Monday, 19 February 2018

Macro Levels Trends – (Return to) Brazil – Re-Cap, General Considerations and the View From On High at Davos 2018




This weblog – at long last – returns to the subject of Brazil and its socio-economic present and future, and so overall investment potential.

As seen previously, having enjoyed a record growth period for nigh on two decades from the mid 1990s onward, but inevitably suffered because of the negative chain reaction effects of: firstly the American created Great Financial Crisis, then the European Sovereign Debt Crisis and so inevitably the concomitant “Contraction Effect” to the BRICs and 'Next 11' nations.

Brazil like most was overtly exposed given its innate global inter-connectedness. But those previous twenty years of prosperity aswell as its socialist start-point means that – unlike others – by comparison Brazil enjoys a level of theoretically readily adjustable socio-economic leeway (and thus a buffer) by which to steer its future course; by 'trimming its fat' seen across heavy bureaucracy and generous social provisions.

As a recent FT graphic displayed, EM central and institutional banking sought to effectively increasingly de-couple from the US$ ( historic global reserve currency) since 2006, by generating core national debt precisely for domestic B2B and B2C banking purposes. Greater self-sufficiency to avoid replays such as the Latin American Debt Crisis of the 1980s and early 1990s in which ineffable close ties to the US$ both assisted stability yet also ironically created domestic collapses. So since 2006, EM central banks have effectively retained an overall near static lending level from the USA, and grown the presence of domestic currency based lending both at home and across EM nations. Hence for the MINTS and CIVETS a far greater portion of their own foreign debt resides in Reals, Rubles, Rupees and of course Renminbis.

Thus whilst EM countries are still much affiliated with the West and likewise “caught a serious cold” when America sneezed enormously in 2008/9, whilst the West still effectively experiences its 'New Norm' of slow growth within Main Street and thus very financial slow trickle-down to the masses given the massive over-capacity in capital and labour to be absorbed (labour participation rates still questionable), EM nations have been far better placed because of their changed stance toward domestic reliance and cross-EM cooperation.

So whilst the GFC debunked the previous ideology of secure EM “de-coupling”, whilst at the complex nexus of 'macro-led' international high finance it was not yet so, it seems that domestically from both national treasury budgeting and sector/company exporting perspectives, there is reason to believe – by way of delayed and lesser recession and more rapid rebound – that the strong foundations of ongoing “de-coupling” are indeed in place.

Those AEMs (Advanced Emerging Markets) with broader economic activity bases across varied sectors and well balanced Domestic vs Foreign Trade-based Current Accounts, have been typically well positioned to expect renewed growth through positive government incentives and yet stronger FDI interests in their own emergent commercial spheres.

As seen, China going through its own period of economic rotation from an infrastructure/supply and export-led model to that of an increasingly domestic/demand internally-led stance; so as to perpetuate its 'soft landing' transformation. In comparison to such a subtle and thus far well-managed economic shift, India with its far greater shadow-banking and black-markets economic environment was forced to undergo drastic currency reforms designed to both create better transparency and prompt an increase consumer spending. By contrast again, instead of seeking to prop-up a devalued Rubel because core Oil and Gas market reliance, Russia sought to await renewed global expansion, subtly expand FDI in other arenas such as agriculture, and vitally sought to expand its own geographical influence - to both typically distract its populace from its own economic woes in the period, aswell as seeking to gain a return to the Russian fold those ex-Soviet peoples whose lives had not been transformed by EU expansion, because of their location in the effective 'buffer-zone' between East and West..

Thus on paper, and thereafter seen in the sharp rise of the Bovespa, to domestic and worldwide investors, since 2016 Brazil stood-out as the sole “unencumbent” of the all too obvious socio-economic headwinds affecting the other other BRICs, MINTS and CIVETS.

And additionally as the pumping heart of pan Latin American/Mercosaur economies – themselves individually undergoing very visible socio-economic change, from Venezuela’s unrest to new Modernisation of the West Coast countries through much from rare materials extraction to direct 'low cost' oceanic connectedness with China – Brazil still leads the way as an economic model of the region and Central America.

