Weekend Economists Que saudade! Brazil, Part 2 August 28-30, 2015
Que saudade!
The word saudade (sah-ooh-dah-jee) has no direct translation in English, and it's a major source of linguistic pride for Brazilians. Use Que saudade! (kee sah-ooh-dah-jee) when you miss something so desperately, you have a heartache over it. People say Que saudade! when they remember their best friend who's now living far away, or their childhood beach. Brazilians also often say simply Saudades! at the end of e-mails to tell you they're missing you terribly....A Few Favorite Brazilian Portuguese Expressions: http://www.dummies.com/how-to/content/a-few-favorite-brazilian-portuguese-expressions.html
Last weekend, I dragged you through the highlights of recorded history on Brazil up to the 19th century. One of the reasons I was so ignorant about Brazil is because while Brazil was booming, the US was coming apart with the Civil War, so history books focused on events close to home. The US was too busy, in other words, to do much meddling South of the border.
That all changed after a fragile peace was established in these Reunited States...as we shall see.
But what about modern Brazil? Can we get a taste of it without actually flying down to Rio?
The black-and-white film (later computer-colorized) was directed by Thornton Freeland and produced by Merian C. Cooper and Lou Brock. The screenplay was written by Erwin S. Gelsey, H.W. Hanemann and Cyril Hume, based on a story by Lou Brock and a play by Anne Caldwell. Linwood Dunn did the special effects for the celebrated airplane-wing-dance sequence at the end of the film.
The story is silly, but the music! and the Dancing! Special Effects!
= new reply since forum marked as read
FROM FEBRUARY--THE PICTURE CAUGHT MY EYE
CAMPAIGNING for a second term as Brazil’s president in an election last October, Dilma Rousseff painted a rosy picture of the world’s seventh-biggest economy. Full employment, rising wages and social benefits were threatened only by the nefarious neoliberal plans of her opponents, she claimed. Just two months into her new term, Brazilians are realising that they were sold a false prospectus. Brazil’s economy is in a mess, with far bigger problems than the government will admit or investors seem to register. The torpid stagnation into which it fell in 2013 is becoming a full-blown—and probably prolonged—recession, as high inflation squeezes wages and consumers’ debt payments rise. Investment, already down by 8% from a year ago, could fall much further. A vast corruption scandal at Petrobras, the state-controlled oil giant, has ensnared several of the country’s biggest construction firms and paralysed capital spending in swathes of the economy, at least until the prosecutors and auditors have done their work. The real has fallen by 30% against the dollar since May 2013: a necessary shift, but one that adds to the burden of the $40 billion in foreign debt owed by Brazilian companies that falls due this year.
Escaping this quagmire would be hard even with strong political leadership. Ms Rousseff, however, is weak. She won the election by the narrowest of margins. Already, her political base is crumbling. According to Datafolha, a pollster, her approval rating fell from 42% in December to 23% this month. She has been hurt both by the deteriorating economy and by the Petrobras scandal, which involves allegations of kickbacks of at least $1 billion, funnelled to politicians in her Workers’ Party (PT) and its coalition partners. For much of the relevant period Ms Rousseff chaired Petrobras’s board. If Brazil is to salvage some benefits from her second term, then she needs to take the country in an entirely new direction.
Levy to the rescue?
Brazil’s problems are largely self-inflicted. In her first term Ms Rousseff espoused a tropical state-capitalism that involved fiscal laxity, opaque public accounts, competitiveness-sapping industrial policy (see article) and presidential meddling in monetary policy. Last year her re-election campaign saw a doubling of the fiscal deficit, to 6.75% of GDP. To her credit, Ms Rousseff has at least recognised that Brazil needs more business-friendly policies if it is to retain its investment-grade credit rating and return to growth. This realisation is personified by her new finance minister, Joaquim Levy, a Chicago-trained economist and banker and one of the country’s rare economic liberals. However, Brazil’s past failure to deal promptly with macroeconomic distortions has left Mr Levy to grapple with a recessionary trap.
