"The policy of ‘shoot first, ask questions later’ has placed Rio de Janeiro as the one of the deadliest cities on earth."
The post Police Brutality Has Surged In Brazil. It’s About To Get Even Worse. appeared first on ThinkProgress.
"The policy of ‘shoot first, ask questions later’ has placed Rio de Janeiro as the one of the deadliest cities on earth."
The post Police Brutality Has Surged In Brazil. It’s About To Get Even Worse. appeared first on ThinkProgress.
Brazil's first female president was just suspended, pending impeachment charges. Her replacement just chose a cabinet that is solely white straight men.
The post Brazil’s First Female President Has Just Been Suspended, And The New Cabinet Is All Men appeared first on ThinkProgress.
Brazil's interim administration doesn't mention climate change or the Amazon in its main policy document.
The post The Questionable Environmental Stances Of Brazil’s New Leaders appeared first on ThinkProgress.
Without the medication, women living in poverty have no safe abortion option in the country.
The post Brazil Confiscates Abortion Pills From Pregnant Women Exposed To Zika appeared first on ThinkProgress.
Brazil's President, Dilma Rousseff, is facing renewed calls to resign, but she says she's staying put.
The post Here’s A Quick Guide To Understanding Brazil’s Current Presidential Crisis appeared first on ThinkProgress.
Izaque José da Silva has seen his share of suffering.
The post How A Soccer Field In Brazil Probably Saved A Boy’s Life appeared first on ThinkProgress.
Most studies connecting agriculture to climate change look at the change in crop yield -- but that could be missing a key part of the equation.
The post We Might Be Severely Underestimating Climate Change’s Impact On Agriculture appeared first on ThinkProgress.
Analysts have blamed the largest environmental accident in Brazil on poor mining practices and lax regulatory enforcement.
The post Mining Company Will Pay $1.1 Billion For The Largest Environmental Disaster In Brazil’s History appeared first on ThinkProgress.
Women could be sentenced to nearly five years in prison for having an abortion because of the virus.
The post In Response To Zika, Brazil Moves To Restrict Abortion Even More appeared first on ThinkProgress.
The Zika virus outbreak, bacteria-filled waters, and unfinished venues are threatening the fun.
The post Less Than Six Months Out, The Rio Olympics Are A Mess appeared first on ThinkProgress.
But at what cost?
The post Brazil Says It Won’t Postpone The Olympics, Despite Growing Zika Threat appeared first on ThinkProgress.
Brazil has certainly had its share of trials and tribulations lately: The economy is in recession, inflation is on the rise, budget deficits are widening, its sovereign debt rating has been downgraded, and the political environment is challenging. Yet, the country still has a lot going for it. It remains the largest economy in Latin America, and one that is rich in resources ranging from agricultural products to industrial metals. Home to some of the continent’s strongest political institutions, Brazil has also made significant strides in improving the economic well-being of its citizens over the past decade: The proportion of the population living in poverty has fallen from 17.3 percent in 2006 to 7.4 percent in 2014, according to the World Bank. What can Brazil do to leverage its strengths, re-ignite its economy, and regain its position as one of the world’s most exciting growth stories?
Experts gathered at Credit Suisse’s 2016 Latin America Investment Conference (LAIC) in January in Sao Paulo said that righting the fiscal ship is Brazil’s most pressing concern. But they also said that fixing two long-term structural issues—a closed economy and low productivity—is the key to building a strong foundation for solid long-term growth.
Opening to the World
Brazil could have benefitted more from a rapid expansion in global trade over the last few decades if its economy were more open, said former Mexican President Felipe Calderón, a keynote speaker at the LAIC.
Calderón contrasted the experiences of economies in the Mercosur trade alliance (Argentina, Brazil, Paraguay, Uruguay, and Venezuela) and those in the Pacific Alliance (Chile, Colombia, Mexico, and Peru). Pacific Alliance countries have relatively open economies and export mostly manufactured products, while Mercosur countries are relatively closed and rely much more on commodities exports, which left them particularly vulnerable to a commodities rout led by slowing demand in China. Commodities account for 67 percent Brazilian exports, and steep declines in the price of oil and iron ore, of which Brazil is the world’s third-largest producer, have hit the country hard. The economy shrank 3.7 percent in 2015, and Credit Suisse’s Brazil economists expect drops of 3.5 percent this year and 0.5 percent next – the first three-year contraction since 1901.
