Wednesday, 21 June 2017

Intermission - the Example of Anthony Clark Evans - From Back Lot Car Diffs to Centre Stage in Cardiff




Seemingly a million miles away from the investment topics of the auto-sector is the world of operatic singing, and the various competitions that bring forth astounding new talent. The pinnacle of which is the bi-annual event 'Cardiff Singer of the World', held at St David's Hall and sponsored by the BBC.

The operatic news press was abuzz at the 'wild-card' winner Catriona Morrison, given her late arrival from the lower ranks. Alongside the formal recommendation of the expert panel, the public voted for Louise Adler.

[NB This coalescence of Scottish-English winners subtly helping to quell the Scottish independence issue].

Other finalists were of Mongolian, Chinese-Australian and American backgrounds.

But it is the American, Mr Anthony Clark Evans – a baritone - that investment-auto-motives wishes to herald.

Unlike many budding opera singers, who from a young age are recognised as future potential and molded as such, with the multitude of supportive advantages therein from institutional grants to wealthy parents and patrons etc, Mr Clarke Evans had to rely upon himself, his self-determination and natural talent.

As a long-time aspirational singer, this man did all he could to finally get on track toward his goal, never giving-up even when things appeared dire. With such passion for his subject, itself necessarily underpinned by pragmatic real-life choices, he paved his path forward by working as a used car salesman for some time before being signed by Colombia Artists Management.

Those with such talent and appreciation of the higher art-forms usually also endemically have higher notions and expections of life itself and of course themselves. They see things very differently to those around them; focused upon the 'best' rather than the accepted 'standard'.

Thus it must have been painful to his very soul when he was stuck in a Kentucky auto-dealership selling cars and trucks to 'make ends meet'. Not so much the process in itself, though it can be soul destroying, but the fact that his mindset was so radically different to the archetypical mindset of the usual car sales person, who care little beyond 'shifting the metal'. His obvious sensitivity and consciousness must have been trampled in what is a 'cut and thrust' game between cross-town dealers, intra-state dealers and the newer collection of on-line operators.

[NB Perhaps especially regards the availability of dealer finance, a field which so soon after the financial crisis is once again peddling large credit packages to poor credit-history customers with little job security under the notion of low rates so as to sell vehicles].

More than his contemporaries, the achievement of Mr Clark Evans should be not only recognised but loudly applauded.

There is of course a parallel to the life story of Paul Potts – which itself inspired the film 'One Chance' starring James Corden...mobile-phone salesman turned opera singer. But the reality of having experienced the art-form, then forced to exist in the 'backwater banality' in a Kentucky town, is (without disrespecting that state) far more a tragedy than comedy.

Even more material in today's world where the upward mobility of so many has been made virtually impossible given the consequences of the 2008 crisis.

Mr Clark Evans is now well known at 'the Met' in New York and a number of other world class opera houses, having worked his way up from his beginnings in 'The Ozarks', well known for roles in La Boheme, Pagliacci and much else.

Today we live in a western-world in which people feel let-down and indeed beaten down, by badly performing economic structures, a lost faith in balanced politics, a fragmented society purported as cohesive, and the media's continual propulsion of celebrity-culture amid the masses who still seek to emulate at great cost, so creating a schizophrenic societal mentality precisely because people's reality is so far from the perceived. Critically the shattering of the post-WW2 'American Dream' in which the rise of 'mental disorders' is itself simply the natural human reaction to a new 'invisible tribe' attitude whereby deep financially-driven hostility is masked by friendliness and so the affects of hidden hypocrisy.

Unsurprisingly, for many a screen-focused existence is far better than the real thing.

In such an age the story of Mr Clark Evans needs to be highlighted more than ever, not told through the Hollywood screen or through Netflix, but in the everyday social intercourse of people.

It would reset the idea of 'everyday ambition' toward 'aspired perfection', and more importantly the ideal of 'everyday perfectionism' (in all things) an attitude which moulds the broad consciousness.

In the meantime it would be wonderful to think that a closer alliance could be formed between the high artistic aims of opera and that of similar world-class automotive exhibitions.

As such, given his professional background, his life's vocation means Mr Clark Evans is the perfect candidate to appear at the renowned events, whether Pebble Beach, Amelia Island, Villa d'Este, Goodwood FoS, Hampton Court, etc which would provide for a level of sublime interaction.

Within popular culture since 1968 it has been the voice of Matt Monroe singing 'On Days Like These' (accompanying the winding drive of a Lamborghini Muira through the Italian Alps) that has been 'the' automotive signature tune

Perhaps it is time for something new in 2018 and onward, whereby each Concour's d' Elegance commissions new unique classical signature tunes. The sound of the human voice and orchestral instruments as counterpoint to the high pitched whine of starter motors and the explosions and tuneful exhausts of IL6's, V8's, V10's, V12's and W12's, would be glorious.

For it has been the creations of the artists of this world who have given life its very meaning for many, especially for those in less than convivial personal circumstances – in a true Rudolfo manner (as per 'La Boheme').

After all, let us not forget that the very basic metal-working shops in which the great carrozzeria performed their own 'rolling sculptures' - Figoni et Filashi, Farina, Pininfarina, Ghia, Vignale, Chapron, Barkers, Mulliner, Park-Ward - were in the winter-times of decades past little different from the cold artistic lofty garrets of painters, poets and playwrights.

Thus it is heart-warming to witness the rise of someone who through ambition, effort and talent has risen to the heady heights of classical singing.

For used car salesmen it was once (and perhaps still is) an old 'trick of the trade' to cure any worrisome audible whine of a car's 'diff' (axle differential) by adding saw-dust into the diff's 'banjo' housing. This and a thousand other tricks inevitably creating the untrustworthy stereotype.

So how prosaic to see a person work their way up from Car Diff's and Banjos to Cardiff and Orchestras.

And just maybe he could create a populist following, via performances at the very successfully resuscitated ACE Cafe in North West London. A place where all kinds of enthusiasts and clubs meet...a new kind of venue which circuitously depicts the man's very own initials.





Tuesday, 6 June 2017

Intermission – An Apposite Jordan B. Peterson Citation - “Clean Up Your Room”


The recent events in Brasilia provide a momentary pause to the long-running weblog topic about the past, present and future of Brazil.

Time for an intermission, and so pause for thought.

