The Brazilian Case

I have seen in my career companies joking about how much Brazil is not serious, but the logos of their Brazilian clients remain up and strong in their sales decks, so I have decided to clarify a few things about culture, history and the current state of politics to see if things improve in the corporate world that I’m in.

Why Brazil?

I’m a Brazilian living in the UK for 10 years but I have never turned my back on my roots. Business-wise Brazilian jobs rarely pay better than north-american companies but very often pay better than European ones, so I believe it is worth it for everyone to follow what is going on there.

In terms of politics, Brazil is unbeatable, it is one of the most entertaining dynamics anyone could expect and I’m going to describe in more detail what is going on from my perspective.

Please first let me give you some context and discuss cultural and political topics that we need to get out of the way.

Brazil with Z or S

When the military overruled the Brazilian empire and turned the country into a republic, the republicans changed the name to Brazil with Z, and it stayed like that for about 30 years or so. Lots of countries use S now, but it doesn’t really matter, use whatever you feel comfortable with.

Brazilians Are Always Late

This is one of my favorite pre-conceptions about Brazilians, and I used it well.

I’ve been to meetings where a Canadian, North-American, British, Japanese, German, Dutch… pretty much every one of the world arrive late to a meeting at one point in their lives. What is their excuse? None! If I am late, what is mine? “Well, sorry I’m late but I’m Brazilian, so I can!” People laugh and I get a “get-out-of-jail” free card.

In business, Brazilians are not late more often than other people, but socially… gosh, that is another story. If you go to a gig (or a show) that starts on time, half of the audience won’t even be there. If you are invited to a dinner party and you are there on time, it means you are there to help setting it up. If you are on time and just sit on the sofa and do nothing until 30 minutes later when people start to arrive, you are just being rude.

Funny, but true.

Brazil Is A Corrupt Country

True, but not more than any other, I assure you of that (allegedly).

Of course, the fact that lobbying is illegal and that political parties are not allowed to receive money to vote in favor or against a bill doesn’t help because it is impossible to stop that from happening.

Imagine if lobbying was illegal in the USA, what do you think would happen? Possibly would become the most corrupt country on earth, simply because lobbying is such a large market that billions are spent in buying political power.

I remember a colleague of mine who lives in Minnesota saying that his son was never put to play a soccer match in the team where he was training for a year because his mum didn’t sign a contract between the club (where she was a councilor of) and the coach's private company. This minor day-to-day corruption is everywhere.

If you think it is any different in Europe you are mistaken, allegedly.

The Capital Is Rio And The Language Is Spanish

F*ck you.

To be fair, Rio was the capital until the 70’s when Brasilia was built in the middle of the country to attract more people to empty regions and to prevent the capital from being bombarded by the sea like the nazis did in the 40s.

About the language, Brazil was almost Dutch but never Spanish. In fact, the Dutch occupation in the north has left millions of afro-brazilians with bright blue eyes and dark skin, it is beautiful.

Don’t go to Rio without a local guide

That is bullsh*t.

Rio is awesome and the favelas are quite safe if you want to visit one. I remember going to a samba party (Roda de Samba is how they call it) and a black girl was dancing like a pro with her body moving fast, her cardio must be superb. When I spoke with her, she was a dentist, quite an accomplished professional, had travelled the world, and just loved samba.

I just love that lifestyle.

Animus Relationship With Other Countries

The only time Brazil was abusive against another country was with Paraguay in the mid-1800’s. That war was awful but after that moment in time, all conflicts started getting resolved diplomatically and so the international relations move permanently to the side of the pen, not the sword.

Of course, there were the first and second world wars where Brazil has taken part, especially in the latter because its army helped to invade Italy, but there was no animosity there, it was just business.

After that episode, the great diplomat Oswaldo Aranha has managed to gather countries around a single entity, the UN, and that is why the Brazilian president is always the first one to speak at the UN meetings.

There were diplomatic issues in the 70s when French boats were fishing too close to the Brazilian coast and the marines were aggressively kicking them out. But it wasn’t so serious as it happens all the time, now with Brexit this is pretty much an issue for Danish fishermen who were fishing in UK waters, this stuff never ends.

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Alright, after taking that out of my system I can talk about today.