When it comes to the openness of its economy, while Brazil can claim significant growth in trade over the last half century-plus, it nevertheless lags other countries in that regard. The difference in the trade openness coefficient (the sum of exports and imports as a share of GDP) between Brazil and the rest of the world increased from 10.5 percentage points in 1960 (about 14 percent in Brazil and 24.5 percent worldwide) to nearly 33 in 2014 (some 26 percent in Brazil to some 59 percent worldwide), according to Credit Suisse.
Among the reasons: Brazil has the highest customs tariffs in the world on consumer goods and intermediate products, and the second-highest tariffs on capital goods. The country also imposes heavy non-tariff barriers, including state and federal taxes, and it has not signed as many free-trade agreements as other countries. In 2014, the country had just five trade agreements, compared to 20 in the United States, 40 in Colombia, 44 in the Eurozone, 45 in Mexico, and 54 in Chile.
And the fact of the matter is that closed economies have a harder time staying competitive than open ones. Trade barriers protect domestic industries, but keeping out foreign competitors also removes incentives for them to become more efficient. For example, said Calderón, Mexico’s remarkable post-crisis recovery stemmed partly from new trade agreements and removing tariff barriers throughout the economy. “The more tariff reductions you apply to a sector, the more competitive that sector becomes,” the former president said. “The big lesson is: open your market.”
Low and Slow Productivity
Professor Ricardo Paes de Barros, Instituto Ayrton Senna Chair at the Brazilian university Insper, put Brazil’s slipping labor productivity in striking terms at the LAIC. In 1980, a Brazilian worker produced about the same amount, in value-added terms, as a South Korean worker; today, it would take three Brazilians to keep up with a Korean. Similarly, in the 80s, a Brazilian worker was 10 times as productive as a Chinese worker, whereas today the two are roughly equivalent.
In recent years, more Brazilian workers have moved out of agriculture and into service professions. Low-productivity, labor-intensive sectors, such as health care, education, and retail sales have grown fastest, with the share of workers in this segment of the market rising from 51 percent in 1996 to 59 percent in 2015. While Brazil’s overall productivity grew 13.4 percent over the past two decades, workers in industries that are inherently less productive grew 3.7 percent less productive.
Credit Suisse attributes these productivity declines to the concentration of government workers, who earn higher salaries than private-sector workers in similar jobs in fields such as health and education. The relentless growth of Brazil’s public sector limits potential productivity growth, the bank’s economists say. The higher the public sector’s share of the Brazilian economy, the lower the odds that it can grow even a modest 2 percent over the next three years.
Credit Suisse’s analysis suggests that Brazil could spend 43 percent less on all public services, 51 percent less on education, and 70 percent less on health care and still get the same results. The shortcomings of Brazil’s education system only contribute further to its sluggish productivity growth, Paes de Barros says. The professor thinks Brazil may need to bring in international consultants to help reform its education system, but that it also must do better at gathering and publicizing performance data from its many school districts to learn what works and what doesn’t. Brazil is still a young nation, with the share of working-age people set to expand for another six years. Investing more wisely in its youth is critical to the country’s future growth prospects.
The state of Brazilian exports has deteriorated over the last decade. The country has become more reliant on exporting raw materials compared to manufactured goods, and has suffered from the recent downturn in the prices of many commodities. Meanwhile, the cost of manufacturing goods in the country has surged over the past decade, rendering it less competitive in the global marketplace. How can the country compete more effectively? It must get back to its roots, said manufacturers at Credit Suisse’s 2016 Latin American Investment Conference in Sao Paulo in January. In other words, the place to start is by modernizing the country’s outdated manufacturing base.
