Time for a bullet update

Not really a fast train in another BRIC country

In my post at the end of last year I was very skeptical about the bullet train engineering and auctioning process. So where are we now? The April 29 date for receiving the documentation of bidders war postponed to the end of July, when it was cancelled.

The current situation is now that the bidding is to be divided into two parts: technology and operator in the first part and construction in the second part.

The two phases of bidding are to start in September or October (whatever that means) but the schedule is to remain unchanged with construction beginning in 2013 and the whole project not costing more than 20bn USD. At the rate the USD is falling, I may even believe the latter part... but 2013 is just around the corner - especially if the bidding gets delayed for another year.

But after that it can get accelerated - biddings for the World Cup can already be kept in partial secrecy so that the evil press and public doesn't snoop around too much. Why not expand to the bullet train?

BTW: No bids have been received yet - must be one hell of an interesting project in the Country of the Future.

The R-Word?

The last few months have been very strange. As mentioned in the "about me" section, I work for a chemicals company and while we are in specialty chemicals, many of our suppliers and market partners also are in a broad range of chemical commodities.

What is strange is that while everybody keeps talking about Brazil being the country of the future and with growth opportunities everywhere, we, our market partners and suppliers have started to feel something weakening. While raw materials have spiralled out of control around the world, the favorable exchange rate has kept imports somewhat in check - so raw material costs are not on the levels of the rest of the world. Thus, the lack of demand cannot really be based on cost, or at least not fully. So consumer demand is still also up and capital inflows have remained strong?

To check if it really is just my neck of the woods, I have consulted people in the automotive industry: Demand is down... And I have checked my favorite indicator: Diapers. Diapers is not something that you stop buying just because the economy is down - in fact, it probably would be one of the last things that you would stop buying... yet even here a huge diaper producer in Brazil has told suppliers to slow down on deliveries... Is consumer demand weakening?

As the central bank has hinted that interest rates may start falling soon (after all, the 12.5% already are the maximum level that the bank wanted to reach... in December) and that commodity prices have peaked... and capital inflows have been mainly due to high real interest rates, and not so much to invest in the country.

I would not call it a recession - there is just too much business activity going on, but the economy continues on the brink of overheating, especially in real estate. Infrastructure is not keeping up to the demand, and the creaking is becoming visible on all ends. If consumers start balking too - and consumer indebtness has gone up strongly in 2011 - then the economy may be in trouble.

I would not go long on the BOVESPA if I were you...

Brazil, Country of the Future?

Interesting what the internet archives for you. Here is a BBC Article from April 2000 - so much has happened in the past 10 years... and yet there is so much to do.

"Generations of Brazilians have long been taught that they lived in 'the country of the future'.
With its vast territory, natural resources and economic potential, its people were led to believe that Brazil had a guaranteed place as one of the world's leading countries." (bbc.co.uk)

Continue reading here.

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.

About this Blog

"Brazil is the country of the future", a common saying in Brazil. Critics usual expand the phrase with "... and will always be."

However, much has changed since the lost decade of the 80s. Brazil has gone through a remarkable change - 25 years of democracy and 15 years of economic stability are the basis for the situation in Brazil today.

Is the country over the hill? Not yet, but chances have never been better. This blog highlights and comments the current situation of the powerhouse of Latin America.

About Me

I am a German expat living in São Paulo with my family (more or less since 2009), working in management for a German chemical multinational. Previously I have worked for the same company on a global level and for a consulting firm in Europe. I studied Economics and Business Administration in Germany and the USA. The only place I have lived for longer than in Brazil in my life is Germany, but I have also moved in and out of Africa (twice) and the USA (twice).

This is my second time to Brazil.