The Howler

I don’t have to relate here about the events and emotions in Iran. The Pullitzer-Prize-worthy blogging of Andrew Sullivan at The Atlantic and Nico Pitney at HuffPost are appallingly complete and deeply moving. They embody Obama’s words: “We are bearing witness”.

Using Andrew Sullivan’s words: “Did you notice how many times he [Obama] invoked the word "justice" in his message? That's the word that will resonate most deeply with the Iranian resistance. What a relief to have someone with this degree of restraint and prudence and empathy - refusing to be baited by Khamenei or the neocons, and yet taking an eloquent stand, as we all do, in defense of freedom and non-violence.”

In stark contrast to Obama’s eloquent stand and the cautiousness of the European government leaders, Lula, the great world leader, saw fit to defame the standing of Brazil and its people in the world.
As a belligerent child, who sees his beloved toy taken away from him, President Luiz Inácio Lula da Silva declared in Geneva, that based on personal experience, the protests currently taking place in Iran are a reaction of losers, and that the controversy surrounding the re-election of Ahmadinejad will not change his intention to travel to Tehran in the near future.

In this hour of desperation, while the Iranian people are demonstrating in the streets for their democratic rights, Lula can only talk about trade between Brazil and Iran.
"I want to go to Iran, I pretend to fix a date and visit Iran because we are interested in building a partnership with Iran, interested in trade with Iran," he said.

At a press conference, to emphasize his understanding of world politics and the definition of democracy, he stated that Iranian’s actual president Mahmoud Ahmadinejad has 61 or 62% of the votes. How can you imagine fraud with such an impressive popular support?, he wondered.

"I do not know anyone other than the opposition, who should have disagreed with the Iranian election results. There are no figures available, there is no proof. For now, it's just, you know, something between “flamenguistas and vascaínos," (referring to two rivalling Brazilian football clubs).

Lula, the popular leader of the Brazilian dream, prototype of the common man that reached the highest levels of society, collided head-on with equality, with equal rights and obligations, with the principles of equality and democracy. With his imbecile statements he shook off his carefully built-up image as a reformist and took the cloth of the repressor and anti-libertarian.

The Brazilian president's view on the election in Iran does not make the slightest difference - either in Tehran or anywhere else in the world, but it is revoltingly gross to compare the peaceful demonstrations for justice of the Iranian people to two rivalling Brazilian football clubs.

Seeing his jaunt to Iran going beyond reach, he probably had meant to say to the Iranian people: "Sifu" (fuck you).
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Note 1: Lula used this obscene expression (Sifu meaning fuck you) during a meeting with governors. The TV-News outlet ‘Jornal Nacional’ qualified the words as "extravagant", which was very generous of them.
Note 2: With the peaceful demonstrations getting approached with violence by the Iranian authorities and the hospitalized injured arrested by the Basiji, several foreign embassies in Tehran are helping to protect the victims and are taking in injured. Why is the Brazilian Embassy not on the list?

90612

A Good Yankee Conquered Latin America

The judgement of the first hundred days of the Obama administration might have had all the attention in the US, it is, as a matter of fact, a global affaire. The foreign policy of the Bush/Cheney administration was ruinous in its approach to and contacts with Latin America. Bush’ few visits to Latin American countries were always characterized with massive, sometimes even violent protests and demonstrations. Neither the Latin American leaders nor the people expected anything positive from Bush/Cheney, and as a consequence any American initiative, commercial or charitable, was met with mistrust and suspicion. Exponents of this disastrous foreign policy were the dubious American interventions in local affairs in Venezuela, Bolivia and Paraguay and the re-instalment of the 5th US Navy Fleet in the Caribbean. The US, personified by George Bush, was “el diablo” as Hugo Chávez stated openly and with which statement many a Latin American government leader silently agreed.

