Wednesday, October 24, 2012

Dame Doze (give me dozen) Brazilians and Pobrezinho (poor) me

When the Brazilians go for shopping in Miami and Buenos Aires, they do not ask for the price of clothes or other consumer items costing around hundred dollars a piece. They simply choose something and tell the salesperson nonchalantly, "Dame Doze" ( give me a dozen ).  " Dame Doze" has become the nickname of Brazilians.
Guess the name of the city in the world in which the maximum number of US visas  were issued in 2011. Not Mexico City, nor Monterry, Shanghai, Beijing or Chennai.
It was Sao Paulo.  398,000 visas were issued there as against 331,000 in Beijing, 305,000 in Mexico City, 292,000 in Shanghai, 270,000 in Monterry and 159,000 in Chennai.
The Paulistas (as the inhabitants of the city of Sao Paulo are called) do not go for jobs or to earn money in USA. They go there to spend money; on sightseeing and shopping. The Miami real estate agents and Florida Street shopkeepers of Buenos Aires speak more Portuguese than English and Spanish these days to attract the Brazilians loaded with money for investment and shopping. 
There were a total of 792,000 Brazilians who were issued US visa in 2011. According to a survey, Brazilian tourists are the highest per capita spenders in US. The reason for this are (a) the rapid increase in wealth thanks to the booming economy (b) the strong currency Real ( right now 2 Reals = 1 US$ . It was at one time almost 1.5 Real for a dollar) and (c) the cost of things and living in Brazil have become very high due to the exorbitant local cost of production and services. 
Sao Paulo is the most expensive city in Latin America as well as in the whole of Americas and one of the most expensive cities in the world, ranking 12th globally. It is more expensive than London (rank 25th) , New York (33rd), Paris (37th) and Rome (42nd) , according to the March 2012 cost of living survey by Mercer, a reputed human resources consultancy firm whose survey is the reference for multinational corporations. The Paulistas find it cheaper to fly to Miami or Buenos Aires for shopping than buying in Brazil itself. Sao Paulo has the largest fleet of private helicopters and jets among the cities of  the world. It is the only city in the world which has 4 Tiffany shops and 3 Bulgari outlets. Santos port near Sao Paulo has become the new Miami for cruise liners. 
Although Brazil has hundreds of beautiful beaches along its 7400 kms of the Atlantic coast, the Brazilians seek beach holidays in other Latin American beaches such as Punta del Este and Cancun. The Brazilians have overtaken the Argentines to the top spot in Punta del Este, the beach resort in Uruguay known as the summer playground of the rich and famous Latin Americans. Many Brazilians own permanent villas and apartments in Punta just to spend a couple of months in a year.
You might think that the Brazilians are beach creatures used to lying down on the sand in bikinis and shorts. Hold on.. The largest number of skiers in the ski slopes of the famous Bariloche in Argentina are Brazilians. They have direct charter flights to Bariloche from Sao Paulo, Rio and Belo Horizonte during the ski season.
I hope the Indian tourism Ministry and travel agencies focus on this under-explored Brazilian market seriously and systematically. The Brazilians have admiration for Indian spiritualism, yoga, meditation,culture and IT skills. Their interest in India have been stimulated further by the Brazilian soap opera " Camino das Indias" ( passage to India ) which drew record audience from January to September 2009. Bindi, saree, kurta  and Bollywood dancing have become fashions in Brazil since then.
While the Brazilians go abroad to spend money, foreigners are coming to earn money in Brazil attracted by the high salaries and huge business growth opportunities. Engineers and technicians from Portugal, the former colonial master, are now seeking jobs in the country of the colonised. 
Faced with shortage of professionals, the Brazilian government is sending out on scholarship over hundred thousand Brazilians for higher studies abroad. India has also made a bid for a small share of this pie. A Brazilian delegation was invited to visit Indian Universities, IITs and IIMs last year.
The Brazilian companies have leveraged the strength of their strong currency and cash surplus to acquire assets abroad. JBS, the meat processing company of Brazil has acquired US , Latin American and European firms to become the largest in the world. Vale, the mining giant has bought the Canadian nickel mining company for an astounding sum of 17 Billion US Dollars.The Brazilian industrial development bank BNDES is actively extending credits and encouragement to Brazilan companies to acquire foreign assets and become global champions. Petrobras raised 70 billion dollars in the largest- ever IPO in the world in 2010. President Lula celebrated this proud achievement saying, "It was not in Frankfurt, it wasn’t in New York, it was in our Sao Paulo exchange that we carried out the biggest capitalization in the history of capitalism".
In the past, Brazilian football players used to go to Europe to become Euro millionaires. These days some European players have come to play in Brazilian clubs to save in the strong Brazilian currency. Earlier the best Brazilian players were playing in Europe while the Brazilian clubs were stuck with only the left-overs, those waiting to go to Europe and those who had to returned from Europe on retirement. Now the number one player Neymar plays in Santos club of Brazil despite the multimillion Euro offers from many European clubs. Neymar earned 18 million dollars in the last season in salary and endorsements ranking  as the 13th best paid player in the world.
The Brazilian-Argentine football rivalry is much more intense than the India-Pakistan cricket emotions. Who is greater? Maradona or Pele? is the eternal debate over endless glasses of Caipirinhas and Malbecs. But now the Argentine shop keepers swallow their pride and sell Brazilian football jerseys to the Brazilian shoppers. Obviously they are cheaper in Argentina than in Brazil. 
The wine-drinking snobbish Argentines used to look down on the beer-guzzling Brazilians. During my golf game in Buenos Aires in 2003, the Argentine threesome in my group lamented, " we have become so poor after the 2002 crisis that we have to drink beer now ".  Now the Argentines bartenders eagerly open the most expensive wine bottles to  the Brazilian tourists.  The Argentine wine exporters are betting on Brazil as one of their largest markets. 

