Brazil is no country for beginners.
—Antônio Carlos Jobim
Vinícius de Moraes, the Oxford-educated Brazilian poet who wrote “The Girl from Ipanema,” was an unabashed lover of Brazilian women. He married seven of them.
De Moraes knew a good thing when he saw one, and he was unapologetic in his devotion to feminine beauty. He famously declared, “Ugly women, forgive me, but beauty is fundamental.” Through his writing he did much to incite the imaginations of men across the globe about the allure of Brazilian beach culture. There was an actual “Girl from Ipanema,” Heloísa Eneida Menezes Paes Pinto, a supermodel-beautiful 17-year-old with emerald green eyes, and a walk like poetry, whom de Moraes spotted in 1962 from his girl-watching perch at the Veloso Bar, a block from the beach at Ipanema.
“The Girl from Ipanema” won a Grammy for Record of the Year in 1965 on its way to becoming the second-most-widely-recorded popular song in history. More than any other single influence, it probably helped shape Rio de Janeiro’s reputation as home to some of the world’s most beautiful women. As Victoria’s Secret proclaimed in its “The Girls of Brazil” advertisement, “No country has produced more Victoria’s Secret models than Brazil.”
I freely admit that I was one of many men who fell under the spell that de Moraes cast. Before I ever set foot in Rio de Janeiro, I was completely sold on the attraction of scantily clad Brazilian women cavorting on white sand beaches. Indeed, as I have previously confessed, I married a Brazilian girl who made the Sports Illustrated swimsuit models seem like slobs. With her as a goad and a guide, I spent much of the past decade getting to know Brazil.
As upcoming details explain, not everything I learned is good. Brazil is a complicated country. Like every country, it has its snares as well as allures. To be sure, I found myself more interested in the allures of Brazil, especially its beautiful women than in some of its less attractive features. As I got to know Brazil, however, I became excited about its economic prospects, with gratifying results. In recent years, the model portfolio I recommend to investors in Strategic Investment has been heavily tilted toward Brazilian equities and bonds with returns that far exceeded the “risk-free” gains you could have made in U.S. Treasury obligations, much less the U.S. stock market as measured by returns on the S&P 500.
Partly because North Americans have tended to hold a low opinion of Latin America, I have sought in this book to open eyes about the opportunities in Brazil. A Brazilian friend who went to school in the United States was literally asked by American schoolmates whether Brazilians have ever seen elevators. In trying to counter this kind of ignorance about Brazil, I may perhaps have inadvertently overstated the case for Brazil, partly by downplaying the drawbacks and difficulties that Brazil faces and that you might face in trying to do business or live there.
In this chapter, I want to take a second and closer look at some of the troubles with Brazil. Not the least of these is that Brazil seems to be following too closely in the footsteps of the United States.
Russia, China, and India, the other BRIC countries, have little cultural affinity to the United States. Brazil, alone among the emerging powerhouse economies, is an American economy that shares close cultural affinities with the United States. As Jim O’Neill, chairman of Goldman Sachs Asset Management points out, “Demand in the so-called BRIC economies of Brazil, Russia, India, and China is now more important to the world economy than the United States and Europe.”1
The following main points that I bring to your attention do not contradict O’Neill’s observation that Brazil is rapidly becoming one of the world’s foremost economies. Indeed, I may even move there. But I do so with my eyes open. I can see that for all its strengths, Brazil also has weaknesses. For better or worse, it really is another different, less arthritic version of the United States. As it matures, many of its “American” similarities to the United States are destined to come more to the fore. Among the worrying signs I explore in this chapter are a surge in obesity, growing abuse of consumer credit, too much American-style, anticompetitive economic regulation. Topping it all is the unequivocally sorry indicator that Brazil trails only the United States among the world’s countries in the number of lawyers per capita. Of course, if you can endure these drawbacks in the United States, you should feel right at home in Brazil.
Let’s start with “The Girl from Ipanema.” Vinícius de Moraes wrote that song about her heartbreaking beauty around the time that French President Charles de Gaulle was dismissing Brazil. De Gaulle quipped, “Brazil is the country of the future, and it always will be.” I decided to look back to de Gaulle’s time to see what I could learn about this beauty who allegedly sucked the air out of the Veloso Bar every time she sauntered past.
Was de Moraes telling the truth? Or did the legend of Brazilian beach culture begin with a hallucination? Was Vinícius de Moraes such a sucker for Brazilian women that he could fall in love with any Brasileira who wasn’t dog ugly?
That could conceivably have been difficult to answer, but a few minutes research persuaded me that de Moraes did not exaggerate when he praised the girl named Heloísa. One of the links I discovered in my online research was to a 2003 Playboy featuring Heloísa Pinheiro, “The Girl from Ipanema,” shot when she was 58 years old. There are few women at that age who would be plausible Playboy models, but even with the damaging effects of decades spent in the sun, Heloísa Pinheiro—once, The Girl from Ipanema, and now, The Grandmother from Ipanema—was still gorgeous in 2003.
Seeing Heloísa at 58 makes it easy to believe that she was impossibly beautiful as a 17-year-old girl in 1962. No wonder that de Moraes and his collaborator, composer Antonio Carlos Jobim, became infatuated with her. She embodies what has tended to make Brazil special: not only the legendary beauty of its women, but their ability to hold their beauty late in life. This is reflected further in Brazil’s Miss Grandmother contest, which went viral on the Internet a few years ago.
Brazilian women tend to hold their looks well into middle age. And this, unfortunately, punctuates a recent and worrying trend about what is now going wrong in Brazil. Sadly, whereas the original “Girl from Ipanema” was tall, thin, young, and beautiful, her counterpart today has almost a 50 percent chance of being overweight on the way to being obese.
An unhappy side effect of the surge in real income in Brazil has been a surge of obesity. Brazil, like all the BRIC countries is getting fatter as it gets richer. A social indicator of weight gain among Brazilians is the drop in undernourishment that accelerated in the last quarter of the twentieth century. In 1975, four times more Brazilians were underweight from malnutrition than were obese. That changed as incomes grew.
Part of the issue is that poor people who reach middle class income levels tend to have status anxieties. In particular, they know that rich people seldom prepare their own food. Consequently, a surge in income can lead a formerly poor family to completely abandon the traditional diet. Rather than prepare their own meals from higher quality fresher, natural ingredients, they prefer to abandon cooking altogether and buy ready-made meals, such as store-bought breads and cakes, frozen dinners, and fast food. The move away from the traditional cooking to more processed foods tends to make people fatter.