To stabilise gross public debt, he has promised a whopping fiscal squeeze of almost two percentage points of GDP this year. Part of this is coming from the removal of an electricity subsidy and the reimposition of fuel duty. Both measures have helped to push inflation to 7.4%. He also plans to curb subsidised lending by public banks to favoured sectors and firms. Ideally, Brazil would offset this fiscal squeeze with looser monetary policy. But because of the country’s hyperinflationary past, as well as more recent mistakes—the Central Bank bent to the president’s will, ignored its inflation target and foolishly slashed its benchmark rate in 2011-12—the room for manoeuvre today is limited. With inflation still above its target, the Central Bank cannot cut its benchmark rate from today’s level of 12.25% without risking further loss of credibility and sapping investor confidence. A fiscal squeeze and high interest rates spell pain for Brazilian firms and households and a slower return to growth. What makes this adjustment perilous is the political fragility of Ms Rousseff herself. On paper she won a comfortable, though reduced, legislative majority in the October election. Yet the PT is already grumbling about Mr Levy’s fiscal policies—partly because the campaign did not lay the ground for them. Ms Rousseff suffered a crushing defeat on February 1st in an election for the politically powerful post of head of the lower house of Congress. Eduardo Cunha, who vanquished the PT’s man, will pursue his own agenda, not hers. Not for the first time, Brazil may be in for a period of semi-parliamentary government.
The country thus faces its biggest test since the early 1990s. The risks are clear. Recession and falling tax revenue may undermine Mr Levy’s adjustment. Any backsliding may in turn prompt a run on the real and a downgrade in Brazil’s credit rating, raising the cost of financing for government and companies alike. Were Brazil to see a repeat of the mass demonstrations of 2013 against corruption and poor public services, Ms Rousseff might be doomed...
A LOT OF WATER HAS RUN UNDER THE BRIDGE SINCE FEBRUARY....AND THE ECONOMIST IS NEARLY FASCIST IN ITS ATTITUDES....
http://www.economist.com/blogs/graphicdetail/2015/03/economic-backgrounder
DOOM AND GLOOM COMMENTARY AT LINK...COMPARED TO MOST NATIONS, INCLUDING OURS, BRAZIL IS DOING PRETTY GOOD.
Rutgers University Warns Students - "There Is No Such Thing As Free Speech" | Zero Hedge
Ironically, U.S. college campuses are rapidly becoming the least free, most censored places in the country. Many people have commented on this, including high profile, enormously talented comedians such as Chris Rock and Jerry Seinfeld. In fact, Chris Rock was so appalled that he stopped playing colleges because audiences had become “too conservative” Before getting all bent out of shape, this is what he meant:
Not in their political views — not like they’re voting Republican — but in their social views and their willingness not to offend anybody. Kids raised on a culture of “We’re not going to keep score in the game because we don’t want anybody to lose.” Or just ignoring race to a fault. You can’t say “the black kid over there.” No, it’s “the guy with the red shoes.” You can’t even be offensive on your way to being inoffensive.
Although I’ve touched upon this subject before, I haven’t given it nearly the amount of attention it deserves. That said, I would suggest rereading a powerful post published earlier this summer, A Professor Speaks Out – How Coddled, Hyper Sensitive Undergrads are Ruining College Learning. Here’s an excerpt:
Things have changed since I started teaching. The vibe is different. I wish there were a less blunt way to put this, but my students sometimes scare me — particularly the liberal ones.
I once saw an adjunct not get his contract renewed after students complained that he exposed them to “offensive” texts written by Edward Said and Mark Twain. His response, that the texts were meant to be a little upsetting, only fueled the students’ ire and sealed his fate. That was enough to get me to comb through my syllabi and cut out anything I could see upsetting a coddled undergrad, texts ranging from Upton Sinclair to Maureen Tkacik — and I wasn’t the only one who made adjustments, either.
The current student-teacher dynamic has been shaped by a large confluence of factors, and perhaps the most important of these is the manner in which cultural studies and social justice writers have comported themselves in popular media. I have a great deal of respect for both of these fields, but their manifestations online, their desire to democratize complex fields of study by making them as digestible as a TGIF sitcom, has led to adoption of a totalizing, simplistic, unworkable, and ultimately stifling conception of social justice. The simplicity and absolutism of this conception has combined with the precarity of academic jobs to create higher ed’s current climate of fear, a heavily policed discourse of semantic sensitivity in which safety and comfort have become the ends and the means of the college experience.
Moving along to today’s post, I want to highlight two different stories that I came across today demonstrating just how far “higher education” has cratered in recent years. First, let’s turn to Rutgers University, whose “Bias Prevention & Education Committee (BPEC)” recently put out an alert that began with the following statement:
(It's right there, in the fine print). Of course I'd like to point out that all censorship has it's costs and consequences too, especially self-censorship.
Complete story at - http://www.zerohedge.com/news/2015-08-27/rutgers-university-warns-students-there-no-such-thing-free-speech
none of the real serious topics are missing...