The prestige of Brasilian shoppers gave me an advantage during my stay in Buenos Aires in the last four years. Whenever I wanted the special attention of shopping assistants in Buenos Aires I would speak in Portuguese, making use of the Brazilian accent I had acquired during my four year stay in Sao Paulo. My café con lait ( coffee with milk ) skin color also helped in making the Argentines mistaking me for a Brazilian.
Hmmm…While my Brazilian accent and skin color fooled the sales persons, my Indian purse exposed me at the billing counter when I bought 1 or 2 pieces instead of 12. The billing clerk would  murmur " Pobrezinho " and " Pobrecito" . These are non-pejorative words and sweet way of saying "poor guy" in portuguese and spanish.

Tuesday, October 09, 2012

The message for Latin America from the reelection of Chavez

This article was published by the Indian think tank " Gateway House" on 11 October 2012


also by The Hindu newspaper on 12 October

The free, fair and peaceful Venezuelan elections on Sunday, with a clear and accepted outcome has restored the confidence of the world which had some doubts about the vulnerabilities of the Latin American democracies after the constitutional overthrow  of President Lugo of Paraguay in June this year and the unconstitutional removal of Honduran President Manuel Zelaya in 2009.  The immediate and graceful acceptance of the people's verdict by Capriles, the loser and his message of congratulations to Chavez augur well for the future of the Venezuelan democracy.  These are also good for the growing maturity of the young Latin American democracies many of which were restored from military dictatorships in the eighties. 

The reelection of Chavez for the third successive term is an undoubtable proof of the empowerment of the masses of the region. It is the poor and lower middle class who set the political and economic agenda of the region by their election of Leftist leaders. Conscious of this, even the centre- right governments of the region are strongly committed to Inclusive Growth. 

Despite the high stakes involved in the outcome of the Venezuelan elections for outside powers, there was absolutely no external interference. It was purely a Venezuelan decision for Venezuela. Yet another reassertion of the Latin Americans that they are capable and determined that they would decide their destinies themselves, based on their aspirations and perspectives.

On the negative side, there is apprehension that Chavez would use this mandate to intensify his policies of  weakening and abuse of democratic institutions and damage to the private sector business and industry.  Hopefully, he will tone down his radicalism and moderate his approach. It seems logical given his awareness of the clear message from the latest election that (a) his victory margin has come down (b) the uncertainty of his health from cancer  and ( c ) the emergence of Caprilles as a credible alternative to Chavez by securing 45% vote and his reaching out to Chavez's electorate ( unlike his predecessor candidates, who would not even pay lip service to the poor) by reassuring that he would continue the good parts of Chavez's pro-poor policies.  More importantly, Caprilles's promise to take Venezuela to the mainstream path of Latin America which is moving towards pragmatic centre with a balance of pro-poor and pro-market policies is appealing even to Chavistas who are tired of the the excessive radicalism, unnecessary confrontation and poor management of the resources and economy by Chavez.

The second negative score is the reelection of Chavez for an unprecedented third term and his continuous rule for twenty years from 1999 to 2019. This is not a good news for the region which has come out from the forgettable past regimes of Caudillos ( strong men). At present, he is the longest serving Latin American President. In all the other democracies of the region, Presidential term is limited to two or one. Even the Constituition framed by Chavez himself had limited the term to two but he got it amended later to remove the term limit.  This bad example might inspire others like President Correa of Ecuador, President Evo Morales of Bolivia and the Argentine President Cristina, who have dreams of unlimited terms and power. 