Another reason that surging wealth may tend to make people fatter, in addition to eliminating undernourishment and deflecting people away from the traditional diet, is the effect it has in contributing to more sedentary leisure activity. In per capita terms, Brazil was by far the richest of the BRIC countries in 1970. Yet even Brazil has experienced an enormous increase in the proportion of households with TV sets, from 24 percent in 1970 to 88 percent in 1999.2 That percentage would now be above 90 percent after a jump in real income that brought 39.5 million Brazilians out of poverty and into the middle class in the nine years ending in May 2011.3 People who spend a greater percentage of their leisure time in sedentary pursuits like watching television tend to gain weight.
There are no doubt other factors in addition to greater caloric intake and more sedentary leisure pursuits that contribute to an unwholesome weight gain as incomes rise. I am convinced that consuming more highly-processed fast foods laden with unnatural ingredients such as trans fats and high fructose corn syrup contributes significantly to the obesity epidemic.
If you don’t understand the dangers of high fructose corn syrup, it is a highly refined, unnatural product that cannot be metabolized readily into ATP for cellular energy like sucrose. Scientists and natural foods advocates believe that the 1,000 percent increase in consumption of HFCS between 1970 and 1990 is responsible for the surge in nonalcoholic fatty liver disease in the United States.4 It turns out that drinking a lot of soft drinks loaded with high fructose corn syrup can be as harmful to your liver as swilling vodka or cachaça, the Brazilian rum that is the third most widely drunk spirit in the world.
Of course, as the world’s largest and most efficient sugar producer, Brazil suffers less with high fructose corn syrup than does the United States; Brazil produces 20 percent of the world’s sugar at a cost of production “on the order of $170 to $210 per ton,” as compared to $525 per ton in the United States.5 Presumably, the greater efficiency of Brazil’s natural sugar industry will slow the substitution of industrial, high fructose corn syrup for sugar. But the temptation to substitute a cheaper, if metabolically dangerous, sweetener will eventually impinge further on the traditional Brazilian diet.
Almost every group that becomes rich enough to eat fast food quickly gains weight and puts itself on the path toward insulin insensitivity and Type II diabetes. The roughly 40,000,000 Brazilians who escaped poverty over the past decade showed a high propensity to move away from the traditional diet toward prepared foods, including store-bought breads and fast food. The alacrity with which people tend to consume products that frequently create health problems for themselves also creates investment opportunities for others. In our Strategic Investment model portfolio we have had a profitable holding in Souza Cruz, the Brazilian tobacco giant. Disinterested observers have known since the days of King James I that smoking is bad for your health. Yet this common-sense observation has not deterred millions of additional smokers from taking up the habit each year.
Equally, three Brazilian billionaires, among them former tennis champion Jorge Paulo Lemann, noticed the growing propensity for fast-food consumption among lower-middle-class Brazilians and decided to do something about it. They bought Burger King Worldwide Holdings for $4 billion and have subsequently announced plans to expand the number of Burger King outlets in Brazil by tenfold, from 108 to more than 1,000.6 Presumably, they know what they’re doing. They are the same shrewd investors who orchestrated a $52 billion takeover of Budweiser through an international vehicle—a fact that brings new perspective to the joke that Americans who want to use their consumption to stimulate the U.S. economy should spend all their money on beer and prostitutes, as those are the only things still made in the United States. Presumably the Brazilian Beer Barrel Billionaires who own Budweiser got a chuckle out of that.
In the likely event that Brazilians escaping poverty continue to lavish their higher incomes on fast foods rather than buying more fresh fruits and vegetables, you can expect to see a growing number of obese people in Brazil.
According to a 2010 report on the Reuters newswire, nearly half of adult Brazilians are overweight, and 15 percent are obese. The story quotes Brazil’s health minister José Gomes Temporão, as saying, “if we stay at this pace, in 10 years, we will have two thirds of the population overweight (or obese) as has happened in the United States.”7
Unfortunately, more and more Brazilian waistlines are bulging, betraying the country’s image as a haven for buff sun worshipers. Among Brazilians between 20 and 24 years old, the percentage of overweight women has shot up to 48 percent from 28.7 percent in a previous national survey (1996–1997). Whereas a decade ago and earlier the beach on Ipanema was crowded with beauties, today about half of them look like the stereotypical overweight American.
It is a sign of the times that the Brazilian magazine CartaCapital, published in conjunction with The Economist, ran a photo of an obese woman cavorting on a sparkling, white sand beach, with a warning that a mere 50 to 100 excess calories per day can result in obesity.8 On the lighter side, the report also emphasized that Brazil still has a long way to go to sink as far into obesity as the United States where 70 percent of adults carry excessive weight, 30 percent are obese, and 10 percent are morbidly obese. More shocking still is the projection from researchers at Johns Hopkins University that essentially all American adults will be overweight by the year 2048 if present trends continue.9
For a lover of Brazilian women, seeing this country move along the same trajectory as the United States in the direction of obesity is a sad sight. It is also an instructive one from an investment perspective. It suggests that Brazil is a country where the opportunities and risks may be tending to follow a template based upon its stage of economic development, rather than being more directly informed by peculiarities of Brazilian culture, much less genetics.
Unfortunately, for lovers of beautiful women, Brasileiras are tending to get fatter in proportion to income growth. Women in the south of Brazil, the country’s wealthiest region are fatter than those in the north. And obesity is growing most rapidly among those whose incomes have risen the most. Wealthier women in the cities tend to be chubbier than poor women in the countryside. The one bright spot to show up in nationwide surveys undertaken in Brazil since 1975 was a hint that the obesity among the wealthiest segment of Brazilian women in the southeastern region tended to drop as their commitment to physical exercise rose after 1989. This seems to be unique among developing countries.10 No others seem to have any distinct demographic segments that are making countertrend headway against obesity. This may reflect the uneven development of Brazil, concentrated in the southeastern region of this vast country. The states of São Paulo, Rio de Janeiro, and Minas Gerais, encompass an area greater than seven core states of the European Union—Austria, Belgium, Luxembourg, the Netherlands, Italy, Denmark, and Germany—combined. In the immortal words of George W. Bush, “Wow, Brazil is big.” Brazil’s industrialized southeastern region, about one-tenth of the country, with a population of about 75 million, is more comparable to a middle-income country than to a developing economy one.
The apparently established trend for higher-income women in Brazil to counteract the slide toward obesity through exercise suggests a bright future for operators of health clubs in Brazil and purveyors of exercise clothes and equipment, like Track & Field, the high-end Brazilian brand now expanding into the United States. Its first stateside shop opened on the Upper East Side of New York close to Central Park at Madison Avenue and 77th Street.