So much so that the recent interest by America's Boeing into Embraer was hardly a surprise; to both immediately strategically off-set Airbus-Bombardier alliance efforts and to gain a large stake in the 'high-value' aspect of pan LatAm growth itself more reliant on air-transport to quickly cross the Amazon and Andes.

However, by 2017 that positivity had shifted somewhat toward temperate caution, with the combined negative effects of a concerning 2 issues.

Firstly, the specific effects of still evident foreign trade contraction, affecting aspects of both its primary and secondary industries. China's own ongoing shift in iron-ore, general metals, minerals and agricultural products meant that slower demand and less elastic pricing curves continued to be felt in primary sectors. Whilst in secondary sectors, activities ranging from food processing and sub-component assembly, still awaited meaningful new consumer and business growth in what were the still cautious Triad regions, likewise negotiating harder in procurement to buoy their own unit margins.

Secondly, the ongoing affect of the “Lavo Jato” (carwash) scandal, which unearthed widespread 'kick-back' contract corruption (in oil and construction sectors) across what should be independent, separate political and commercial realms. Allegations spread across both sides of the political divide, with the innate irony that a recent prosecution of people's favourite “Lula” (Luiz Inacio Lula da Silva) has not undermined his attractiveness; whether true or not, that judgement believed by the masses as politically driven to ensure tabled and unpopular necessary reforms.

Unsurprisingly given its long drawn out affair, “Lavo Jato” has created a quake of confidence across politics, industry and of course the general public; leading to one-day strikes and for a time apparent simmering mass unrest – since seemingly quelled.

All of this undid much of the good-work experienced over the previous 20 years that had led to fundamental 'bottom-up' social improvement, to the extent that in recent years the expanded middle-class has enjoyed better living standards than not just those others within EM nations, but also on-par and better than many Europeans and Americans.

With such political ructions there have been worries by some overtly 'nay-say' international investors that Brazil might possibly returning to its “dark days” and “lost decade” of the 1980s.

Though it must be recognised that precisely because of a more internationalist and equitable experience of 21st century globalisation – beyond the previous 'Washington Grip' - and the innate failure of centrally-planned Communism, much of Latin America is itself today the pro-markets counterpoint of its old 1950s – 1980s Red-Led self.

To try to dismiss such homeland and foreign angst about Brazil via a powerful new economic template, Michel Temer was appointed President in August 2016. (His replacing the impeached Dilma Rousseff) so as to serve-out the remainder of the Party's elected term, (until January 2019).

Since appointment he has indeed set-out the new governance template – and expectantly suffered loss of popularity for doing so. The vision to roll-out very necessary socio-economic reforms that seek to re-shape what is now (realistically on a worldwide basis) a Brazil that is notably less competitive than its former yesteryear self. From that of an overtly 'socially burdened' nation to a far more future-facing and dynamic country. Indeed to regain a competitive strength reminiscent of its 1950s/60s and 1990s heydays.

This can only be achieved via reforms virtually “across the board”, but with specific focus upon the endemically damaging and untenable budgetary costs of (globally comparatively) over-entitled elder citizens, who enjoy retirement at 54 upon overtly generous state and private incomes.

The off-set of this unpopular move is far greater support for the young by way of education etc, and critically including those much marginalised, the newer immigrant population (both legal and otherwise) that have travelled from neighbouring countries to seek better lives. (The sizeable regional impact of Venezuela's economic problems creating overland migration into Brazil).

In essence, to take from the 'comparatively rich' and give to the 'new poor'. Obviously many who have retired remember their negative experiences of the bad old days, which when added to their productive efforts over the last twenty years means that have gone 'from famine to feast', and see themselves as deserving of their awaited retirement benefits; even if regarded as 'Champagne Socialists'.

