Friday, June 21, 2013

And now Brazil

Turns out that economics triggered Brazil's social unrest.  But how can that be—isn't Brazil the oft-touted model of an successful emerging economy?  Well that maybe true but even a successful economy is not immune from the global economic reality.  And the reality these days is that vast swaths of the world's economies are inhabited by people and governments who don't have money to spend.  And so Brazil's exports have crashed.  In the meantime, a successful economy has raised the incomes of many people.  So naturally, the petty real estate speculators are raising rent and property prices.  It's what they do after all.  So while their petty Predators raise prices whenever possible in an effort to mop up the country's middle-class income gains, the effect is to raise prices for everyone—even those who have never seen a bit of that income prosperity.

In the meantime, the Leisure Class mania for sport got Brazil into hosting the World Cup AND the Olympics.  The irony here is that football / soccer is popular in the poor areas of the world precisely because it is a sport that can be played without much expensive equipment.  Brazilians are crazy for sport because it designates social champions from the nation's slums.  And yet here they are, building hopelessly overpriced stadiums so that guys who travel by private jet will feel comfortable watching others play a game.  I have never been to Brazil but I can guess there are plenty of better places to spend $14 Billion for upgraded infrastructure.

Behind the protests, Brazil's dysfunctional economy

By Sébastian SEIBT (text) 20/06/2013

The anger of the Brazilian protesters is not dissipating.

On Tuesday, June 18, 50,000 of them took to the streets of Sao Paulo to express their anger at the government, as President Dilma Rousseff said that she was “listening” to the aspirations of a country in the throes of a widespread protest movement based in the country’s big cities.

Brazil President Dilma Rousseff on Thursday cancelled a trip to Japan planned for later this month as her government grapples with a mass protest movement.

But some are starting to grow impatient with the president’s reassurances, and deplore that she has not yet proposed any concrete solutions.

“The government doesn’t know what to say; they have no back-up plan,” one protester told Brazilian TV channel Globo News.

The absence of a quick fix can partly be explained by the nature of the protesters’ demands. The anger over the rise in the cost of bus tickets and the spending on preparations before the 2014 World Cup, which Brazil is set to host, has indeed shed light on the dysfunction of the country’s current economic model.

Spiralling inflation

The increase in bus ticket prices (0.20 real, or 0.06 euros) is symptomatic of the inflation that has been plaguing Brazil for several months. “Prices are going up at a rate higher than 6% per month, which is higher than the 4.5% objective established by the government,” explained Christine Rifflart, an economist specialised in Latin America at the French Economic Observatory (OFCE).

The rise in public transportation costs is part of a larger increase in the cost of living in Brazil. Prices of basic goods like tomatoes rose by as much as 90% in a year, for example. Rent has also been on the rise over the past several years, increasing by an average of 120% since 2008. “This inflation is essentially due to the increase in salaries,” Rifflart pointed out.

Consequently, the poorest Brazilians – those whose salaries have not risen – are getting poorer.

“Brazil remains one of the countries with the highest level of inequality when it comes to salary and access to social services,” noted Jérémie Gignoux, an economist at the Paris School of Economics.

If the Brazilian government succeeded in significantly lowering the poverty rate in the country, which went from 34% of the population in 2004 to 22% in 2009, authorities today are having a difficult time stopping the spiralling inflation.

The government is indeed stuck between two, somewhat conflicting priorities: the need to fight inflation and the need to stimulate the economy so that it is healthy again. Brazil’s economy, the seventh largest, grew “by only 0.9% in 2012, essentially because of low export levels,” Rifflart said – compared to an average annual growth rate of 3.6% over the past decade.

In order to revitalise the sale of Brazilian products abroad, the government could lower its currency rate in order to make exports less expensive, but that could end up worsening inflation.

The World Cup: a bitter pill to swallow

But it is not so much Brazil’s poorest residents who are in the street marching in protest against the cost of living. “Students and the middle-class Brazilians are also participating in the protests, which makes this a slightly unusual social movement,” Rifflart observed.

For the new middle class, the spending related to hosting the World Cup in 2014 is a hard pill to swallow. “They find it indecent to spend between 11 and 15 billion dollars to organise this sporting event, while public services and infrastructure need money,” the economist explained.

The government is therefore faced with middle-class citizens demanding public services that are up to the level of their new social status. “It’s the price Brazil is paying for the growth that allowed 30 million Brazilians to lift themselves out of poverty and join the middle class over the past several years,” said Stéphane Witkowski, chairman of the board at Paris’s Institute of Latin American Studies, in an interview with French daily Le Figaro.

Moreover, the quality of education available to most Brazilians remains “very weak”, noted Christine Rifflart, while the best schools are still largely attended by those who can pay for them: the richest Brazilians.

Brazilian authorities have said they are going to revamp public services. But concrete plans and proposals have been slow to emerge.

And, judging from the massive crowds that have made their way through the country’s big cities over the past 10 days, the protesters are no longer willing to wait. more

Brazil burning: The story of an illusion gone sour

Pepe Escobar  June 20, 2013

When, in late 2010, Dilma Rousseff was elected President after eight years of the impossibly popular Lula, a national narrative was already ingrained, stressing that Brazil was not the “country of the future” anymore; the future had arrived, and this was a global power in the making.

Protests in Brazil indicate what goes way, way beyond a cheap bus fare.

This was a country on overdrive – from securing the 2014 World Cup and the 2016 Olympics to a more imposing role as part of the BRICS group of emerging powers.

Not unlike China, Brazil was breathlessly exploiting natural resources – from its hinterland to parts of Africa – while betting heavily on large agribusiness mostly supplying, you guess it, China.

