Now it is Brazil’s turn. Much is being made of Brazilian threats of huge fines and prison sentences against executives of Chevron, an American oil company, after a small leak of oil off the coast. Critics have taken to complaining about Brazil’s expensive welfare state and dependence on commodity exports. Its torpid economy ground to a halt in the middle of last year. Admittedly officials say that they deliberately cooled the economy, to drive down an overvalued currency and astronomic interest rates. Yet their expectation of growth of 4.5% this year and a bit more next looks implausible.

In this section
The endangered public company
The Greek run
Spring can come again
Rethink the reset
»The Brazil backlash
Counter revolution
Reprints
Related topics
Business
Emerging markets
Brazil
Does Brazil deserve the backlash? Some of the criticism is misplaced or inaccurate. Unemployment is low, wages rising and foreign direct investment pouring in ($67 billion in 2011, a record). Most economists reckon that Brazil can continue to grow at around 3.5% without triggering higher inflation. Many countries would love to have Brazil’s highly productive farms and its big new oilfields, two of the sources of its commodity dependence. Compared with Russia, China and even India, Brazil more clearly enjoys the rule of law. Its welfare state represents a defensible political choice for a country of yawning inequalities. Above all, Brazil’s strength is a democracy that has yielded broad political continuity and economic stability.

Even so, its government must start to confront the country’s weaknesses. That 3.5% growth rate may seem lavish by Western standards, but it is below both what Brazil needs to be to continue recent social gains—and what it could be. Some of the sources of the faster growth of recent years may now be exhausting themselves. These included a bonus from the stabilisation, opening and reform of the economy in the 1990s, and a huge lift in the country’s terms of trade, thanks to China’s appetite for commodities. Henceforth Brazil’s labour force will not grow as fast, even as the pension bill rises. Domestic credit cannot go on increasing at today’s rate, as households are starting to struggle with debt (see article).

At the same time, Brazil has turned itself into a very expensive place to do business. The government blames the currency for this; it has gone to great lengths to drive its value down. But the government itself is responsible for much of the “Brazil cost”. Not only has the tax burden risen from 22% of GDP in 1988 to 36% today, but the tax system is absurdly complex. Most of the money goes on over-generous pensions and wastefully big government, rather than transfers to the poor.

The minimum wage is now three times that of Indonesia or Vietnam (no wonder manufacturers are struggling). Businesses face pointless regulation. Lack of investment means freight costs are high. And the state has started messing around with business: a rule that 65% of equipment for the deepwater oil industry must be produced at home guarantees that developing the new fields will be slower and costlier than it need be.

Time for another burst of reform

Dilma Rousseff, the president since January 2011, says she is starting to tackle some of these problems. She wants to eliminate the fiscal deficit, has started to cut taxes for favoured industries, has invited private investors to modernise four airports and is assailing a banking oligopoly that has helped to keep interest rates up. But the picture is uneven: her effort to drive down costs is too timid; she was responsible for the silly new protectionist oil regime; and the impression is that she is prepared to settle for growth of under 4%.

That would hurt Brazil. Investors will start looking for higher-growth markets in Latin America—Peru, say, or Colombia and soon perhaps Mexico. The poor, who supported Ms Rousseff in large numbers, will suffer most. She should treat the backlash as a warning. Brazil cannot run on autopilot.

From http://www.economist.com/node/21555583

Technorati Tags: backlash, commodity exports, dependence, economic stability, emerging markets, foreign direct investment, inequalities, oilfields, political choice, political continuity, superpowers, welfare state

On the same hand, we are going to let you with the blog posts of the week… this is a series of posts on other blogs and websites about Brazil in english. We will feature these bloggers and their work, and if you have a website or would like to have your post here, just let us know…

Eat Rio featuring a famous bar in the Chapeu Mangueira Favela in Copacabana… the favela has the presence of the police,so according to him, you must visit this place: http://eatrio.net/2012/05/great-food-in-a-favela-bar-do-david.html