Foreigners appear then to question whether Brazil/Brasilia will continue to engage in what is now possibly a BRIC led new version of global capitalism; possibly operating as the guiding 'go-between' influence amongst AM and EM participants. Or whether the country returns to a protectionist stance akin to the 'ISI' (Import Substitution Industrialisation) paradigm of seventy years ago; itself now prompted again by Trump's 'America First' stance.

The outcome remains to be seen, but given the massive shift in EM collaborative power, a retraction back to an inward-biased economy appears unlikely, especially since itself was between the 1930s and 1980s wholly based upon the advantages of foreign owned technology transfer, as well illustrated by the American, German, Italian and French industrial nameplates of its notionally domestic auto-industry, even if badge-engineered as homegrown.

Indeed, today thanks to past international cooperation, Brazil relative to the 'Next 11' countries and beyond sits as their industrial and commercial patron and mentor. So whereas once the domestic patronage system of the land was reviled by the underling workforce, today as 'EM Patron', Brazil sits in an enviable position; its increasingly privatised industries, array of private firms and new university spin-outs and incubators, able to take advantage of their highly competitive position; if given the freedom to do so.

Temer's government recognises Brazil's path toward gain from such increased global potential, one that would see the descendants of Brazil's own immigrants of a century ago, themselves seek fortune in the wider world.

But the fact remains that to do so the success of Temer's reforms are indeed still very necessary, and indeed provides an economic uplift for the most marginalised people.

Rationally compare these change in retirement and so pensionable age, which is not materially detrimentally on an immediate and personal basis, to the far more harmful actions of various Western governments. Whereby to reduce costs the already very minimal social security net is often wrongfully withdrawn; done so knowingly, and to the detriment of the recipient so creating further social marginalisation.

In contrast, Brazil is undertaking its budget balancing in a fair and open way.

The Reforms would allow Brazil to supercharge further transformative FDI (so allowing for further climb up the value-added/value-creation ladder) and allow Brazilians to re-embrace the very idea of positive globalisation.

And at worst, if a new ISI path is ultimately formed – no doubt centred on further imported IT and Digital Sciences knowledge – with New Protectionism, the Reforms would provide yet greater budget flexibility to encourage greater prevalence of domestically nurtured copy-cat industries and services across an ever broadening spectrum.


The President's Speech at the WEF -
(Davos, late January 2018)

To gain insight the remainder of this web-log summarises Temer's speech at the recently held World Economic Forum meeting in Davos, Switzerland; introduced by Prof Schwab with the sentiment of new future “Smart Globalisation”.

Loose transcript...

“Brazil is back in business, with more opportunity for trade and business, following the most severe recession we have ever faced, yet returned to 'growth track' illustrated by the fact that inflation – once in double digits – was under control at 3% - very close to the base-line level. Interest rates likewise from previously 14% to 7%. SEOs in the past suffered losses in the billions, but now enjoy substantial profits, crop yields beating all records, the 2017 trade balance over US$60bn, and up until November 2017 the Net FDI totalled $64bn.

The 'country-risk' has dropped significantly, from over 500 basis points in Jan 2016 to today's 200 basis points - achieved in 1 year and 8 months by our Administration in Office; not 4 or 8 years (as might have previously been so). In this short time we have drastically changed the face of Brazil, reforms aimed at modernising and up-grading the economy and business environment, the labour market, public management practices and administratyion of SOEs. The current agenda the most serious of reforms for many dacades.

Five key elements (principles and objectives) underpin this historic journey:


1. Responsibility -
Dealing (in a straight-forward manner) with the inherited problems. A diagnosis of a serious Fiscal crisis requiring equally seriously matched Fiscal responses. Transparency of public accounts as opposed to half truths, no pretence or pretexts or excuses. A Budget-Cap ceiling extending to 20 years now operational, to ensure proper rebalancing of government accounts. Such consolidation efforts allowed the 2017 posting a Primary Fiscal Deficit well below the target and expectations.
The flip-side of the Fiscal coin being Social Responsibility – often empty rhetoric – and only truly tenable when public accounts are in good order, so giving the space to overcome still evident high inequality.

