Bradesco published this week that confidence about the economy in Brazil is up. Inflation is taking a downward turn which leads to forecasts for low interest rates in the long run.
Besides, the Bank analysis says that:” Higher GDP and stronger FX are also expected, confirming the Brazilian economy’s favorable conditions and calmer political news flow.”
There is increasing violence in favelas in Rio. I have been watching these local newspaper reports:
Wagner Moura (through his character) in Elite Squad noted that the Brazilians use the same techniques as the Americans in Iraq for pacification. Through my own military training, I know the Brazilians use the same model as the Americans did in Iraq, based on techniques the Los Angeles Police consulted on. Wagner . 2014-16 may have been like the surge (Iraq 2006-07, see my blog/ book, http://www.lima37.com) for the olympics and world cup, and now it’s going to be like the years after the Americans left when all the security gains fell apart, ISIS came back; which may be good for certain businesses, including defense.
It would be interesting to see what Brazilians think of this situation.
Boa Sorte, Rio!
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.
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.
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.
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.
The OECD Forum in Paris.
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/