The riots which led to enormous damage to public buildings in the supposed cause of anti-Reforms protestation appears to have been deliberately orchestrated; using the anger of a minority of disillusioned young men to 'vent-off' general anger.

Hence there looks to be more behind the riots than immediately meets the eye.

However, such visible extremism, seemingly secretly condoned by many with fantasies of yesteryear rebellion, indicates that this is a pertinent time for many now 'over-entitled' lower middle-class Brazilians - who themselves went on one day strikes - to undertake their own period of self-reflection.

To have some 'time out', see the bigger picture and their responsible place within that picture.

Temer's reforms are far from truly unpalatable and will help provide the necessary monies for new social safety nets for those nationals and immigrants who have long been 'under the radar' and truly marginalised. Those who to date have been merely surviving and existing. So allowing them to better secure, and participate within, a more meaningful future.

Those Brazilians who have long enjoyed the fruits of two decades of economic stability, and the comforts of the new middle class should now look to themselves to further improve metropolitan conditions and lifestyle. Firstly in the Confucian manner about ones-self, family, community and so city etc in obvious ways, from beautification to crime prevention. Instead of blaming the already over-burdened state.

Unlike the West which is still having to battle macro-economic headwinds, stagnation and possible decline – and which has a remit to fairly implement social security assistance (but often knowingly fails) – Brazil is on its long upward economic trajectory.

As the ethos of reduced state-interventionism takes hold and is slowly but gradually superseded by increasingly vibrant and forward-looking commercialisation within a myriad of sectors, so new thinking, improved competition, and new efficiencies for wealth creation for ever more people.

However, the recent Brasilia experience which turned the capital into a momentary war-zone and ghost-town is seemingly the consequence of overt leftist agenda which fails to recognise the power of a true mixed-economy. It is an ideology out of kilter with the realms of balanced fairness, and indeed appears a far cry from the righteousness of past Latin ideals for inclusion and social improvement.

Instead recent actions appear very much self-seeking and so highly retrogressive, even if profferred under the thin veil of of "social justice".

As is now understood, much of the western world has been similarly deeply tainted, through which nearly fifty years of academic post-modern ideology (from its Marxist 'Communard' roots) has through ever more fragmented identity-politics been inculcated via the mainstream media.

So whilst shock events in the UK - such as the Manchester Arena bombing and Grenfell Tower fire - provide a momentary basis for apparent unity, the truth is that society long ago became selfishly deconstructed into a multitude of 'them and us' agendas (on religious, sexuality and race bases) which when set against the 'new norm' of scant financial resources generated endemic fragmentation of western societies.

But thankfully there remain some true defenders of "reason and right"...none better known than the Canadian Professor Jordan B. Peterson.

His experiences of targeted persecution by the far left for countering the dominant, untrammeled liberal theocracy has become well known.

[NB Others who have stood alone against a sea of deliberately formed persecution of any kind, for any length of time, will understand his plight].

Thanks to his centrist, balanced, long-view critical thinking – absorbed from many of the Humanities fields and the Sciences - Peterson has become an icon of the modern age for those both young and old who vitally understand a necessary sense of responsibility regards themselves and society at large.

[NB regards one important topic - his opposition to the extrapolation of gender pronouns (as discussed by the befuddled Canadian Senate) has sound basis. Yet thus far one seemingly unrecognised issue in this burgeoning 'trans-gender' age, is the ability for criminals to deliberately abuse this trend, by disingenuously creating false 'alternatively gendered' identities of both sexes for highly lucrative illegal purposes].      
So at this pertinent watershed point in Brazil, those Brazilians who have deplorably similarly become as overly self-entitled and are approaching the worst of the West , should...in Peterson's words...”Clean Up Your Room”.

Only such a centrist attitude amongst the many will stop Brazil from slipping back into its distant history of crowd induced, swing politics which often assisted the political protagonists far more than the people; and under which enormous pendulum swings of social idealism gave inevitable way to the unwanted economic swings of continued long-time bust after long-period boom.
          
Time now for all to question themselves and heed Peterson's sentiments. 


Friday, 19 May 2017

Micro Level Trends – Brazil's Automotive Sector – “Brazil 66”...Sixty Six Years of Economic Power Lifting (Part 5.3)



Following the previous headline stories from inside Brazil via the 'Rio Times', this portion of the web-log summarises the Financial Times' recent Special Report titled 'Reinventing Brazil' (16.05.2017).

Such reports are typically produced when new positive sentiment towards a region has become apparent in the wider world after a turnaround in capital markets dynamics, local investment project plans, B2B and B2C sentiment. Yet such 'pull-outs' will also be produced when the tipping-point of a new era appears, such as with the recent similar report on South Africa and its political retuning.

The beginnings of such 'good news stories' are in turn promoted by substantial advertising by national government (seeking FDI), industry and trade bodies (looking to promote new or regenerated sectors), and tourist boards (to attract foreign currency and create commercial opportunity).

The FT's articles then provide a good momentary further snapshot to the previous post, and importantly provides insights from vitally positioned political leaders, business luminaries and entrepreneurs.

Hereafter are condensed summaries of the articles provided :


Item 1:
“Reforms end three years of turmoil and recession”

- New 'buzz' on Avenida Faria Lima (Brazil's Wall St).
- Sao Paulo bourse sees marked shift in new IPO numbers
(3 so far in 2017, with 10 – 15 others expected)
- Sentiment driven by Temer's steadfastness on required Reforms
- Beyond exported commodities, industrial powerhouses emerging
- Scandals seen to reflect strong anti-corruption arms of the law
- New middle class expect better 'democratisation' of public assets and services
- Rousseff's budgetary machinations replaced with Temer's better 'mechanisation'
- Newly imposed budget ceiling necessitate major systematic overhauls.
- State asset divestment toward domestic and (critically) foreign investors
- Airports, Highways and Oil and Gas increasing levels of private ownership
- Apparent successful return of inflation target management
- Reduction of BNDES (national development bank) lending...which...
- * relieves Treasury
- * disconnects its from the low rates inducing 'high inflation spiral'
- * reduces prevalence of politico-business 'connections'
- * Temer... “I am not disposed to fiscal popularism”...when real change is needed.


