Lost Sambista

A Brazil never seen.

Archive for the tag “Brazilian economy”

Lost Samba – Chapter 23 – The Brazilian Hyperinflation begins

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The Federal University of Rio de Janeiro, Photo, Zica da Zuca

A bus to school, to my Dad’s office or to anywhere boring in the “real world”, would go from Ipanema towards Copacabana. After crossing my old neighbourhood it would leave the Zona Sul through the Túnel Novo. After this it would pass Botafogo’s training grounds before turning left towards the Botafogo beach and onwards into the city. On my first day as a university student, I was pleased to be catching the 511 bus, as it would not turn into Botafogo beach but instead would take a right into peaceful Urca where the Federal University – the UFRJ – was located. As the bus went along the good old Avenida Nossa Senhora Copacabana, I thought about the new cycle that was about to start, and realized that I didn’t know what to expect: was I going like the academic experience? What was the economics course actually about? What were my fellow students going to be like?

The campus was quiet, with well-kept trees bordering alleys that separated the well preserved nineteenth-century buildings. The one that housed the economics department originally served as a madhouse and although the asylum had long-since been transferred to a new building on the campus, we sometimes saw nurses chasing after runaway patients.

In the 1960s, the UFRJ had been at the epicentre of the students’ resistance to the military dictatorship. The National Union of Students (UNE – União Nacional dos Estudantes) had organized many crucial gatherings in its open-air amphitheatre that was just below our classrooms and most of the students who had opted for armed struggle reached that decision in the same places where I was now studying.

Even in 1981 there were rumours that some fellow-students were either undercover police agents or were members of underground organizations. I doubted this was the case, but there was no way of knowing. Anyhow, with the re-birth of open political debate, the students’ union was lively and there were active Trotskyists, Leninists, Maoists and anarchists, as well as people joining the new ideological groupings with more ecological and existential agendas.

These leftists fought amongst themselves. They bickered over almost everything; as, for example, which stance should the students union take over the Soviet invasion of Afghanistan, or which of the various communist parties was the true representative of the masses or which thinker best represented the people’s aspirations, Lenin, Trotsky, Mao, Bakunin or some other obscure Marxist. They also had serious fallouts over other theoretical and practical intricacies that made the experience of being involved with left wing politics seem more like belonging to a religion than anything else.

Now that the military regime was on its deathbed and the Soviet Union was beginning to show cracks, also having ceased long ago in investing in Latin American revolutions; the debate on choosing between either fighting or embracing the capitalist system had become obsolete. My generation was caught between this stagnant state of affairs and the pragmatism of the yuppie generation that would soon kick in. We recognized the importance of politics and welcomed the political springtime, but could not relate to the outdated dialogue.

Some teachers who had endured hardships during the military dictatorship saw us as a new breed of students; one of the first contingents to be free from the dictatorship’s constraints and, therefore, they expected a lot from us. Meanwhile, the militant Leftists saw us as alienated bourgeois kids while the nonpolitical students, already the majority, saw us as fake revolutionaries. Like our parents, they believed that politics was a waste of time, instead, they concentrated on forging their futures as stock market success stories.

*

The introductory courses that the university offered were vastly more interesting than the classes at the result-orientated factory schools that most of the students had come from. The programme concentrated on political economy and aimed at preparing students for future roles in government development agencies. We studied Marx – something extraordinary considering the government-funded university was still part of the apparatus of a pro-American dictatorship. Some of the professors had recently returned from exile and were excited to lecture freely in their own country. Everything was going well until an outbreak of hepatitis that I had contracted in Mauá forced me to spend over a month in bed.

That time off at home marked a subtle turning point both for me and for the country. Political freedom was already a given but an era of economic hell was about to break loose. Around the world, religious fundamentalism was taking root, HIV Aids was spreading, and Ronald Regan and Margaret Thatcher were consolidating the grip of conservative policies over the USA, the UK and the rest of the world.

In the minds of most Brazilian Leftists, the desperate middle and upper classes in the rich countries had voted in Regan and Thatcher to lead a crusade against the libertarian and egalitarian principles that had defined our intellectual upbringing. No matter how one saw this change of direction, it was undeniable that the duo had an anti-socialist agenda. For the new leaders of the two greatest western economies in the world needed to deal with a crisis caused by what they considered a warped way of thinking. While I was confined to my bed, and ate and drank from separate glasses and plates so that my infection wouldn’t spread to the rest of the family, foreign banks decided that their loans to friendly dictators – loans they’d been more than happy to make – were now a threat to world economic stability. They wanted their money back and if their debtors could not pay, they wanted to make money on those loans. Interest rates on international debts skyrocketed to levels that were unthinkable when the loans were taken out.

