Whither the Protests in Brazil

A new week, a government that is flailing around trying to come up with some response to the protests. Political parties trying to stake out some turf in the protests to shore up their power.  Where is it headed?

The rain and cold of a Brazilian winter will not help the protestors’ cause as it will show who is out on the streets in protest and who is out there to either see and be seen or to have a great time. Since Friday, President Dilma has been more present than in the protests’ first ten days. However, she remains as out of touch as ever. The idea of a Constituente Assembly she’s promulgated has drawn little support and most has led to head-scratching. Of course, such an idea will take months if not years to get organized, so most commentators see it as a way to “barge the line”, given inaction the appearance of action. As many other commentators have said, her other ideas are largely rehashes of earlier PT and Dilma pronouncements.

However, the government’s appearance in the game, even if it is out of tune with the dissatisfactions of the protest crowds and the swirl of discussion on the social media, is part of a trend that is dangerous to the protest movement.

Spanish sociologist Manuel Castells has pointed out that social media can’t necessarily translate social and political dissatisfactions into action. Ex-President Fernando Henrique Cardoso cited this point in an interview yesterday in Folha de São Paulo. But, I think they are both right and wrong.

This movement started in an unusual way. There was the straw that broke the camel’s back — the São Paulo transit fare hike. However, as sports and movie stars and international politicians don’t seem to be able to stop reminding us here in Brazil, it was never about the 20 centavos.  The dissatisfactions were so much greater and go directly to problems that have infected all the governments of Brazil.

I think there are two basic areas of dissatisfaction: moral and practical.  The moral dissatisfaction has to do with corruption in all its forms, but especially the corruption (and subsequent impunity) that enriches the political class. People have been citing constantly on Facebook in the past week an old report by Jorge Pontual that showed corrupt American politicians being convicted of their crimes and going to prison. The suggestion being that this doesn’t happen in Brazil. We’ve even gotten to the cynical point where one of the convicted Lula mensaleiros (José Genoino) is now the head of the National Assembly’s Ethics Committee. There are many other aggravating causes of this moral anger: excess billings and kickbacks on capital projects, straight ahead bribery, the attempt to undercut the already limited freedom of investigation of the Ministério Público, the PEC-37.

The practical sources of the dissatisfaction of Brazilians comes from two primary sources. First, we pay too much for everything. Prices are quickly growing out of control. The subway and bus fare increase in São Paulo, a paltry 20 centavos after 3 years of stability, was what got all this started. But, it is only one price among many that are excessive. Yesterday, i needed to replace a broken kitchen appliance that would cost from $20 – $30 in New York. I paid R$180. That’s over three times the relative cost (and the product is manufactured domestically, so there is no import duty component). We are also all fed with the tax burden of some 47% on all goods and services we purchase. Most parts of the tax are hidden at the various wholesale transaction levels, so the government can trumpet that it is lower tax rates to consumers. However, the consumers are waking up to the fact that they are paying these higher wholesale charges.

The second area of practical dissatisfaction is the lack of quality in public services, especially health and education. While this generally does not affect the middle-class, which has private health plans and sends their children to private schools, everyone understands that the system is broken and no one in authority is doing much to fix them. Instead, they are busy dividing the spoils that attach to buying ambulances that have no drivers and no hospitals to go to, or shoddily produced school materials that need to scrapped even before they are used. Yes, the bus fares were reduced back to R$3.00 as of yesterday, but the service and fleet still is in lamentable condition.

One factor about this wave of protests that is confusing traditional politicians is that it is largely leaderless. Yesterday, some of the Passe Livre leaders went to Brasilia to meet with President Dilma, but they don’t represent the large range of issues that protestors want reformed. In fact, true leaders have not yet emerged from this movement. They will, but it will take some time.

Political parties have tried to inject themselves into the “vacuum” of leadership only to find their efforts rebuffed, at times violently. What they don’t understand is that protestors are fed up with all the political parties, who all utter many of the same platitudes. It’s not a matter that the protestors are apollitical or reject parties. It’s that they reject the current group of parties that they feel have betrayed them.

It will take some patience to identify new leaders who are able to transition from this type of social-political struggle into political leadership. Calls for Bukharin type anarchism to reappear are misplaced. It won’t happen. However, leadership needs to emerge through some ineffable process of groups coalescing and aims of the movement gaining some greater focus on objectives that can be attained.

We are not condemned to live in interesting time, we are privileged to do so.

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Understanding the (R)evolution

I’m writing this especially for my American, Canadian, Israeli and other foreign friends. What has been happening in Brazil, especially São Paulo, my home here, in the last week, has the potential to change the post-dictatorship political morass that threatens to drive the country firmly back into third-world status.