Some might fear that Chavez's victory based on his model of ideological polarization might spread further in the region giving rise to more Chavista Presidents. But his model has already reached its peak and is losing appeal steadily and irreversibly in the region. This was evident from the case of  Humala, fellow leftist leader from Peru. Chavez's support was kiss of death for Humala during the Peruvian elections in 2006. Besides asking Peruvians to vote for Humala, Chavez went further and openly attacked  Alan Garcia, the opponent of Humala, calling him as thief among other things. Humala, who was till then leading in the opinion polls, lost the elections unexpectedly since the Peruvian voters were provoked and scared by the aggressive interference of Chavez. In the 2011 elections, Humala got out from the label of Peruvian Chavez, remade himself as the Peruvian Lula, espoused pragmatism and won the 2011 elections. Similiarly when Mujica, the former guerrilla leader of Uruguay was contesting the elections in 2009, the opposition scared the voters calling him as a Uruguayan Chavez. But Mujica got over this defamation by assuring that he would be a Uruguayan Lula and got elected.  The defeat of the radical leftist candidate Obrador in the June 2012 Mexican elections is also a message to the Latin American Left that radicalism is not a ticket to power.  Even Ortega, the authentic Marxist President of Nicaragua has become business-friendly, moderate and pragmatic 

One of the long term achievements of Chavez for Venezuela is the diversification of the trade and economic partnership. Before him, Venezuela was dependent on US for over 80 percent of oil exports. Now China and India have become the second and third largest markets with 30% and 15% of the share.  Reliance has just signed a contract on 25 September for long term purchase of 300,000 – 400,000 bpd ( which is over ten percent of the total crude imports of India). Reliance has also expressed interest in exploration and production in Venezuela. ONGC is already investing in two oil fields there. This is good for the Indian strategy of diversification of oil imports and investment in these days of uncertainties caused Arab Spring and sanctions on Iran. 

Thursday, October 04, 2012

The Labor Market Story Behind Latin America’s Transformation

The unemployment rate of Latin America and Caribbean (LAC) reached a historic low of 6.5% in 2011 and "Latin America witnessed tremendous social progress during the last decade", says the October 2012 report of the World Bank entitled " The Labor Market Story Behind Latin America’s Transformation". The report has analyzed the evolution of the labour market in the last decade.

Other highlights of the report:

the robust growth that the region experienced was remarkably pro-poor, with more than 70 million Latin Americans lifted out of moderate poverty between 2003 and 2010
More than 35 million additional jobs were created while informality, one of the Latin American trademarks, fell in seven out of the nine countries where it could be measured consistently throughout the decade.
- Strong employment creation during the 2000s was coupled with a sharp decline in the inequality of labor earnings, a fact that stands in sharp contrast with both international trends and the stagnation that characterized the region in the previous decade. 
- Another set of momentous transformations in the labor field concern the changes in the patterns of cyclical labor market adjustments that occurred as LAC entered in the 2000s into an environment of low and stable inflation, finally breaking with its traditional history of home-grown macroeconomic instability. The dramatic decline of inflation in the region led to rising downward wage rigidities, which translated into lower fluctuations of earnings, especially during downturns. 
- During the last two decades Latin America has gone through a major transformation in the educational attainment (measured by years of schooling) of its labor force, a process that is still ongoing. The set of skills brought by Latin American workers to the labor market improved rapidly. In parallel to the steady increase in the supply of more educated workers, the inequality in educational attainment between the rich and the poor population has fallen.
many LAC countries experienced during the 2000s a steady decline in income inequality, which stands in sharp contrast with rising inequality in virtually everywhere else.  

- Inequality of (labor and non-labor) income fell substantially, by 5 Gini points on average for 15 LAC countries
-The services sector continued to employ an increasing number of workers: its relative share in total employment increased by 2 percentage points;
- In spite of going through the worst international crisis since the Great Depression, real wages did not fall significantly during 2007-2009. While the real wages fell on average by less than one percent in Colombia, Ecuador and Mexico,  they actually increased in Argentina, Brazil, Chile, Peru and Uruguay. 
- Even in the midst of the current slowdown, labor markets in LAC have continued to perform remarkably well. The unemployment rate for the region as a whole closed at nearly 6.5 percent in 2011, the lowest since the peak of 11 percent in 2002-2003. This is not an isolated fact, it is rather a reflection of deep changes in Latin American labor markets that took place in the 2000s and which have, in turn, been part of a broader set of fundamental transformations (including the decline in household income inequality, the consolidation of sounder macro-financial frameworks and associated restoration of counter-cyclical policy capacity, the stunning reduction in poverty and the swelling of the middle classes ) that jointly constitute what the World Bank has labeled the “new face” of LAC.