Item 2:
“Finance minister reins in profligate spending”

- Minister Henrique Meirelles...”need to down-size government proportion of GDP”
- Background in US-Latam banking and as Brazil's previous Central Bank Governor
- Expected that the mass populace's approval will return as results of Reforms appear
- Government expenditures cost 20% GDP today, to be 15% in a decade
- “This is now a constitutional requirement” (so driving the imperative)
- “Need to treat public sector and private sector social entitlements similarly”
- “For Brazil to create (future) jobs it must have pension reform”
- “This to also ensure pension system remains solvent”
- “The 1st part of labour reform regards (domestic and foreign) Outs-Sourcing passed...
- ...this eliminates a lot of rigidity in the system”
- “The 2nd part of labour reform – yet to be passed – concentrates on the over-generous laws regards workers' rights (which presently deters domestic and FDI investment)
- “New measures to simplify bureaucracy and the tax system (to encourage commerce)
- Presently Brazil one of the worst countries in the world to initiate a new business.
- Need to change historical trends of major sentiment driven inflows and outflows of investment.


Item 3:
“Development Bank overhauls lending”

- The role and methods of BNDES to evolve and modernise
- From yesteryear's 3rd/2nd World idiom toward a more laissez faire 1st World character
- Responding to criticism about perpetuating the 'Patron System'
- This being the advantageous funding terms (below market rates) to the Brazilian elite
- To reduce subsidised lending
- Apply stricter criteria for financing
- Achieve a steep increase in benchmark interest rates, closer to market rates.
- The Sao Paulo business lobbyist 'FIESP' objecting to seemingly radical change
- Past has seen mismatch between BNDES and Central Bank aims = systemic friction
- BNDES responds saying the outcome would be a broad gain for all by reducing inflation
pressures on the Central Bank and so allow for reduction in base rate, so raising lending levels.
- BNDES to increasingly distance itself from the Treasury
- It will increasingly look to local and international markets for wholesale borrowing
- But over next 5 years low-cost loans to be available for specific projects
- Those with greater social benefit: Education, Health, Sanitation, Solar Energy, Urban Mobility, Waterways, Railways, Transportation/Distribution of Gas and Bio-Fuels, Public Administration, Small Businesses.
- These projects to be presented as Public-Private ventures so attracting local capital.

Item 4:
“Political uncertainty still drags on the economy”

- Public dissatisfaction protest of 2013 directed at costs of The Olympics
- Public malaise rising since given incurred debt vs public obligation
- This after 30m raised out of poverty by the PT Party (internal ideas of “turncoat public”)
- New promises made but little achieved besides 'plea bargains' to eradicate corruption
- Leading to the enormous Petrobras Scandal and others since (eg Odebrecht Construction).
- The enormity has tainted the elite (past and present governments and business leaders)
- Affected Temer's governments standing, with only 9% approval rating.
- Today Brazil stands at “the most vulnerable point in its 30 year democracy”
- With only 30% of Brazilians currently believing in Brazilian Democracy (-22% YoY)
- Supreme Court responds by dismantling the legal privileges of politicians
- The October 2018 election now “wide-open”
- Bolsonaro vs Doria (right-wing Congressman vs centrist Mayor of Sao Paulo)


Item 5:
“Views from the top on what Temer should do”
Panel of guests from the Brazilian business world

As per corruption :
- “What we see happening today (regards corruption) is not new, having happened in the US during the 1920s (cites 'The Robber Barons')”
[NB this suggests that such periods are inevitable as countries move higher up the economic ladder and portions of any elite maximise their gains as the economic system that previously protected their gains itself evolves to greater inclusion of the masses].
- “Such scandals will unleash a better Brazil into the future”
- “There is an enormous gap between what we are as a country and what we can be”

As per Labour Reforms :
- “We have operations in 80-90 countries, [Brazil] is the most complicated”
- (And as such) “Brazil is only 3-4% of our revenue”
- “We have a large number of claims (and outcomes) that make little sense”
As per Taxation Reforms :
- “the problem here is not just about size but complexity”
As per Public Administration Reforms :
- “The tendancy to over-regulate in many areas from consumer rights to telecoms”
- “In telecoms our obligations do not match real world use requirements”
- “We have a lot of obligations to the past, but very few to the future”
    - “Something that must change is the governmental belief that individuals are unwise (and so require 'Nanny State' protection).
    - “If you don't alter the welfare system how are we going to pay for longer lived pensioners?”“The world has changed, so much Brazil”
As per SOE Political Appointments :
- “We have no Ministers or Army on the Board [of Petrobras], when talking of 'Re-inventing Brazil' we need professionals”

As per FDI and Trade :
(Year to March saw record FDI of near $86bn)
- “Brazil has to have the export mindset, not just flavour of the month because of crisis”

As per Populism vs Economic Reform
- “Maybe the time has come for business to be more engaged in debate (re: Reform tensions)
- “Brazil (desperately) needs global leaders, modern laws and old values”
- “It needs people who can understand what is happening around the world”.


Item 6:
“Sao Paulo's talent for renewal is paying off”

- City expands beyond its trade and industrial heartland roots
- Newer higher value sectors in Services, IT and Retail
- Broadening of the 'Culture Industry' creates future economic value-streams
- Increasing 'info-tainment' correlation to the internet
- City planning to de-congest routeways (more bus-ways and cycle-ways)
- The “Beautiful City” campaign eradicates graffiti but is criticised for
also removing social commentary and 'artworks'
[NB The campaign's main aim to eradicate gangland 'tags' and improve aesthetics. Graffiti is low-order crime but recognised as gang allegiance stepping-stone to higher crimes and gang culture].
- Main issues of public transport and crime under central government control in Brasilia
[NB Strong police force but with less autonomy than believed ideal].
- The failures of the public system (eg medical) promotes opportunities for entrepreneurial new entrants able to deploy innovative or technology transfer IT
- Sao Paulo's market size (21m residents) and their aspiration and dissatisfaction provides a central 'growth point' for very varied new business possibilities.
- The city's role as Latin America's 'Financial Hub' means obvious self-serving economic eco-system as well as increasing presence of FinTech and small and large Venture Capital.




Friday, 5 May 2017

Micro Level Trends – Brazil's Automotive Sector – “Brazil 66”...Sixty Six Years of Economic Power Lifting (Part 5.2)




Before looking at the future of Brazil, a future much enabled by the previously highlighted Reform Agenda, and the possible long-term shape of government planning, the domestic auto-market and the roles of incumbent MNC players, and new indigenous and foreign entrants, it is well worth seeing a socio-economic 'snapshot' of the here and now in Q2 2017.