The international banks could not care less if their decisions suffocated the indebted countries and their citizens. Experiencing something like an ever worsening toothache ordinary Brazilians began feeling the consequences of the monetarist policies. When companies were forced to close down and inflation skyrocketed, people saw themselves jobless, with no social security to help them, while their money had less and less value. This came from the same creature that had sponsored the military coup back in 1964, now it was showing its true self again, but in a different angle.
Due to ineptness and to sheer lack of experience with such adverse economic conditions the policies that the government adopted were disastrous. With the Brazilian foreign debt rising to stratospheric levels, the authorities ignored the seriousness of the situation and resorted to printing more money in order to honour their internal obligations, a perfect recipe for disaster.

Over the following fifteen years, inflation in Brazil accumulated to 20,759,903,275,651 percent, an absolute world record. To give an idea as to how bad the situation became, had Dad not protected his money, for the same price that he had bought our comfortable apartment in Ipanema in the mid-1970s, he would only have been able to buy a cup of coffee a few years later.

At my university, faculty members and students saw this upheaval in a different light. It happened that our economics department was at the forefront of the opposition to the government’s policies long before the crisis began and many of the professors had issued warnings about the dangers ahead. Many Brazilians believed these academics could guide the country out of the mess, and they became public figures, appearing on television debates and contributing full-page articles in the main newspapers.

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The prices during Brazil’s Hyperinflation.

Meanwhile, in order to stimulate national industry, the government resorted to control imports, something that had a crippling effect on Dad’s business just as he entered his ninth decade. Now on top of a shrinking market, just getting a license to bring his goods in became difficult.

After I recovered from the hepatitis, the challenges my Old Man faced in his business meant that the pressure was, more than ever, on. The good times were clearly over and his only hope for me was that studying economics would save me from ruin. Still, I had fallen behind and the more I considered the situation, the more obvious it was that economics was not for me. I was doing badly while, to my naive surprise, my fellow students took their studies seriously and actually liked the course.

During this turning of the tide, Kristoff – my German-Chilean school friend – managed to get himself arrested on the same bus route we had made just the year before. The arrest took place in Uruguaiana, on the Brazilian border with Argentina and Uruguay, a cattle-country town that had become notorious as a hot spot for smuggling and money laundering. Although Kristoff was not smuggling drugs, he took the rash decision to light a joint in the street. Before he could inhale a single puff, out of nowhere agents of the federal police ambushed him, arrested him there and then, and later transferred him to a jail in Rio. As this was Kristoff’s first offense, he was bailed. A few weeks later, someone reported him on another charge. The police stormed into the classroom while he was attending a lecture at the university and hauled Kristoff back to jail – albeit a relatively luxurious one for foreigners and people with a university education. Kristoff’s father made a discrete appeal to the minister of justice and, to avoid a trial, the court agreed that he would be quietly deported to Chile.

back to chapter 01                                  next

 

What are the protests in Brazil about?

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While Brazil’s economic well being looks promising in the short and in the medium run, things have been strange in the political arena. Earlier this year, during the Confederations football Cup, there was a raging wave of protests while, under the surface, there is political unrest that may erupt during the World Cup.

Any uninformed person would jump to the conclusion that the protests come from the hungry masses who are discontent with the government for privileging big contracts instead of spending money on hospitals, education, housing etc… It is true that many are not happy but no, this is not where the anger is coming from. The discontent is coming from the middle and upper middle classes. The typical protester is a young, white male with a good level of education and no economic upheaval to deal with.

In other words, the protests are coming from the right rather than from the left. In general, the vast majority of the Brazilians, the working class, do not have strong reasons to protest, a proof of this is that there are very few working class people in the protests. The statistics show that there has been an improvement in their standards of living; more jobs, more education, more consumption… the list is long. They have benefited from the policies of the current left wing party, the PT, that has been in power for around a decade and that will most probably win the next elections.

So what are the protests about? Ask the average middle class Brazilian, and he will answer that they are about corruption in the government, more specifically among members of the PT. This is where the argumentation gets bizarre, they do not mention corruption in other parties, which in many cases is more severe than in the PT and if you listen closely, they will describe corruption as an exclusivity of the Lula and the Dilma governments, a clear fallacy for anyone who knows anything about Brazil.