The growth of chubbiness also has grim implications for health care costs. It implies a future of declining marginal returns for health care spending in Brazil, following along the lines of the astonishing plunge in marginal returns on health care spending in the United States. As you may remember from the footnotes of the debate surrounding Obamacare, the United States spends twice as much per capita on healthcare as any other advanced economy, without achieving any measurable benefit in terms of improved health outcomes. Among the grim correlates of increased consumption of high fructose corn syrup, in addition to growing nonalcoholic cirrhosis, are surging heart and kidney disease, all of which contribute to soaring health care costs.
It is notable that the stage of economic development tends to be more telling in informing the propensity to fat than apparently distinctive genetic and cultural factors. Across the G-20, North America is by far the fattest continent, with Mexico joining Canada and the United States near the top of the obesity scale. The high-income British settlement colonies also are standouts for obesity, even more than the United Kingdom itself. Canadians, Australians, the British, and Germans all have their issues with fat. Italians and French are less prone to obesity.
The Japanese are outliers. They have enjoyed the world’s second-richest economy through the last quarter of the twentieth century. But just about the only fat people in Japan are sumo wrestlers who stuff themselves remorselessly in a concerted effort to gain weight.
The question is whether and to what extent other countries, such as Brazil, may have a cultural/genetic advantage that tends to obviate the impact of growing real income in leading to obesity. Approximately 1 percent of the Brazilian population is of Japanese ancestry, implying that Brazil might share to a minor degree in any genetic factors that contribute to Japanese remaining lean.
What does the record show? There is strong evidence that people of Japanese descent, as with other immigrant groups in Brazil, are rapidly assimilated as Brazilians. This was underscored late in the past century when the Japanese government, aware of the demographic problems presented by plunging population, decided to solicit Brazilians of Japanese ancestry to return to Japan. The government reasoned that because of their Japanese ancestry Japanese-Brazilians would be more readily accepted in Japan. Special legislation was passed in 1990, giving the descendants of Japanese in Brazil priority status in immigrating back to Japan.
Contrary to expectations, however, it soon became evident that the “returning Japanese” from Brazil were no longer Japanese but Brazilian. As one account put it, “Despite their Japanese appearance, Brazilians in Japan are culturally Brazilians, usually only speaking Portuguese, and are treated as foreigners.”11 While I am only guessing, I suppose that the body fat profile of Japanese has more to do with their diet and physical activity than their genome. Whether this is reflected among Brazilians of Japanese descent is complicated by the fact that Brazil’s distinctive culture is likely to have played a role by thoroughly mixing the country’s gene pool.
The thorough mixing of the country’s gene pool first occurred to me as I began to wonder why Brazilian women have long enjoyed a reputation for great beauty. Let me explain. If you are looking for a succinct definition of beauty one of the best is the regularity and symmetry of the features. Perhaps the best way to attain regularity and symmetry of features is by thoroughly stirring and mixing the human gene pool. This is what Brazilian culture has done. As the Austrian author Stefan Zweig wrote almost three-quarters of a century ago in Brazil: A Land of the Future:
. . .for centuries the Brazilian nation has been established on one principle alone, that of free and unrestrained intermixing, that total equality of black and white and brown and yellow. What in other countries is only set down theoretically on paper and parchment, absolute civil equality in public and private life, has a visible effect here in the real sphere. . . . It is touching to see even the children, who vary through all shades of human skin color—chocolate milk and coffee—come from school arm in arm. . . . this whole thing constantly mixed itself together, interbred, and was refreshed by the constant influx of new blood through the centuries. Having come here from all European countries and finally, with the Japanese, from Asia, these blood groups are incessantly multiplied and varied in innumerable crosses and hybrids within the borders of Brazil. All shades, all nuances of physiology and character can be found here. Anyone who crosses the street in Rio sees more peculiarly mixed and already indeterminable types in an hour than he would otherwise see in another city in a year.12
As a result, Zweig concluded, “Seldom can we see more beautiful women and children anywhere in the world.”
Taking this at face value as an informing factor in beauty, there is the further question of whether high-speed “race mixing” makes for a healthier, leaner population. To my knowledge, this is a subject that has never been researched. But the fact that the United States, Canada, and Australia are among the fattest countries on the globe suggests otherwise. All three countries have populations comprised of immigrants from all over.
The United States has frequently been perceived as the great melting pot. During its dynamic period, the culture of the United States attracted immigrants to assimilate. No longer. Today’s immigrants to the United States tend to segregate themselves in ethnic enclaves and continue speaking their original languages. As Zweig observed over 70 years ago, Brazil is the world’s most thoroughly stirred melting pot. Genetically and culturally, Brazil is a much more integrated society than the United States. If there are health benefits from thoroughly mixing the genomes of various populations, they should be more evident in Brazil.
On the other hand, especially where obesity is concerned, it is equally conceivable that the populations that have been exposed to the traditional Western diet over the longest time may be better adapted to it. There is strong evidence that some peoples, who have only recently begun eating Western-style diets, are more prone to obesity and Type II diabetes than those of European descent. Polynesian immigrants to New Zealand, for example, are dramatically overrepresented among the ranks of the morbidly obese. They are disproportionately diabetic and more prone to suffer from other ailments aggravated by being overweight.
Equally, there is evidence that the general health of Brazilians has been improved in at least one sense because of the more complete assimilation of immigrant groups in Brazil. A striking example of this is provided by the different experience of Arab immigration to the United States and to Brazil. Notably, nineteenth-century Muslim immigration to both countries, mostly from the Ottoman Empire, did not lead to the formation of distinctive Islamic communities. Most immigrants were rapidly absorbed into the wider American or Brazilian society.