With the recent 'on the ground' report from the FT's John Authors pointing to the broad “new expectations” from Brazil for investors with successful reforms, this juncture of the web-log seeks to provide an echo of the current pulse of Brazil, the city and elsewhere.
Done so by re-conveying the recent news topics voiced by the English language newspaper 'The Rio Times'.
But before entering the realms of the daily news, the first vital issue to convey is the manner in which Brasilia has progressively led the world.


The Automotive Headline -
On 19th April 2017 Brasilia announced the easing of protectionism within its auto-industry.

This comes after criticism that for too long “exacerbated protectionism” and will see new measures inacted under the title of 'Roto 2030' (Route 2030), surpassing the previous prescription of the previous 'Inovar Auto' scheme.

Introduced by Snr Igor Calvet (Minister for Industry, Trade and Foreign Services) the new “open door” initiative starts at the beginning of 2018. 

As stated this will indeed create improved conditions of competition so raising all-round product quality in the long run. In the mid-term help broader B2C and B2B choice in all vehicle sub-sectors, from the new availability of more package efficient small city cars better suited to congested streets through to purchase flexibility for road haulage companies that can better balance up-front price versus running costs and residual values.

However, any notion of any 'automatic' price reduction resulting from cheaper imports was stated as not the case - though in reality will be seen to a certain extent - since much depends upon taxation issues, logistics costs and labour costs. 

This implicitly indicates that the government will seek to manage ultimate retail prices to both “harmonise” similar products – so effectively creating a Brazilian-made home-advantage - and in that process take advantage of the available tax-take on those cheaper imported vehicles, the importers obviously seeking to reduce such import prices as much as possible so as to reduce the final cost of per unit importation. Those same importers also likely to 'buy' sales through standard trade tactics, such as prey registrations of new vehicles sold as notionally used at discount.

This web-log previously described the lobbying role of the Importer's Association IBEIFA, and understandably this lobbying group is enthused to see such a shift in policy, even if for now the exact details remain unclear. The prime issue for it is the IPI tax level on industrial goods, which moved from 25% to a lofty 55%.

Reducing this problematic constraint and gaining assured long-term clarity regards a tax-reduction time-line – so that its members can better plan – obviously is critical to fully enacting the ideology of the 'open door' announcement.

However, for now this a brave undertaking given the mass populace's mood regards domestic employment security and opportuty, so balancing the rhetoric against outcomes is critical, as Temer's government well understands.
But given the evolving protectionist rhetoric elsewhere around the world, Brazil should be applauded, and in this way the country can be seen to be increasingly fulfiling its role in global leadership, with (ROTA) 2030 the seeming watershed point.
Bravo Brazil!


The Main News Feeds -

Item 1 : The 2017 General Strike

On May 28th a General Strike took place organised by the 9 biggest unions. The believed impact of announced Austerity Measures and the agitation of the unions sent protesters onto the streets across Rio de Janeiro, Porto Alegre and Brasilia; with stoppage of public transport and access to public buildings in Rio itself.

The industrial heartland of Sao Paulo continued to operate but at a notably slower pace given both worries about commuting and possible riots keeping people at home and of course the general 'feeling in the air' amongst those at work.

Given their position in the lower social ranks, it appears that many of the lower middle class masses (themselves very fearful of unemployment and a much retracted social-net budget) believe that President Temer is “removed from the people”, having gained his post directly because of Rousseff's forced departure.

Others, typically very the innately 'middling' class, have taken an alternative perspective. They believe that the strike was called in the self-interest of the unions, with especially senior union members defending their accrued personal interests, both political and financial.

But as seen in an Ipsos poll of 1,200 people in early April, Temer's own approval rating of just 4% highlights the general dissatisfaction amongst Brazilians; 98% believe Brazil to be on the wrong path

That in essence equates to the desire that if the people are to ultimately feel the pain, then so too should the privileged who occupy the highest offices of the land.

Perhaps only by rebalancing Brasilia's own rewards system, will the apparent anger and intraction of the masses be overcome. Shared pain for shared latter gain.


Item 2 : Pushing the Reforms Forward

President Temer sought to demonstrate his pluck with the statement that even in the face of social protests his cabinet's Reform Agenda will succeed.

The nationwide strike at the end of April contesting the primary pillars of the reform measures (esp pensions, labour and social security) was meant to undermine the scale of change, but Temer pre-empted any ideas of a dragged-out battle by stating that the three elements of the Judiciary, Executive and Legislative were of the same unified 'progressive' mindset.

With special mention of Japanese investment interest whilst opening the new Japan House cultural centre, he stated that effectively a new era was underway that would be to the eventual good of all; workers, managers and domestic and foreign investor / owners.

Temer argued that the Reforms are necessary since the sizeable aspect of a bloated Pensions Budget negates resources being given to Education and Health Care, and that old restrictive Labour Laws prevent the hiring of more workers by both domestic and (especially foreign) companies.


Item 3 : Best Trade Balance in 28 Years

At long last having absorbed both the 'Car Wash' affair and the 'Weak Meat' scandal the National Trade Balance saw a surplus of US6.969 billion, the best result since 1989.

Demonstrating continued strength, the first four months total reached US$21.387 bn, far surpassing the previous record of 2016 when it saw US$13.2 bn. April 2017 saw Total Exports of $17.686 bn versus $10.717 bn for Total Imports.

Unsurprisingly given the meat scandal's requirement to temporarily close meat-packing plants and cancellation of shipping orders, Meat Exports were down 13.3% in April YoY.

But with new confidence arising the government predicts a 2017 EoY Balance Surplus of $55 bn (versus the $47.7 bn of 2016).

This a very tangible and so pertinent sign of renewed national economic confidence, the $7 bn differential between 2017's exports and imports so bolstering the fiscal and monetary policies required behind the Reform Agenda.


Item 4 : Temer Meets Spain's Rajoy

To help further boost the record trade figures, President Temer met with Spain's President Mariano Rajoy at the end of April. Both are convinced of the need to advance relations between MERCOSUR and the EU.

Previous arrangements such as the Bus and Coach builder Irizar's entry into Brazil will now be complimented by new mutual destination projects in General Development, Trade, Infrastructure, Water and Transport; with heightened diplomacy the enabling factor.