Although the 5th Summit of the Americas, sarcastically called the G-34 (the number of countries attending the meeting of three days in Trinidad and Tobago) as part of a soup of letters and numbers in which leaders dive, was distinguishably unimportant, it was, however, the perfect event for the new president of the USA to meet efficiently with all government leaders of Latin America, notably the Left-Wing leaders with anti-American feelings, among them Hugo Chávez (Venezuela), Evo Morales (Bolivia), Fernando Lugo (Paraguay) and Daniel Ortega (Nicaragua). But it was also crystal clear that the meeting in a country once a haunt for pirates and smugglers had to offer some thrilling bids and a bit of suspense.

The Summit was created in 1994 by the then US President Bill Clinton. The initial objective was to create a single trading system, the FTAA (Free Trade Area of the Americas) for the whole region. After several dead ends, especially between the United States and Mercosur, the initiative was buried after the last meeting in Mar del Plata.

But this time, it was the Latin American and Caribbean debutante ball for prince Barack Obama, and you never could know whether Hugo Chávez would try to spoil the party and steal the show (he anticipated that he might veto the final declaration) and the absence of Cuba was remarkable since the island of the Castro brothers was the predominant theme of this picnic.

Several Latin American leaders agitated as usual against the financial shenanigans perpetrated by Big Brother America, albeit knowing they need to work with Obama. You just had to observe the body language and juggling rhetoric of Lula in relation to Obama. Again, as in the G-20 summit in London, we had the flawless performance of the US president stating that he was here to listen, to recognize flaws and trimming edges, but let's remember the obvious: the US is still the indispensable superpower, maybe weaker, more limited and less arrogant, but still the No. 1 Superpower.

There were also limits to achieve necessary change. Before the trip to Trinidad and Tobago, Washington broke some ice in relations with Havana, allowing more travel and financial remittances from Cuban-Americans to the island. But not enough to make an immediate reversal of the economic embargo, in force for 47 years, the age of the President. This will depend on tortuous negotiations with the anti-Castro lobby in Congress, and positive gestures of the Castro brothers.

Who was to know, that Chavez, supported by his vassals, might lay an ambush, but what fun could there be with "el diablo" George W. Bush not present? It should have been difficult to repeat the waves of protests and bullshit targeting Bush during the 2005 summit in Mar del Plata.
Before the Summit started Itamaraty, the Brazilian Ministry of Foreign Affairs, released a statement: “President Obama is new in office and it makes no sense to create a "negative" situation during the summit”, and continued to say that the Cuban government itself would have no interest in a confrontation with the Obama government, because of its willingness to a "dialogue."
"President Lula goes to Trinidad, aware that neither Obama, nor Cuba are interested in transforming the embargo in a big controversy during the summit.”
For many, the US remains an imperialistic country, but Obama is a good Yankee.

Before the summit started The New York Times published a sombre toned article, emphasising the erosion of the US influence in Latin America and the deeper engagement of China in the hemisphere, but it is ridiculous to imagine that one day the “Emerging Asian Superpower“ will have a hegemonic role in American’s backyard.

The veteran "Brazilian-expert" Abraham Lowenthal, professor of international relations at the University of Southern California, said that Obama’s trip to Latin America during its first 100 days of government is prove of the importance he gives to the region, given the alarming economic crisis and geopolitical challenges in other parts which consume all attention of his administration. Latin America, however, is not a priority of this government. The urgent national issues, like the economic crisis, drugs and immigration, dominate his domestic agenda.

What is the importance of the summit for Brazil? And can somebody tell me how many summits President Lula has already participated in during the four months of this year? Since the summit in Mar del Plata, Brazil is more prominent and influential. For Lula, it is great to be charmed by Obama. But in the words of Rubens Barbosa, former Brazilian ambassador to Washington, the summit is a "non event" because it was originally initiated to stimulate a dead FTAA (Free Trade Area of the Americas), against which Brazil resisted. FTAA is not any longer, but there is Hugo Chávez’ Alba. Leaders can always find a reason for another summit.