Everywhere you look there’s still more evidence that the world economy is grappling with a global deflationary supply glut.
To be sure, this wasn’t supposed to happen.
Trillions in central bank cash and seven years of ZIRP across DMs was supposed to give a defibrillator shock to global demand and trade. Instead, the wealth effect never trickled down (surprise!) and wide open capital markets only served to keep insolvent producers in business, contributing to still more supply as everyone hangs on until the bitter end. As China’s slowdown continues unabated, the commodity hoarding becomes more evident and indeed on Thursday, The International Grains Council reported that global grain stocks are forecast to hit 447 million metric tons, the highest level in 29 years.
From the report:
End-season grain stocks in 2015/16 (aggregate of respective local marketing years) are now placed at 447m t, up fractionally y/y. While carryovers of wheat, barley, sorghum and oats are expected to increase, maize inventories are seen retreating slightly from last year’s levels. Trade in the year ending June 2016 is forecast to be down by 2% y/y. As China has recently been a heavy importer of feedstuffs, including sorghum, barley and DDG, traders are wary of potential changes to state support mechanisms, which could alter buying patterns.
And more from Bloomberg:
Wheat and corn futures in Chicago are heading for a third year of losses after back-to-back bumper global harvests and world wheat production this year will match last season’s record 720 million tons, the IGC said. European wheat crops escaped damage from heat this summer, and prospects for the U.S. corn harvest have improved, said Amy Reynolds, a senior economist at the council.
Corn futures declined 6.2 percent this year on the Chicago Board of Trade and wheat slipped 17 percent. The commodity is trading about 6 percent above a five-year low set in May.
France, the European Union’s largest wheat grower, will harvest 41 million tons of the grain, the IGC said. That’s higher than FranceAgriMer’s outlook earlier this month for a record 40.4 million tons. Surging supplies of grain have filled up silos in Rouen and Dunkirk and sent futures in Paris to a nine-month low.
Complete story at - http://www.zerohedge.com/news/2015-08-27/global-grain-stocks-30-year-highs-mean-food-deflation-next
On 15 November 1889, worn out by years of economic stagnation, in attrition with the majority of Army officers, as well as with rural and financial elites (for different reasons), the monarchy was overthrown by a military coup.
Early republic
In half of the first 100 years of republic in Brazil, the Army exercised power directly or through figures designated by it. Getúlio Vargas, for example, was the military's confidence man brought to power in October 1930.
The "early republican government was little more than a military dictatorship, with army dominating affairs both at Rio de Janeiro and in the states. Freedom of the press disappeared and elections were controlled by those in power". In 1894, following the unfoldings of two severe crises, an economic along with a military one, the republican civilians rose to power.
Little by little, a cycle of general instability sparked by these crises undermined the regime to such an extent, that by 1930 in the wake of the murder of his running mate, the defeated opposition presidential candidate Getúlio Vargas supported by most of the military, led a successful revolt. Vargas was supposed to assume power temporarily, but instead closed the Congress, extinguished the Constitution, ruled with emergency powers and replaced the states' governors with his own supporters.
In the 1930s, three major attempts to remove Vargas and his supporters from power occurred: in the second half of 1932, in November 1935, and in May 1938. Being the second one, the communist revolt, used as an excuse for the preclusion of elections, put into effect by a coup d'état in 1937, which made the Vargas regime a full dictatorship, noted for its brutality and censorship of the press.
In foreign policy, the success in resolving border disputes with neighboring countries in the early years of the republican period, was followed by a failed attempt to exert a prominent role in the League of Nations, after its involvement in World War I. In World War II Brazil remained neutral until August 1942, when the country entered on the allied side, after suffering retaliations undertaken by Nazi Germany and Fascist Italy, due to the country having severed diplomatic relations with Axis powers in the wake of the Pan-American Conference.
With the allied victory in 1945 and the end of the Nazi-fascist regimes in Europe, Vargas's position became unsustainable and he was swiftly overthrown in another military coup, with Democracy being "reinstated" by the same army that had discontinued it 15 years before. Vargas committed suicide in August 1954 amid a political crisis, after having returned to power by election in 1950.
