Groundhog Day in Brazil

No, this is Barcelona airport (and yes, it is in operation)

I came back from Spain last weekend and came through two airports there: Palma and Barcelona. Both are huge and whereas Palma is a bit old, it is still fairly efficient and even sports valet parking. Barcelona by contrast is a modern, efficient and great airport to fly into and out of or to connect through: Transit is fast, waiting times short, with a great shopping area and a pretty good Spanair lounge.

Then I flew into Guarulhos and noticed how much there still is to do...But the airport claims to be ready for the world cup, with a MOP (Modulo Operacional Provisiorio, i.e. a provisional terminal). I was also "lucky" to experience this MOP on a business trip this week: Whoever has flown through many of these RyanAir airports in Europe will be able to picture this well: A very simple structure with many chairs and a small counter which sells semblances of food - if you are willing to fork out 3.00USD for a bottle of water - has the charm of a bus station. Oh yes, my flight also left late and came back late the next day... And I also did not find a parking space, I did what everybody does. As there is no alternative and the generous 3000 spaces are never enough...

What else is new this week?

• The minister of tourism quit after allegations of corruption - that is number 5 this year. The new minister (also from the PMDB) has named his number one priority getting ready for the world cup. Sounds like Groundhog Day to me.
• A new hobby of thieves, blowing up ATMs, seems to be catching on. This week, the 500th (yes, five hundred) ATM was blown up trying to get some easy money. Unfortunately for the culprits, the money was tainted with special ink, as is the case of most ATM if they are tampered with. The Civil Police is searching chemical industries in the whole region for possible losses of chemical products used to make explosives... 500 ATM, that is alot of explosive in just 9 months...
• Inflation is expected to hit around 7.5% this year, and GDP growth should not surpass 3.5%
• The USD hit a 12-month high vs the BRL - this will help exports and possibly slow down some speculative capital inflows
• To protect the Brazilian car industry, the government has increased the IPI (a tax) for small cars with no Brazilian components to 35% (up from 7%)
• Construction Workers at the 2014 World Cup Stadiums in Rio and Belo Horizonte have been on strike (B.H. sind this week, Rio since September 1)

Looks like the last couple months will not be boring. ;-)

UPDATE 17.09.2011: According to the Infraero website, the MOP in Guarulhos is not temporary, but can be used "for a very long time, if required".

Doing Business with the help of the police

Foto by Federico Stevani

Here is a "great story" of a friend - He told it to me just told me a few days ago - it sounds more like a bad Hollywood movie, but is real:

He, like many Brazilians is heavily invested in the property market and had a storefront he was renting out. One day he got an offer from a guy wanting to open a bakery. They struck a deal that the baker would not pay the first months rent but would heavily invest in upgrading the place.

On day 10 of the second month the rent was not paid, nor the property taxes, nor the condominium fees. My friend called the baker who gave a lame excuse but paid the next day.

On day 10 of the third month the rent wasn't paid again. This time my friend could not talk to the baker, checked around for him but could not find him anywhere. So he contacted a lawyer and told him to solve it.

All of this lead to only limited success and the bakery remained open but the baker was never there and the rent was not paid... for several months in a row.

This friend of mine also had a buddy that worked at Garra, an elite unit of the civil police (with a reputation of being pretty violent). They played football together and one evening after a game and during beers, my friend told his police buddy about this. The buddy got interested and asked more questions and my friend told him all he knew about the case, including that he also knew that the baker had a daughter that studied medicine at the XYZ-university. "A daughter at the XYZ-University, eh?" the cop asked... "Ok, don't worry about your baker anymore."

Eight days later the rent, property taxes, condominium fees and overdue interest of the whole period was paid... and the key was returned in an envelope into my friend's mailbox. The bakery was vacated but painted beforehand and left in pristine condition, with a brand new hardwood floor.

My friend did not ask the cop what happened - he did not want to know and has not asked since. However, what he does know is that most likely has a debt somewhere and hopes that he never has to pay up.

BTW: To get a feeling about what police means, check google for what you get when you search for "policia" and "brasil". Then compare it when you search for "polizei" and "deutschland".

C is for Corruption: The Car Dealer

Nice car, if you can get it to market.

Having been in Brazil for a few years now and never having lost contact between the early 90s and now, when I was out of the country, I have several accounts of corruption cases which have not made it into the media (yet), which I will will be posting. The first one, was The Paper Company.

This one is The Car Dealer:

A large German car producer wants to expand it's market footprint. Brazilians are all over Audi, BMW, Mercedes and Porsche and all you have to do is setup a storefront - advertisment and financing is usually not necessary. Many pay in cash or charge it to Amex, they just want the damn thing.

The problem was that in the northeast a dealer wanted to do everything the correct way: Get all the documents properly, make sure the site got licensed, hire all employees correctly, etc. The guy was not German, but he actually was one of the correct Brazilian business men I so much admire as they maintain their moral standards in an... let's say "adverse" environment.