RioGringa, has great insights on Brazils preparations to the big events the country is about to host… http://riogringa.typepad.com/my_weblog/2012/05/rio-plus-twenty-a-litmus-test.html

RioRealBlog, still one of the most good content filled websites about Brazil… you should not miss this post about the changes in Rio de Janeiro: http://riorealblog.com/2012/04/15/short-nights-long-days-for-rio-de-janeiro/

Recife as it is, and seen by a political science doctoral student during his research in Brazil: http://photowolff.tumblr.com/post/22836643265/the-most-violent-favela

Technorati Tags: Brazil, doctoral student, favela, favela bar, Maya Gabeira, political science, Rio de Janeiro, surfer

It is so much gas in areas such as basin Parecis in Mato Grosso and São Francisco, Minas Gerais, the gas becomes bubbles in the water, a phenomenon called exudation. At certain points, such as in small Buritizeiro in Minas Gerais, the water that gushes from the ground, with only a match lights a huge intermitent flame.

But to take advantage of all this potential, it is necessary that the government sets a new policy for the use of gas and that the ANP, which has invested R$ 120 million per year in the study of sedimentary basins, starts re-doing the bidding rounds, stalled since 2008, with the discovery of the pre-salt area.
Experts believe that with more raw materials and new techniques of exploration, the domestic industry can gain competitiveness. And today, the price of gas, above the world average, can converge to international levels over the next eight years, reducing by 53% the amount charged from the industry, estimates the Federation of Industries of the State of Rio de Janeiro (Firjan).
The potential is enormous. Today, 96% of the basins have not yet been explored. Geological studies by ANP indicate large reservoirs in six basins, from North to South. The director of the Institute of Electrotechnics and Energy (IEE), and former director of Petrobras Ildo Sauer goes further: for him, Brazil is on the verge of an energy revolution. According to the expert, estimates of the Department of Energy realize that Brazil could have reserves of 7 trillion cubic meters, compared to 395 billion cubic meters today. The volume is equivalent to four million barrels of oil per day.
- It’s a real revolution. With the development of technology in production, it will reduce costs and lower environmental impacts. But the government has to draw policies – highlights Sauer.

Transition to a clean matrix
Marco Tavares, from the consultancy Gas Energy says gas exploration in the basins was given a new dimension with the discovery of a new technique, by Americans, which makes the fields economically viable:
- So the U.S., which imported 20% of its gas consumption, now produce 100% of their demand. There, the market is 30 times greater than Brazil. The gas is cleaner than other fuels and can leverage the industrial development of the country.
Among the environmentalists, the gas non-associated to oil is also seen as an option to coal, diesel and fuel oil, for having fewer environmental impacts. According to Ricardo Baitelo, coordinator of the Renewable Energy Campaign for Greenpeace, the gas is the link between low-emission energy, like wind and renewable, and more pollutants:
- The gas has an important role, which is to serve the current scenario of transition to a clean energy matrix. Therefore, it is essential that transition, which will last until 2050. If you compare the emissions of the gas with fuel oil, the emission drops by half.
Rodolfo Landim, president of YXC oil and Mare Investments, notes that the gas appears as the best option compared to other energy sources shrouded in controversy. On the other hand, Landim highlights the importance of Brazil to return to the auctions:
- The market reacts to government decisions. We see so many problems from the adoption of hydropower, nuclear power plants are a taboo, coal has a number of environmental problems and solar and wind do not generate enough power. And Brazil will continue to grow. Why not use the gas to produce diesel, the most consumed in the country?
In addition to auctions, research is necessary. Sauer points out that the gas in San Francisco and Rio Solimoes is in a different tank (called shale) of the then known:
- We are studying the technology, costs and environmental impact to produce this gas. The U.S. has a similar gas, the so-called shale gas, for which they have developed a technology that reduces costs .

The abundance of gas has even been mentioned in 1956 by writer Guimaraes Rosa in his walks through the backlands. In “Grande Sertão Veredas” there is a clear reference in the region of Minas Gerais. “In one place on the hillside, springs from the ground a sulfur vapor with astounding noise, cattle runs from there, for fear.”

