10 Takeaways on Brazil’s Dramatic Political and Economic Landscape
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WorldCity’s Global Connections event on the condition of Brazil took place the morning after that nation’s highest court opened an investigation into President Michel Temer following a report that he was recorded approving a bribe for imprisoned former House speaker Eduardo Cunha to “keep quiet”.
Those events and more created quite the backdrop for discussion at Global Connections.
Not only is the current president in trouble. Brazil’s previous president, Dilma Rousseff, was impeached and her predecessor, Luiz Inácio Lula da Silva, is the focus of the judge who started the investigation known as “Lava Jato,” or Car Wash, Sergio Moro. Two of Brazil’s best-known multinationals, the national oil company Petrobras in particular and construction giant Odebrecht are at the heart of the scandal, which has led to more than 100 arrests and dozens of prison sentences.
The Global Connections panel made up of three gentlemen with extensive ties and business in Brazil fielded fascinating political questions but also economic ones from the Miami audience.
After all, Brazil is Miami’s top trade partner, with $14.27 billion in trade in 2016, almost doubling the amount of Miami’s next largest trade partner (Colombia).
With that in mind, here are the ten biggest takeaways from the latest WorldCity event:
1. “Give it a little time.”
Flavia Vigio, Executive Director for Miami and Latin America at Golin, asks a question at Global Connections.
“Do you think what’s happening (politically) gives a bad reputation to Brazilian businesses?” asked Flavia Vigio, Executive Director at Golin for Miami and Latin America.
The short answer from the panel was no. Panelist Carlos Bretos noted Brazil is still one of the top-10 economies in the world and 400 of the 500 biggest companies still conduct business there.
“There are several things that put Brazil in good perspective, said Bretos, vice president of enterprise sales and general manager at Lexmark Latin America.
“Haste makes waste. Give it a little time. Tread water,” said panelist Thomas Skola, a lawyer and member of the Brazilian-American Chamber of Florida. “Before this week, you saw the numbers on some of the other investment products. They were going forward.”
2. Wells Fargo seeing business uptick
Claudio Cury (right) from Wells Fargo Capital Finance answers a question at Global Connections.
“In the past year, we have seen an increase in volume coming from Brazil compared to last year. It has been very positive,” said panelist Claudio Cury, managing director of the supply chain finance division at Wells Fargo Capital Finance.
Last year, projects larger than $3 billion were put on hold in Brazil, but “nothing was lost,” said, Cury. “Just postponed.”
“For the country to take a bigger participation in the worldwide market, there are several reforms that have to happen,” said Bretos. “That is right now what is under risk.”
The political fallout and the next group of politicians who come to power will play a massive role in dictating whether Brazil moves towards larger economic growth.
3. Justice is taking center stage in Brazil
Carlos Bretos from Lexmark Latin America earned his MBA in Sao Paulo, Brazil.
“It is important to get political stability though when you want to put your money into a country,” said Bretos. “The growth of justice in Brazil, I think Brazil is leading right now in terms of taking out caps and limits to go (investigate) and do whatever is needed to put in jail who has to be in jail. This is new for us.”
4. Brazilian consumer response to political climate
Global Connections: Our Experts Prognosis, from the Hyatt Coral Gables
“How much of that (political uncertainty) permeates to the consumer level?” asked Rodrigo Seabra, Director of Sales in Latin America for BDP International. “Are people starting to postpone investments?”
The answer from the panel was Brazilians are resilient. Most indices there were doing well until the latest news of the investigation into President Temer.
“There is a cultural change in Brazil,” said Cury. “What was acceptable before is no longer acceptable. This dramatic event is actually helping them wake up and say, ‘No more.’”
This year there have been three IPOs in Brazil. Last year there was only one. Locals are investing into the Brazilian economy.
5. Brazil’s market is still competitive as evidenced by prices
“I just came back from Brazil less than two months ago. I was representing a client. We were looking for warehouse space. There was no vacancy,” said Juan Gallardo, director of Terra Capital and Consulting. “The prices there were higher than Miami. I do believe it is a really thriving economy.”
Gallardo was in Sao Paulo looking for that warehouse space.
6. Brazil setting fantastic example for rest of Latin America
Gallardo added his excitement to the Brazilian panel as a Mexican about the example Brazil is setting for the region, “and if I may say, the entire world. It’s going to flush (corruption) out.”
Another audience member also chimed in with praise for the panel’s country.
“In 2014, I used to read a lot about censorship for the journalists who are there, some violence at the time,” said Stnley Rigaud, manager of international economic developments at the Beacon Council. “That’s a plus that things are being reported, and the censorship has gone down…It’s good that we’re seeing these revelations.”
7. Does President Temer finish his term?
Thomas Skola, attorney and member of the Brazilian-American Chamber of Florida, adds his legal insight to the current state of Brazil.
The panel was asked to make this prediction, with Cury first opining if Temer stays, investments will slow in Brazil.
“Is there a tape? Is it valid?” Skola added from a legal perspective on the matter. “That’s newspaper fodder. If it’s newspaper fodder, then you start getting a movement for impeachment that’s hard to stop.”
8. Follow the money
Cury said more than 300 million Brazilian real worth of bribes have taken place (the equivalent of more than $90 million). One senator received 2 million Brazilian real alone.
“More will come out of this,” said Cury. “Who else received all that money?”
“Delay leads to stagnation,” Skola noted though. “It’s the same thing that’s happening in Washington D.C. with all the commotion there. You’re not getting your tax code reformed or a bunch of other things that need to be done.”
9. Will former President Lula go to prison?
If the events revolving around Brazil’s current president weren’t dramatic enough, its former President Luiz Inacio Lula da Silva is also being investigated for corruption, all the while he sits atop recent polls of 2018 presidential election candidates. However, he also scores the highest rejection rate.
When WorldCity President Ken Roberts asked the panel of Lula’s chances in 2018, Brazilian-American Chamber of Commerce of Florida President Ericson Reis offered his opinion from the audience.
“I don’t think Lula is a risk. Lula will go to prison,” said Reis.
10. Will former President Lula be President again in 2018?
Lula was a champion for the Brazilian working class in the 1980s, helping end two decades of military dictatorship, before eventually serving as president from 2003-2011. Now, popular anti-corruption judge Sergio Moro has questioned him about potentially receiving a beach apartment in return for helping a construction company win government contracts and hiding ownership of that apartment.
Skola said he may be leading in 2018 election polls, but there really are no other candidates right now. Cury said two weeks ago he would have given Lula a 10 percent chance of being president again. Now? “Fifty percent.” Bretos noted Lula’s party did lose a ton of local positions recently.
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