Although heavily criticized in the US, Chavez friendly handshake and gesture to present the new US president with the book “Las venas abiertas de América Latina” (or in English: “Open Veins of Latin America”), written by the Uruguayan Eduardo Galeano in the seventies of the last century, was one of the most remarkable public expressions of seeking a rapprochement with the US and at the same a signal to the ‘imperialist’ that the future had to be laid out with mutual respect. Remember, the book - which is arguably Galeano's best-known work, analyzes the history of Latin America as a whole from the time period of European contact with the New World to contemporary Latin America, revealing what he views as European and later US economic exploitation and political dominance over the region - is clearly a signal of the Latin American leaders to Obama, that continuation of this loathed policy can not and will not be accepted any longer.

Whether US policy to Latin America will change dramatically in a positive direction requiring mutual respect, we have to see. But for the time being “A Good Yankee Conquered Latin America”.

90437

Wrong Choices

This is a (translated and edited) text of the blog of Miriam Leitão, economist and columnist for O Globo
The response of Lula’s government to the financial crisis has serious defects: some market sectors are benefiting but not the entire economy, and incentives are given without something in return. The car, a product for the middle class and the rich got a tax waiver, the employees of the automakers received an employment guarantee, but the sugar-alcohol sector has neither, not even a guarantee of the labour laws.

In the United States, aid to the automakers was given under the condition of environmental improvements. Here, nothing was requested from the automakers, except to keep labour employed, which creates a distortion in the economy: all Brazilians can be dismissed, except employees of the automotive sector and public officials.

March 30 was the “Day of Cars”, here and in the US. There, the president of General Motors fell in disgrace because the government refused his plan for the adjustment and adaptation to the requirements. I do not want to compare the aid of billions of direct tax-dollars to the coffers of the auto-industry in the US, to the tax waiver here, but insist that this was a great opportunity to induce changes upon the Brazilian auto-manufacturers.

The new president of GM will have 60 days to submit a new plan, but already started to say that the new cars will be different. Frederick Henderson said that the automaker is one or two generations behind in green technology for cars and that the company will have to learn to make money on light cars, and not just SUVs. Another requirement is that of a fiscal adjustment in the company, which will separate good assets and problematic liabilities difficult to digest, such as the employees’ pension fund.

Over in the U.S. it is entirely different, but it is important to see the attitude of governments, in helping the industry. The Obama administration has asked something in return. The Lula government extended the reduction of the IPI-tax for cars and trucks requiring only keeping employment at the same level. It is worth remembering that the manufacturers of trucks did not meet the requirement, from the beginning of 2009, to manufacture only trucks with clean diesel engines. After seven years of delay, they said they were not prepared and needed three more years to deliver here in Brazil, what they deliver in other countries already for years. This, for example, could have been a consideration, a quid pro quo.

The complete absence of concern of the Lula government for the environment is shocking. Yesterday the government reduced the IPI-tax to zero for electric showers, high consumers of energy, and a product which has been abandoned in other countries. Electric showers have had a reduction of the IPI before and have now been set to zero along with other conventional building materials such as cement and brick. The Ministry of the Environment had asked to equalize the tax for the electric shower (which was 5%) with solar panels (which pay 18%). The decision "has not yet been taken” and is still in consideration by the Treasury.

End of March Banco do Brasil got authorized to extend the credit line of the FAT Giro Rural for two years. The credit line is BRL 4 billion (USD 1,8 billion) and the first trance will be paid from April 1. The agribusiness is getting an aid package for the sugar-alcohol sector and the production of meat, two flagrant champions of slave labour. Livestock breeding is directly related to the deforestation of the Amazon. The BNDES (Development Bank) will make a classic rescue operation, supplying BRL 200 million (USD 87 million) for a bankrupt slaughterhouse, which operates in a deforested area. In none of the aid programmes any change in conduct was negotiated, neither in relation to the workers, nor in regard to the environment. This all happens as if the Brazilian government is not of this world.

The vehicle per capita in Brazil, according to Anfavea (Automobile Manufacturers Association), is one vehicle for every eight inhabitants. This is the overall average, taking into account the population and the fleet of 25.5 million cars. Just to compare, the same density in the US. is one vehicle for every 1.2 inhabitants, in Japan it is one vehicle for every 1.7 inhabitants, in Mexico it is one for 4.7 inhabitants, in Argentina it is a car for every 5.2 inhabitants, all data from Anfavea.