More recently, however, Arab immigration to the United States has led to the formation of distinctive Arab-American communities. Arab-American associations estimate that there are 3.5 million Americans of Arab descent.13 As time has passed, they have proven ever less likely to assimilate. There are an estimated 1.8 million practicing Muslims in the United States.14
By contrast, as reported in the Washington Times, few of Brazil’s estimated 10 million descendants of Arab immigrants even realize that they have Arab ancestry.15 A recent census showed only 27,000 Brazilians claimed to be practicing Muslims. Why the very low level of identification as Arabs among Brazilians of Arab descent? Because they don’t form distinctive communities. Intermarriage between Brazilians of Arab descent and other Brazilians, regardless of ethnic ancestry or religious affiliation, is very high; few Brazilians of Arab descent have more than one parent of Arab origin. Consequently, new generations of Brazilians of Arab descent show no ongoing affiliation with Arab culture. Only a few speak any Arabic. Instead the vast majority, especially those of younger generations, speak only Portuguese:
“Assimilation and integration have been so strong that sometimes it is difficult, if not impossible, to know who in this country is of Arab descent and who is not,” São Paulo State Governor Geraldo Alckmin said at a recent meeting of Brazilian and Arab businessmen. “About 10 million Arabs live in Brazil, giving it the largest Arab population outside the Middle East,” said Antonio Sarkis, president of the Arab-Brazilian Chamber of Commerce.16
Although Brazil may have a higher representation of Arab blood in the population than the United States, the country has until recently been almost entirely free of Islamic terrorism-related events. This apparent immunity to the troubles arising from what Samuel Huntington described as the clash of civilizations, came to an abrupt end early in April 2011 when a Brazilian Muslim opened fire on Tasso da Silveira primary school in Rio de Janeiro. The shooter, Wellington Oliveira, killed 10 girls and 2 boys and wounded 12 others before committing suicide after being shot in the legs by Brazilian police. Oliveira’s neighbors and relatives described him as a “nearly friendless, introverted man” who had recently converted to Islam from being a Jehovah’s Witness.17
A good thing about Brazil has been its apparent immunity to the violence, tribulation, and social costs arising from the clash of civilizations. Now there is unwelcome evidence that even a highly integrated country with a distinctive culture cannot remain entirely aloof from the random antics of homicidal maniacs. Where such terrorism doesn’t arise from ethnic groups harboring grievances, similar grievances can be transmitted to “nearly friendless, introverted” weirdos over the Internet.
Apparently, even Jehovah’s Witnesses can be converted into terrorists if they have a reliable, broadband connection. One of the troubles with Brazil is that if lunacy is a modern contagion transmitted over the Internet then Brazil will be increasingly exposed as broadband coverage grows. According to Internet World Stats, 34.4 percent of Brazilian households were wired in 2010, as compared with 74 percent in the United States.18
Heretofore, the absence of terrorism in Brazil has made it very attractive to me. I have always found it a good thing that one can generally travel within Brazil without having to deal with heavy-handed security at airports or to worry about a terrorist attack. Unless you’re flying to the United States, airport security is low-key in Brazil. The way I like it. You do not have to take off your belt or your shoes or remove every scrap of lint in your pockets to board a plane. You don’t even have to take your computer from your briefcase to clear security. That part of travel in Brazil can be a delight.
Less delightful is the fact that Brazil needs to invest hundreds of billions in upgrading its infrastructure beginning with airports. Economists suggest that infrastructure bottlenecks cost Brazil more than 1 percent of GDP annually. I would guess that this is an underestimation.
For example, much of Brazil is comprised of unexploited iron deposits. But transportation bottlenecks prevent production of many potentially world-class deposits. Many of the transportation and port assets that are required to access the huge iron deposits are controlled by Vale, the world’s largest iron exporter, and Anglo Ferrous, a wholly owned subsidiary of AngloAmerican, PLC. The Brazilian government requires Vale to share a small portion of the haulage capacity on its private railroad with other iron producers. But the demand far exceeds the capacity.
There are plans or hopes of spending vast sums to expand railroads in Brazil. Included are plans to build high-speed bullet rail links between Rio de Janeiro and São Paulo. And many more billions will have to be spent upgrading airports, freight rail links, and highways. Part of the difficulty that explains the slow development of infrastructure in Brazil is based in the country’s geography. While Brazil is the world’s most well-watered country (in the sense that it has more fresh water than any other country), as discussed previously, the waterways are not conveniently situated to facilitate transport. Among Brazil’s major navigable rivers, only the Amazon flows to the sea. But the area it drains is mostly tropical jungle—a region of low productivity. Brazil’s most productive regions, in the southeast of the country, do not have easy access to the sea through waterways. Unlike coastal regions of the United States, most of Brazil’s Atlantic Coast is defined by a high wall known as the Grand Escarpment. This is the exposed face of another difficult geological/topological feature, the so-called Brazilian or Amazonian Shield; an area where most of the rivers flow away from the sea, either north, as tributaries of the Amazon, or to the west where they eventually feed into the Paraná River system, and thus into the Rio de la Plata, past Buenos Aires and Montevideo into the Atlantic Ocean.
As discussed, the engineering required to provide infrastructure for transport of Brazilian products is much more complicated and costly than the equivalent infrastructure in the United States. Fundamental logistics obstacles help explain the slow development of Brazilian infrastructure. Another hampering factor blocking improved infrastructure in Brazil has been a tradition of astonishing, Italian-style corruption in the public sector. As in Italy, the bureaucracy in Brazil is bloated and ponderous. (Not that it is always much better in the United States.) What Brazilians get in return, like the Italians, “is mediocre secondary schooling, a lottery in healthcare, and a permit-mad bureaucracy apparently designed to impede what it cannot entirely prevent.”19 The heavy-handed bureaucracy is the handmaiden of corruption. Among the most corrupt agencies of Brazilian government is the Ministry of Transportation. As the BBC reported on July 7, 2011,
Alfredo Nascimento stepped down after a magazine alleged staff at his ministry were skimming off money from federal infrastructure contracts.
Mr. Nascimento denies any wrongdoing, and says he will co-operate with any investigation.
He is the second member of President Dilma Rousseff’s cabinet to resign over corruption claims in the past month.
Her chief of staff, Antonio Palocci, resigned after press reports questioned his rapid accumulation of wealth. He’s also denied wrongdoing.20
Setting aside the question of whether Minister Nascimento is personally part of the ring of corruption in his agency, it is easy for anyone who drives on Brazilian public highways to credit the notion that large sums are being skimmed from infrastructure projects. The public highways are always in disrepair. The pavement is wavy, curdled, and punctuated with potholes.
The bright spot for drivers in Brazil is the fact that many thoroughfares have been converted to private concessions. In general the upkeep on private toll roads is vastly better than on public highways. The private toll roads in Brazil can be very lucrative. More than 1.2 billion people travel the highways in Brazil each year. And auto sales have surged, leading Brazil to surpass Germany as the world’s number four car market. Note that we have made handsome profits in Strategic Investment from our holdings of the public Brazilian tollroad company, CCR Rodovias. As of July 2011, we had posted an unrealized gain of 173.69 percent, equivalent to more than 1,000 years of income from constant maturity U.S. Treasury bills. As I write, Bankrate.com reports the constant maturity yield for one-year Treasury notes at 0.16 percent.21 In a mere millennium, plus another lifetime (1,085 years), you could gain 173.69 percent in U.S. Treasury yield. Brazil has troubles. But among them is not the trouble of living with an insolvent government. Brazilians with money to invest do not face financial repression as those of us in the United States do.