From http://oglobo.globo.com/economia/um-brasil-cheio-de-gas-4766632

Technorati Tags: energy frontier, mato grosso, minas gerais, national petroleum, natural gas, raw materials, sedimentary basins, self sufficiency

To start off, this is possibly the most organized list of brazilian corruption scandals ever seen. Built by the brazilian Veja magazine, the list goes back till 1980s political scandals that shocked the country. In Portuguese.
http://veja.abril.com.br/infograficos/rede-escandalos/rede-escandalos.shtml

Expats Cutting Ties with the US

Colonial Conservatoria and it´s slave history
We recently visited the tiny mountain village of Conservatoria in southwest Rio state. Previously coffee country – now catlle ranches. Huge fazendas and a growing tourist economy.

Wordless Wednesday: Brasilia Stadium 2014
This is what the FIFA soccer stadium in Brasilia is supposed to look like by the time the World Cup begins in 2014.

Random Stuff to think about…
I believe that the lack of empathy and understanding from outsiders remains a big obstacle to long-term improvement of life in the favelas.

One Law For The Rich….
I usually use this blog to plug my own stories but I am making an exception today for this brilliant piece of reporting about how rich Brazilians are destroying the environment to build themselves palatial homes. Some of the most powerful and influential people in Brazil, film maker Bruno Barreto and the Marinho family that run the Globo media empire among them, have consistently flouted the law by cutting down forests, diverting streams, and disturbing rare habitats.

When the Beach Closes
Dusk on the beach and the waft of Ganga hangs pregnant. The curve of the shore allows a lordly scope and for that 10 minutes as the sun goes down the back of the towers that fortify the beach gleam gold. A huge leaping cumulous whale floats low in the sky, its underbelly turned purpley pink. You wait for it to submerge but it doesn’t. It’s all wrong though. In books the sun should disappear over the horizon where you can see it. But like much about Recife, nothing goes how you think it should.

An interview with Brazilian Bubble, by Rachel Glickhouse
We were very honored to be interviewed by Rachel Glickhouse from RioGringa.com last week (the full Q&A session can be read here). As we’ve never done this before, we believe the outcome was very positive.

http://www.riogringa.com/
You can read hundreds of news stories and dozens of books about Brazil’s global rise as an economic powerhouse, but I’ve read few books that come close to putting in such sharp perspective how far the country has come as with Saga brasileira, by one of Brazil’s most famous economy reporters, Miriam Leitão. There’s a possibility you have opinions on Leitão, but either way, it’s worth putting them aside for the sake of the book. While I think it could potentially be interesting for Brazilians, especially for econ nerds and those who were born after the worst of the economic crises, it may not be that much of a revelation. But for foreigners who work with Brazil, live in Brazil, or have any sort of interest or stake in Brazil, you really should read this book.

Technorati Tags: Updates about Brazil from other websites

For Brazilian bubble: http://brazilianbubble.com/an-interview-with-brazilian-bubble-by-riogringa-coms-rachel-glickhouse/
For RioGringa: http://www.riogringa.com/

Below is the story:

An interview with Brazilian Bubble, by Rachel Glickhouse
By Brazilian Bubble On April 21, 2012 · 7 Comments

We were very honored to be interviewed by Rachel Glickhouse from RioGringa.com last week (the full Q&A session can be read here). As we’ve never done this before, we believe the outcome was very positive.

Find below the highlights…

RG: What’s the idea behind the blog, and why did you decide to start it? What kind of feedback have you received?