There will also be the technocrats who will say that they are annoyed at the enormous presence of the State in the economy. They will defend Brazil adopting an economic model closer to the precepts of Wall Street and of the City of London: leave everything to private enterprise; they have the most qualified people and they know what they are doing. However, this is not what the protest are about, the young people in the streets do not carry neo-conservative nor monetarists flags. These arguments are only being heard now when the economy is beginning to dip. It was not so when Brazil paid their gigantic external debt, fixed the hyperinflation that corroded Brazil in the 80’s and in the 90’s and when it became the darling of international investors. In fact, the last time anyone heard these voices was when they gave terrible advice to the military regime in tackling the economic crisis. Everyone knows that if it were for these people Brazil would never have climbed out of that hole.

The question still begs an answer, what are the protests about? It is our understanding that they are about anxiety and powerlessness in the middle classes. The moralistic crusade, the hatred towards the left, the privileging of the technical over the democratic process reverts us to the rise of fascism and Nazism in the 1930’s. The country that the PT constructed during its large mandate has helped the rich to get richer and has taken a huge portion of Brazilians out of poverty. Meanwhile, the PT’s traditional voting base, the urban middle class, has not received the benefits of the economic growth. In many ways, they feel betrayed and are now worried about what will happen after the World Cup and the Olympic Games.

Justified or not, the poison is in the air. The protests were violent and there may be an escalation during the World Cup, when the embarrassment for the Government and the international exposure will be at its greatest. There are many questions: No one knows what this new right wants, not even themselves. All we know is that there is a lot of irrational anger and that they want the PT out. Apart from this, there is no party behind them nor do they have any leadership or any defined goal. Never the less problems may arise when some better organized group or power will appropriate this energy and use it for nonconstructive purposes.

The pro-The Economist’s BS

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We find it strange that in a time when the western economies are going down the drain, some commentators still retain their colonialist ways of thinking that they know what is best for ex-emerging countries. The fact is that while the neo-liberals are try desperately to cling on to their failed theories, China and Russia are showing themselves more powerful than the west not only in economics but also in geo-politics. Strangely enough we don’t read articles in renowned magazines telling them what to do, after all they do not follow the neo-liberal hornbook, they are not democratic and at least Russia is as or more corrupt than Brazil.  We also note that the “bastions” of laissez-fair and of incorruptibility applauded their government’s when they deplete their population’s wealth to save banks involved in a sort of corruption that overshadows what happens in Brazil by miles.

Despite all the boo-ha Brazil is still growing more that the west, and if there are no missteps they will continue to keep away from the Economist’s recipes for disaster and will follow, who knows?, the Chinese example. Actually it is good to note that China has now long surpassed the US as Brazil’s main commercial partner and that, by the way, Germany, who is leading the European recovery is by no means a neo-liberal place. There the government plays a big role harmonizing its country’s issues rather than attending to the issues of companies that “cannot fail”.

Anyway bellow goes an excellent article exposing who the Economist represents, and, in our view, who is sinking the West:

http://www.counterpunch.org/2013/09/23/the-financial-core-of-the-transnational-capitalist-class/

Meet and Greet the Power Elite

The Financial Core of the Transnational Capitalist Class

by PETER PHILLIPS and BRADY OSBORNE

The institutional arrangements within the money management systems of global capital relentlessly seek ways to achieve maximum return on investment, and the structural conditions for manipulations—legal or not—are always open (Libor scandal). These institutions have become “too big to fail,” their scope and interconnections pressure government regulators to shy away from criminal investigations, much less prosecutions. The result is a semi-protected class of people with increasingly vast amounts of money, seeking unlimited growth and returns, with little concern for consequences of their economic pursuits on other people, societies, cultures, and environments.

One hundred thirty-six of the 161 core members (84 percent) are male. Eighty-eight percent are whites of European descent (just nineteen are people of color). Fifty-two percent hold graduate degrees—including thirty-seven MBAs, fourteen JDs, twenty-one PhDs, and twelve MA/MS degrees. Almost all have attended private colleges, with close to half attending the same ten universities: Harvard University (25), Oxford University (11), Stanford University (8), Cambridge University (8), University of Chicago (8), University of Cologne (6), Columbia University (5), Cornell University (4), the Wharton School of the University of Pennsylvania (3), and University of California–Berkeley (3). Forty-nine are or were CEOs, eight are or were CFOs; six had prior experience at Morgan Stanley, six at Goldman Sachs, four at Lehman Brothers, four at Swiss Re, seven at Barclays, four at Salomon Brothers, and four at Merrill Lynch.