The 2000 census said that 54.4 million Brazilians lived in households that had one or more cars, which then represented 32% of the population. Imagining that this percentage has grown a bit, as the sales of vehicles increased - though most new cars have been bought by the same families who had cars before, but some new entered the market - who owns a car belongs to the middle class and from there upwards. The two figures show that the motorized do not reach 40% of the population. The ones who buy a new car are exactly the ones who have a higher income.

The government did something that will benefit only the middle class and the rich, protected only employees of automakers and support the agribusiness without requiring any change of conduct.

Lula is losing the chance to change opened up by the crisis.

90349

Polemic: Lula's White Blue-Eyed Bankers

Last Thursday 26 March during a visit of British Prime Minister, Gordon Brown, President Luiz Inácio Lula da Silva blamed the rich countries for the crisis.

"The crisis was caused by irrational behaviour of white people with blue eyes, who in the past seemed to know everything, and now show no knowledge at all", said Lula in reference to foreign speculators in the first world countries.
When asked by a journalist whether his statement would not have an ideological bias, Lula said: "As I do not know any black or indigenous banker [...] I can only say that it is impossible that the part of mankind, which is the worst victim, shall pay for this crisis. This is not possible," he added.
”We can not allow the poor to be the first to pay the bill run up by the rich," he emphasized.

During his statement to the press, at the Alvorada Palace (the Brazilian White House), with the visiting British Prime-Minister at his side, the president compared the financial crisis to a fever and also defended the actions of the government as inducer and articulator of policy.

“It is usually said that the government only is a hindrance, and when the crisis happened, those who seemed to be the “gods of the economy”, seek that same “non-knowledgeable” government, to save them.“

And continued to defend regulations for the international financial system, by saying: "It is not possible to have a society where you enter a shopping mall or an airport without being filmed, always being watched, and the financial system is not monitored and has no regulations."

Lula said that the global economic crisis will worsen if the G-20 meeting in London in April does not submit concrete initiatives to recover the global economy.

"If the G-20 is just a meeting to mark another meeting, we will be discredited and the crisis may worsen".

Lula questions the effectiveness of the economic package presented by the President of the United States, Barack Obama, which provides for USD 1 trillion for the purchase of assets considered "toxic”.
"If Obama made the decision in the best interest to the United States. Great. I hope it works," he said "but I can not use the little money we have left, to buy titles that I call “rotten”," he added.

He stated also that he hopes that Obama, in the G-20 meeting in London, presents a plan as the views of the American president are supreme and must be respected.

Note:
AmericaBlog's “Chris in Paris” writes in his post "Lula and Berlusconi need therapy":
"The last time I checked, disgraced but wealthy Merrill Lynch CEO Stanley O'Neal is African-American....." and contests Lula's words. Clearly he doesn't understand the language and the way-of-thinking in developing countries and doesn't know how the people living in these countries see AND experience daily the Americans living in their countries.
Lula's words had nothing to do with racism or discrimination, but everything with the cold truth as the big speculators (including bankers) of the USA created the mess the US and the world are in, in the first place and the European bankers ran into this pit out of greed too. Have you heard of any 'coloured' bank in Latin America which needed bail-out money? Brazilian banks proved to be sound. So, Lula is right, it were the "white, blue-eyed bankers" and it is of no importance that by any coincidence there was somewhere, sometime a 'black banker'.
Lula's words, blunt as they came from his infamous big mouth, are however correct. The poor, developing and emerging countries are suffering most, thanks to the insatiable greed of the white, blue-eyed bankers of the rich countries.
A sore blogpost. Better read the text in the original language first, before starting to shoot. Incredible that in general you attack the main stream media and now use their words as basis for your blog. A blogpost not worthy the slogan: "A Great Nation Deserves The Truth". It is not Lula who needs therapy, the white, blue-eyed bankers (speculators as Lula said) in the US and Europe need it most and urgently as well, as they don’t seem to be inclined to change their attitude. So don’t blame Lula without knowing what you are talking about.