BB: The blog started as a joke between friends: some of us thought Brazil was experiencing a real estate bubble and some didn’t. So we bought the domain for fun and started re-posting cool articles about Brazil from other websites. All in English, as we didn’t want to limit ourselves to the Brazilian border. It started with real estate, but then it went to stocks, economy, culture…pretty much a mix. It’s important to not take life too seriously. Serious subjects like business and finance should also entertain the readers, so we like to treat everything with a flair of humor. The truth is that we love our Brazil, and we criticize things that most Brazilians do: high costs, bureaucracy, politics, corruption. But at the end of the day, our focus is business and finance, and we feel our site plays in a niche market not explored by others. The feedback we get from our audience is the best possible… we receive emails from avid readers (including high-profile economists) who tell us that they love the site and all. That is good fuel to keep us going, despite a couple of naysayers.

RG: What’s your outlook in terms of high costs of living and real estate in Brazil?

BB: Our thought is that there is in fact a real estate bubble in Brazil, but it doesn’t mean it will pop tomorrow. As long as there is credit flowing into the system, it can keep going for a while. But the truth is that real estate prices in Brazil have been increasing at a faster pace than inflation for about 50 months in a row. And as the economist Robert Shiller says, although there are moments of euphoria and depression in any housing market, in the long run prices adjust to inflation. Hence, in our opinion, a price correction will take place; it can take 6 months, or it can take 5 years, who knows. Regarding high costs in Brazil, we always discuss this at the blog. It gets more expensive by the day, but Brazilians seem to be willing to pay the price, as long as they can pay for the monthly installments. A friend told me recently that her housemaid makes about R$650 a month and, surprisingly, she was approved for a motorcycle loan that has monthly payments of R$270! Isn’t that crazy?

RG: You’ve written quite a bit about the BNDES. What’s your take on it, and is this kind of lending sustainable in the long term?

BB: BNDES is a tool used by the government to lend to businesses and get the economy going…fine. In theory, that role would have been better played by the private sector, which is more efficient, as you don’t get the public machine to play politics. But the major private banks in Brazil won’t lend…they are too lazy to take risks as long as they keep making money out of high interest rates. They simply have no incentive to lend more. So that’s why the government in Brazil plays a crucial role in lending; just ask Guido Mantega how mad he is at the private banks because they resist lowering their lending rates. So, for now, BNDES, Caixa and Banco do Brasil should keep playing that role. Our criticism comes when politics are at play. Why keep lending to Odebrecht, OGX, and Petrobras at less than 5 percent, and not to millions of small businesses? Why keep making the same guys rich over and over again, when there are so many savvy entrepreneurs in Brazil that need that extra push? Brazilians are incredibly creative, but there is no money for them to explore these possibilities. I think it is easy for Eike Batista to write a book saying how Brazilian entrepreneurs could be like him, but no entrepreneur has the leverage in the government that he has. An average entrepreneur doesn’t play politics – he is just worried about growing his business, and for that he needs to borrow at low rates. Is there a “Bolsa Familia” for that?

RG: There’s a lot of promise in the oil and gas sector but it seems there’s going to be a lot of delays in terms of exploiting the pre-salt reserves. How long will it take for Brazil to become a global oil power?

BB: Brazil is already an oil power: it is self-sufficient. How many countries can afford to have that? It is just that (again) the government is in the middle of it, which makes the whole system inefficient. And the government is also dictating how it wants Petrobras to explore its reserves. It gets very hard to get the right execution, efficiency and costs if you have the public machine dictating how to do your job. The market forces cease to exist, costs go up, and delays become a common trend. The government needs to get out of the way and let Petrobras run the show. It is great company but its biggest shareholder is the government. I think Brazil will have its challenges, but if it manages the process well, it can get it right. Only time will tell. It needs to be a private initiative, with some help from the government, not the opposite. It is that famous question: does Brazil wants be more like Norway or Nigeria? One of them is totally market-driven, super efficient, invests wisely, and puts its oil revenue in a well-managed sovereign fund. The second, Nigeria, needless to say anything. Same for Venezuela.

RG: Productivity seems to be one of the biggest economic hurdles in Brazil that isn’t discussed as often (though you guys do, of course). What do you think keeps productivity low in comparison to other developing markets?

