How joining OECD affects Brazilian business?

Brazil made a formal application to join OECD. Getting into the club, at last and no longer an outsider. What changed?

Raising the bar

This week Minister of Finance Henrique Meirelles was in Paris for the OECD Forum. He participated in a ministerial panel. Talking to a group of delegates from Diplomacia Civil, Minister Meirelles said that the country’s entry into the organization would bring gains for both parties. According to Clara Nogueira, he stressed that for Brazil, membership would mean a richer and more direct dialogue with the most influential countries in the world economy, as well as increasing the possibility of intensifying trade relations with the private sectors of such countries. The minister also informed that being a member of the OECD would allow Brazil to modernize its economy, coming into contact with new technologies from other countries.

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Minister Henrique Meirelles with the Diplomacia Civil delegates

More compliance, more international participation

According to an executive in the insurance sector: “OECD let Brazil participates in these meetings because they want to persuade us gradually”. He explained that in the insurance business, OECD has agreements about how export credit agencies can support their exporters in terms of conditions, assistance, risk spread, compliance with environmental requirements; and those foreign agencies are bound by these agreements in their Brazilian business.

The rational is simple. A Brazilian exporter will be at a disadvantage when competing internationally. The Brazilian will have to pay a disproportional risk spread. OECD sets  a standard, an independent benchmark that is recognised and prestigious.

In fact, the OECD’s tradition of rule making in the area of officially supported export credits, dates back to 1963. By exchanging information on Members’ export credits systems and business activities, OECD has a major influence in national export credits policies relating to good governance issues. Not a bad idea when we think that it includes  anti-bribery measures, environmental and social due diligence.

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Why are you afraid of globalization?  

The idea that there is a fear of globalization was the most interesting thing I heard today at the OECD Forum.


The lounge was crowded.

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From the OECD Forum in Paris

The OECD Forum opened yesterday in Paris to debate the most pressing social and economic challenges confronting society. Leaders and influencers from all sectors of civil society are here. The speakers include former and current heads of state and government, leaders of NGOs and trade unions, academics and the press.

I met some Brazilians there and we talked about the possibility of Brazil finally getting into the “club”. Getting an OECD membership is a big step towards committing to international governance. It would help attract foreign investment to Brazil. An OECD analyst told me that many members have joined when there were scandals going on in there countries. So apparently the domestic turbulences in Brazil would be not a problem.

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The OECD Forum in Paris.

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When will Brazilian GDP recover?

For 2017, the Brazilian government’s official number is 1% growth, with the recovery starting already in the first quarter.

However, according to O Estado de S. Paulo newspaper, the Minister of Finance, Henrique Meirelles, has already admitted in private conversations with members of Congress that the economy should something around 0.5% in 2017. for the last quater of 2016, a decline of 0.5% quater over quater GDP. Minister Meirelles also said that he believes the worst in the economy is already over.

Besides, the recent interest rate cut should boost the economy. Nevertheless the minister admits that employment levels should not rebound soon.

A touch of irony?

Regarding the BCB’s decision to cut interest rates, Meirelles commented that: “contrary to what happened in the past, the interest rate reduction is now solid. It is based on falling inflation.” (My personal opinion is that he is right. It is important to stress the differences between the Temer’s vs Rousselff/Lula’s administrations).

Source: Bradesco BBI Briefing and Estado de São Paulo  http://politica.estadao.com.br/blogs/coluna-do-estadao/o-pior-na-economia-ja-passou-diz-henrique-meirelles/

 

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Optimism returns, The Economist

http://www.economist.com/news/business/21709352-stand-leader-little-optimism-returns-brazilian-firms-emerge-gloom?frsc=dg%7Cd

…. A positive trend, albeit brief

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Brazil’s economy The only way is up

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Cheer up. The Economist is calling a bottom

Brazil’s economy

The only way is up

The recession rages on. But there are incipient signs of recovery

FOR many Brazilians, the high point of the Olympic games in Rio de Janeiro came in the rain-drenched Engenhão stadium on August 15th. That was when Thiago Braz (pictured) won an unexpected gold medal, and set an Olympic record, in pole vaulting. Brazil’s beaten-down economy is nowhere near performing a feat that would remind anyone of Mr Braz’s jump. But it may be starting to pick itself back up.

The signs are still tentative. Manufacturers are investing again: imports of capital goods were 18% higher in dollar terms in June than in the same month last year, the first year-on-year rise since September 2014. Industrial production increased in June for the fourth consecutive month after two years of nearly uninterrupted decline. Firms’ stocks of unsold goods are starting to shrink, and the number of lorries on motorways has stopped falling.

 

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Brazil versus Rousseff: democracy won

The Brazilian Congress impeached the head of the executive, president Dilma Rousseff. All senators voted, under the processual supervision of the president of the Supreme Court, Ricardo Lewandowski. The result: 61 in favor and 20 senators against the impeachment.

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Presidents of the Senate, Renan Calheiros and of the Supreme Court, Ricardo Lewandowski during the judgment of the impeachment of president Rousseff.

Is it a coup d’etat? Funny to even make this question after seeing more then 70 hours of judgement. Brazil is a republic. The executive, the legislative and the judiciary are equal powers. The law that rules impeachment was made in 1950.

As Kenneth Rapoza, Forbes contributor points out:

The impeachment is not a coup because:

  • The constitution has a list of impeachable offenses. Breaking the budget law is one.
  • The decision to impeach comes from Congress, starting in the Lower House.
  • The Senate is the final judge and jury on the matter, regardless of third-party interpretations of the law. Senators interpret the law.
  • Dilma’s attorneys appealed to the Supreme Court at least two times, citing procedural errors. Once, the Court agreed and took Cunha out of the committee to rule on whether to impeach in the Lower House. All other appeals were dropped.
  • Dilma can appeal the Senate impeachment vote to the Supreme Court. If it was a coup, she could not appeal.
  • Dilma lives in the Presidential Palace. Usually a coup is an illegal takeover that runs the president out of town.
  • Dilma is being investigated for receiving illicit campaign funds from Petrobras, but she is not being tried for anything related to the Petrobras scheme. Therefore, it is irrelevant that Cunha’s co-conspirators are tainted by that scandal.  If the co-conspirators had also allowed for, or spent money the government did not have, then we could compare the two ‘crimes’ .
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