Se habla espanol aqui.
We’ve left Sao Paulo for Buenos Aires, about a two hours by air from sao Paulo, and crossed the Pope’s line from Portuguese indebted colonies to ones that were once part of Spain’s global empire. The ride in offers a tantalizingly different feel than the city we just left—even in the dark. It seems more open and less claustrophobic, but it may look totally different in the light of day tomorrow.
We discussed the question I raised, “If you were to have a postcard to send to others that said ‘This is Sao Paulo, what would be on it,’’’ and the question stumped us. It’s a difficult city to characterize. We did leave with a pretty good picture of the economy, partly a result of our visit today to an asset management firm that laid out pretty well the macro economy. One factor that’s important in evaluating these countries we’re visiting is that their conversion from dictatorships do democracies (Roosevelt famously described one Latin American dictator as an “S.O.B.—but he’s our SOB”. As I recall, Brazil rousted the generals in the 1980, and despite rampant inflation that reached 15% a month, doesn’t seem ready to reverse history. The politics are contested (there’s an important election in October), but the system seems viable.
The economists at Rio Bravo, the asset management fund confirmed much of what we’d been reading recently about Brazil’s economy. The most impressive single fact to me was the relative importance of Foreign Direct Investment brought by multinational corporations, which employ 2% of the work force, but produce over half the GDP, which is to say Brazilian industries are neither globally competitive nor productive (I wish I had asked about some of the great companies, including what used to be AmBev, which bought Stella Artois-Inbev—and Anheuser Busch, forming AB Inbev), indicating the need to improve worker productivity, which has stalled. The most pronounced trend, though, was the reduction of financial inequalities, which are due more to labor earnings than to social programs.
They were also expansive on some of the directions they thought the government needed to take the economy—in particular, spending on transportation/infrastructure/education (especially in the primary grades. The universities are free, but the needs are great before college). Legal and labor issues, as well as taxes, have also, they argued, impaired the economy. One example they gave was the difficulty in firing people—courts tend to be friendly to labor, so people laid off sue, and companies settle out of court, making doing business costly (as I said, 79th worst place to do business). The other area of concern is savings, which are really low. Interestingly, the country ranks #1 in optimism about the future. Perhaps the coming World Cup and the Olympic Games will fuel the optimism, but the events will sorely test the infrastructure of Brazil. We were a little surprised to see so few advertisements or trinkets touting the coming games.
Their conclusion was that one needs to take a long-term view of the Brazilian economy, so maybe that’ll be my excuse to return in a few years.
In the meantime, it’s “Buenos noches” from Buenos Aires—it’s 1230 at night