The manner in which Spain addressed its own Reform Agenda after the European Sovereign Debt Crisis was of interest to Temer, with lessons learned obvious application to Brazil.

Rajoy said “the Brazilian government has a number of ambitious plans for its economy in keeping with its immense potential, and I'm convinced that this is an opportunity for increasing the presence of Spanish companies and to optimize our trade”.


Item 5 : Fevela Clearances...Cinematic Story-Telling

Vila Autodromo in the Jacarepagua district (West Rio) was a favela that began to expand with the need to build and service the major upscale housing complex that accompanied the 1974-1977 on-site creation of the Autodromo Internacional (Nelson Piquet).

Over four decades the fevala grew from an all male small construction worker shanty village to latterly include wives and girlfriends who cleaned the luxury apartment blocks; with the inevitable arrival of children and even aged grandparents.

Though much improved over the years the fevela had not been planned, so lacked properly considered fundamental amenities for what became a large township; and though its notional 'citizens' were hands-on regards gradual improvement it was always functionally below par of the ever improving modern norm.

This reason / excuse was given when the government sought to utilise the land for construction of the 2016 Olympic Village, Stadiums and infrastructure. The location was apt for such a scheme and the old 'township' would always be a symbol of Brazil's erratic social past, but more importantly a problem to the redevelopment ideals of the city and nation.

Thus the inhabitants of the Vila Autodromo fevela were removed to 'make way for the future' and that story has been captured in spirit – if not detail – by the new film “Vazio do Lado de Fora” (Empty on the Outside). Directed by Eduardo Brandao Pinto the short film will appear soon at the renowned 2017 Cannes Film festival.

However, undoubtedly to ease social tensions and avoid appearing the international bad-guy “it does not tell the story exactly, more of an aesthetic”.

It now seems obvious that whilst still fresh in the mass-memory, Brazil seeks to quickly re-tell the story to re-set the mass-consciousness. It seems that Historical Revisionism appears quicker than ever.


Item 6 : The Favelas Continue to Grow

Previously reported some years ago, once again the facts about the seeming endless growth of many fevelas have been re-reported to highlight a prime social issue. Between 2000 and 2010 the average population growth in 'normal' (ie officially planned and organised) areas of Brazilian cities was about 7%.

In stark contrast the fevelas saw a massive upturn through both incoming residends and the rise of birth rates over death rates. The highest seen in Rio de Janaeiro with a mighty 27% increase.

This has been reported to illustrate the size of the problem that not just the government faces, but the population at large as the idiom of the 'haves and have nots' becomes ever more complex.

Even though a costly exercise, to help aid integration of those at the very bottom of society, the Senate recently approved an Immigration Amnesty law in mid April which actually goes far further than its title implies. Well beyond mere amnesty, it provides a new era of security for the previously illegitimate immigrants, by providing citizenship rights to state resources such as welfare, healthcare, education and employment status rights.


A New Era For Many -

This then validates a mass of people who were previously 'under the radar', and far worse off than the current bleating working and lower-middle classes, and allows them to become fully participant in, and beneficiaries from, the slowly re-bounding Brazilian economy.

For a country which promotes the ideals of 'diverse social integration' the upfront costs will be sizeable, but the advantages brought by quickly deploying more unskilled and semi-skilled labour, from directed education and the assurance of a social safety-net means that over the mid and long terms Brazil will have been seen to have maintained and indeed improved its productive capacity. 

This beginning with the major infrastructure projects that demand enormous levels of affordable man-power, providing the basis for new factories and plant which in turn require many levels of personnel skill-sets and in turn promote the professions from engineering to accountancy and so much more.




Friday, 21 April 2017

Micro Level Trends – Brazil's Automotive Sector – “Brazil 66”...Sixty Six Years of Economic Power Lifting (Part 5.1.4)




This section relates to the observations of the OECD (Organisation for Economic Cooperation and Development) - complimented by those of the IMF (International Monetary Fund) - regards the current issues faced by President Michel Temer and his administration.

The most recent Economic Forecast by the OECD released in November 2016 is recounted here; an update expected soon.


OECD Report Summary -

- Emerging from a severe and protracted (4 year) recession
- Political uncertainty diminished
- Business confidence rising
- Consumer confidence rising
- Investment sentiment and cases strengthening
- Unemployment a mid-term challenge
- Inflation expected to gradually return to target range

- Fiscal conditions still fragile
- Need to to re-balance the Fiscal and Monetary by:
- 1. Consolidate public finances
- 2. Underpin macro-economic stability
- 3. Loosen monetary policy
- 4. To create the investment climate

- Raise productivity by:
- A. Strengthen competition
- B. Reduce administrative 'red tape'
- C. Continue infrastructure improvements

- Need to manage expected rising inequality



Pulling Out of Recession -

By November 2016 Brazil had experienced 6 quarters of technical recession, with accordant rising unemployment, business bankruptcies likewise and corporate debt higher.

But after heavy falls of business and consumer confidence sentiment appears to be increasing, albeit from lowly bases. Whilst industrial production figures have been mixed, tending to negative, investment growth has become positive. The replacement of Rousseff by Temer has tempered the previous political uncertainty, with next elections in October 2018 and the next government installed on new year's day 2019.

With that increased certainty the sovereign debt (bond) rate has fallen by a third back to 10%, but the period since 2013 has seen the fiscal balance decline to -11% by early 2016, now sitting at -9%, so showing improvement. Although down dramatically since its 2015 EoY high of nearly 11%, inflation now sits at 8%, so well above the 4.5% target and the 6.5%-2.5% 'tolerance band'.

Rebalancing Fragile Fiscal Conditions via Monetary Policy -

- 1. Consolidate public finances
- 2. Underpin macro-economic stability
- 3. Loosen monetary policy

A New Fiscal Rule imposed to reduce the fiscal deficit from its 9% of GDP, whilst the primary deficit of 3% hampers the need to create primary surpluses to keep public debt on a firm and sustainable declining path. Weakness obviously lies with the cyclical nature of reduced revenues during a recession, but critics cite poor taxation policy regards exemptions which are yet to be discontinued. This 'slack' backdrop means that the fiscal stance is expected to be only mildly contractionary; yet still part of necessary process to correct past excesses and strengthen the fiscal future; in essence the avenue chosen to try and strike an appropriate balance.