90346
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The Most Envied Man of Carnival 2009

Betto Almeida, 36, paints the body of (female) dancers, who participate in carnival parades in Rio de Janeiro and São Paulo. For many Betto Almeida is a lucky bird. In addition to his daily work as art director of TV soaps, he paints, brushes, drips and sprays paint on some of the finest Brazilian carnival bodies and that already 12 years.
With sweat on his forehead, he says that it is hard work but worth it. A modelling agency pays him BRL 1,000 (€ 335) for about two hours required for painting a model. During the samba parades, he paints two models a night. And throughout the year he paints a minimum of 50 women for various events.
“I started to do it for the …. continue reading and see the video

Lula, the great world leader

This is a translation of a post written by my fellow blogger: Wanderley Filho

One of Lula's ambitions is to be recognized as a major world leader, a leader with a recognition which equals Nelson Mandela, for example. This wish seems to be promoted constantly by his assistants. In the midst of this illusion of greatness, some nonsense takes form as ridiculous proposals and end up as a mockery of Brazil.

Lula has already proposed the “World Zero Hunger" program, which should be financed by taxes levied on international arms trade; he said also that he would re-establish the geopolitics (he loves that word) of this planet with bio-diesel; that the countries of the G-20, led by Brazil, will dethrone the countries of the G-8 at the moment of creating of a new global economy and that the victories of the leftist parties in Latin America, starting with his own, had paved the way for the election of Barack Obama in the USA. At the height of arrogance towards its destiny as a world leader, Lula revealed that even God, in transit in Brazil, had decided to remain there to help him.

With the same modesty, Lula pretends, which many diplomatic delegation of the world already had done, to resolve the discord, which is the base of the current conflict in the Gaza Strip between Islamic terrorists and Israel. The extract below was published on the website of Folha Online:

"I sent Celso Amorim [Minister of Foreign Affairs] to the Middle East in order to tell them that Brazil is interested in active participation, so that finally a path to peace can be established in that area, in that geographic area of the world. (...) The existence of two states is quite possible, that there will be diplomatic relations, that there can be development, that there is improvement and I think that the Palestinian people deserve this opportunity."

Wow! Things are so simple that no one realized how easy it is to solve that first seemed insoluble. Brazil is not even able to maintain order in its favela regions of Rio de Janeiro, dominated by drug traffickers who forced the legal government out of the region. Every year, there are 50 thousand Brazilians murdered, a number much larger than that of the war in Iraq, for example. But Lula knows how peace in the Middle East can be achieved. This borders on the ridiculous. Or rather, it's ridiculous.

[With a paraphrase of one of Lula's famous sayings:]
Never before on this planet a "world leader" was as insignificant.

Source: Lula, o grande lider mundial
90113
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Laugh: Obama in Brazil

The US is not the only one having elections this year, as we, here in Brazil, have some too in October. Ok, it is less important and world shocking but for the local people the election for mayor and the municipal council are of utmost importance.
And so ... Obama inspires and candidates in Brazil “borrow” his name

The candidate for the presidency of the United States Barack Obama enthused and inspired candidates for prefeito (mayor) and vereador (councilman) in Brazil, adopting his name in the municipal elections in October. There are candidates for mayor and councilman taking a ride on the fame of the US Democrat presidential nominee and decided to couple the name of Obama in their quest for success in the polls. No candidate in Brazil is using the name of John McCain.

The Brazilian law allows candidates to use nicknames during election campaigns and in their identifications. The adoption of the name “Barack Obama” is non-partisan and occurs in various regions of the country

The candidates said they appreciate the life story of the American and want to represent change in their municipalities, one of the banners of the real Obama campaign in the US presidential elections. They also said that the racial issue weighed in their decisions.

(photo above) "I am the first black candidate for mayor of my city," said “Claudio Henrique Barack Obama" who disputes on a PTB-ticket (Labour Party of Brazil) a seat in the municipal council of Belford Roxo, in the federal state of Rio de Janeiro. Officially: Claudio Henrique dos Anjos, is a consultant in information technology and is optimistic. He said that he occupies the third place in polls and consequently has a chance to go to the second round. (In Brazil there is a multi-party system and a candidate needs to be elected by an absolute majority (50% and one vote), if candidates not reach this absolute majority in the first election day, there is a second election day (second round) 14 days later between the top two or three candidates only.