I call it a (r)evolution, following the lead of my friend Joicy Britts, who raised the excellent point this morning on Facebook that what most are calling a revolution isn’t really. It is much more an important, evolutionary step in the progression of Brazil from dictatorship to democracy.

Brazilians who reacted in disgust to the over-the-top response (as well as poorly managed and trained) by the police last week to Thursday’s protest march in São Paulo, took to the streets in large numbers. Certainly, more than 100,000 in São Paulo (despite much lower police estimates), another 100,000 in Rio de Janeiro and crowds in Brasília, Belo Horizonte, Fortaleza, Salvador, Curitiba and Porto Alegre among other important cities.

And the protests will continue. But, what are they about. As one of the slogans of the movement says, “it’s not about the 20 centavos” that São Paulo wants to raise the bus and metro fare. It’s really as many people have been posting on social media, an awakening of the sleeping giant of the Brazilian middle class that is sick and tired of being manipulated and abused by a political class (both politicians and civil servants) who appear more interested in lining their own pockets than in providing useful services.

I wrote a post for an American blog two weeks ago about the political and economic problems that Brazil is facing, in which I focused on the lack of useful infrastructure and poorly delivered services. What was bothering me is evidently bothering many Brazilians and has helped define the content of the current protests. Poor health services, dismal public education (2nd worst in the world in a recent survey) and an emphasis on grandiose public relations projects like the World Cup and Olympic Games that makes the government feel good about itself but doesn’t improve the quality of life of Brazilians.

Not since the public pressure through marches and protests led to the impeachment of President Fernando Collor twenty years ago have Brazilians united to express their indignation at the embarrassing level of corruption and lack of real concern for the needs and aspirations of Brazilians. In that episode, as in the Diretas Já campaign for restoration of democracy in the early 1980’s, public pressure led to real social and political change.

Now, the protests are not just limited to the corruption of one politician and his or her cronies. They are much broader, showing a desire to undo the system of jeitinho brasileiro that emphasizes an immediate result over ethical behavior and a long-term plan. Whether it is possible to achieve such a wholesale change will be the real test of the protest movement and its ability to continue to animate the conscience of Brazilians of different social classes and different regions of the country.

It was remarkable to watch the protests yesterday and to see the enthusiasm of my many friends who participated. It was especially interesting to see the reaction of two friends who had been opposed to the protests because of the vandalism and general argy-bargy of some of the participants. Both of them changed their tweets and posts during the evening to embrace the protests and both ended joining the marchers.

One note for foreigners about the symbols of the protests. White towels or sheets in the windows are a sign of support for peaceful protest not violence. And the reference to vinegar refers to the police attempts to confiscate bottles of vinegar that participants in earlier marches wanted to use to counteract the effects of tear gas. So, the revolt picked up the name and tag of the Vinegar Revolt (#revoltadovinagre). The dominant tag I’m seeing today on Facebook and Twitter is #changebrasil, which is a bit closer to the point.

So, let’s get out on the streets

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Come On Banco Central! Try a Little Harder!

As reported in all the media — here’s Estadão’s article — the Banco Central has responded to the rising inflation trend with a 1/2 point increase in the SELIC prime interest rate, back to 8%. The SELIC has always been the primary tool for controlling inflation. However, this is the first stagflation,  the combination of inflation and low growth,  that Brazil has faced in more than 15 years (the 15 years I’ve been here). (That ugly term was first used by the Financial Times this morning in speaking of current financial conditions here.) At the same time that the government clearly wants to dampen consumer demand, it also needs to warm up the productive sector of the economy.

Industrial production has been stagnating all year and the Focus report estimates for next year show no significant growth. Estadão points out in their article that part of the inflation pressure is a disequilibrium between demand for goods and their supply.  With industrial production down, supply is also down. However, with employment at basically full employment levels, where is the labor necessary for expansion in the production sector going to come from? The answer in most countries is  increased productivity. However, the Brazilian economy has always ranked near the bottom of the productivity league table. This is largely due to the ineffective education system that doesn’t allow industry to adopt the most advanced manufacturing techniques and limits many workers to unskilled or semi-skilled jobs. Until Brazil tackles its education problems and develops serious worker training programs applicable to the information rich jobs of the Twenty-First Century, things will continue as they are now.

What I believe the government should have done is raise the SELIC 1/4 point to 7 3/4% and announced immediate expenditure cuts in discretionary programs and personnel, especially the bloated ministries. The PT now has to prove it’s looking out for Brazil, not just to fill the bureaucracy with its party members.

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Financial Times Offers Some Support for Yesterday’s Analysis

Today’s Financial Times reports on how the Brazilian economy has slowed down in the first quarter, which they believe is primarily due to weakness in the retail sector. That’s a polite way of saying Brazilians are going into stores and fainting at the prices.

