Opinion

The Great Debate

from Breakingviews:

Brazil’s companies need soccer team’s global clout

By Dominic Elliott

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Brazil’s corporate squad pales beside its soccer stars. The country’s national football side has unquestioned world-class quality in almost every position on the pitch. Yet if there were a World Cup for businesses, Brazil would struggle to get past the group stage.

“A Seleção”, as Brazil’s soccer team is known, has won the sport’s biggest prize a record five times. Its skill on the ball is described by the exhortation “joga bonito” - “play beautifully”. Brazil has some corporate champions that are both skilled and strong. But it’s doubtful the world’s seventh-largest economy could field a world-beating team of corporate stars.

Several Brazilian companies can hold their own against the world’s best. That’s especially true in finance. In a soccer team, lender Itaú, buyout specialist 3G Capital, and investment bank BTG Pactual could comprise a menacing front line.

Brazil would surely place Ambev, its largest listed company, at the heart of its midfield. Though the $115 billion brewer is technically a subsidiary of Belgium-listed Anheuser-Busch InBev, the parent company’s management is dominated by Brazilians. So is AB InBev’s board. It includes two of the three principals at 3G, who together with Jorge Paulo Lemann, Brazil’s richest man, created Ambev in 1999.

from Breakingviews:

Investors cheer for Brazil World Cup rout

By Rob Cox

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

At the opening of the Confederations Cup in Brasilia a year ago, President Dilma Rousseff was booed by thousands of soccer fans for all of Brazil to see. It’s easy to understand then why she isn’t planning to speak at Thursday’s opening ceremony of the World Cup. An embarrassing turn as host of Earth’s biggest sporting event - or crushing repeat of the 1950 Maracanaço - may be the greatest obstacle to her clinching a second term.

With each dip in Rousseff’s poll numbers, the Bovespa Index kicks up a notch. Investors are hoping her experimental economic policies will come to an end at the ballot this fall.

from Breakingviews:

Review: Brazil’s toughest tests lie off the pitch

By Dominic Elliott 

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Michael Reid’s astute new book has a stark warning: the country of samba, sex and soccer is teetering on a knife-edge. “Brazil: The Troubled Rise of a Global Power” explains why protests against this year’s World Cup are turning increasingly violent. Reid, a journalist for The Economist, persuasively urges a return to the broad liberal consensus that served Brazil so well between 1994 and 2006.

Brazil taxes and spends like a European country and shares other bad habits with the West. Yet it produces “distinctly Latin American” results, says Reid. GDP per person is still a disappointing $12,000, about two-thirds of the level of Argentina, and it remains the world’s twelfth most unequal country. The masses understandably want more opportunity, as well as better hospitals, schools and public transport.

Mexico’s reversal of fortune

In Latin America, this looks to be the year of Brazil — thanks to the impending World Cup and presidential elections. But with another lackluster year looming in emerging markets, fans of transformation, growth and investment potential should instead look to Mexico.

Brazil’s president, Dilma Rousseff, is expected to win a second term this year, and its soccer team stands a good shot at victory. But growth has slowed considerably. In the world’s seventh largest economy, reforms are stagnating and the country faces a possible ratings downgrade.

Mexico, by contrast, is in the throes of serious reforms. It will likely lead Latin America with at least 4 percent growth this year and an improving investment outlook. Standard & Poor’s recently boosted Mexico’s credit ratings because of energy reforms that the rating company trumpeted last month as a “watershed moment” for the country. It is becoming a story of inverted fortunes, as Michael Shifter and Cameron Combs of the Inter-American Dialogue recently wrote.

Argentine leader’s health recovering, as her dynasty ebbs

As Argentina’s Cristina Fernandez de Kirchner convalesces in the presidential residence after surgery, a poor prognosis for her political and economic agenda awaits her outside. Yet the populist leader is unlikely to respond with major policy initiatives as she enters a prolonged lame duck period.

Fernandez faces big losses in Sunday’s mid-term congressional elections, which will likely determine how much legislative clout she can muster. Hope for her third presidential mandate is all but extinguished. Under her administration, Latin America’s third largest economy is slipping further behind the region’s top two — Brazil and Mexico — and looking ever more like the laggard Venezuela.