Democrats and Republicans

There is no such polarization in Brazil, there are many political parties that are quite powerful in different regions, so I will use the terms "Democrat" and "Republican" as their original meanings (not referring to the US-based parties).

A democrat is in favor of democracy (voting + house of representatives) and republican is in favor of a republic (not imperial or dictatorial). For example, since I believe in democracy and I’m not an imperialist I am, by definition, a democrat republican.

Antagonizing Sides Of The Brazilian Elections

Of course, when you have an election you will have to slam the opposition when you have the chance. (Not by using fake news of course, which will be talked about in this article.)

However, when you win the election you need to put all of that aside and call the opposition to talk and negotiate. If a politician takes the antagonizing electoral campaign to heart and carry that over to the government, it is not only childish, it is terrible for a democratic environment where agreements need to be made to release funds to take care of abandoned children and elderly, for example (which is a problem for the state to solve, in my view).

Two moments in recent history where this unproductive antagonization happened:

1) When Dilma won the re-election in 2016 for a very small margin. The losing candidate has used all of his influence and money (allegedly) to ignite an impeachment process. Dilma wasn’t liked by anyone, even by people in her own party, and so the process ran super smoothly against her and her term was cut short.

2) When Bolsonaro won the election by leveraging the ever more popular antagonization of the labor party (Dilma’s and Lula’s party). After winning he fired a few of his supporting team because his sons wanted to run the show and corruption started to pile up fast (and some assassinations, allegedly). The Bolsonaro family has increased 20x fold the number of militaries in the federal government and he resigned from his party so now he answers to no one and the army is on his side... can you see a dictatorial coup boiling up slowly?

Having antagonical elections is normal, but to have an antagonizing government is bad for everyone.

Fake News

There are several institutions in that country fighting hard against fake news. The supreme court has an investigation, the parliament has a few others, the federal police also... I remember when the parliament opened a CPI (parliamentary commission of inquiry - o something like that) the third son of Bolsonaro deleted his twitter account.

He was trying to hide his fake news spree but it worked against him, but the investigation has reached pawns in the game just not the ones we need it to, at the moment.

The Amazon

This forest covers many countries but its majority is in the north of Brazil mostly in the state of Amazonas. Although curious about that whole place I have never been even close… too expensive and too many bugs.

Man-made fire has always been a problem especially in a region half of the size of the United States (which makes any law-enforcement very difficult, especially with the lack of roads - which are impossible to build as the forest "eats it out" in months) but this time it is different and more dangerous because Bolsonaro has reduced the protected area to please his mega-farmer supporters.

The Mega-Farmers

Farmers in a country with such a large primary market (food and minerals) and hundreds of millions of arable hectares of land are always going to have a strong political influence. The mega-farmers are called latifundiaries, which is a generalization of private estates with 30 or 50 thousand kettles or sheep.

These people (and companies) have airplanes to move around their properties and scare the kettle off to a corner or another of the fields. There are coffee companies that spend millions of dollars a year in ERP and HCM software, so it is a pretty big business.

There is a general feeling amongst farmers in that country (I know because half of my family are farmers too) that food and money work against nature; so, the more arable land available the more food (and money) we will have, correct? This affirmation needs to change in their mind because it is not correct.

Tomato farmers in Italy produce 20 times more than Brazilians. In other words: the lack of faith in technology by older, more conservative, communities is part of the problem that drags the Brazilian economy down, in my view.

Political Bias Between Farmers and Conservationists

Whereas during labor government the ciliary woodlands were protected by law, which reduced by almost 20% the arable land, in the current government (2021) some of it was cut back nationwide and specific regulations for the amazon region was made to loosen up what farmers can and cannot do as well.

I’m not trying to defend the labor’s initiatives for the environment, they were bleak in that subject, to say the least. Most of the regulations that protect the environment come from other strong parties like Green and Rede.

In other words, the country is getting more and more brown especially now that the Minister of the Environment was sacked due to allegations that he was helping to smuggle timber from natural forests. It is a terrible shame and these crooks will pay for it, as the supreme court, the environmental agency and many congresspeople have signaled.

The Original Peoples

The original peoples also are part of this political discussion, of course.

There is a respectable federal independent body that takes medicine to remote locations and protects these remote populations from predatorial behavior from local governments and businesses that want their land for mining or farming.

There are major problems caused by latifundiaries taking over the land from amerindians by brut force and only the national guard can do something about that when guns are involved in the discussion.