Contemporary era
Several brief interim governments succeeded after Vargas's suicide. Juscelino Kubitschek became president in 1956 and assumed a conciliatory posture towards the political opposition that allowed him to govern without major crises. The economy and industrial sector grew remarkably, but his greatest achievement was the construction of the new capital city of Brasília, inaugurated in 1960. His successor was Jânio Quadros, who resigned in 1961 less than a year after taking office. His vice-president, João Goulart, assumed the presidency, but aroused strong political opposition and was deposed in April 1964 by a coup that resulted in a military regime.
The new regime was intended to be transitory but it gradually closed in on itself and became a full dictatorship with the promulgation of the Fifth Institutional Act in 1968. The oppression was not limited to only those who resorted to guerrilla tactics to fight the regime, but also reached institutional opponents, artists, journalists and other members of civil society, inside and outside the country (through the infamous "Operation Condor"
. Despite its brutality, like other totalitarian regimes in history, due to an economic boom, known as an "economic miracle", the regime reached its highest level of popularity in the early 1970s.
Slowly however, the wear and tear of years of dictatorial power that had not slowed the repression, even after the defeat of the leftist guerrillas, plus the inability to deal with the economic crises of the period and popular pressure, made an opening policy inevitable, which from the regime side was led by Generals Geisel and Golbery. With the enactment of the Amnesty Law in 1979, Brazil began its slow return to democracy, which would be completed during the 1980s.
Civilians returned to power in 1985 when José Sarney assumed the presidency, becoming unpopular during his tenure due to his failure in controlling the economic crisis and hyperinflation inherited from the military regime. Sarney's unsuccessful government allowed the election in 1989 of the almost unknown Fernando Collor, who was subsequently impeached by the National Congress in 1992. Collor was succeeded by his Vice-President Itamar Franco, who appointed Fernando Henrique Cardoso as Minister of Finance. In 1994, Cardoso produced a highly successful Plano Real, that, after decades of failed economic plans made by previous governments attempting to curb hyperinflation, finally granted stability to the Brazilian economy, leading Cardoso to be elected that year, and again in 1998.
The peaceful transition of power from Fernando Henrique to his main opposition leader, Luís Inácio Lula da Silva, who was elected in 2002 and re-elected in 2006, proved that Brazil had finally succeeded in achieving its long-sought political stability. Lula was succeeded in 2011 by the current president, Dilma Rousseff, the country's first woman president and as such one of the most powerful women in the world.
In June 2013, following the viral phenomenon of worldwide manifestations (such as the "Arab Spring", the "Occupy Wall Street" and the "Spanish Indignados" , numerous protests erupted in Brazil. For days, hundreds of thousands of people took to the streets in several cities to protest. Initially a movement against the increase in public transport fares, it assumed gigantic proportions, sparked by the excessive use of force by the state polices, turning into a series of huge demonstrations by groups and individuals, angry about a range of issues (including new stadium projects for international sports events, demands on quality of public services, anger about corruption, and opposition to a constitutional amendment proposal, PEC 37, which is interpreted by some as an attempt to curb repression of corruption). Thus it became a movement containing conflicting ideologies, with so far no single political agenda nor recognizable leadership.
Government and politics Today
The form of government is that of a democratic republic, with a presidential system. The president is both head of state and head of government of the Union and is elected for a four-year term, with the possibility of re-election for a second successive term. The current president is Dilma Rousseff, who was inaugurated on 1 January 2011. The President appoints the Ministers of State, who assist in government. Legislative houses in each political entity are the main source of law in Brazil. The National Congress is the Federation's bicameral legislature, consisting of the Chamber of Deputies and the Federal Senate. Judiciary authorities exercise jurisdictional duties almost exclusively. Brazil is a democracy, according to the Democracy Index 2010.
The Brazilian Federation is the "indissoluble union" of the States, the Municipalities and the Federal District. The Union, the states and the Federal District, and the municipalities, are the "spheres of government". The federation is set on five fundamental principles: sovereignty, citizenship, dignity of human beings, the social values of labour and freedom of enterprise, and political pluralism. The classic tripartite branches of government (executive, legislative and judicial under a checks and balances system) are formally established by the Constitution. The executive and legislative are organized independently in all three spheres of government, while the judiciary is organized only at the federal and state/Federal District spheres.
National Congress of Brazil, seat of the legislative branch.
All members of the executive and legislative branches are directly elected. Judges and other judicial officials are appointed after passing entry exams. For most of its democratic history, Brazil has had a multi-party system, proportional representation. Voting is compulsory for the literate between 18 and 70 years old and optional for illiterates and those between 16 and 18 or beyond 70.