In my piece yesterday, I simply did not have the space to tell some of the tales, tomatoes jumping from R$ per kilo to R$8 to R$10 per kilo in a month. Then, it was potatoes. Then, it was gasoline. Retail spending is dropping because people can’t afford to pay the prices for the same goods they were happily buying at the end of last year.

It’s nice to have some support for the points I was making in the article yesterday. I also note that my story about the kilometric backups along the highways leading to Brazil’s ports took on a whole new ugly dimension yesterday. The Mayor of Cubatão, a city that borders Brazil’s largest port, the Port of Santos, decided to close at night all the yards where trucks stay while waiting to load or unload at the port. This forced all the trucks back out onto the highway leading down from São Paulo. The result of which was a 50 + kilometer backup, extending all the way up the hill to the suburbs of São Paulo. (When I say “up the hill”, São Paulo sits at an altitude of 740 meters—2,400 feet—above sea level. The highways traverse this grade change in a little over 10 kilometers. It’s a spectacular feet of engineering.) The Mayor has since retreated and is now leaving the yards open overnight.


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Brazil Growth Prospects

I’ve just published this afternoon a new analysis of Brazil’s economic and political prospects on the Corr Analytics web site as part of the initial issue of the Journal of Political Risks.

In it, I argue that Brazil seriously risks exhausting its recent growth spurt because of inattention to the real infrastructure needs of the country, while it spends a nota preta on the World Cup and the 2016 Olympics.

Step on over to Anders Corr’s site and have a look at my piece and other country analyses and security briefings. Thanks to Anders and his team.

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Retail Worries

Ok, this is my impressionistic take. Later in the week, I’ll try to put some data together on this. 

My take–retail is suffering in São Paulo. Today, we walked the length of the commercial part of Rua Oscar Freire, Brazil’s largest luxury street. The number of store closings in the last few months is really staggering and worrying. Brands from Tommy Hilfiger to the megastore of Presentes Cleusa (with Suxxar, etc.) they called Sta. Helena, and others. Even Haagen-Dazs closed their quite successful outlet at Oscar Freire and Bela Cintra. True, almost all of these brands continue with their mall stores.

However, when I combine this observation with the recent performance of the Brazilian economy (GDP/PIB growth of 1% or less), the constant readjustments that the government makes to stimulate the economy, I have to believe the shine is off at least this BRIC.

Criticism of the BRICS in general is rising as four of the five economies are stuttering and  outperforming either Europe or the United States.  As an acquaintance observed today at lunch, the BRICS are not doing as well as the press touts and Europe is not doing as badly as everyone laments.

But, I will put some data together this week and see if this hypothesis has some legs.

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I’m sixty-six years old. I confess. I really don’t know what age I feel, but old — I certainly don’t feel that way. Sure, I’ve had my share of the onset of old age complaints. Prostate, blood pressure, sore back and knees if I don’t work out enough. My beard is now almost pure white and my hair, the little of it that’s left, is finally turning grey. But, I feel healthier and stronger than I have in years.

Two days ago, I took the bus to have lunch with a good friend, a thirtyish woman who is also a professor in one of the business schools where I teach. When I got on the bus, I paid my fare (because I still haven’t gone over the local city district office to obtain my free bus pass).

The bus conductor (cobrador) politely asked if I wanted to stay in the front of the bus rather than passing through the crowded rear. I agreed, wondering why he asked. Then a middle-aged gentleman (in every sense of the word) got up from his seat and offered it to me. I thought of saying no since I was only going three stops. But, then I realized that he was offering me the seat because I looked elderly and that the conductor had suggested I remain in the front for the same reason. So, I agreed and took his place.

I was amazed and discombobulated for two reasons. First, as I said, I simply don’t feel old. I’m not sure what “old” feels like, but even with the onset of occasional aches and pains, I don’t feel that. So, I was surprised. I need to learn to accept that my view of myself is not the same as the view that other have of me and find strategies for dealing with their perception.

The second reason for my confusion was the politeness and respect that people showed me. I was dressed in jeans and wearing my high school’s baseball cap, so it couldn’t have been that. So, it must have been my appearance of being elderly. I’m simply not used to having Brazilians be polite. My general impression is that Brazilians are more on the rude, self-protective side than on the polite side when dealing with strangers. I was very pleased and gratified with the way people on the bus, whom I had never seen before, made the effort to accomodate a stranger. I’m not sure I would have seen the same behavior in my native New York. To them, um grande obrigado.

So, I started out with a confused reaction to the treatment I received, but on reflection, they have restored my faith in the personal warmth of Brazilians and put my normal level of cynicism on vacation for a while.

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