Tuesday, October 19, 2010

We do not want your money

The Economist, Oct 14, 2010
Last week's The Economist claimed, in its Big Max Index, that the BRL is overvalued by over 40% vs the USD. While this is only one of many indexes, many in Brazil (as elsewhere) are talking about a new currency war.

Fact is, that the Real has gained much value against the USD and EUR over the past years, and is approaching (or is at) the all-time high of 2008 (before it plummeted and made holidays in Brazil a bargain for foreigners... for a while).

The Brazilian government has now responded, afraid that a further appreciation will hurt Brazilian competitiveness, and has raised the IOF (Financial Operations Tax) for foreign capital inflows for fixed capital investments for the second time this month to a staggering 6%. This is to keep "predatory investors" out of the Brazilian market, which has some of the highest interest rates in the world.

In fact, the rates are very attractive: A short-term fixed capital investment will easily give a post-tax return of over 6% p.a. - with local inflation around 5% this is still pretty attractive... if you assume FX-rates will remain stable.

Guido Mantega, the finance minister is afraid of this currency bubble... he should also start looking at a few other bubbles, most notably the housing market in São Paulo...

Saturday, October 9, 2010

A Small Dictatorship in a Democracy

The first time I saw the above flag, I thought of Cuba - but, no: This is the flag of the state of Maranhão (located in the Northeast Region), one of the poorest states in Brazil and with an HDI on par with sub-Saharan Africa. If this were not enough, the state has been under uninterrupted rulership of the Sarney clan for 44 years. José Sarney is a classical old-school "coronel" (in the "traditional" style of politics, the local coronel in alliance with other large farmers, controlled the votes of mostly rural inhabitants. The local political chiefs in turn exchanged votes with state politicians in return for political favors) - in other words, a political situation rife for corruption.

Sarney has been active in the Maranhão state politics since the 1950s as member of the parliament, senator and governor - after leaving office, to become running mate for president of the late Tancredo Neves in 1984, he made sure the state remained under family control and pushed his daughter, Roseana, into government.

He assumed the presidency after the Tancredo Neves passed away on the eve before assuming office in 1985 (surely a great topic for conspiracy theorists). Ms Sarney has just been reelected governor, which does not mean much hope for the Maranhão state and it's people - but at least she states it will be her last time in office.

When the highly polemical (but very enjoyable) biography, "Honorable Bandits" (available in Portuguese) was presented in Maranhão last year, a student group allied to Sarney stormed the building where the book was presented, and attacked the authors. Fortunately nobody was seriously injured. For a more neutral external view, please refer to The Economist article "Where Dinosaurs Still Roam".

Thursday, October 7, 2010


Now this is an interesting fact, retrieved from speedtest.net - I am pretty sure that it is not representative, because it only tallies speedgeeks - but if we compare speedgeeks to speedgeeks around the globe, Brazil, which is the 9th largest economy by GDP by PPP (right behind France, Russia and the UK), is still far behind in terms of technology.

Especially if I consider, that today it is possible to get 50mbit broadband in São Paulo (albeit for a fortune), this shows the level of technological inequality in the country. In Latin America, Brazil remains in second, behind Chile (which fits to the GDP/head picture) but on a global scale, 65th place is pretty nasty...

Monday, October 4, 2010

Run-Off between Serra and Dilma...

Lower House Candidate Tirirca with his Slogan: "It can't get worse than it already is."

With 99.99% of all votes counted, Dilma is at roughly 46% of votes and Serra has 32%. This puts Dilma worse off and Serra better off than expected.

The run-off will be on October 31 between the two. Dilma, who had been soaring in the polls, has recently lost some ground due to a(nother) corruption scandal in the PT government.

Schocking has been the final result for the lower house, where the former circus clown Tiririca (mentioned here and depicted above) managed to get roughly 1.4m votes in the São Paulo state. The second-most voted candidate received less than 600k. Or as a comment of g1.globo.com.br mentioned yesterday:

"This is so typically Brazilian: We vote for a fool as our representative who will then make a fool of the people of Brazil."
BTW: The above photo is the official campaign photo from the mediaset on his website...

Saturday, October 2, 2010

Brazilian Elections: "She's the Man"

It still is unclear if Brazil is in for a run-off in the presidential election, where voters line up to (basically) decide, whether they will vote for Dilma Rousseff (depicted on the left), former chief of staff of the immensely popular president Lula from the PT (Worker's Party), or her rival José Serra, former governor of SP state and member of PSDB (Social Democrats). This week's The Economist has an editorial on the election an rightfully states that, unless disaster strikes, Brazil is in for a further four years of PT, albeit without the charm, charisma and popularity of Lula. According to the latest poll, Ms Rousseff, who has never held elected office and has risen through the ranks as a career civil servant, would receive roughly 50% of the vote - an absolute majority would carry her to a victory.

The stellar popularity of Lula, now to be transferred to Dilma, as she is popularly called, is due the reduction of poverty through social measures, but also inheriting and not reversing macroeconomic stabilizing measures from the previous government - or, as The Economist puts it:
"...Lula deserves praise for bringing into the Brazilian mainstream the once-novel idea that reducing poverty is a proper aim of government (though others sneer snobbishly). But when asked what Lula has done for his country, such people also point to the policies he inherited from his predecessor, Fernando Henrique Cardoso." (The Economist, Sep 30, 2010)
But on the sidelines, there are much more interesting things going on. In these elections, not only the future president will be elected, but the upper and lower chambers of the parliament and governor seats are also up for grabs, as are the offices of the state parliaments. On the lower levels, there are the examples of one candidate who appears to qualify for office, because his daughter was brutally murdered a few months ago and has the catchphrase: "Through suffering I have learned to fight - now I am fighting for your vote." 

But there are also two further examples that are at least curious, not to say frightening: The "Mulher Pera" (clicking the link may infringe your corporate IT policy), a starlet with... let's say physical attributes and the circus clown Tiririca (Slogan: "It ain't gonna get worse, than it is") are both running for the lower house of congress in Brasília. Both are candidates for small parties and are so called "Puxadores" (pullers), who are popularly known and thus do not need much marketing. As these candidates will most likely get more votes than they need, the Brazilian electoral system deems that excess votes be passed on to further candidates in their parties - in the case of Tiririca three most likely "pulled candidates" will be career politicians, currently up to their neck in campaign financing scandals and thus would most likely never be elected by popular vote.

These candidates and others are most likely in for their last term in any case - the Lei Ficha Limpa or "Clean Record Act" allows electoral courts to refuse registration of candidates already found guilty by a higher court. However, as this law on recently was pushed through congress and some of the wording is open to interpretation, thousands of appeals will be upheld. Still, today's Estado de Sao Paulo newspaper lists a total of 1248 candidates will not be able to be elected, although they are on the ballot. Of the total of 172 candidates for governor of Brazilian states a total of 15 (!) are in limbo due to pending court decisions.

All in all, even having a clear tally tomorrow evening will not mean that clarity will prevail once once these candidates are supposed to take their elected seats.