But even though there appears to be a broad political consensus in favor of privatized highways, (even the left-oriented Workers Party government has pushed privatization), many members of the public resent paying the higher tolls generally charged on privately maintained roads. There is a feeling that the public gets very little return on the high taxes it pays. So you may have to keep an eye out for the danger of a backlash against private toll roads, which could eat into the high profits of CCR Rodovias. But so far, so good.
The Brazilian news magazine Epoca published a cover story in its July 25 2011 issue “Agencia da Nacional da Propina” (National Bureau of Tips) documenting corruption in the Agencia Nacional do Petroleo (ANP). This story details the procedures employed by high officials of the ANP to transform theirs into an agency for payoffs and extortion. Transcripts of conversations, including photographs, document the bold demand for R45,000 of propinas to secure a meeting for clarification of the process to be followed by an oil company to register its interest in obtaining an oil concession. The story goes on to list nine other agencies that appear to be tainted by similar corruption.22
The Epoca exposé underscores the pernicious logic, familiar to everyone who does business in Brazil, that links ponderous bureaucracy to payoffs and extortion. (Think of doing business in Broward County, Florida.) It is commonplace for mayors and other officials of municipalities, much less national politicians and administrators of ministries, to grow quite rich in the course of a few years in office. Their support is so often required to expedite the approval process for licenses and permits to do anything associated with building that major contractors shower them with propinas (tips) as a cost of doing business. The bureaucrats may not contribute much to the productive process, but their support is essential.
I recently heard an example that starkly illustrates the fact that regulators and administrators of bureaucracies in Brazil tend to pursue their own interests rather than their ostensible purpose in promoting the welfare of the public. A tycoon in the major industrial city of Belo Horizonte proposed to build and contribute a civic center to the city at his own expense. He proposed to provide the land upon which the structure would be built, commission a first-caliber design, and pay the full construction costs. All told, he offered the city a gift worth more than R10 million. What he was not prepared to do was pay off officials in the permitting departments to accept the gift. In the end, that proved to be a fatal deficiency, as the bureaucracy rejected the proposed civic center.
The apparently cavalier rejection of this large donation to the city made good economic sense from the point of view of bureaucrats looking to optimize the value they receive in propinas. Obviously, they could not expect to extort large sums from a civic benefactor simply for the privilege of permitting him to proceed with his contribution.
They would much prefer to deal with the landowner trying to advance a for-profit project. By rejecting the civic center this is what they got. The tycoon still owns the land. Since he was frustrated in his endeavor to make a civic contribution, he has decided instead to try to build a for-profit concert center. Time will tell whether he will be more prepared to “tip” the bureaucracy to gain their approval of his for-profit endeavor. But as he grew quite rich doing business in Brazil it is reasonable to assume that he is comfortable doing business in the Brazilian way. This must be what the bureaucrats assumed and helps explain why functionaries allegedly working in the public interest would be only too glad to block a major civic contribution.
The bureaucracy has nothing to gain from civic benefaction. But for-profit projects, office blocks, apartment buildings, retail space, and, yes, concert venues, entail situations where time is money and well-placed functionaries can find themselves in a position to profit handsomely by helping landowners, developers, and contractors to create a more favorable equation between time and money by parting with some of the latter in the interests of saving a lot of the former.
As this suggests, one of the troubles with Brazil is that it is not an easy place to do business. A big part of the problem is that almost every step in launching a company is ponderous and heavily regulated. I have had a hand in launching companies in many countries over the past 40 years. Unlike the process in the United States, Canada, New Zealand, Australia, or in most European countries, where opening a company is quick, usually requiring no more than filling out a form or two, launching a company in Brazil is a much more drawn-out, complicated process. It takes an average of 120 days to open a new business in Brazil, compared with just under two weeks in the average OECD country. I recently slogged through a process of almost a year to launch a new company in Brazil. It entailed hours wasted at the notary and standing in successive lines in various bureaucracies. In the process, I had to apply for a Brazilian social security number or CPF. It gave me an appreciation of what Antonio Carlos Jobim may have had in mind when he warned that, “Brazil is no country for beginners.”
Consider it a form of protectionism (for those already in business, the competition is lessened when would-be competitors are sidelined by red tape), or merely an expression of a peculiarly Brazilian approach to business, but unlike in most other countries, official applications in Brazil require that your name must be executed with your first name first followed by the middle names and your last name. In the United States, the United Kingdom, or Canada, any legal document that asks for your name would be answered with your last name first, followed by your first name, and then your middle names. When I filled out my application for my CPF, as an analog reaction, I automatically began with my last name as I have become accustomed to doing. In due course (a matter of more than a month), my CPF was issued. I was dismayed to discover, however, that due to my unfamiliarity with the Brazilian way to fill out applications my CPF was useless in completing the formalities for launching the company. It was issued to a man with the first name of Davidson. To remedy this, effectively required me to “change my name,” a process that entails a whirlwind of visits to the notary and one bureaucracy after another.
One thing that process taught me was that it is not always preferable to handle documentation and paperwork for Brazil in Brazil. Most official documents, including the CPF, can be obtained from Brazilian consulates overseas. Dealing with them has the advantage that they are usually consolidated in one place, so you don’t have to wander all over large cities visiting many different official offices as a supplicant. Also your chance of getting help in a language other than Portuguese is much higher in a consulate office than it would be in Brazil itself.
While there are certainly informing differences, if anything Brazil has a tendency to be too much like the United States. I have never been a fan of the surfeit of lawyers in the United States; there is one for every 265 Americans. Equally, it strikes me as a bad sign that Brazil follows the United States closely with one lawyer for each 306 persons.23
Of course, Brazil’s legal tradition, unlike that of the United States, is not rooted in English common law. The common feature that Brazil shares with the United States is a tradition of high returns to pettifogging. People in both countries go into the practice of law because it pays. Unhappily, a slowdown in business development is a likely consequence of prosperity for lawyers.
Contemporary Brazil certainly provides ample evidence of stultifying bureaucracy inhibiting progress. One of the more striking examples involves evidence that foreign partners have been required to market innovations in dental practices created by Brazilians. Many residents of advanced countries would be surprised to learn that in keeping with brushing their teeth more than any other people, the Brazilian standard of dentistry is among the highest in the world. Recently the American dental supply company Ultradent, along with its German competitor KaVo, expanded their product research into Brazil:
“It’s an environment that encourages original research,” says Luiz Abreu, general manager for Brazil and South America at Ultradent. . . . “Brazil always attracted our attention because it is the third or fourth country in the world in terms of numbers of articles published in orthodontic journals,” he says. “But since we arrived . . . we’ve got closer to that reality and seen that Brazilians really contribute new ideas, especially in combining more sophisticated materials with less invasive techniques.”24
As the Financial Times concludes,
Not all conditions in Brazil are ideal for innovation, however. Just as notorious as the country’s inequality is its stultifying bureaucracy. Ultradent’s Tilos range, developed by Brazilians, is on sale in the United States, Europe and Japan but not Brazil.