But rising current expenditures, plus projected increases in pensions costs, is an argument that undermines fiscal health over the mid/long-term. The reaction has been a new expenditure rule, which matches the recommendations of previous OECD economic surveys. This new rule limits real increases in expenditures whilst simultaneously lessening the rigidity of the budgeting process; except for pensions and benefits which amounts to almost half of government spending.

Separate pensions reform is noted as required to ensure the created fiscal adjustment is able to be successful. That reform though necessarily seeking ensure adequate continued decline in inequality and poverty by improving the targeted social benefits. Better spending efficiency is believed to exist across many areas, and it is believed that the new fiscal rule provides sufficient room to attain a balance of objectives regards overall spending and social cohesion.

The commitment regards public expenditure will provide for further monetary easing going forward, which should in-turn give rise to stronger investment (as public investment projects are followed by private investment interest).

A raft of structural reforms have the potential to boost growth significantly and make it more inclusive.

Reducing what are viewed as high compliance costs which relate to a complex state-based and fragmented indirect taxation regime is viewed as immediately advantageous to firms, an effort to consolidate the varied 'mini-taxes' into a singular VAT that encompasses import and export measures so as to strengthen international trade. The idea is that a full deductibility for imports would provide greater (price-based) competition for domestic producers/providers, so enhancing overall productivity.

Improved infrastructure would reduce transport costs, especially so for exporters, (so providing an effective efficiency boost regards price and speed to markets.

Stronger trade integration would benefit low-income earners specifically as the export sector would have a larger impact on the demand for unskilled and low-skilled workers.

Further educational attainment would raise productivity and allow more low-income households to join Brazil's middle-class.

These very broad policy avenues enabling the country...


- 4. To create the investment climate


Expected Slow and Gradual Recovery -

2017 should see progressive growth thanks to rising investment sentiment, but the pace of this recovery will inevitably be impacted by the size of corporate debt and the over-capacity/spare-capacity in various sectors.

Speedy implementation of structural reforms should see greater immediate momentum compared to historic re-growth periods....but....the measures highlighted are not adequate compared to the ambitious agenda needed.

Slow earnings growth and continuing contraction in private credit will initially limit consumption, this environment much assisted by the achievement of lower interest rates, which if attainable and properly entrenched would provide for improved recovery.

But critically, the background of low international trade growth and ongoing competitiveness challenges, the external sector will not be able to provide as much support as in past years. Inflation will continue to ease because of this weaker activity and reduced administrative costs, expected to return to the tolerance band by end 2017. Unemployment expected to rise until mid 2017 before falling as the economy gains new stride in 2018.

'Upside Risks' could be seen with a stronger momentum from Brasilia regards structural reforms could create better conditions and so more sooner, domestic demand boosted by lower spreads (regards government bond prices), less currency devaluation, and lower real interest rates.

'Downside Risks' could arrive from the corporate sector if a protracted recession results in rising corporate defaults as a consequence of high debt levels, which would weaken various parts of the financial sector.

And lastly, although political risk appears much diminished, it still remains under the surface with respect to the final implementation of the New Fiscal Rule.


Summary -

The OECD's remarks effectively parallel those of the IMF (International Monetary Fund) in as much that (to quote the IMF's November 2018 report)...

“Whilst capital markets have responded positively to the new political stability introduced, so bolstering asset prices and confidence, and helping the country ride a positive wave of sentiment regards emerging economies – and some high frequency indicators suggest the recession may be nearing its end – the implementation of much needed reforms to durably restore policy credibility is subject to risks”

This presently appears 'all to true' with the likelihood that such reforms – especially pensions and benefits - will be harder to implement than academically perceived given the social tensions that exist amongst the lower middle and poor regards the aftermath effects of the public indebtedness created by World Cup and Olympics projects (such as rising public transport costs) and now the fear of impacted state-provided incomes for OAPs and the increased number of marginalised people.

It is for these reasons – and especially the fragility of the inter-connected EM economies, much reliant on China - that investment-auto-motives previously implicitly and explicitly highlighted the need for Brazil (and the Latin American region en mass) to encourage greater trade with the USA , Europe and the UK.




Friday, 7 April 2017

Micro Level Trends – Brazil's Automotive Sector – “Brazil 66”...Sixty Six Years of Economic Power Lifting (Part 5.1.3)



The following few sections seek to provide a synopsis of the present economic picture given the very mixed highs and lows of celebratory world showcase events set within what rapidly became a deflationary and now seemingly static economic climate, as EM nations experienced their own global slowdown from 2013 through to late 2016.

This portion starts with a recap of the general background, with provision of key data sets from the CIA Fact Book for 2016 and recent YoY data, thereafter followed by a synopsis of the OECD's latest report.


Background to the Modern Day -

Unsurprisingly, given the socio-economic previous realities of a markedly delineated society and a bottom-up groundswell passion for fairness, justice and improvement, like much of Latin America, Brazil has been historically beset by very disruptive and volatile 'left-right' reactionary politics, with broad swings in policy consequences regards the influence of the outside world.

Hence the ideologies of a very left-leaning and idealised 'social utopia' versus those of right-leaning 'engrained stability' have historically clashed.

But critically, though undoubtedly with major disruptions, over the last 6 decades true social progress has been made; whereby necessary pragmatism has overcome past engrained combative ideologies; so leading to far greater social cohesion and decline in poverty rates.

After the massively positive impact f the Vargas-Kubitschek eras, the next prominent watershed period came in the late 1980s, with efforts to overcome the suffering of the 'Lost Decade', finally taking affect as of 1994 onwards. Herein it was re-recognised that devout leftist or rightist stances would not suffice in a rapidly globalising age, and so a new 'middle way' path was sought and seen to deliver.

The ability to convince the public of the force for good that globalisation and capital markets could bring to a broadened mixed-market economy was thanks to the very personal understanding – from his auto-industry experience - of the previously highly leftist President 'Lula'.The results of his own learning was in effect imparted to his people given their confidence in him as “one of our own”.

That internationalist yet fiscally conservative 'middle-way' would serve as the basis for socio-economic improvement for the many, across the previously entrenched race divide, and with it the ability to better mix in new workplaces, social situations and en mass, so reducing the previously engrained 'under the surface' tensions between ethnically distinct social groups.

That recognised, even with the social lubrication of improved general wealth - as with any mixed society - the tribal mentality of “birds of a feather sticking together” still typically in extremis over-rides improved social dynamics. (The aforementioned idioms of: self-perpetuation for the upper echelons, self-education for the middle and self-preservation for those still struggling.