People from twenty-two nations make up the central financial core of the Transnational Corporate Class. Seventy-three (45 percent) are from the US; twenty-seven (16 percent) Britain; fourteen France; twelve Germany; eleven Switzerland; four Singapore; three each from Austria, Belgium, and India; two each from Australia and South Africa; and one each from Brazil, Vietnam, Hong Kong/China, Qatar, the Netherlands, Zambia, Taiwan, Kuwait, Mexico, and Colombia. They mostly live in or near a number of the world’s great cities: New York, Chicago, London, Paris, and Munich.

Members of the financial core take active parts in global policy groups and government. Five of the thirteen corporations have directors as advisors or former employees of the International Monetary Fund. Six of the thirteen firms have directors who have worked at or served as advisors to the World Bank. Five of the thirteen firms hold corporate membership in the Council on Foreign Relations in the US. Seven of the firms sent nineteen directors to attend the World Economic Forum in February 2013. Seven of the directors have served or currently serve on a Federal Reserve board, both regionally and nationally in the US. Six of the financial core serve on the Business Roundtable in the US. Several directors have had direct experience with the financial ministries of European Union countries and the G20. Almost all of the 161 individuals serve in some advisory capacity for various regulatory organizations, finance ministries, universities, and national or international policy-planning bodies.

Estimates are that the total world’s wealth is close to $200 trillion, with the US and European elites holding approximately 63 percent of that total; meanwhile, the poorest half of the global population together possesses less than 2 percent of global wealth. The World Bank reports that, 1.29 billion people were living in extreme poverty, on less than $1.25 a day, and 1.2 billion more were living on less than $2.00 a day. Thirty-five thousand people, mostly young children, die every day from malnutrition.  While millions suffer, a transnational financial elite seeks returns on trillions of dollars that speculate on the rising costs of food, commodities, land, and other life sustaining items for the primary purpose of financial gain.  They do this in cooperation with each other in a global system of transnational corporate power and control and as such constitute the financial core of an international corporate capitalist class.

Western governments and international policy bodies serve the interests of this financial core of the Transnational Corporate Class. Wars are initiated to protect their interests. International treaties, and policy agreements are arranged to promote their success.  Power elites serve to promote the free flow of global capital for investment anywhere that returns are possible.

Identifying the people with such power and influence is an important part of democratic movements seeking to protect our commons so that all humans might share and prosper.

The full, detailed list is online and in Censored 2014 from Seven Stories Press

Peter Phillips is professor of sociology at Sonoma State University and president of Media Freedom Foundation/Project Censored.

Brady Osborne is a senior level research associate at Sonoma State University.

The Economist’s B.S.

Bulshit

The change in mood reflected from an article written two or three years ago and in the Economist’s recent cover shown above as well as in the article that follows inside is a clear portrait of this magazine’s right-wing monetarist bias, bu in this case it borders dishonesty.

The criticism is launched from a perspective that is becoming more and more obsolete and that has proven to be disastrous both in Europe and in the United States; the ne0-liberal one. The focus of the article is Brazil’s “outdated” state intervention based economy which, in the opinion of the editors, is what is scaring foreign investments away.

This is comical. For one, throughout the world banks aren’t willing to invest, not in Brazil nor anywhere else, so it is a fallacy to state that it is Brazil’s economic model that is putting investors off. The fact is that the big banks are currently sitting on their trillions, mostly obtained from the western governments salvage packages that detonated serious recessions.  They are waiting for the “outside” world to be on its knees, and in this situation the money owners will be able to force the theories that the Economist represent down their populations throats.

But looking more specifically at the mood change in the Economist’s covers, the practices that they criticized in their latest publication were as true when the first picture of “promising” Brazil was issued, as they are now. So we have to ask what has changed? It surely hasn’t been the Brazilian ruling party, not has it been their economic policies. Indeed what has changed is the balance of world power where so-called peripheral countries, namely China and Russia, have been showing themselves stronger than the west in terms of economic power and in throwing their weight on geopolitical decisions, namely Iran and Syria.

It is crucial to note that these two countries have been achieving better economic results without using the recipes that the Economist suggests for Brazil. Actually it is fair to say that the Brazilian economic model is closer to the Chinese and to the Russian ones than to the western neo-liberalized ones. So why doesn’t the Economist launch a similar attack on them? It would be pathetic wouldn’t it? But yes, the Brazilian State has an enormous stake in the economy and this has been so since the 1930’s when it was put in place by Brazil’s dictator/caudillo Getulio Vargas who ruled Brazil for a great chunk of the twentieth century and who, by the way, was by no means a communist.

