I recently had the pleasure of chatting about business and ‘things going on’ in Brazil with Dr Ronaldo Veirano. Ronaldo heads Veirano Advogados, a leading Brazilian law firm (www.veirano.com.br ) and is Honorary Consul for Australia in Rio de Janeiro.
He is such a well-versed and urbane man, sharp, insightful and yet with a calm perspective of Brazilian and indeed international positions.
Ronaldo is positive about the next few years in Brazil, albeit that there are regulatory structures that need simplifying. He sees the start to major investment in Rio de Janeiro’s massive oil extraction and management business. The last 2 years have featured growing M & A interest in Brazil for the US, Europe…and a little from Australia. Investment into and business around infrastructure projects is broadly moving well, even if some skill shortages are slowing the pace. The major construction companies have bolstered their skill bases and in Rio the major municipal/State projects are progressing well. Although one major roadway, rushed to meet an early deadline, already needs re-working due to poor quality. One hopes those lessons will be learned early rather than later. In Rio, Porto Maravilha is well advanced and the 'oil economy' is taking shape.
The man in the street finds it tough and President Dilma Rouseff frequently tweaks policy and changes laws to assist, via price controls for example on electricity and petrol, minimum wage mandates, tax relief and taxes on imports, employment regulations. The question of whether these store up large imbalances that at some stage ‘burst’ is asked but…
For the World Cup, it seems that the host cities have been pushed hard, perhaps too much, to fund projects, including venues, that will not reap post-World Cup benefits and run the risk of being ‘white elephants’. He notes the issues of land ownership that threatened to slow progress on two or more Rio 2016 Olympic sites/venues have been resolved and has much praise for the business skills of the recently appointed COO, Sidney Levy.
This year’s World Youth Day in July, with the Pope visiting Rio is being seen as a first test of some facilities – and local residents are being campaigned to house visiting pilgrims during their few days in the city. Some expect up to 5 million people to visit Rio during the week-long program although in truth the numbers will probably be fewer.
Professor Bolivar Lamounier, a Sao Paulo-based political commentator and risk adviser, member Academic Committee of the Club of Madrid, has recently written a viewpoint on Brazil’s middle classes – approx 45-50% of the population. He contends that continuing economic growth is sustaining the rise of credit-driven upward social mobility and asks how these groups will generate their future income, especially as some 40% of such families are currently in debt. He sees the answer in training and education but declares Brazil’s capacity to deliver these is “disastrous”; and that it will take time to raise standards and build capability. Of course, most BRICs and developing countries share the same problem. Lamounier contends this lack of skill shows in the way new infrastructure projects are being planned and implemented by government, “just too inefficient”. He would have preferred to see much more major investment and management from overseas.
He also feels that Brazil does not yet exercise international influence or gain recognition commensurate with its economic rank as 6th largest economy. Lamounier expects the 2014 presidential elections to be far more competitive than the previous two.
Brazil is, of course, not alone among current emerging economies in having to contend with serious socio-political and economic problems and distortions. And we have seen that in other countries over recent years. Ultimately, the challenge is for strength of governance and open systems to prevail and provide a base for stability and spreading equality. As Brazil’s once-booming economy stalls, public sector “super salaries,” as they have become known, “are feeding newfound resentment over inequality in the nation’s unwieldy bureaucracies. Powerful unions for certain classes of civil servants, strong legal protections for government workers, a swelling public sector that has created many new well-paying jobs, and generous benefits that can be exploited by insiders have all made Brazil’s public sector a coveted bastion of privilege.”
“Some historians blame Portugal, the former colonial ruler, for creating a powerful public bureaucracy in which mandarins wield great influence and earn outsize salaries.” “Still, in the developing world, Brazil’s Civil Service is envied in some aspects for its professionalism.” (Extracts from a New York Times article by Simon Romero, 10 February 2013.)
Reporters Without Borders (RWB) released a report in January titled “The Country of Thirty Berlusconis”. Brazil, they say, has narrowed the gulf between rich and poor in the past decade, enhanced its diplomatic influence in the western hemisphere and is now attracting not only investors but also new immigrant waves from a Europe in recession.
However, 5 journalists killed in 2012 in connection with their work puts Brazil among the world’s five deadliest countries for the media.
The report describes the concentration of media ownership noting it contrasts starkly with the extent of its territory and extreme diversity of its civil society. Ten leading business groups owned by as many families still control the mass media market.
According to RWB, Brazil falls far short of providing all of its citizens with equal and untrammelled access to online information. The Internet is much more subject to censorship and blocking than in neighbouring countries, contrary to the image that Brazil is promoting of itself ahead of the World Cup and Olympics. Google Brazil had to take down or modify around 300 items relating to the 2012 elections. Altogether, it was asked to remove more than 2,300 items between January and June 2012. “Expensive and imperfectly developed, the Brazilian Internet has not yet won its democratic spurs, or has won them only as regards to the technical and practical aspects.”
The report states “the “colonel” culture is at the root of the media’s strong dependence on the centres of power in Brazil”…with Colonels today being landowners, industrialists, politicians. The Brazilian media system is controlled not only by broadcast frequency allocation but also by the allocation of state advertising, a major source of income for the media. They state that the press law that curiously survived the return to democracy in 1985 and the adoption in 1988 of the democratic constitution, rendered most of (the Constitution’s) provisions obsolete. This hangover from the dictatorship continued to serve as a means of pressuring journalists, especially unruly local journalists, in the name of “protecting the honour, privacy and image of persons,” above all politicians who wanted to maintain their influence over the media.
The report takes to task the coverage of the government’s “pacification” of favelas as one-sided and geared totally to image issues. “Pacified favelas are in the minority and do not include those in the western part of the city where quadrilhas – criminal gangs consisting of retired and active service soldiers and police officers – prevent any media presence.” As an aside, a recent note by Bloomberg estimates that if the economic activity of the favelas was separately counted, it would amount to a GDP of US$6 billion.
Reporters Without Borders advocates a complete overhaul of the current legislation governing the media. The new legislation should include strict clauses on media ownership and media funding through state advertising, ‘Net neutrality’, space for community broadcasters and an equitable system of accreditation for the 2014 World Cup and the 2016 Olympic Games.
The full report can be obtained at http://en.rsf.org/IMG/pdf/rsf_bresil_gb.pdf