The recent story of Brazilian manufacturing is a story of ups and downs. Exports of manufactured goods soared between 1997 and 2005, stabilized for a time, declined in 2008, and have remained stable since. As a result, manufactured products, which represented 57 percent of exports between 1995 and 2005, only accounted for 48 percent of the total in 2015. The destination of manufactured goods has shifted, too, away from Europe and the United States (52 percent in 2002; 36 percent in 2015) and toward Africa, Asia, Latin America, and the Middle East (43 percent in 2002; 58 percent in 2015). Commodities exports, meanwhile, shot up from 27 percent of the total between 1995 and 2005 to 38 percent in 2015.
China’s rise and the ensuing increase in demand for raw materials helped spur Brazil’s shift away from exporting manufactured goods, but the rising cost of manufacturing in Brazil has also made its products less attractive to foreign buyers in recent years. According to a study by the Boston Consulting Group, Brazilian manufacturing had a 3 percent cost advantage over the United States in 2004, but suffered from a 23 percent cost disadvantage in 2014. The study chalked the increase up to rising wages – factory pay in Brazil nearly doubled over the study period – and weak productivity growth. Inputs have also become more expensive: Industrial electricity prices in Brazil doubled between 2004 and 2014, while natural gas prices rose 60 percent. As they became less competitive abroad, many manufacturers began to focus on the domestic market, where demand was growing, credit was expanding, and the country’s relatively closed economy protected them from global competitors.
Brazilian industrialists at the LAIC said one challenge in getting manufacturing exports back on track is that it will require significant investment. José Velloso, CEO of the Brazilian Association of Machinery and Equipment Manufacturers (Abimaq), said that after five years of falling investment, the average age of equipment in Brazil’s industrial complex is 14 years, compared to about five years in Germany.
One area where the country can make immediate headway, says Fernando Garcia, commercial director of electric motor company WEG, is in its use of electric motors. According to Garcia, Brazilian manufacturing companies could save significant sums through decreased expenditures on Brazil’s expensive electricity by upgrading to more efficient motors. The industrial sector accounts for 44 percent of Brazil’s electricity consumption, with 70 percent of that power feeding electrical engines, and about 65 percent of Brazil’s industrial engines are more than 10 years old. If the country replaced every electrical engine made before 2009, when new efficiency requirements were introduced, with a newer, more efficient model, Garcia estimates manufacturers would reduce electricity use by 15,000 gigawatts per hour each year, an amount equivalent to 9 percent of the entire country’s current consumption.
Investing in automation would also help improve both the quality and productivity of Brazilian manufacturing, says Dan Ioschpe, a board member of the Brazilian Association of Auto Parts Manufacturers (Sindipeças). According to Ioschpe, the fact that Brazilian auto parts factories employ five workers to do the same work a single worker can accomplish in a German factory is largely due to higher levels of automation in Germany.
Several speakers at the LAIC noted that Brazil can also increase competitiveness by opening up its economy and improving the quality of its education system. But as Abimaq CEO Velloso noted, the need to modernize its manufacturing facilities is an imperative. The productive capital stock in Brazil is worth $50,000 per worker, compared to $100,000 in Russia and $300,000 in the U.S. and Japan. “In Mexico, workers are more productive than in Brazil, but less so than in the U.S.,” he said. “[But] if they cross the border, their productivity gets much better. It’s not because they got an education on the way to the U.S., it’s because in San Diego, they have much better working conditions.”
Finally, experts at the LAIC noted that the challenge Brazilian companies across a variety of industries face in order to thrive in the global marketplace is the same as that facing any company, in any industry, in any country: They must find the business models that best facilitate the innovation necessary to develop products that customers ultimately want to buy. José Carlos Magalhães, CEO and founder of private-equity firm Tarpon Investimentos, noted that instead Brazilian businesses have too often settled for copying their business models from the developed world, when local adaptation is required. “We were more focused on replicating from abroad with competence,” Magalhães said. “I think this will no longer exist or gradually disappear, and we will have to incorporate innovation and changes in business models into our management systems.”