I don’t want to generalize because this reality is changing and bad news like that is rarer and rarer… but we should never lower our guard and keep vigilant over the behavior of large farming companies.

This is hard for me to talk about because I have family and friends who are farmers, but I have some experience outside of this close group. I used to see my parents planting rice and making good money, but I also have been in deep conversations with farmers all over the world.

In Brazil alone, I have known farmers and horse breeders from the center of the country (Mato-Grosso state where I lived for a year), coconut and carnauba wax farms in the northeast (Piaui state where I also lived), large vineyards, kettle, and rice farms in the south.

To give you an idea of distances, from the estate of Rio Grande do Sul where I’m from until the estate of Piaui (where I lived in 2011) are 5 hours straight flight non-stop. These are very, very different regions, cultures and markets, so I believe I know a bit more than the average person about this topic.

Poverty and Taxation

My take on poverty is this: there is nothing wrong with being poor as long as everyone has the right to live in a flat or a house and can eat and have a decent life… and this requires a large state and a large state require large taxes.

The US and Brazil, two capitalist countries, have around the same amount of people below the poverty line. These are 30 to 40 million people who can barely eat without humanitarian help (numbers pre-covid).

Socialist countries like England, France and Germany, that charge 40% income tax (and the bigger your income is, the bigger your taxes will be) poverty is almost none. Of course, there are fewer millionaires buying boats and throwing bonga parties in Europe, but we also don’t have poverty.

If you don’t want to pay taxes, move to Nigeria or Brazil where there are zero taxes on dividends and you won’t pay more than 15% income tax if you own a business (and work as a contractor, for example) so if you are unhappy with the amount of taxes you pay, how about moving over there?

In other words, if you have some money, you have a choice: do you want to pay for a larger state, or do you want to keep your left-overs and live with abandoned children asking for food at your doorstep?

I know this is real for millions of people around the world so I’m trying to be human in this controversial topic.

The Economy

Brazil has always been in the top 20 in terms of GDP and has always grown, even when the inflation was 25% per month. Inflation is great for a government that has debt because inflation eats it away along with people’s buying power, which is bad but better than deflation.

Hyperinflation forces people to increase the size of their kitchen cupboards to be able to fit more stuff. With 25% inflation, you will be able to buy equivalent to 750 dollars 30 days after you have received 1000 in your bank account. People rushed to the supermarket to spend all that they have received before they couldn’t buy the same groceries anymore.

Even in this scenario the economy kept on growing and companies like Microsoft and Oracle have opened their first offices in that country and lots of investment was being made but you can imagine that the regular person who remembers that time is scared-to-death of inflationary movements in the currency.

During Dilma’s presidency, this was exactly what happened and people went mental… this is happening now (August 21) but people seem very quiet, I don't know why.

I can’t explain the current apathy but my take is that people will quietly vote for the labor party again in the next elections.

What is going on today?

Today Brazil doesn’t rely on the IMF, doesn’t have hyperinflation, there is no military dictatorship torturing musicians and actors, still has one of the largest mining markets in the world (with Vale), still has the fifth largest TV company and if you don’t know Petrobras, well, you know nothing about the oil business. Budweiser, Qilmes, and Burger King are owned by Brazilian investors, the national health system and the primary school meal programs are still amongst the largest in the world and research institutes like Fiocruz and Butanta are still up and strong enabling pharma industries all over the world to grow and thrive.

The current president is quite controversial, but this is just a hiccup in that republican democracy, and it wasn’t the first time, read about Janio Quadros when you have the chance.

What is next?

We need to wait for the election next year, in 2022. It is hard to say how its economy and society will behave and being so it is hard to predict where consumption and the future’s market will go (even harder than it is normally).

But remember that Brazil is a country of extremes and an economy still in development which normally incur big fluctuations of the stock market and currency exchange. Please remember, if prices fluctuate downwards, they also fluctuate upwards in the same measure.

If you invest in Brazil you may lose 50% of it, which will take you 10 years to get back)… but if its prices go up, you could make 50% in the first year, so it still works but it is not for investors with stomach issues.

I’m a proud Brazilian and hope to help professionals like you to understand what is going on and make your decision of investing in Brazil or not (which I do myself, this is not a recommendation) but now with more information.