2. Dialogue -
It was absolutely necessary to join forces across the previously broken-down triumvite of Government-Administration-Judiciary (ie Legislative) to face enormous challenges. The ability to listen and to compromise. Doing this we have garnered support.

3. Efficiency -
Passing crucial reforms for Brazilian productivity and so the competitiveness of Brazilian products. An example is labour reform, previously stuck in the past from decades ago, now reflective of today's reality in the 21st century. To match international precedents, critically re-balancing the protection of employees against the legal certainty of employers.

We likewise reformed Education, particularly Secondary education, wherein an old, obsolete standardised curriculum has been reshaped and led by the needs of the job market, which far better directs students toward their professional call or vocation, from a young age.

And engaged the whole of the Public Administration to enhance the Business Environment, slashing layers of bureaucracy, red-taped stream-lined or removed. All aimed at Import or Export, Open or Close a business, via the automation of registration processes, computerising Tax and Customs procedures. After all, an entrepreneurs time is too valuable to be spent in queues, or government service counters.

4. Rationality -
Investors now find a Brazil with a legal framework that recognises that the state operatus cannot and should not do everything, adopting a realistic model conceptions and privatisations with a safe regulatory framework. In a year and a half we have tendered 75 projects to the private sector, with a further 75 likewise in 2018.

These include: Ports, Airports, Highways, Railways, Power Transmission Lines, Gas and Oil Deposits, which all offer opportunity to both international and domestic investment companies. Also strengthened the autonomy of Regulatory Agencies, whilst acting on a strong technical and independent basis.

A new Bill passed per SOEs and their professional management, objective rules per the Oil and Gas sector. Therefor releasing the state from obligation with Petrobras in specific operations.

5. Openness -
We live in a world where isolationist trends are gaining ground, yet also know that protectionism is not a solution. When closed, we are closed to new technologies, new ideas, new possibilities, and effective solutions to our shared problems. We are further opening Brazil to the global economy and positioning the country within that scene. By working with Mercosaur partners we have restored the Bloc's original intent for truly free markets, identifying trade barriers and seeking to remove them, investment agreements and even government procurement. We've drawn closer ties with Pacific-Alliance countries, and new trade agreements with Canada, S.Korea, Singapore and after 20 years the potential of a Mercosaur-EU trade agreement – wide ranging and properly balanced.

Brazil has applied to the OECD to formalise what appear aligned institutional and national standards. At the multilateral level, we support a rules based system, as set out by the WTO and the aspirations of the Paris Summit on Climate Change with ratification at the UN. A country like Brazil, with the world's largest forest and cleanest energy mixes and is an agricultural powerhouse whilst using less than 9% of territory.

This is the New Brazil....one of: Responsibility not Popularism, Dialogue not Intransigence, Efficiency not Red Tape, Rationality not Unrealism, Openness not Isolationism.

The international community will be asking itself if indeed this path will be followed, given the upcoming elections. I say “yes” we shall complete our agenda, voters know reforms provide growth an jobs and economic gains. All economic players agree that there is no alternative to the reforms currently being promoted and put in place. The 'set-back' potential is virtually none-existent.

After the reforms, the next step is brining the social security system into order. Brazilians have come to recognise that the current system is unfair and unsustainable, hence the push upon Congress to pass the Reform Bill....the latest of those so far passed by Parliament.

Beyond this a stream-lining of the Tax System, to facilitate life for Business, Workers and Citizens at large.

Brazil has come back, back on the Development Track and during this period of Global Re-growth, able to provide Contribution and Input.
Hence....'Brazil is back in Business'... and we invite you all to take part in this new chapter in our history.
To re-iterate the scale of the Brazilian turn-around the chairman Professor Scwab congratulated President Temer on actions to date and the path forward given the complexity of aligning the myriad of Brazilian stakeholders.