Together with several smaller parties, four political parties stand out: Workers' Party (PT), Brazilian Social Democracy Party (PSDB), Brazilian Democratic Movement Party (PMDB) and Democrats (DEM). Fifteen political parties are represented in Congress. It is common for politicians to switch parties, and thus the proportion of congressional seats held by particular parties changes regularly. Almost all governmental and administrative functions are exercised by authorities and agencies affiliated to the Executive.
Law
Brazilian law is based on Roman-Germanic traditions and civil law concepts prevail over common law practice. Most of Brazilian law is codified, although non-codified statutes also represent a substantial part, playing a complementary role. Court decisions set out interpretive guidelines; however, they are seldom binding on other specific cases. Doctrinal works and the works of academic jurists have strong influence in law creation and in law cases.
Supreme Federal Court of Brazil serves primarily as the Constitutional Court of the country.
The legal system is based on the Federal Constitution, which was promulgated on 5 October 1988, and is the fundamental law of Brazil. All other legislation and court decisions must conform to its rules. As of April 2007, there have been 53 amendments. States have their own constitutions, which must not contradict the Federal Constitution. Municipalities and the Federal District have "organic laws" (leis orgânicas), which act in a similar way to constitutions. Legislative entities are the main source of statutes, although in certain matters judiciary and executive bodies may enact legal norms. Jurisdiction is administered by the judiciary entities, although in rare situations the Federal Constitution allows the Federal Senate to pass on legal judgments. There are also specialized military, labor, and electoral courts. The highest court is the Supreme Federal Court.
This system has been criticized over the last few decades for the slow pace of decision-making. Lawsuits on appeal may take several years to resolve, and in some cases more than a decade elapses before definitive rulings. Nevertheless, the Supreme Federal Tribunal was the first court in the world to transmit its sessions on television, and also via YouTube. More recently, in December 2009, the Supreme Court adopted Twitter to display items on the day planner of the ministers, to inform the daily actions of the Court and the most important decisions made by them.
Military
The armed forces of Brazil are the second largest in Latin America by active personnel and the largest by the level of military equipment. It consists of the Brazilian Army (including the Army Aviation Command), the Brazilian Navy (including the Marine Corps and Naval Aviation), and the Brazilian Air Force.
The Army has 235,978 active personnel. The states' Military Police and the Military Firefighters Corps are described as an ancillary forces of the Army by the constitution, but are under the control of each state's governor. The Navy once operated some of the most powerful warships in the world with the two Minas Geraes-class dreadnoughts, which sparked a South American dreadnought race between Argentina, Brazil, and Chile. Today, it is a green water force and one of the ten navies that possess an aircraft carrier. The Air Force has about 700 manned aircraft in service.
Brazil has not been invaded since 1865 during the Paraguayan War. Additionally, Brazil has no contested territorial disputes with any of its neighbours and neither does it have rivalries, like Chile and Bolivia have with each other. The Brazilian military has also three times intervened militarily to overthrow the Brazilian government. It has built a tradition of participating in UN peacekeeping missions such as in Haiti and East Timor.
We know China is big. By some measures, China is now a bigger chunk of the global economy than the US.
But it’s also slowing.
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This slowdown matters. A lot. China is the world’s largest consumer of—in no particular order—copper, steel, iron ore, automobiles, aluminum, mobile phones, nickel, rice, tobacco, meat, Swiss watches, television, rubber, potash, energy, robots, beer, machine tools, red wine, flavored milk, rare earths, wheat, coal, as well as plenty of other raw materials and products. And because of China’s seemingly endless demand for such sundries, companies—and entire countries—have built their business and economic strategies around catering to the People’s Republic. That means China’s problems are the world’s problems.
Brazil Beware
Look at Brazil. China is its largest trading partner, buying up tons of Brazilian iron ore and soy beans. Weak Chinese demand has hammered prices of such commodities. For example, prices for iron ore—the key ingredient for Chinese steel mills—are down more than 60% over the last two years.
Predictably that has meant Brazilian iron ore export revenues have fallen, too.
Here’s the thing about buying Brazilian commodities. To do it, you need Brazilian money. In general, rising exports push up the value of a currency. On the other hand, falling exports push a currency down. That’s what happened to the Brazilian real. It lurched lower by more than 30% against the US dollar over the last two years.
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The feeble currency, in turn, has set off inflation in the country…
… which prompted the central bank to start raising interest rates…
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… which has slowed down the economy. Brazil might have entered a recession in the second quarter.
SEE HOW OTHER NATIONS FARE, AT LINK