This dealer had everything together, except for the operating license which was issued by the mayor's office of the medium-sized town. And the mayor wanted to get a car for free to issue the license. The dealer refused and the license was not issued. The dealer tried all legal loopholes he could find... to no avail. He got pressured from future customers, from friends and from the big German car company that wanted to sell cars in this town, and was willing to bend rules - but he did not give in.

Eventually, the mayor must have had pity, or the mayor lost the election - but the dealer did not pay up... and got the license... a few years after he applied for it.

C is for Corruption: The Ministers

You can trust me, really!

Actually, I wanted to continue my series of first-hand stories on corruption but this breaking news is too good to be left aside:

Wagner Rossi, Minister of Agriculture, has just left Dilma's government - he is minister number 4 to go due to corruption charges. Who were the other three?

1. Antonio Palocci, "Home Affairs" whose net wealth miraculously increased twenty-fold from 2006 to 2010. He had already been forced out in a corruption scandal during the Lula government in 2006 - some people never learn.

2. Alfredo Nascimento, "Transportation", accused by Veja Magazine of organizing a true corruption structure in all public transport biddings. Nascimento had been minsiter for two terms under Lula too.

3. Nelson Jobim, "Defense", after calling fellow government colleagues "idiots" and after stating that he had voted in José Serra in the 2010 presidential bid. Jobim had been in the Lula government since 2007.

And why did Rossi leave? He was accused of receiving and distributing huge sums of money in public auctions, embezzlement and of flying around in the private jet of a company that won one of the biddings. He was also accused of electoral fraud, which resulted in, among other things, of throwing away several tons of food staples. He was NOT a minister under Lula, but did command the powerful Companhia Nacional de Abastecimento, charged with stabilizing seed, fertilizer and food demand for the poorer parts of the society.

This does not throw a lot of good light on Lula.

C is for Corruption

Let us hope he showered

Transparency International publishes an annual corruption perceptions index, where "the degree to which corruption is perceived to exist among public officials and politicians" (TI.org) is measured. A non-corrupt country gets a 10, a corrupt country gets 1. In 2010, ranked first in the list is Denmark with a 9.3. Last on the list is Somalia with 1.1. Brazil is 69th, between Romania and Bulgaria, at a 3.7... improved from 4.0 since 2002.

Alot has changed, especially in the private sector, with more multinationals coming into the country, bringing higher compliance standards in and with Brazilian companies also adapting, often because of compliance codes, but also because of better fiscal controls, such as with the electronic centralized invoicing system nfe: nota fiscal eletronica.

In politics, corruption still is a major issue, such in the Escândalo do Mensalão no Distrito Federal, where the then governor of Brasília José Roberto Arruda was accused of (and subsequently arrested for) siphoning off on significant sums of governmental funds to companies and political companions. What made this case spectacular is that Arruda filmed several of these money hand-overs (as depicted above) - but it is not singular.

But also in the private sector, corruption is still a problem. Having been in Brazil for a few years now and never having lost contact between the early 90s and now, when I was out of the country, I have several accounts of corruption cases which have not made it into the media (yet), which I will post in the next few weeks.

But let us start with a juicy one - to protect those involved, I have anonymized each case:

The Paper Company

A major paper company wanted to install a new factory in one of the poorest states in the Northeast of Brazil. Because the company wanted to have the local political buy-in, they decided to meet with the governor to discuss the licensing and subsequent construction - for this, the president of the company flew in. In the first meeting, the governor clearly stated that no license would be emited unless an upfront payment would be made. This upfront payment was to be a deposit into a personal account of the governor and the value was a significant 6-digit value. Infuriated, the paper company president left the governor's palace and instructed to shutdown all non-crucial activity in the state immediately. The new factory will be built a few kilometers down the road... in the state next door.

The Shame of Being the World’s 7th Largest Economy 2011,

Worth a read: (Article from Brazzil Magazine, written by Professor Cristovam Buarque Monday [I would vote for him!], 18 April 2011)

In the 19th century, Victor Hugo refused to shake hands with Pedro II, the emperor of Brazil, because he was the ruler of a country living comfortably with slavery. Today, Victor Hugo would not shake the hand of a Brazilian to congratulate him for achieving seventh position among the international economic powers while living so comfortably with the surrounding social tragedy.

Continue here at ExpatBrazil

For Brazil, It's Finally Tomorrow

The Wall Street Journal has written a mostly positive article about Brazil - and the catchphrase, Brazil Country of the Future still hangs in there...

For the past century, Brazil has been a land of great potential—but few results. With runaway inflation and stratospheric national debt, the country was too much of a mess for anyone to take it seriously on the world stage.

How things have changed [more] (Source: WSJ Online)

Basically, Mr. Prada highlights the three major points I always have to complain about Brazil: Lack of adequate public infrastructure, still rampant corruption and horrible education. If Brazil wants to "leapfrog" into fourth place, then these are the things that need to be addressed. Especially if we consider, that Education usually takes a generation to kick into the economy with full force, the time to invest is now, to be able to get where the country would like to be by 2050.