BB: We’ve talked a lot about this; it is a sensitive issue to us. Believe it or not, over the past 30 years, worker productivity in the Brazilian manufacturing industry fell 15 percent. When we read these kinds of headlines it makes us wonder what the hell happened to our Brazil… it almost seems like a group of people that should be worried about this were sleeping at their jobs for 30 freakin’ years. While these guys were sleeping, China’s productivity rates went up 808 percent in that same period. The main issue, besides the urgent need for investments in education and infrastructure, is that Brazil is a closed country. If you don’t open the country, the local companies will have no incentives to invest, educate the workforce, trim costs, and make better products. Competition is everything: it is good for consumers, it is good for companies, it is good for the market. Just see the Americans – they have access to good quality products at low prices, while in Brazil is the complete opposite. Brazil needs to be more open, but it seems to be doing the exact opposite by taxing every import. Sincerely, that’s a huge turn off.

RG: Taxes and bureaucracy are among the most talked about economic hurdles in Brazil. Which realistic steps could be taken to alleviate Brazil’s tax burden?

BB: Shrink the government and fight corruption…but of course it won’t happen in our lifetimes. Brazil needs reforms, but there is not a lot of people in the government with the energy and the will to do that. They will prefer to focus their efforts on making the most for their own self-interests, period.

Technorati Tags: blog, Brazil, brazilians, corruption, economy culture, niche market, real estate bubble

The Botafogo bay front and Copacabana when it was just a resort area from the summit of Pão de Açucar in 1919. Harriet Chalmers Adams was the photographer

Looking Down on Urca in the 1950′s

Prudente De Morais at the corner of Rua Farme De Amoedo in 1974

Leblon beach as photographed by T.F. Page Sr. in 1953

For more pictures: http://www.eayearbooks.com/rio_images.htm
In most years a Escola Americana Carioca Yearbook was produced. A yearbook as defined in the dictionary is usually a bound publication recording the year’s events and typically containing photographs of students and faculty. They are documents of an earlier time. This website endeavors to display some of those EAYEARBOOKS.

Technorati Tags: old and new pictures of Rio de Janeiro by the American School of Rio

The Nordic pre-salt adventurers in Rio are divided between those dedicated to the production of oil itself and the ones dealing with the supply of products and services of high technology. Both groups are supported by Innovation Norway, the outer arm of the Norwegian government in Brazil, which help professionals adapt. Outside the language, the barriers are not few. “The amount of verb tenses and conjugations of the Portuguese is amazing,” says in impeccable English the geologist Orjan Birkeland, 52, vice president for exploration of the Norwegian state company Statoil, one of the world giants in the industry. In the booklet Doing Business in Brazil, the Norwegians receive advice on how to get away with the proverbial slowness, the fierce protectionism and the bureaucratic mazes of Brazilian authorities. These include, of course, the specific barriers concerning the participation of foreigners in the Brazilian oil industry. The Norwegian Granli Thomas, 31, who concludes a Ph.D. precisely on acclimatization to the tropics, and even draws a recurring diagnosis of professional contacts in Brazil. In his thesis, he reverberates what was already said before about Brazil by dozens of other foreign observers: “The Brazilians are based more on interpersonal trust, than trust in the institutions, they have great appreciation for hierarchy and rarely make direct criticism. A yes can mean a no. ”

The first major company to reach Rio, was the Norwegian Statoil in 2001. “The interest of Norway in Brazil came down to the beach and Carnival,” recalls Helle Klem, 59, for seven months in charge of the Consulate General in Rio de Janeiro. Recent data show that beach and Carnival are not heading the list of attractions in Brazil anymore. After the United States, the Brazilian economy has become the largest recipient of Norwegian money and resources are almost invested all in oil.
According to a recent survey by the Federation of Industries of the State of Rio de Janeiro (Firjan), last year alone the direct investment of Norwegian companies in Rio de Janeiro reached 577 million. That volume of investment in Rio leaves behind only the Norwegians investments in Singapore, whose companies were also strongly attracted by the pre-salt exploration.
With a relevant difference: Unlike in Asia, most Norwegians come here to stay – preferably well installed near the beaches of Ipanema and Leblon.

