big problem. People are very concerned. Very, very concerned. It will have very important political implication."

In fact, this is so deeply perplexing to me that I'm going to give it some days to sink in and talk about it more another day.

"Brazilians are rock stars in Miami right now"

The Financial Times reports that the South Florida real estate market, obliterated in 2008, is seeing a rebound due to the influx of rich Brazilians. Brazilians do love Miami. But will it last? My favorite part (because I like disaster) is the last paragraph where the university professor notes that a change in the exchange rate could send the market tumbling again as Brazilian cash in.

The Chevron Oil Spill

Reuters published an interesting article yesterday about a recent 2,400 barrel Brazilian oil spill (by contained) caused by the US company Chevron. For those of us that tend to be skeptical that it will be so easy for Brazil to obtain "developed-country status" within the next two decades, it supplies some interesting information. While the proximate cause was errors in Chevron's calculations of pressure and rock strength, the article argues that the ultimate cause is the vast difficulty involved in tapping subsalt oil supplies.

Though the Brazilian government has tightened restrictions following the 2010 BP disaster in the Gulf of Mexico, the fact that Brazil is counting so heavily on subsalt oil makes it likely that risky exploration will continue. Brazil has been making good progress since the end of hyper-inflation in the mid 1990s, but the country's political culture makes it difficult to take on some of its most glaring problems, such as education and health. Recent oil discoveries represented a way to take them on without making large sacrifices elsewhere, and the allure of billions to spend on social issues without cutting out other spending on voters is more than any government can resist. So don't expect Brazil to willingly slow down it's own oil development, given the huge payoff leaders can expect.

At the same time, even when moving forward as fast as possible, Brazil can expect to encounter further difficulties. As quoted in the article:

"This spill shows that there is much that we still don't know," said Segen Estefan, a professor of undersea engineering at the Federal University of Rio de Janeiro.

"We have to recognize that we really don't fully understand the risks and need to do much more to not only make drilling safer but find ways to clean up spills. As you go deeper everything gets more difficult."

With things getting further behind schedule and many becoming impatient with the delay in payoff after the 2009 announcements of oil, it seems likely that the pressure to deliver results soon will risk bigger disasters.

Roubini on Brazil

The first time I sat down last year to try to learn something about now-President Dilma, one thing in particular leapt out at me. It was a brief passage that I found in Bloomberg (this was over a year ago, so I don't have the link) to the effect of this:

Reporter: Can Brazil keep growing at this fast pace without major structural reform?
Dilma, looking irritated at someone questioning Brazil's economy: Is Brazil growing now?
Reporter: Yes...
Dilma: Then it can grow.

Obviously, what struck me about it was the incredible stupidity of the presidential candidate (who is an economist), akin to someone in airplane that's out of fuel claiming she can fly for eternity. Dilma has growing on me since that offensively idiotic statement, especially with the ministerial bloodbath that is continually happening. But the issue of structure reform hasn't gone away, and as far as I can tell, probably won't in my lifetime.

Nouriel Roubini made headlines in Brazil today with skepticism about Brazil's future, noting that the few good years that Brazil has been having until now are far from a guarantee of future success. The main weaknesses that he pointed to in Brazil's economy:

-Dependence on commodities - as soon as commodity prices fall globally, Brazil will be in trouble.
-Lack of investment - despite various investment programs (PAC 1 and 2, investments for the World Cup and Olympics), Brazil is simply not capable of investing what it needs to guarantee future growth. This includes mainly education and infrastructure, which have the power to seriously limit progress if they stay the way they are.

On the plus side, all is well as far as energy, and at least the country's financial system isn't capable of destroying the economy for it's own gain.

In the end, pretty typical stuff that you'll read over and over again researching the Brazilian economy. Views on Brazil seem to have cooled a bit over the last year.