“We can develop new products, but our product registration process is one of the most complicated in the world,” Mr. Abreu says.25
Within a year or two the new technology developed by Brazilians will be available for use by Brazilian dentists.
Another of the troubles with Brazil, closely linked to the ponderous bureaucracy, is the surprisingly high cost of employing people in Brazil. A common misconception of people planning to set up business in Brazil is that the country has a cheap workforce. This is a reasonable extrapolation from the fact that slightly less than 64 million of Brazil’s population, the so-called D and E social classes, working class and poor earn less than U.S. $9,880 per year (U.S. $760 per month). But while there is a lot of poverty in Brazil, that does not translate into cheap labor.
For one thing, payroll taxes in Brazil are extremely high. Your actual costs to pay someone R$10,000 per month would be more than R$20,000. Compounding that, you are obliged by law to pay every employee a bonus of a thirteenth month’s salary each year. So instead of calculating your annual employment costs by multiplying a month’s salary by 12, you must multiply by 13. The higher up the skills scale you go, the more expensive compensation is in Brazil. As reported by Moises Naim in the Financial Times, “the salaries of executives in São Paulo are higher than London.”26 The “Custo Brasil,” or Brazil cost, is such that Brazil tends to be, as Joseph Leahy reported in the Financial Times, “a low-margin market in terms of profitability, particularly for companies in the start-up phase.”27
The employment taxes and social benefits mandated in Brazil are so steep that state and municipal governments looking to save money sometimes evade the social contributions mandated by law. By failing to pay their withholding taxes, pension contributions, and other levies, the lower levels of government can cut their current costs drastically, but at the expense of creating multiple liabilities in the future.
Notwithstanding the great strides achieved in modernizing the Brazilian economy as reflected in the acceleration of growth in recent years, Brazil’s potential continues to be stunted by heavy-handed bureaucracy, endemic corruption, and the highest real interest rates in the world. Within the past few years, the surge in real incomes has lifted approximately 40,000,000 Brazilians into the new middle class, creating the basis for the emergence of consumer credit on an unprecedented scale. Per the Financial Times, “Mean household income has grown by 1.8 percentage points above gross domestic product (GDP) per year since 2003—the reverse of China, where GDP growth has grown above household income by two [percentage] points a year.”28
In other words, the more rapid growth of income in Brazil shows that Brazil’s economy is more dependent upon consumption and has a much lower investment rate than China’s. As Shannon O’Neil, author of LatIntelligence observed, China’s growth has been investment led:
From 2000 to 2008, China invested an average of 41 percent of GDP, a ratio more than double that of Brazil (and other countries such as the United States). In 2009, in the depths of the worldwide global downturn, investment soared to almost 50 percent of GDP, much dedicated to infrastructure. Thousands of factories, millions of miles of road, new ports, high speed railway lines, and airports have sprung up over the past decade. The country is now populated by entirely new cities and manufacturing centers that then drive growth.
Brazil, by comparison, invests less than 19 percent of GDP a year. Infrastructure is notoriously bad—which some economists estimate will curtail future growth by nearly 1 percent a year. Instead, consumption fuels Brazil’s recent rise. In 2009 a whopping 84 percent of GDP was consumption—compared to . . . just 13 percent in China. Brazil now ranks at the top of the list of the world’s best shoppers led by booming credit, the expansion of foreign and domestic retailers, and the now 100 million strong middle class. The current over-reliance on consumption leads economists and policymakers alike to worry about overheating.
Furthermore, China’s transformative growth has been mostly self-funded. It leads the world in internal domestic savings, which has risen steadily since the turn of the 21st century and in 2007 topped 54 percent of GDP, dwarfing the 23 percent average rate of OECD countries.29
Many economists who have studied Brazil suggest that “the best way to fund investment is to increase the efficiency of the public sector.” While I know of no direct study estimating losses to Brazil due to government corruption, the famous tangetopol (or “bribesville”) analysis in Italy showed losses equivalent to 7 percent of GDP. According to the Corruption Index compiled by Transparency International, Brazil is only slightly more corrupt than Italy, ranking 73rd, as compared to 69th, on a descending scale.30 If you adopt the not-unreasonable assumption that corruption costs Brazil 7 percent of GDP, it implies an annual loss in excess of US$150 billion. Curtailing that corruption could, in theory, free enough resources to raise Brazil’s investment rate to 25 percent.
One way or the other, the best opportunity for improving long-term growth prospects is to curtail corrupt and inefficient government. According to Harvard University economist Ken Rogoff (co-author of This Time Is Different, quoted in Leahy’s Financial Times article, “the government has grown inexorably, which makes it less flexible. . . . That’s a weakness, I think it’s actually the weakness in the model.”31
Brazil, like the United States, is highly consumption oriented. It is, after all, an “American” economy. Although a formal rendition of “shopping center” into Portuguese would be centro comercial, the common term for a shopping center in Brazil is um shopping. They turn the American adjective “shopping” into a masculine noun.
A recent visit to a major Brazilian shopping center underscores the familiar-but-different character of Brazilian consumerism. One thing that immediately strikes a visitor is not just that a shopping center is um shopping, but the fact that many Brazilian retail outlets trade under English names: BrooksField, Basic Blue, Handbook, Sketch, Authentic Feet, Track & Field. These were just some of dozens of English-language brands calling to Brazilian shoppers at B.H. Shopping in Belo Horizonte.
As I entered Mr. Cat shoe store to explore sale prices on comfortable Brazilian shoes, I heard the lyrical voice of Bruno Mars crooning the unofficial anthem of consumerism everywhere: “Billionaire.”
Something else you would soon notice in um shopping is the tremendous difference in the quality of customer service in a Brazilian shopping mall as compared to one in the United States. Decades of stagnant income in the United States have dictated a strategy of cost-cutting as a primary focus of successful retailers. Consequently, when you enter a store in the United States you can generally wander the aisles unnoticed and unmolested by sales personnel. Typically, when you select products to buy in the United States you must then stand in a long line waiting for someone to take your money. Not so in Brazil. When I entered the Mr. Cat shoe store, I was one of four customers being attended by five sales personnel. Something you must get used to in Brazil is the eager attention of sales staff now employed in record numbers in the hope of encouraging you to buy.