Putting things straight, the US and its European followers have consistently backed Brazil while using such an economic model as an anti-communist bastion in the “dangerous” continent of Latin America during this entire period. They strengthened Brazil when Fidel Castro became too popular, and more recently they did it again when Hugo Chavez gained too much appeal for their taste.

What the Economist’s sponsors would not like to see is an independent Brazil, and for that matter an independent Latin America. This may explain the phone tappings on its president and may very well also explain the “spontaneous” protests that erupted throughout the country during F.I.F.A.’s Confederations Cup with a level of organization and a spread that only professionals can achieve. It seems to us that it is no coincidence that such an article would appear right after the Brazilian government denounced the illegal actions of the American one in the United Nations, also announcing that it will be moving towards an independent route on the internet. It also seems no coincidence that this kind of bad press should appear when the ramp up for the next elections is coming up and the pro-American candidate lags in third place, far behind two left-wing candidates.

For one thing, all of this shows that Brazilians do not buy the neo-liberal vision that God has blessed America with the right answers and the moral upper hand. It also leaves the question that if the West has failed miserably in the Middle East could it be turning its eyes on Latin America?

Brazil’s 80’s economic crisis vs. UK/US/Europe’s current crisis

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There is a strange sense of deja vu for ayone who felt in full the Brazilian economic crisis in the eighties and who is now being affected by the British/E.U. recession. With destiny having made me witness the same fate for two different people at two different times there is an empathy with what the young people are going through and a privileged position to compare both cultures and psychologies when reacting to bad times.

The first observation is that the Brazilian crisis was much worse. When the mixture of recession and galloping inflation hit the country, neither the population nor the government understood what was going on; the last case of hyperinflation and economic stagnation had been in Germany in the 1930’s and, apart from coming up with an ethnocentric and a bellicose dictatorship, there was no other known formula to counter that crisis. In the 1980’s, the Brazilian crisis was peripheral; the big international  financial powers were safe and for Brazilians there was no billionaire agreement to save their banks. From the big banks’ point of view they had little to lose and could afford a much more detached posture than they are having now. From the Brazil’s point of view, with no power to drag prosperous countries down the drain with them, it had no negotiation clout and in order to get any money the authorities had to bow low to the IMF’s demands which at the time was inexperienced in dealing with recessions and therefore much more draconian and insensitive.

For the people, there was also no national insurance network to help them, even if minimally, and this put many families in a distress that will be unknown for most Brits in their crisis experience. Dramas hit close to home and several friends and their families lived through suicides, economic exiles and degradation in all forms. In my case, the long absence of career opportunities after I graduated decreed an economic exile. This happened despite my being well-connected in Rio’s upper middle class, having a bachelor’s degree in one of the best economics universities in the country and being more fluent in English than any of my colleagues

The second observation is that despite being so different culturally both administrations opted for similar attitudes when faced with a crisis; namely cowardice, arrogance and following the disastrous conservative recipe of “tidying” up the house to make growth appear magically. In both cases, the beginning of the crisis was marked by the governments rushing to save the powerful hoping that they would come back with jobs for the less privileged. In Brazil it took some time to realize that this was not a pattern that big money followed, their only interest was to keep their money safe. It is anyone’s guess how long it will take the coin to drop in the UK.

The third observation is that when the crisis began in Brazil, the country was still under a dictatorship. This was perverse, in particular for its less protected citizens. The apparatus and practices that had created the inflation and the recession were never going to be the agents cure the problem. It was only when the country became a democracy and had the people backing a group of decision makers who were driven by no agenda other than solving the country’s issues that drastic and effective measures could be taken. In this the UK, Europe and the US are better equipped.

The fourth and last observation is that the indifference of the international community to the country’s plea ended up being its main strength for navigating out of dire straits. When they realized that they were in this alone the country’s financial and economic planners had sufficient autonomy to manoeuvre in unorthodox ways which, despite accidents on the way, ultimately put the country in its current favorable position. In this the “first world”, and in particular the UK, has more problems; the disproportionate power say that the financial institutions have in their economies allows for much less room for manoeuvre.

All in all it is interesting to see the countries who once left Brazil to die in the desert encountering the same problems further on down the line. The sad part is that there seems to be universal pattern where the people who did not participate in the bad decision-making end up being the ones who pay the price when things go wrong.

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