To Summise -

The World Economic Forum has in the past been vilified as the elite's self-congratulatory squawk-box, positioned literally from on high, illustrating the difference between the notional uber-wealthy and the rest of the world.

Yet, as relayed, the efforts by Brazilian economists to better re-orientate their homeland toward another high-potential era within the expanding global economy – largely thanks to the trading mutuality of BRICs and Next 11 - actually illustrates fairly managed socio-economic flexibility for the mid and long-term gain of the many, not just the few.

President Temer's administration fulfils the national idiom : “Ordem e Progresso”








Sunday, 11 February 2018

An Alternative Valentine's Message – Countering the 'Dark Heart' of Modern Feminism with Yesteryear 'Big Hearted' Decency.


Before returning to the subject of Brazil – itself trying to balance socio-economic issues ranging from soya-bean exports to children's toy imports - a very timely social 'prescription' for the very socially shattered West, so as to halt what have become the vicious attitudes and cultural ploys of post-modern ideologues; which only serve to undermine brighter futures for all.

...........................................................................................................

Anyone with any all too rare 'common sense' recognises that whilst all people should obviously have equal rights and be treated by one another kindly and fairly; people are not – through the hands of nature and upbringing – 'equal'.

Each person has their own innate set of perspectives, values and relative mental and physical capabilities, formed from childhood and thereafter, which (within general parameters of their environment: 'progressive' or 'prohibitive') may be nurtured and improved by that individual as part of their own temporal and spiritual 'growth path'.

The right to civil equality then (both in law and in interactions within general society) then has little to do with the innate idea of formulating an 'equalising society'. Some will be naturally better conceptual and academic thinkers at an earlier age because of the advantages of their lineage and home-life: the indelible 'nature – nurture' debate. Others like wise will seek to escape their limiting environment to become even better than those born and raised more fortunate. Others will have a natural proclivity, because of background or interests, toward the more practical, in turn learning about relative interactivity of any singular system's interconnected processes – so ranging from auto-mechanic to systems engineer to bio-mechanical transplant surgeon.

The point is that we are innately different, but can choose to be better people, and put the effort in to do so, no matter what the odds set against us.

When Ayrton Senna recognised he had 'touched the hand of grace' during his best ever drive (during qualifying in Monte Carlo), and that it would probably never be repeated yet proved him the best, he recognised that his next challenge was to put the same effort into growing as a human being, to the same extent as when he reached nirvana as a racing driver.

The story of Mother Theresa has been retold a million times, to the extend that she is viewed as a modern era Saint. Her life devoted to others, her 'spiritual lamps' little more than a bucket and bowl in the yesteryear slums of India, she was 'the hand of  grace' every day through her benevolence.

Creating such beings – or even striving toward such - amongst the majority however is almost impossible when the society itself is being torn apart by nefarious social agendas.

And the latest chapter of Feminism – in it's 3rd wave – through cultural impact is doing just that – now that men have 'awoken' (to deliberately use the uber-liberal term) to the fact that they are being disenfranchised via the power of the mainstream media and advertising.

This done because since the 1970s Feminism not only 'empowered' women to not only earn equal pay to men on a 'like for like' job basis, but fuelled their personal consumeristic habits, this 'pushed to the power of squared' thanks to the availability of credit cards, hyper status symbolism and ease of personal bankruptcy with limited consequences - arguably praying upon their ancestral roots as the 'gatherer' of the 'hunter-gatherer' social equation.

And let it be truthfully recognised that after centuries of economically empowered men looking after their partners and families, often to their own personal detriment, that the few generations of economically empowered women has seen many women seek 'individual liberty' with little or indeed no concern for their male partners or relations when the historical 'bread-winner' became socio-economically disenfranchised.

Feminism then fulfilled its societal role decades ago, yet the latest wave has obviously been about the creation of the idea that life still remains “unfair” to them and that the already heavily tipped power-balance between men and women – see the arguments of the MGTOW movement - requires further 'action', and so continued distortion.