China’s ongoing economic slump has sparked turmoil on world markets, but it’s been particularly challenging for Brazil, which ships 40 percent of its exports to the country. How much does Brazil stand to gain from a stabilization in Chinese demand? Find out what Credit Suisse Chief Economist James Sweeney had to say at Credit Suisse’s 2016 Latin America Investment Conference about the outlook for China and its consequences for Brazil.
The post Global Growth, Commodities, and the Lessons of Brazil appeared first on The Financialist.
Economists and executives at Credit Suisse’s 2016 Latin America Investment Conference agreed that Brazil should make getting its fiscal house in order a top priority as a first step toward re-igniting growth. But that will require a delicate balancing act. Watch the video to hear Mansueto Almeida, a researcher at the Brazilian Institute of Applied Economics (IPEA), explain Brazil’s budget challenges.
As a country, Brazil has many things going for it: a large economy, a young population, and plentiful natural resources. But if it is to enjoy the economic growth those assets can provide, it needs to make structural reforms that can help close budget deficits, slow the growth in public debt, and remove obstacles to economic growth. Former presidents and central bankers, economists and industrialists, all agreed at the Credit Suisse 2016 Latin America Investment Conference (LAIC) that for Brazil to make the changes necessary to re-ignite growth, Brazilian officials must first overcome the political infighting, scandals, and public disillusionment that have brought it to the economic crossroads it sits at today.
Fernando Henrique Cardoso – president of Brazil from 1995 to 2003, and a keynote speaker at the LAIC – knows a thing or two about tough reforms. As Finance Minister from 1993 to 1994, he was the main architect of the Plano Real (or “real plan”), a successful effort to stop hyperinflation. In 1999, after the Asian financial crisis, Cardoso’s government adopted a so-called “tripod” of policies that stabilized the economy: setting inflation rate targets, floating the currency, and running budget surpluses. To pass tough fiscal reforms now, he said, politicians must pull together to come up with a similarly ambitious-yet-achievable plan and convince churches, academics, union leaders, and business leaders that drastic change is necessary. “We have to generate a new consensus,” Cardoso said. “Nobody can change a country if we don’t have a convergence of ideas.”
Brazil has run primary deficits (shortfalls in government revenues, without factoring in interest payments on debt) several years in a row, with the result that its public debt has shot up from 51.7 percent of GDP in 2013 to 65.7 percent in 2015—and is expected to hit 77 percent by 2017. Credit Suisse economists say Brazil needs a primary surplus of 5 percent of GDP in 2016 and 4 percent in 2017 to stabilize debt levels, but instead, they predict deficits of 1.4 percent of GDP in 2016 and 1 percent the following year. Public debt will likely continue rising until 2019.
Both S&P and Fitch cited the country’s deteriorating fiscal position as the primary factor in their decisions to downgrade Brazil’s sovereign debt rating below investment grade in the fall of 2015. Moody’s echoed them in December, when it announced it was considering a downgrade, a step most analysts expect the agency to take in 2016. But just as nerve-wracking as the debt and deficit numbers, the raters noted, were the fractious politics of Brasilia, the country’s federal capital. Economist and credit ratings expert Norbert Gaillard said countries that have quickly regained their investment-grade status have come up with clear road maps for dealing with their fiscal imbalances. That will be an uphill battle in Brazil, but not an impossible one.
The measures for which politicians need to build support – cutting spending and raising taxes – aren’t easy propositions in Brazil, where the tax burden is already high and a large proportion of government spending is non-discretionary. Public opinion of the government complicates things further. Recent polls indicate only 8.8 percent of Brazilians approve of current President Dilma Rousseff’s government, and some 70 percent disapprove. As recently as early January, hikes in public bus fares set off public protests in Sao Paulo. “If you cut subsidies, the people who receive subsidies will be against the cuts,” said Henrique de Campos Meirelles, former president of Brazil’s central bank, at the LAIC. “Every measure has a cost. To be able to do something we need some leadership to mobilize society and say, ‘The costs will have to be paid by someone.’”