[NB herein the slow but seen rise of social and political influence from distinct previously marginalised groups such as Afro-Latinos and the Aboriginal peoples have partly generated a new idea of proud racial distinction – as with the rise of self-proclaimed 'Negritude' – so discouraging inter-breeding outside of racial boundaries so as to maintain what is regarded as ethnic purity].

Thus old class-bound and new sociological idioms about the true limits of the idealised the “melting pot society” may reshape Brazil's peoples, with both the fused and distinct cultural identities no doubt seeing emergent trends in tomorrow's consumer trends

The major issue and realisation is that since 1994 major swathes of previously virtually destitute people across Latino, Afro-Latino and Aboriginal spheres have through opportunity and application been able to rise into and populate much of the new lower middle class; with even with the present economic contraction, today's poverty rate being about 21%, as compared to 40% in the early 1990s.

This thanks to the created foreign policies which by default and design had the door of international relations (and so FDI) always open, though at differing degrees. At times fully open, or left partially ajar, but never wholly closed. Even when the rhetoric of 'self-protectionism' was voiced to the populace and the very real introduction of import tariffs, it was done reliant on foreign input to nurture modern developing industries - such as with energy, automotive, IT, healthcare and pharmaceuticals and now the simultaneous ambitions regards exploration of both outer-space (aero-space) and inner-space (nano-technology).

Depending upon the era and the ideals of elected and non-elected governments, Brazil's relationship with the rest of the world – America, Germany, Italy, Russia and latterly China – meant that such external input to boost domestic self-development altered as circumstances changed and as the government seat of Brasilia sought to ply one foreign powerhouse country against another for access to Brazil.

This EM typical 'half open, half closed' policy stance obviously to leverage any threat of foreign 'commercial imperialism' for its own ends, so as to advance indigenous technical capabilities.

This has been the central pillar of Brazil's industrial and commercial strategy throughout time, so as to subsequently introduce – with reduced early-phase superficiality – the idea of truly indigenous modern industry.

Given its complexity, demand and so wealth creation opportunities the automotive industry has always been centre-stage of the development agenda. Part of that agenda is to remain through growth the largest vehicle producing country in Latin America and so likewise remain the most powerful trading partner within the Mercosaur region in the 21st century.

Thus, perhaps because of the very nature of its 'mosaic' populace (facing across Latin and Central America, Europe, Africa and now China), its simultaneously multi-directional and very pragmatic foreign policy, and a history of recycling previous foreign technology transfers under its own branded banners, means that Brazil could be viewed as the archetypical template of the necessary 'hybridised' and deeply 'globally integrated' 21st century nation.

However, the present circumstances of Brazil means that although this is already well underway, the ambition has slowed as the country tries to rebalance its economic basis, both internally and externally.


Today's Broad Picture -

The following provides observational snap-shots of Brazil today as conveyed by the best regarded - though still heavily US influenced - external agency with remit to measure and advise on global and nationhood economic matters.



The Central Intelligence Agency :
Fact Book 2016.

Espoused as the “ear to” America and the World, the CIA has become legendary and almost mythical given its apparently enormous intelligence gathering capabilities; that ability increasingly externally focused across the world and with increased Presidential empowerment since WW2 and the later half of the so called 'American Century'.

Today its activities are worldwide and expansive, spanning hard and soft-power activities, and though with an understandable prime focus upon counter-terrorism, at times in service of its homeland its actions highly questionable.

Yet its breadth and depth of intelligence gathering within the public sphere, and its desire to appear a very useful soft-power instrument, has meant that it publishes critical information to the world, which itself often underpins governmental, academic and commercial economic and socio-economic research around the world.
A key part of that research provision is the World Fact Book for each country, Brazil outlined by following:

To paraphrase: “In 2010 the 25 years record growth rate of 7.5% was achieved, but GDP slowed since 2011 because of several factors including: over-dependence on exports of raw commodities, low productivity, high operational costs, persistently high inflation and low levels of investment. Unemployment reached the historic low of 4.8% in 2014 but has since risen

[NB this actually now 11.8% and resulting in a dramatic lowering of the cost-base and so comparative productivity rates].

The previous investment grade standing of Brazil has seen quick decline as efforts to prop-up a positive primary account surplus failed, with the three main credit ratings agencies prescribing 'junk' status.

Brazil hopes to restore its strength by imposing local content and technology transfer requirements on foreign businesses, by investing in education at all levels and expanding its national research projects.

The general indicators:

1. GDP (Purchasing Power Parity levels at 2016 figures) shows the country as standing as 8th in the world, behind China, EU, USA, India, Japan, Germany and Russia, but ahead of Indonesia, UK, France, Mexico, Italy, S. Korea, Saudi Arabia, Spain, Canada, Turkey, Iran and Australia.

This theoretically puts the spending power of the average Brazilian adult, business and government in a comparatively powerful position, even though declined in real terms since the high of 2014 when the total equalled US$3.37tr against $3.13tr in 2016.

2. GDP (real Growth Rates at 2016 figures) illustrate that in the real – growth adjusted for inflation – economy, posits Brazil as ranked at 55th in the world. The after-effects of the 2008 Financial Crisis and 2013 European Debt Crisis upon global trade so leading to contraction saw Brazil's growth rate significantly alter, today standing at -3.3%. This however is better than the -3.8% seen in 2015, itself possibly the trough of the recession.

3. GDP (Per Capita at 2016 figures) shows an estimated average of $15,200, itself down $700 on the previous year, and lower by $1,400 on 2014. However, 2013 was measured as $12,100 (then 94th in the world) which suggests a sizeable change in government statistics or measurement anomaly given unlikely real-world per capita leap by $4,500 in a single year.

4. Gross National Savings (as % of GDP at 2016 figures) shows 17.2% est, itself up on 15.9% in 2015 and the 16.7% in 2014. Presently the country stands 104th in the world.

5. GDP Composition (by End Use at 2016 estimated figures vs 2013 figures) illustrates that Household static with 62.5% vs 62.5%, Government has declined to 20.^% vs 21.7%, Fixed Capital Investment has declined to 15.8% from 18.3%, Exports (Goods and Services) has risen to 13.9% from12.4% and Imports (Goods and Services) lessened to -12.7% against a previous rise of 14.9%.