Surging income, along with the reform of the bankruptcy laws, has helped accelerate the boom in Brazilian consumer spending. But the fact that many of the new middle class really are new to credit creates a worrisome potential for short-circuiting the boom. For one thing, the growth of consumer credit has helped drive the surge in imports of durable goods, such as home appliances from China. Consequently, the 30 percent improvement in Brazil’s terms of trade arising from the global commodity boom has been diverted into consumption rather than savings or investment.
Just as Brazilians who shift to an American-style diet tend toward obesity, so Brazilians who indulge in U.S.-style credit abuse may face considerable difficulties. The dangers of overindulgence in credit are even greater in Brazil than in the United States because Brazil has the world’s highest interest rates.
As of May 2011, the average rate of interest on consumer lending in Brazil jumped from 41 percent to an astonishing 47 percent, and the average interest rate on signature loans reached 147 percent. With interest rates at that level, amounts owing double in little more than the blink of an eye. As you would expect with rates this high, however, most loans are short term. Thus the inflection point where Brazil’s credit cycle turns sour figures to be much nearer the starting line than it is in the United States, where the average interest rate on consumer credit cards on July 15, 2011 was 16.43 percent.32 With Brazilian interest rates almost three times higher than those in the United States, it is little wonder that three Brazilian banks are among the world’s 10 top credit card issuers: Itau-Unibanco, Bradesco, and Banco do Brasil.
Partly because Brazil does not have a level of consumer credit reporting comparable to the United States, Brazil’s consumer credit laws permit more ready garnishment of wages than do the laws in the United States. (About 60 percent of consumer loans in Brazil are secured against payrolls, cars, or property.) For this reason, the current exposure of Brazilian banks to bad consumer debt is less acute than it would be under American laws. Nonetheless, delinquencies in Brazil (in excess of 15 days) have moved up rapidly, rising from 7.8 percent to 9.1 percent of total loans in the first five months of 2011. According to a separate analysis by credit rating agency Serasa Experian, delinquencies rose at a 23 percent rate through June 2011.33
Of course, sky-high interest rates still being paid by more than 90 percent of borrowers provide substantial coverage against losses for the banks. The most worrying aspect of the deterioration of credit indicators is that they are occurring in an economy that has remained strong and where unemployment is at a record low. As Paul Marshall observes,
Normally credit indicators cyclically follow [read lag] the economic cycle. When they begin to deteriorate before any economic weakness, it usually represents a structural problem relating to underlying cash flow or underwriting weakness in the quality of credit—Brazil has both problems.34
The combination of high nominal and real interest rates in conjunction with growing delinquencies implies that Brazil’s credit cycle will be unnecessarily short. Even if Brazilian families, many unaccustomed to handling credit, do not mind devoting 20 percent of their current income to pay the debts from the previous spending spree, the expansion of high interest consumer debt in Brazil is nearing its limits. This implies a slowdown ahead.
While increased consumer credit and consumption are mechanisms to facilitate popular participation in economic growth, Brazil must increase its investment to continue to grow robustly in the future. As true as this is, it would be a mistake to ignore the fact that Brazil has already made crucial investments that put it well ahead of the United States particularly in the important field of energy. As you will be well aware, American politicians have been jabbering on for decades about the importance of achieving energy independence. In Brazil, this is not a daydream, it is a fact.
Brazil is not only energy independent, it has gone much further than the United States in developing so-called alternative energy. Brazil is the world leader in biofuels. It is also right at the top with 82 percent of its electricity generated through renewables. The figure for the United States is 11.14 percent.
Speaking in support of his scheme to spend trillions to double the percentage of U.S. electricity generated from renewable energy, no less an authority than President Barack Obama proclaimed, “We know the country that harnesses the power of clean, renewable energy will lead the twenty-first century.” Wittingly or not, Obama endorsed Brazil as the country of the future where energy is concerned. The promise that the United States will generate a significant percentage of its electricity through “clean, renewable energy” is reminiscent of Obama’s promises to end unemployment and balance the federal budget, but the promise of renewable energy in Brazil is not pie in the sky. It is here today.35
Not only is renewable energy generation installed on a large scale in Brazil, it pays a hefty yield. CIA Energetica de Minas Gerais (CIG; recent price: $17.55) operates 54 hydroelectric generating facilities, in an array of low-cost, renewable assets that includes three thermal plants and two wind farms. While U.S. politicians talk about building the system of the future around “clean, renewable energy,” CEMIG (as it is known) powers a state larger than France almost entirely with renewable generation that involves scarcely any hydrocarbon fuels.
Even better, as I write, CEMIG paid a dividend of 11.14 percent. Compare this to the 3.75 percent yield (again, as I write) on the U.S. 30-year Treasury bond. I personally don’t happen to believe that President Obama is right about very much. But I do think he hit the nail on the head when he said, “We know the country that harnesses the power of clean, renewable energy will lead the twenty-first century.” The trouble is that the United States is ill-positioned to take more than trivial steps toward meeting its liquid fuels and electricity needs from renewables. Brazil, on the other hand, will.
Looking out over the next several decades, it seems quite likely that the return on a 30-year IOU issued by a bankrupt government is likely to be a lot lower than the return on an equivalent investment in one of the world’s leading renewable electricity generators, especially given that the yield on CEMIG is three times that of the Treasury bond.
While in the past, Brazil has often seemed to be disadvantaged by its tropical climate, energy is one area where it benefits tremendously. For one thing, in a world getting colder, Brazil is a huge beneficiary of old-fashioned solar energy. As I write this sentence in August, the expected high temperature in Belo Horizonte, capital of Minas Gerais, is 77 degrees Fahrenheit. This is the dead of winter in Brazil. Because of weather like this, Brazilians do not have to spend money buying heating oil to warm their homes
All countries and economies have drawbacks and weaknesses, Brazil no less than others. The key to successful investment is to find places where life will get better and problems will be solved. No one should labor under the illusion that Brazil is paradise. It isn’t. People grow as old and ludicrous and fat here as they do anywhere else, but while many wealthier economies shrank during the global financial crisis, Brazil grew 5 percent with growth surging to 7.5 percent in 2010. It grew in spite of higher real interest rates and the fickle withdrawal of hot money.