Recent political controversies make the task of rallying public opinion more difficult. A corruption scandal known as “Operation Car Wash” has dogged elected officials for the past year and a half, and President Rousseff is facing impeachment proceedings, accused of making public finances look better than they were during her 2014 re-election campaign. The person who initiated the impeachment, Chamber of Deputies Speaker Eduardo Cunha, was indicted in August 2015 on money laundering and corruption charges related to Operation Car Wash. The governing coalition – of which Cunha is a member – is splintering under the strain. More than 100 deputies out of a total of 513 have left the coalition, according to Credit Suisse.
Though the government cut spending by 104 billion reais ($25.7 billion) last year and has proposed additional cuts in 2016, experts at the LAIC said the real problem that politicians need to address is Brazil’s non-discretionary spending. Politicians began increasing social spending when commodity prices were rising, and social spending has continued to rise 3 to 4 percent a year since 2012, according to Mansueto Almeida, a senior researcher at the Brazilian Institute of Applied Economic Research (IPEA). Welfare, employee salaries, and social security comprise a combined 77 percent of the annual budget, according to Credit Suisse, and many of those benefits are indexed to inflation, which is running at almost 11 percent.
Tax increases are also probably necessary to right the fiscal ship, though Almeida points out that Brazil’s tax burden is already 34 percent of GDP, much higher than in other developing countries. Henrique Meirelles said that the government could make tax hikes more palatable by making them temporary, but they’d also have to put forth a credible plan for ending the crisis to assure taxpayers that the measures would, in fact, end. Brazil can get past its current problems, but to do so its government officials first have to reach compromises among themselves and then convince the public that putting off the pain of tough structural reforms will only delay their country from realizing its considerable economic potential.
"I think it’s fair to say that it’s a little bit troubling in a few different ways."
The post Why Publicly Shaming Bigots Won’t Make People Less Racist appeared first on ThinkProgress.
250,000 people are without drinking water, reports say.
The post Brazil’s Collapsed Mines Are An Environmental Disaster appeared first on ThinkProgress.
Water shortages are hardly unusual in the developing world. Consider China, which holds 7 percent of the world’s water resources but uses 16 percent of the planet’s water. But in India, the problem is even worse. The country contains about 18 percent of the world’s population but only 3 percent of the planet’s fresh water. That, combined with poor resource management, has yielded a situation in which the per capita availability of water is one-fifth of the global average: 1,200 cubic meters per year compared with 6,000 cubic meters worldwide.
Agriculture accounts for 90 percent of the current demand in India, but increasing urbanization is boosting municipal needs, while improving economic growth is also boosting industrial demand. In Indian cities, only 64 percent of residents have their own water hookups—compare that to 91 percent in China and 80 percent in Brazil—and water often only runs for 1 to 6 hours a day. And when there is water, its quality is often poor. About 9 percent of homes in India have water that is contaminated with chemicals such as arsenic and nitrate, according to the government. Water is also frequently contaminated with bacteria during the rainy season.
Fixing such problems is an imperative for the country’s people, but it also provides an opportunity for investors. The three main ways to mitigate the shortages are to improve efficiency, reduce pollution and create alternate supply sources. One key area of investment is water treatment: the country currently treats only 30 percent of wastewater compared with between 70 and 100 percent in developed countries. There are also opportunities in desalination, since the country’s current capacity is miniscule. A project to clean the Ganga River, which flows through 11 states is estimated to cost 1 trillion rupees ($15 billion). The project is expected to generate an estimated 10 billion liters per day in additional treatment capacity over the next 10 to 15 years.
All told, India needs some 13.5 trillion rupees (USD $220 billion) of investment in urban water supply and sewers over the next 20 years, and that creates a major opportunity for water industry players, according to Credit Suisse. The government will supply much of that funding, but the involvement of the private sector—which consists of some 25 large companies and a handful of multinational companies—will grow as well. Water treatment companies—including equipment suppliers, plant operators, wastewater treatment companies, and desalination firms—are expected to find enough new business to support average earnings growth of 15 percent annually over the next few years. “Significant investments are required,” says Anantha Narayan of Credit Suisse’s India equities team, “to correct the mismatch in water resources.”