Prime examples illustrated in TV series and TV advertising, where females have long been portrayed as the stronger sex to the belittlement of men, and not only in comedies, with the apparent intent that men start to believe their supposed subjugation through various forms of verbal and visual communication.

If as many men were as avidly and unashamedly sexist and passive aggressive in today's world as many of the supposedly 'empowered' women there would rightly be a female outcry.

But such everyday sexism was largely banished by the end of the 1980s largely because of the general workplace interaction experienced as industry turned to services, and indeed the beginning of female workplace bias, from schools to HR departments to call centres, nursing, retail etc.

The fact is that today the sociological 'war on men' has become all too obvious, stemming from the echelons of overtly liberal academia (ie far beyond the supposedly benign initial intent of 'gender studies') into the very centre of the mass media and so human consciousness.

One obvious appalling example being a recent advert in the FMCG space for 'Quorn' (soya) mince.

The advert sees a man returning home from work late in the evening, only to then be pressurised by his female partner to do the cooking of the evening meal – as an 'apology' for being late from work.

Truly unbelievable!

The man has obviously been working extended hours out of career or income necessity, or for the material betterment of his own relationship.

Yet his female partner expects him to also cook their meal, whilst she has obviously been at home awaiting his return. All under the guise that 'he wanted to make it up to her'.

Supposed female empowerment – for rights and responsibilities in society – has only become undermined by in too many instances the selfish and near psychopathic; a maze of wiley 'mind-games'. Such unfairness only ultimately creating a massive dilution of trust.

Examples of such innate inter-relationship and societal unfairness then only serves to undermine the astounding efforts of the Suffragettes, from speeches of Emmeline Pankhurst to the martyrdom of Emily Davison (who would undoubtedly be ashamed of the behaviour and hypocrisy of many 'modern women'), and those likewise later upstanding women and men who have fought the injustices of not just sex but race and caste etc.

Moreover it probably erodes the essential belief that many men have in the exemplary efforts that many women contribute in many vitally important everyday fields that keep societies 'civil', from education to the emergency services to the law.

It's about time the western world was rebalanced toward social betterment for all and not the disingenuous and increasingly obvious sub-text of Modern Feminism.

Televisual pro-female culture-molding, the enormous rise in financially-driven high divorce rates and the latest nasty issue of a seemingly likewise money-led “j'accuse” mentality.

[NB obviously these differ from possibilities of child abuse, which itself is utterly haenous, but even here it seems that money or other agendas play a role, as with those apparent victims who sought recompense from the late Jimmy Saville's estate]. 

Modern Feminism has shown itself to be an obvious female 'power-grab' of all that is financial by the instigators and promoters of the far left, who themselves use women's paradoxical proclivity for both the seeking of innate fairness, and yet endemic 'fury' when thought be 'scorned'...itself fuelled by the notion of brainwashed, group-think 'empowerment'.

Remember, whether female or male a Judge stands alone and deploy critical thinking, whilst a crowd, whether a mass of male football fans or indeed female and LGBTQ 'pink protesters' inevitably are swayed by the mentality of their surrounding crowd.

Whilst the idea of absolute social equality is a misnomer given the spectrum of people alive and their individual talents and failings, the basic element of equality is simply mutual civility and decency.

[NB with 'zero tolerance' for those individuals or cohorts who seek explicit or implicit advantage via apparent civil faรงade; when their objectives are anything but. This is why the passing of any supposed 'hate speech' law is enormously dangerous to the social stability of a nation, when portions of an affected, deliberately disadvantaged  populace are denied their own 'free speech' against the perpetrators of cultural and economic totalitarianism; aspects of which can be seen today. The truth can be very uncomfortable].

So this Valentine's – if we truly want a fair society, that starts with individuals and relationships  - beyond the usual welcome tropes of cards and roses and dinners –  think upon yourself and give the best of yourselves to each other.

This 'prescription' to be repeated ad infinitum into the distant future.