Notwithstanding high real interest rates, and the dangers of growing consumer debt, Brazil enjoys the considerable advantage of being a more deleveraged, solvent economy. While dependable data on aggregate debt to GDP are hard to come by, total debt in Brazil appears to be at least 50 percent lower as a percentage of GDP than debt in the United States. (McKinsey’s 2010 study put aggregate debt in Brazil at 142 percent of GDP with aggregate debt in the United States at 296 percent.) Brazil’s external indebtedness is also much lower relative to GDP than that in the United States In fact, Brazil is the fourth largest external creditor and holder of U.S. government debt.36
Updating the vision of Brazil that Stefan Zweig spelled out in 1940, “its development is still in its initial stages, and no degree of imagination suffices to concede that what this country, this world will mean to the next generation. Anyone who describes Brazil’s present unconsciously already describes its past.”37
For all its problems, Brazil remains, as Zweig perceived, “one of the most important, if not perhaps the most important future reserve in the world.”38
If there is a future for prosperity anywhere, it is in Brazil. In the next and final chapter, we discuss taking part in Brazil’s bright future.
1 Jim O’Neill, “Panic Measures Will Ruin the BRIC Recovery,” Financial Times, August 10, 2011, 6.
2 Carlos A. Monteiro, “Is Obesity Replacing or Adding to Undernutrition? Evidence from Different Social Classes in Brazil,” Public Health Nutrition 5, no. 1A (2002): 105–112.
3 “Almost 40 Million Brazilians Climbed to Middle Class in the Last Eight Years,” MercoPress, June 28, 2011, http://en.mercopress.com/2011/06/28/almost-40-million-brazilians-climbed-to-middle-class-in-the-last-eight-years.
4 See Dana Flavin, “Metabolic Danger of High-Fructose Corn Syrup,” Life Extension, December 2008, www.lef.org/magazine/mag2008/dec2008_Metabolic-Dangers-of-High-Fructose-Corn-Syrup_01.htm.
5 Sugar and Sweeteners Outlook/SSS-249, Economic Research Service, USDA, June 4, 2007, 31.
6 Kerry A. Dolan, “The Burger King Deal Winners: Three Brazilian Billionaires,” Forbes, April 4, 2012, www.forbes.com/sites/k2012/2012/04/04/three-brazilian-billionaires-cash-out-some-of-burger-king-stake.
7 “The Chubby Girl from Ipanema? Brazil Puts on Weight,” Reuters, August 27, 2010, www.reuters.com/article/2010/08/27/us-brazil-obesity-idUSTRE67Q3UK20100827.
8 “Dieta, estilo de vida e gaanho de peso,” CartaCapital, July 27, 2011, 65.
9 Maryn McKenna, “A Diabetes Cliffhanger” Scientific American 306, no. 2 (2012): 26–28.
10 Monteiro, “Is Obesity Replacing or Adding to Undernutrition?”
11 See Kaizô Iwakami Beltrão and Sonoe Sugahara, “Permanentemente temporário: dekasseguis brasileiros no Japão,” Revista Brasileira de Estudos de População 23 (1) (Portuguese); available at bases.bireme.br/cgi-bin/wxislind.exe/iah/online/?IsisScript=iah/iah.xis&src=google& base=LILACS&lang=p&nextAction=lnk&expr Search=447388&indexSearch=ID.
12 Stefan Zweig, Brazil: A Land of the Future, trans. Lowell A. Bangerter (Riverside, CA: Ariadne Press, 2000), 10–11, 122.
13 “Arab Americans,” Arab American Institute, www.aaiusa.org/pages/arab-americans.
14 CIA World Factbook, www.cia.gov/library/publications/the-world-factbook/geos/us.html.
15 “Arab Roots Grow Deep in Brazil’s Rich Melting Pot,” Washington Times, July 11, 2005.
16 Washington Times, July 11, 2005.
17 John Lyons, “Brazil Mourns the 12 Killed by Gunman,” Wall Street Journal, April 9, 2011, http://online.wsj.com/article/SB10001424052748704843404576251182737094852.html.
18 Internet World Stats, www.internetworldstats.com.
19 Rosemary Righter, “Italy Is Venal, but It’s Not Greece: Rome’s Balance Sheet Looks Awful. There Is, However, a Bright Side,” Newsweek, August 1 & 8, 2011, 13.
20 “Brazil’s Transport Minister Quits in Corruption Scandal,” BBC News, July 7, 2011, www.bbc.co.uk/news/world-latin-america-14055768.
21 “Treasury securities,” Bankrate.com, www.bankrate.com/rates/interest-rates/treasury.aspx?ec_id=m1104762.
22 Diego Escosteguy, “Agencia da Nacional da Propina,” Epoca, July 25, 2011 (Edicao 688): 40–46.
23 “What Country in the World Has the Most Lawyers per Capita?,” Answers.com, http://wiki.answers.com/Q/WHAT_COUNTRY_IN_THE_WORLD_HAS_MOST_LAWYERS_PER_CAPITA.
24 Jonathan Wheatley, “Brazil’s Dentists Continue to Innovate in the Face of Stultifying Bureaucracy,” Financial Times, January 7, 2011, 16.
25 Wheatley, “Brazil’s Dentists Continue to Innovate in the Face of Stultifying Bureaucracy.”
26 Moises Naim, “End the Party before Brazil’s Bubble Bursts,” Financial Times, June 1, 2011, 10.
27 Joseph Leahy, “The High Price of Booming Brazil,” Financial Times, February 20, 2012.
28 Joe Leahy, “Brazil: Credit to Redeem,” Financial Times, July 12, 2011.
29 Shannon O’Neil, “Why Can’t Brazil Grow as Fast as China?” LatIntelligence, www.latintelligence.com/2011/06/24/why-can%E2%80%99t-brazil-grow-as-fast-as-china/.
30 Transparency International, Worldwide Corruption Perceptions Index (CPI), Ranking of Countries, http://cpi.transparency.org/cpi2011/results/#CountryResults.
31 Leahy, “Credit to Redeem.”
32 See credit card rates at www.indexcreditcards.com/credit-card-rates-monitor.
33 Jonathan Wheatley, “Brazilian credit: big threat to growth,” Financial Times, beyondbrics (blog), July 12, 2011, http://blogs.ft.com/beyond-brics/2011/07/12/brazils-credit-bubble-big-threat-to-growth/#axzz1xUnGWOJF.
34 Paul Marshall, “Brazil Risks Tumbling from Boom to Bust,” Financial Times, July 5, 2011, 22.
35 See www.whitehouse.gov/the_press_offfice/Remarks-of-President-Barack-Obama-Address-to-Joint-Session-of-Congress.
36 “Debt and Deleveraging, “McKinsey & Company, www.mckinsey.com/Insights/MGI/Research/Financial_Markets/Debt_and_deleveraging_The_global_credit_bubble_Update.
37 Zweig, Brazil: A Land of the Future, 70–71.
38 Ibid.