Most of the inputs into China’s economic model these days involve subtraction – slower economic growth, lower demand for commodities, a reduced focus on exports. But look closely, and there are still numerous additions—including some substantial ones—to the mix. China’s state-owned electrical utilities are set to spend some 350 billion Yuan ($56 billion) on grid improvements in 2015, part of an eight-year plan intended to steer pollution away from coastal population centers. For international coal exporters, it’s nothing short of a sea change – and not a positive one.
The express purpose of the infrastructure upgrade is to correct a geographic mismatch. Chinese manufacturing hubs such as Shenzhen and Guangzhou are on the country’s east coast, perfectly placed for easy shipping, while most of its coal mines are in the west and northwest. But even if the coal were burned in the west and northwest, there were no transmission lines to carry electricity over long distances without significant losses. Instead, domestic coal has been transported east over rail lines and by sea. But in recent years, opportunistic foreign coal producers have also brought seaborne imports into the country, with Chinese traders snapping them up when the price is lower than domestic coal. In total, imported coal makes up about 200 million tonnes of the 4 billion tonnes burned in China each year.
As for that imported coal, it has been burned almost as soon as it’s entered the country – on the power-hungry eastern seaboard. Domestic coal, too, is largely shipped in and burned locally. The problem with that is that the region isn’t simply home to the bulk of China’s manufacturing — it’s also home to most of its people. Authorities see the haze that blankets Beijing and other cities as an increasingly untenable and potentially destabilizing problem. The solution: building 27 ultra-high voltage (UHV) transmission lines to connect the mines in the northwest and the power-hungry cities on the coast. Burn the coal in Inner Mongolia and Shanxi, use the power in Shanghai.
Eight UHV lines are already up and running. The longest spans some 2,100 kilometers from Hami, in the Mongolian border province of Xinjiang, to Zhengzhou, an eastern city that houses, among other things, a Foxconn plant that played a key role in producing the iPhone 6. Five additional transmission lines are under construction, and Credit Suisse analysts expect work on eight more to begin in 2015.
The shift couldn’t come at a worse time for those supplying coal to the country. China’s appetite for coal was already waning, with total demand up just 0.6 percent in 2014 compared to 16.5 percent in 2011. More importantly, demand actually fell by 6 percent in 2014 in the coastal region, and is expected to keep shrinking for the next six years. Additional railroad lines have also made it easier to move domestic coal from west to east, reducing the country’s demand for imports even further. Net imports of thermal coal fell 13 percent in 2014, from 244 million tonnes to 213 million tonnes. Credit Suisse expects net imports of just 92 million tonnes in 2020 – a 62 percent reduction in less than a decade. All told, coal’s share of China’s energy supply is expected to drop from 76 percent in 2014 to 69 percent in 2020.
The Chinese government also introduced tariffs on and hiked quality requirements for imported coal late last year. Add that to shrinking demand, and tens of millions of tonnes in surpluses are expected to flood the global coal market over the next few years, driving prices lower. While thermal coal averaged $71 per tonne in 2014, Credit Suisse’s commodities analysts expect it to stay below $60 for the next three years. “The depressing conclusion for coal producers is that flat output is not sufficiently disciplined – more needs to be done to curtail production,” the analysts write.
So who’s going to blink first? Given the strong dollar, Credit Suisse says U.S. producers will likely exit the market first. But there will be no market for any expanded capacity by major producers for years to come. Mining conglomerate Glencore shut down Australian production for three weeks in December, but other Aussie producers haven’t followed suit, in large part because they’re locked into multi-year contracts with domestic railroads and ports that require payments whether they ship anything or not. A weakened Australian dollar has also made it easier for the second-largest exporter to keep mines running. Russia, the third-largest exporter, “could well be a sticky producer that refuses to scale back output,” thanks to the weak ruble, says Credit Suisse.
But the order in which individual countries cut back won’t really matter in the end. Eventually, all coal producers – even those in low-cost Indonesia, the largest exporter to China – will be forced to shrink production. The coal industry is about to take a trip back to the B.C. era – before China, that is.
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