The wave of Norse who arrived in Rio belong to the cream of the prolific Norwegian oil industry – which represents one quarter of the country’s GDP. Although new to Brazil, the Norwegians already stand out as suppliers of high-tech equipment to Petrobras. They produce oil tankers, submarines radars and giant cranes used to lift vessels. A lively group of eighty students from the Norwegian University of Science and Technology arrived about a month in Rio de
January. Accustomed to traveling the world in search of opportunities, boys and girls are left to pack the most typical attractions, waves and sunbathing that mark their skin so white that no ultraviolet filter can adequately protect. They give their own contribution to the rich list of oddities on the beaches by skillfully balancing on skis on wheels, a nostalgic solution of the adventurous global Norwegians in areas without snow and that was popularized – in Norway itself in their short summer. The student of marine engineering Bergsronning Erlend, 24, is another Norwegian who believes he has come to Rio de Janeiro to stay: “For me it is a very good feeling of being in an unfamiliar place with so many things yet to explore.”

From Revista Veja, 16th of april 2012

Technorati Tags: brazilian authorities, brazilian coast, common interests, doing business in brazil, natural wealth, norwegian companies, norwegians in Brazil, norwegians in Rio, oil exploration, Rio de Janeiro

Over lunch recently, a high-ranking executive gave me a strikingly obvious bit of off-the-record advice: “There might be a day when the Chinese stop building so much with steel, but there will not come a day when the Chinese stop eating.”

China is the most important consumer of Brazilian goods, and that is not likely to change anytime soon. At the moment, Brazil’s #1 export is iron ore, #2 is oil, and #3 is soya. But economists argue China needs to shift from a construction-heavy model to one based more around consumption. It’s also clear that Brazil’s potential to develop its arable land is enormous, and that the country could become one of the world’s breadbaskets.

Earlier this month, I reported on some more bits of good news for the agricultural sector in this piece in the Financial Times.

From: http://frombrazil.blogfolha.uol.com.br/2012/04/17/brazil-investment-advice-agriculture/

Technorati Tags: agricultural sector, agriculture, Brazil, china, consumption, investment advice, money

The data contained in the document from the Department of Supply Chain of Oil and Gas of the BNDES, created six months ago to help develop the oil industry in the Country “The local content policy will require that whoever wins contracts will have to install new plant here. The companies are coming, there are several talking to us, “says the head of the department, Ricardo Cunha.

Initiatives to increase production and overcome the bottlenecks in the industry were boosted after the entry of Graça Foster at the helm of Petrobras and the contracting in Brazil of over 26 drilling rigs for the pre-salt, both in February. The goals are to attract new businesses, expand funding and graduate Petrobras technicians using contracts as bait. A delay in the development of the chain would delay the operation of the pre-salt or result in the importation of equipment and services.

Technorati Tags: drilling rigs, exploration and production, local content, lots of money, offshore exploration, skilled manpower, supply chain

“I was impressed. She told me what are the problems and the objectives of this superpower that is Brazil,” said the filmmaker.

Lee said that the film “Go Brazil Go!” will portray how Brazil has developed in recent years and he said that he should come to the country six or seven more times until you completion of the documentary.

“It’s a documentary about the new Brazil, to find what things have happened to make Brazil a superpower. We will talk to people in the government, arts, sports, and we can not forget the two world events, the World Cup and the Olympics when the eyes of the world will be facing Brazil.”

Sharon Stone is also in Brazil. The Hollywood actress is in the country to attend the amfAR event, an international foundation to support research to advance the cure of AIDS. On Tuesday (26) the actress was dining at the Café de La Musique in Sao Paulo.

Other international stars were also at the party, Grace Jones and Debbie Harry of the Blondie group. The trio are staying at the Hotel Fasano.

Technorati Tags: debbie harry, dilma rousseff, eyes of the world, filmmaker lee, filmmaker spike lee, grace jones, hollywood actress, international foundation, international stars, new brazil, sharon stone