6. GDP Composition (by Sectors showing 2016 est vs 2013 figures) shows Agriculture rose to 6.3% vs 5.5%, Industry lessened to 21.8% vs 26.4% and Services grew to 72% vs 68.1%

[NB of these Agriculture consists of: coffee, soyabean, wheat, rice, corn, sugarcane, cocao, citrus and beef, whilst Industry consists of: textiles, shoes, chemicals, cement, limber, iron ore, tin, steel, automotive (parts and complete), aircraft (parts and complete) and other plant and machinery items].

7. Industrial Production Growth Rate (at 2016 figures) was a contractory -3%.

8. Labour Force (as at 2016) was 110 million people. Occupations are delineated as
(at 2011 estimate) Agriculture 15.7%, Industry 13.3%, Services 71%.

9. Unemployment Rate (at 2016 vs 2015 vs 2013 figures) 12.6% vs 9% vs 5.7%.
[NB the latest Q1 2017 readings being 11.4%, thus showing improvement]

10. Poverty (at 2013 figures) shows 21.4% below the poverty line and 4% below the extreme poverty line.

11 Household Income (by % Share at 2013 figures) shows the lowest 10% of households with 0.8% of generated income, and the top 10% with 42% of generated income. This demonstrates that whilst Brazil has seen much improvement, an enormous disparity still exists between the top and bottom tiers, with over 40% directed to what appears the ultra-wealthy 'Patron' establishment

12 Budget (at 2016 vs 2013 figures) US$ 632bn vs $851.1bn in Revenues, and $677.2 vs $815.6bn in Expenditure. [NB hence the relative positions have since changed significantly].

13. Public Debt of GDP (in 2016 vs 2015 vs 2013 figures) are 75.4% vs 66.5% vs 59.2%, now showing as ranked 37th in the world

14. Inflation Rate (in 2016 vs 2015 figures) is 8.4% vs 9%, ranking it as 199th in the world.

15. The Central Bank Discount Rate (2014 vs 2012 figures) was 10% vs 11%

16. Commercial Bank Prime Lending Rate (2017 vs 2016) is 47.4% vs 44%. Here Brazil is only 2nd in the world for the highest 'prime rates' (behind only Madagascar at 62%, and ahead of Malawi at 44.5%, thereafter Argentina and Syria both on 32%). This is of course a massive issue of major consequence, when what effectively is a much developed country has rates so much higher than what could be termed a 'banana republic' and what is a war-torn region. This effectively blocks domestic lending, so becoming even more reliant upon the stored wealth of national 'Patrons' and the FDI initiatives of foreign corporations themselves with either cash-piles or able to borrow at historically low rates.

17. Stock of Narrow Money (EoY 2016 vs EoY 2015) shows $107bn vs 85.64bn, demonstrating increased narrow liquidity. Ranked 34th in the world.

18. Stock of Broad Money (EoY 2014 vs EoY 2013) shows $928.9bn vs $835.3bn, this period demonstrating a substantial increase in broad liquidity. Ranked 18th in the world.

19. Stock of Domestic Credit (EoY 2016 vs EoY 2015) shows $2.076tr vs $1.644tr. This seen to be raised appreciably. Ranked 13th in the world.

20. Market Value of Public Shares (EoY 2015 vs 2014 vs 2013) shows $490.5bn vs $843.9bn vs $1.02tr. Ranked 20th in the world. These figures illustrate the enormous retraction from capital markets, over one-half of the value withdrawn in the space of two years, as local and foreign investors sought positive returns elsewhere.

21. Current Account Balance (est 2016 vs est 2015) is -$14.11bn vs -$58.88bn. This very positive news illustrates one avenue by which Brasilia has sought to vie against international credit agancy down-grades. The reduction of the balance however appears as much influenced by the deflation of the Brazilian Real. Now ranked 184th in the world.

22. Exports (2016 est vs 2015 est) shows $189.7bn vs $190.1bn. Ranked 24th.

23. Imports (2016 est vs 2015 est) shows $143.9bn vs 172.4bn. Ranked 28th.

24. Export Partners (2015) China 18.6%, USA 12.7%, Argentina 6.7%, Netherlands 5.3%.

25 Import Partners (2015) China 17.9%, USA 15.6%, Germany 6.1%, Argentina 6%

26. Foreign Reserves Exchange and Gold (est EoY 2016 vs 2015) $352.1bn vs $356.5bn. Ranked 10th in the world.

27. External Debt (est EoY 2016 vs 2015) $544.1bn vs $542.3bn. Ranked 21st in the world.

28. Stock of FDI at home (est EoY 2016 vs 2015) $673bn vs 615bn

29 Stock of FDI abroad (est EoY 2016 vs 2015) $295.3bn vs $288.5bn.

30. Exchange Rate vs US Dollar (2016 vs 2015 vs 2014 vs 2013 vs 2012) 3.483 vs 3.3315 vs 3.3315 vs 2.3535 vs 1.95. This illustrates the enormous drop in value against the US$ that the Brazilian Real has experienced, stemming from both the massive shift of contracted global trade, the 'pull-out' from the domestic bourses by domestic and foreign investors and the likely rise and influence of US$ driven black-market FX exchanges, demanding ever higher differential rates (disengenuosly) set against record prime bank lending rates.


To add greater comprehension to the present state of Brazil's economy, the following commentary by a commercial research firm is also given (though with the proviso that there may be a pro-LatAm sentiment so as to promote business).


Focus Economics :

With an webinar talk titled “Latin America in 2017: A Turning Point?” this economic forecasting firm sets the premis that any heightened uncertainty in the northern hemisphere could redirect stronger investor sentiment back toward South America.

Its mid March 2017 commentary stated that Brazil's dynamics were “bleak” with a failure to see significant gains in Q4 2016 and another steep contraction in GDP, progressing the worst (technical) recession on record. High unemployment, austerity measures and tight monetary policy hamper the economy with “muted” gains in Q1 2017. Industrial output sank in January whilst business confidence fell in February. However February also saw improvements in consumer confidence and manufacturing PMI, so providing reason for shift in general sentiment.

Of further assistance has been governmental creation of an infrastructure concession programme as of 16.04.17 so as to prompt renewed investment interest – to the value of US$14bn – in various national airports.


To Follow -

The observations of the Organisation for Economic Cooperation and Development.