Jovelino Selis (Labour Party), a mathematics teacher at the city's public college and a union leader, does not deny the reason for using the nickname of "Barack Obama" to compete for municipal councilman of Ubiratã in the federal state of Paraná. He didn’t have a choice. Not having the 20 thousand reais (12,000 USD), the opposition has, to activate a campaign, he decided to appeal to Obama’s popularity. "It was a marketing move. The idea caught. People are talking about you,” he observes.
Despite the satisfaction with the successful campaign, the candidate regrets the problems generated by the personal choice of his nickname. "They are calling my youngest son Obaminha (Little Obama)," he said, “ridiculing him in school.”

The Brazilian Obamas suffer the same prejudices as the real Barack Obama. Selis said that a few days ago he heard a rumour that he was using an Arabic name by now because of his links with terrorists. "They said that now I have links with the people in the Middle East. I have to do a teacher’s job to show that this is a lie."

Alexandre Jacinto Nunes (centro-democrats), "Alexandre Barack Obama," fears that the anti-American sentiments [rapidly expanded during the Busch/Cheney administration] are a backlash in his campaign for councilman in Petrolina, in the rural savannah like area in the federal state of Pernambuco. In some conversations with voters, Jacinto prefers to omit the nickname he chose for the campaign. Still, the salesman of air conditioners says he does not regret having adopted the name of the US presidential candidate.
Jacinto battles to achieve his dream. With few (financial) resources, he tries to convince the voters of Petrolina that he will improve the sanitation of the city and help revitalize the river San Francisco. "My difficulties are huge. I have to beg for shoes, as mine were only holes and I walk much. It is ugly," he says. "I campaign on foot, by bicycle and motorcycle when someone is funding the fuel."

For the full list: Meet the Brazilian "Obamas" click here
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Meet the Brazilian "Obamas" (updated as from 01 Sept. 2008)

Alexandre Jacinto Nunes (centro-democrats), Alexandre Barack Obama, competes for a chair as city councillor in Petrolina, in the sertão (savannah) of Pernambuco. He is a salesman of air conditioners.

Claudio Henrique, (Labour Party of Brazil) candidate for mayor of Belford Roxo. Former parliamentary adviser to Minister Edson Santos (Secretary of Racial Equality) competes for the first time for public office.

David Cardoso, the Obama of Assentomento, competes for the second time for public office in Pompeu (Minas Gerais). He is candidate for city councillor for the Labour Party of Brazil. Is farmer, married, raised his own and other children, in total eight. He is 41 years and finished high school. Lives in a settlement with (just) 146 other families and did not know Barack Obama, till he got called by that name by others. He aims to fight for "the people who are suffering most."

Epaminondas Bernades Birth is the candidate for city councillor in Barretos (state of São Paulo) and registered for elections with the name: Epaminondas Epa Obama Brasileiro.

Fabio Alonso Jose de Melo, or Fabio Melo Barack Obama, is candidate for the municipal council in Marialva (Paraná). Compete for the PPS (Socialist Peoples Party). He is a law student at the Pontifícia Universidade Católica in Maringa, is 27 years and single. He adopted the nickname after seeing "the picture of the blessed on the Internet."

Jovelino Sellis, candidate for councillor in Ubiratã, Paraná, for the PT (Labour Party). He is a mathematics teacher with the High school and College education network in the state of Paraná. He is married with four children, evangelical, and is said to be a fan of Obama.

Marlúcio Pereira runs in this election for mayor of Aparecida de Goiania (Goianas), a city of 500 thousand inhabitants. He won the nickname “Barack Obama of the Savannah”, but did not register the name with the Election Board. He is black, evangelical and admits to the media that if the US senator takes off favourably, he certainly will embark on the wave until the elections here in October.