But above all Brazil fascinated the world by incarnating this political UFO; a benign, inclusive giant, on top of it benefitting from a lavish accumulation of soft power (music, football, beautiful beaches, beautiful women, endless partying).

The country was finally enjoying the benefits of a quarter of a century of participative democracy – and self-satisfied that for the past ten years Lula’s extensive social inclusion policies had lifted arguably 40 million Brazilians to middle class status. Racial discrimination at least had been tackled, with instances of the Brazilian version of affirmative action.

Yet this breakneck capitalist dream masked serious cracks. Locally there may be euphoria for becoming the sixth or seventh world economy, but still social exclusion was far from gone. Brazil remained one the most (deadly) unequal nations in the world, peppered with retrograde landowning oligarchies and some of the most rapacious, arrogant and ignorant elites on the planet – inevitable by-products of ghastly Portuguese colonialism.

And then, once again, corruption raised its Hydra-like head. Here’s a first parallel with Turkey. In Brazil as in Turkey, participative democracy was co-opted, ignored or forcefully diluted among an orgy of “mega-projects” generating dubious profits for a select few. In Turkey it revolves around the ruling party AKP’s collusion with business interests in the “redevelopment” of Istanbul; in Brazil around public funds for the hosting of the World Cup and the Olympics.

The new capitalist dream could not mask that the quality of life in Brazil’s big cities seemed to be on a downward spiral; and that racism – especially in the police – never went away while the demonization of peasant and Native Brazilian leaders was rampant; after all they were obstructing the way of powerful agribusiness interests and the “mega-projects” craze.

What can a poor boy do

There’s no Turkey Spring – as there’s no Brazilian Spring. This isn’t Tunisia and Egypt. Both Turkey and Brazil are democracies – although Prime Minister Erdogan has clearly embarked on a polarizing strategy and an authoritarian drive. What links Turkey and Brazil is that irreversible pent-up resentment against institutional politics (and corruption) may be catalyzed by a relatively minor event.

In Turkey it was the destruction of Gezi park; in Brazil the ten-cent hike in public bus fares was the proverbial straw that broke the (white) elephant’s back. In both cases the institutional response was tear gas and rubber bullets. In Turkey the popular backlash spread to a few cities. In Brazil it went nationwide.

This goes way, way beyond a cheap bus ride - although the public transport scene in Brazil’s big cities would star in Dante’s ninth circle of hell. A manual worker, a student, a maid usually spend up to four hours a day back-and-forth in appalling conditions. And these are private transport rackets controlled by a small group of businessmen embedded with local politicians, who they obviously own.

Arguably the nationwide, mostly peaceful protests have scored a victory – as nine cities have decided to cancel the bus fare hike. But that’s just the beginning.

The mantra is true; Brazilians pay developed world taxes and in return get sub-Saharan Africa quality of service (no offense to Africa). The notion of “value for money” is non-existent. It gets even worse as the economic miracle is over. That magical “growth” was less than 1% in 2012, and only 0.6% in the first quarter of 2013. The immensely bloated state bureaucracy, the immensely appalling public infrastructure, virtually no investment in education as teachers barely get paid $300 a month, non-stop political corruption scandals, not to mention as many homicides a year as narco-purgatory Mexico – none of this is going away by magic.

Football passion apart – and this is a nation where everyone is either an expert footballer or an experienced coach – the vast majority of the population is very much aware the current Confederations Cup and the 2014 World Cup are monster FIFA rackets. As a columnist for the Brazilian arm of ESPN has coined it, “the Cup is theirs, but we pay the bills.”

Public opinion is very much aware the Feds played hardball to get the “mega-events” to Brazil and then promised rivers of “social” benefits in terms of services and urban development. None of that happened. Thus the collective feeling that “we’ve been robbed” – all over again, as anyone with a digital made in China calculator can compare this multi-billion dollar orgy of public funds for FIFA with pathetically little investment in health, education, transportation and social welfare. A banner in the Sao Paulo protests said it all; “Your son is ill? Take him to the arena.”

Remember “Standing Man”

The neo-liberal gospel preached by the Washington consensus only values economic “growth”measured in GDP numbers. This is immensely misleading; it does not take into account everything from rising expectations for more participative democracy to abysmal inequality levels, as well as the despair of those trying to just survive (as in the orgy of expanded credit in Brazil leaving people to pay annual interest rates of over 200% on their credit cards).

So it takes a few uprooted trees in Istanbul and a more expensive shitty bus ride in Sao Paulo to hurl citizens of the “emerging markets” into the streets. No wonder the Brazilian protests left politicians - and “analysts” - perplexed and speechless. After all, once again this was people power – fueled by social media - against the 1%, not that dissimilar from protests in Spain, Portugal and Greece.

Unlike Erdogan in Turkey – who branded Twitter “a menace” and wants to criminalize social networking - to her credit Rousseff seems to have listened to the digital (and street) noise, saying on Tuesday that Brazil “woke up stronger” because of the protests.

The Brazilian protests are horizontal. Non-partisan; beyond party politics. No clear leaders. It’s a sort of Occupy Brazil – with a cross-section of high-school and college students, poor workers who struggle to pay their bus fare, vast swathes of the tax-swamped middle class who cannot afford private health insurance, even homeless people, who after all already live in the streets. Essentially, they want more democracy, less corruption, and to be respected as citizens, getting at least some value for their money in terms of public services.

The die is cast. Once again, it’s people power vs. institutional politics. Remember “Standing Man” in Taksim Square. The time to take a stand is now.  more

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