Brazil
Two recent stories in US newspapers highlight the huge per-capita spending of Brazilians in the US. While one piece focuses on tourists in NY and retail sales, the other focuses on Florida and also mentions Brazilians buying up real estate. The big point: the taxation making imports so expensive in Brazil as to justify, in some cases, the airfare and hotel expenses.
The Financial Times’ Beyond Brics blog has posted an article by PUC-Rio professor Marcio Garcia, and it’s a very sober look at what this country has been through in the years since it was included in the “BRICs” by Jim O’Neill. Much more importantly, however, is the warning about what we must still do if we are to succeed in the future.
Brazil’s efforts to influence its Latin America neighbors are not always well-received. That by itself isn’t a problem, at least not beyond the stated and unstated strategies and goals behind such initiatives. Reaction will always occur as one group or another feels threatened/ left behind. However, it is important to keep an eye on the trend. Much has been said about Brazil having “lessons to teach” other LatAm countries, and we have been skeptical given increased government spending and intervention in the economy – alongside rising inflation. Brazil has done well, no doubt, but let’s keep our minds open to our own problems before we try to “export solutions”.
Three recent stories with one theme in common: the rise of the middle class and the availability of credit. Looking at banks or diversified financials top-down is not our specialty and, as we’ve said in our Q3 2011 report, “is only of interest to us in order to gauge an important part of the risks”. Keeping this in mind, one of the articles is bullish and points to recent reports showing that credit here has actually accelerated in September, despite talks of banks – and financial authorities – reining in loan growth. The other two articles are also bullish but still reflect, in a way, the difficulties of sustaining such growth.
Two very public comments by high-level Brazilian authorities regarding currency wars: one by the highest possible authority – our President herself, in an editorial piece in the Financial Times. Another by our finance minister, Guido Mantega. Regardless of what one thinks about the global financial crisis and the state of macroeconomic policies each country should follow amidst the turmoil, it’s hard to see what diplomatic, political or practical gains could be achieved through this kind of rhetoric via the global press vehicles.
This article was just published in today’s Financial Times: “Brazil hosts a homecoming”. A few expats coming back do not necessarily a trend make, but we’d say that 1) it’d be nice to see the reversal of the brain drain of the last few decades, and 2) it makes sense in a “Brazil is the new China” way given the number of CVs by foreigners seeking to work in Brazil that firms like ours have been receiving in the last 1-2 years.
Brazil keeps making the news pages everywhere, nowhere more than in the Financial Times – sometimes the extra attention doesn’t translate into quality reporting. That’s not the case with recent FT articles we highlight in this post, but even so, the articles are all about things one can’t predict, control or truly get to know… So perhaps the most interesting of the recent FT stories on “Brazil”, so to speak, was a “Business Diary: Nizan Guanaes” piece highlighting one of our true geniuses in advertising.
In recent coverage of Brazilian “boom or bust” theme, some of it is well written – that’s the few we have linked to here. While not even local writers get everything right, in other articles getting better sources or digging deeper would have really made those stories better or more balanced. We have been around since 1988 and we still don’t pretend to know which precise direction Brazil is taking at any point in time. We seek to assess major risks and find that, most of the time, conservatism is best served by knowing very well the companies that go through our filters and patiently waiting for opportunities.
A Bloomberg reporter is flabbergasted by Rio’s “ski lifts” that are actually a inter-slums transportation system. Part of a larger article on the increased access to credit for people in Brazil’s lower income brackets. Nothing new, but we’d like to repeat words of caution against excessive optimism.
Two quick notes: One on the irony of Brazil’s iBovespa index dropping along with the US’s indexes after the negative S&P outlook, despite two more bullish stories about Brazil. Another on Carl Icahn’s profile in the NYT highlighting succession issues at his firm (“key-man risk”).