Natalino Braz, who simply is registered as Obama, is candidate for the council of Mendes (Rio de Janeiro) for the third time. He is a DEM (democrat) who joined the coalition with the Partida Communista do Brasil. He is a construction worker, is 60 years old and did not finish preliminary school. He is married and adopted the nickname Obama "to see if he was lucky this time."

sources: Revista Epoca, Noticias Terra
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“Passamos A Ser Donos Do Nosso Nariz”

At last we are masters of our own nose

The international rating agency Standard & Poor's announced on 30 April the upgrading of Brazil from BB to BBB- (BBB-(minus): is the lowest rating above non-investment grade BB) with which the country joins the group of "reasonably secure countries for investments". On the stock market in São Paulo (Bovespa) the value of shares rose dramatically after the news broke, while the shares of Brazilian companies listed on the stock exchange in New York joined the euphoria.

President Luiz Inácio Lula da Silva commemorated the promotion to "investment grade" with the words:
"I don’t know how to pronounce the word, nor what it means, but if it is translated into a language Brazilians understand, then it seems, that Brazil is classified as a serious country … .. It is a victory for the Brazilian people, which waited for this moment for years. With this new classification, there is no doubt that Brazil is now a serious country." Clearly alluding to the infamous words of Charles de Gaulle.
According to Lula, the upgrading is of great importance. "It is the guarantee that we are now master of our own nose, and can decide on a policy which we deem suitable for Brazil."

Of course the national press was full of praise and positive analysis and even the international press could not remain at the sideline to extol Brazil to the skies.

The British "The Independent" suggested that the Brazilian economy undergoes a "carnivalesque experience.”
The "Financial Times", meanwhile, put Brazil “among the first countries on the investment list", although it warned that the prevailing high interest rates could impede economic growth.
The French newspaper "Les Echos" wrote that the country "is bathing in sweet euphoria" referring to the absurd stock market rise of 6% in São Paulo within one day.
The Spanish "El País" pointed out that the addition of Brazil to the list of "secure countries" will encourage investors to switch from the speculative markets to a secure investment in this country."
Economists expect that some 1,000 billion USdollar will enter the country.

The essential advantage of the change to investment grade is that large institutional investors, who according to their statutes only can invest in low risk assets, are now allowed to invest in Brazil, as the classification is an instrument that reflects the risk of a country being capable of complying with its obligations. The higher the classification, the lower the risk, and with it the likelihood that investment capital will enter the country.

The president of the Central Bank, Henrique Meirelles (see photo), called the S&P decision "very significant." For him, it shows that Brazil has sufficient immunity against external shocks.

But if everything is so positively judged by everyone, why do I feel so worried about it.
Fortunately I am not the only one as a few critical comments appear on various blogs. Just let’s take one. A résumé of the blog of Jose Paulo Kupfer, a renowned Brazilian journalist.

Résumé: By upgrading Brazil, S&P has completely ignored its own fundamental parameters. Where are the tax reforms, the redesign of the labour legislation and the reconstruction of the social security? And what about the correlation between government debt and GDP, which should be 30%, but actually is more than 40%. And Jose ends by saying: "It looks like, that Brazil has given some "grant" to the "dilapidated" reputation of S&P."

I conclude with my own vision.
Across the board the new classification by S&P has induced euphoria. However, it is questionable whether that is based on real grounds. I admit that the elevated standards for Brazil - to investment grade - will cause an influx of foreign capital. As a consequence, many Brazilian companies can negotiate loans against better conditions abroad, but at the same time, many smaller and medium-sized Brazilian production companies will be pushed even harder to keep up their export due to the USdollar falling further against the real. Although the volume of Brazilian exports measured in USdollars will not diminish, as the overwhelming part consists of commodities (not enriched raw materials and agricultural products), which prices are determined by the market in Chicago, many companies with manufactured products are forced to discontinue their exports. It is obvious, that it will not be beneficial to the country as all manufacturing companies have to concentrate exclusively on the home market. Without doubt the home market will grow, but never to the extent that it will benefit from the S&P classification. Exports of manufactured products will decrease, while the imports increase, both due to the declining value of the USdollar. The trade balance will, as a consequence, entirely rely on the export of commodities whose price is determined by Chicago in which Brazil merely is the direct object. No significant exports in manufactured products with added value almost always lead to a fatal blow to a country.

