China 4 - 0 Brazil

When Brazil was competitive

I know that I am exagerating when I say that Brazil is only competitive in football (soccer) - even though they have recently lost a friendly against Germany. 

However, after this loss they decided to cancel all "classics" (games against top teams) and only play against teams such as Ghana, Guinea and others. A recent game against Argentina in the Roca Cup ended 0-0 - the rematch will be at the end of this month.

Unfortunately this reaction is very exemplary for a Brazilian behavior style. Recently, imported cars have been flooding into the country - especially Hyundai has been very succesful and is even in the process of building a huge plant. On the lower end, the Chinese companies JAC and Chery have entered the country with a bang and riding on a weak USD, opening dealerships and advertising heavily - both are also planning on building plants. And on the upper end, Jaguar, BMW (also planning a plant), Audi, and even Mini have been extremely succesful catering to the wealthy. What was the reaction of the government?: Slap on (even) more taxes on imported cars (i.e. outside of Mercosul) and cars with less than 65% local content (local producers have 45 day grace period). This will raise the average price of most cars not qualifying for exemption by 25% or more, thus killing off the efforts of many of the new emergents. This will not help the Brazilian car industry which already sells expensive and mediocre cars - ask a Brazilian for his opinion the best that is locally produced and he will, without a blink of the eye tell you: Omega!

Where was I? Competitiveness: The World Economic Forum has released their latest competitiveness index and, surprise surprise, Brazil did not showcase well. And this is not related to the companies itself - although there are also weakness there. Brazil finished overall in 53rd place (of 142), better by 5 positions since the last time and on par with India (56th), but way behind China (26th). What drags down Brazil are

"[...] the lagging quality of its overall infrastructure (104th) despite its Growth Acceleration Programme (PAC), its macroeconomic imbalances (115th), the poor overall quality of its educational system (115th), the rigidities in its labor market (121st), and insufficient progress to boost competition (132nd) are areas of increasing concern."

Brazil is saved by market size (10th) - but even business environment (31st), financial markets (40th), technological adoption (44th) and innovation (47) are only midfield.

So overall, Brazil has improved but still is far from being a future leader and if we look very closely, indicators under strong governmental influence perform much poorer than those which are driven by the private sector... Drive on the local roads, fly into any airport, try to hire somebody with an intermediate level of English-speaking skills (or try to fire them later!) and you will know why.

Well, at least Brazil is still better than Argentina in competitiveness. Argentina is currently ranked 85th.

BTW, the top 10 this year were Switzerland, Singapore, Sweden, Finland, United States, Germany, Netherlands, Denmark, Japan, and United Kingdom.

The Asian Perspective on Brazil

"Brazil will gain a place as a significant player in the multi-polar international system taking shape since the end of the Cold War simply on the basis of its economic size and material capabilities. However, its potential to influence international outcomes is likelyto be determined more by the capacity of the country’s elites to identify and harness qualitative assets associated with its stable and democratic governance than by any hardpower assets."

This introduction belongs to an article published in Asian Perspective in 2007. What is interesting is that this is a view of Brazil from the position of other emerging economies and not Europe or the US. The article highlights all the material advantages Brazil has - but these have been mentioned elsewhere.

What is more interesting is that Brazil is placed as a "soft power", i.e. it may shape politics due to its close ties to the western world, it's sheer size and it's focus for decades on economic integration - in the region and globally. Rather than going for global domination, Brazil has sought to find it's place as a partner.

The early participation in peace-keeping missions (such as Haiti), it's hosting of the Earth Summit in Rio in 1992 and it's vast (currently) non-quantifiable ressources of Oxygen and Water give it additional clout, especially if it continues to play by these rules.

The article finishes with what has to be done and it highlights the weaknesses in (too) big government and inefficiency, inequality, lack of education, high taxation and poor rate of investment. However, if overcome, Brazil would be set to become a true BRIC.

Yes, Brazil still has enormous opportunities and recently I had a long discussion with my wife and we came to the (very German) conclusion that the only impediment that Brazil was not "there" yet (or close to there) was that the country was tripping over it's own feet and that it had not yet defined what "there" was. The potential exists and opportunities are huge and Brazil has advanced greatly over the past decades - but the elemental challenges still have not been reliably adressed: Education, Inequality, Taxation, Infrastructure and Bureaucracy.

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.