The 60-year-old Peronist leader was ordered to rest after an emergency operation to remove blood from the surface of her brain, sidelining her from the campaigning she led earlier to keep “Kirchnerismo” alive.

The short and long of emerging markets

Fickle investors have spurned emerging markets in recent weeks, but this rout has obscured a more alluring vista out on the horizon.

Developing economies now account for 50 percent of global output and 80 percent of economic expansion and are projected to continue growing far faster than developed nations. They are expected to possess an even larger share of global growth, wealth and investment opportunities in years to come. So much so that the labels investors use to classify some of these nations will change as the developing develop and the emerging emerge into more potent economic powers

But this long-term view has been lost on many of those who look to emerging market assets for a higher yield in the short term. Their ardor cooled when the Federal Reserve signaled it may soon ease the stimulus that has kept credit cheap, signaling higher interest rates ahead. That was coupled with signs of slower growth in key emerging markets like China and Brazil.

from David Rohde:

The global middle class awakens

People stand during a silent protest at Taksim Square in Istanbul June 18, 2013.  REUTERS/Marko Djurica

Alper, a 26-year-old Turkish corporate lawyer, has benefited enormously from Prime Minister Recep Tayyip Erdogan’s rule. He is one of millions of young Turks who rode the country’s economic boom to a lifestyle his grandparents could scarcely imagine.

Yet he loathes Erdogan, participated in the Taksim Square demonstrations and is taking part in the new “standing man” protests in Istanbul.

Brazil’s protests are not just about the economy

More than a million Brazilians have taken to the streets this past week in the largest mass demonstrations since the impeachment of President Fernando Collor de Mello in 1992. It began as a modest protest movement in Sao Paulo against a seemingly routine 20 cent bus fare increase, but has quickly transformed into a broader and more diffuse protest against a range of grievances: political corruption; the dismal performance of public services such as transportation, health and education; and even excessive spending in preparation for the World Cup. The mostly peaceful protests have spread to dozens of cities across the country while capturing the world’s attention.

Explanations for this outburst of angst are varied. Some analysts point to Brazil’s economic woes and suggest that two and a half years of low growth, and signs that the consumption-led credit boom is coming to an end, are finally catching up politically, prompting popular discontent. Others see the protests as a manifestation of the government’s inability to meet basic needs, and potentially, as an indication that governance challenges are on the rise in Brazil in a more meaningful way.

All of these explanations have a kernel of truth but are ultimately incomplete. To be sure, the current macroeconomic cycle has generated an environment more prone to discontent, but that doesn’t explain the outburst on the streets. Something deeper and more structural is going on, and it has to do with how a cycle of economic enrichment over the past ten years is changing the public’s expectations of its politicians.

from David Rohde:

Prosperity without power

A woman walking near the headquarters (L) of the Federal Security Service, in central Moscow, May 14, 2013. REUTERS/Maxim Shemetov

In Moscow, they are “non-Soviet Russians.” In New Delhi, they are a “political Goliath” that may soon awake. In Beijing and São Paolo, they are lawyers and other professionals who complain about glacial government bureaucracies and endemic graft.

Prosperity is spreading in many emerging market nations, but political change is not.

With Chavez gone, what of ‘Chavismo’?

“The End of the Chávez Era” That was the headline on Colombia’s major newspaper, El Tiempo, the day after Hugo Chávez’s death.

True, Chávez’s controversial and colorful 14-year rule has ended, and Venezuela has lost a president who evoked uncommonly intense passions among followers and detractors.   Venezuelans will not easily forget a leader who, for better or worse, was the consummate showman and left an indelible mark on a highly polarized society.

Yet Chavez also followed in a long line of caudillos, or strongmen, who have been a notable feature in Latin America’s political history. Indeed, Venezuela has had its fair share. As the acute observer Gabriel Garcia Marquez, Colombia’s Nobel Prize-winning writer, noted soon after Chávez’s 1998 election, the new president’s seductive rhetoric recalled so many of the region’s other leading political figures — but he could well end up as yet another Latin American despot.

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