But there is yet another side to the new upgrading of S&P, which is much more dangerous and could even be disastrous. With the crisis in the U.S. housing market, S&P (and other financial graduators) demonstrated its absolute ignorance, or its involvement in the manipulation of the banking system. It would not be the first time that S & P and its peers manipulate an economy of a country, after firstly praising it into the sky, and then opening the door to hell for the mere benefit of the big money guys.
What is more, we live in a special time cycle. The valuation of the real is only partly due to the performance of Brazil itself and for the other part to the fact that the U.S. is ruled by the worst president of all time and that in an election year the economic cycle of a free fall of the currency always can be observed. That means that after the U.S. presidential elections have given certainty about the successor, the dollar will rise worldwide, as the financial institutions "suddenly" discover new confidence in the economy of the country. This will certainly happen if Barack Obama is elected as president. In the unlikely event that John McCain will be president, I believe, the dollar will probably continue its free fall.

This means that in 2009 another ratio will be seen between the dollar and the real. But beginning in 2009 Brazil seriously starts thinking about the succession of Lula. Herewith we enter the next time cycle of elections, which will have a negative impact on the position of (in this case) the real. We have also seen this during the presidential election to replace the predecessor of Lula, during which the real grossly was manipulated (not to use the word speculated) by the financial institutions with the ABN / AMRO as the frontrunner. If we run in a situation that the U.S. economy shows an improvement, as a result of the appointment of a new president and the period before the Brazilian presidential elections shows no absolute clarity about Lula's successor, the value of the real against the dollar will deteriorate.
That is also the moment the international financial world will withdraw its investments from Brazil to profit in the short term.

I shall illustrate this danger. I read in ValorOnLine, the following:
"The private sector has been hopeful about reducing the financial costs due to the upgrading.
For Renato Vale, president of CCR, one of the largest transport companies in the country, Labor Day was one big party. The CCR, which in March won a concession for a piece of the Rodoanel in São Paulo, is currently negotiating abroad a loan of 1.6 billion reais to be paid to the government of São Paulo. The upgrading of Brazil means a savings of several million USdollars in drawing expenditures on foreign funds."

Ok, let’s assume that CCR indeed attracts BRR 1.6 billion (the rate is now USD = 1.60 BRR, thus USD 1 billion) with an interest rate of 5% from the international market. The investor pays in USdollars and both interest and principal have to be paid back in USdollars. 5% interest means an annual interest charge of USD 50 million or 80 million BRR. Suppose he has a payback period of 10 years. That represents is an annual redemption of 100 million USD or 160 million BRR. Total = 150 million USD = 240 million BRR.
I believe the USdollar will return at a rate of around 2.25 BRR, as a result of two presidential elections, restoration of the US economy, the future expectations of the Chicago commodities market, rising imports and the lack of Brazilian exports of products with added value.
This leads for CCR in a rise in annual payments of 240 million to 337 million BRR. It is of no importance whether the dollar changes +5% +10% or in any other different value. The fact remains that a Brazilian company suddenly is facing much higher operating costs and a much higher debt.

We have seen this before. In Pará during the government of Fernando Henrique Cardoso, shipping companies in the Amazônia region could arrange loans from the BNDES (National Development Bank) to build ships for the expansion of the transport capacity in the region. The loans were in USdollars (rate 1:1), although the revenues of the companies were in BRR. We do not have to detail here (see above) what happened during the election year of FHC/Lula (picture right). Suddenly, but insurmountably, the companies faced payments, which were 2 to 3 times higher, than they were accustomed to. It took many on the verge of bankruptcy.
Brazil is not (yet) in a position to withstand foreign manipulation or speculation as the country’s economic cushion is (still) too fragile.
History repeats itself. Always.

I'm afraid that's Lula’s: “Passamos a ser donos do nosso nariz”, will end up with people getting their nose pinched.

80469 - cartoons courtesy of J. Bosco/O Liberal