BRAZIL-More news from the front

Some snippets FYI

The following are some items that have popped up in the press or in interviews with specialists and pundits:

• Urban violence: The thin veneer of civilized behavior that was generally a characteristic of Brazil has been ruptured by an increasing rate of urban crime and violent muggings. Of course, this is not new. It’s been occurring for the past few years. However it shows signs of increasing and this should be a cause for concern. Personal security should become a matter of corporate concern and require specific training for employees.
• The PMDB emerges from the political closet: Vice President Michel Temer has been traveling throughout Brazil in support of his campaign for re-election to the post of president of the PMDB. He stated recently that pressure for Dilma’s impeachment has abated and that the PMDB should begin to think about assuming command of the economy when her term ends in 2018. Many analysts agree that impeachment pressures have indeed been reduced. Fewer, however, seem enthusiastic about the idea of a PMDB presidency. What it does mean is that the “traditional kleptocrats” will have won the war, less through actual combat than by the attrition of the “neos”. It also means that following 2018 (assuming we are still here), there will still be a period of “ethics” cleansing before Brazil can significantly reduce the practice of confiscating the country’s economic rents by those in power.
• Zika virus: Brazil is approaching epidemic levels with this mosquito-borne malady. It is not unique to Brazil but local sanitary conditions and the dismal public services at the municipal level create numerous breeding opportunities. This could affect the inflow of tourists for the 2016 olympics. (The rapid spread of the virus was headline news in today’s NY Times)
• A major environmental issue: The city of Mariana in Minas Gerais was the scene of one of Brazil’s worst environment disaster as a retaining pool of toxic waste material burst releasing a wave of toxic mud estimated at 15 meters high. The entire city was devastated. The mud continued to flow to a local river and to the sea where it has moved northward to the environmentally protected areas in the State of Espirito Santos. The mud has yet to be removed and is still wet. One unaddressed issue is what will air quality be like when the mud dries and becomes airborne dust. No one yet has come out with analyses of how toxic the dust might be and what respiratory maladies could ensue.
• Inflation continues to rise and consumption continues to fall: Supermarket sales discounted for inflation and seasonal fluctuations declined in 2015 by 1.9%. Inflation in January of this year was 1.14% - well above expectations – and a harbinger of increasing pressure in 2016. Moreover, unemployment continues to rise, especially in the automotive sector where sales in January were 40% lower than the same month last year.

Analysis:

I recently observed in my regular report on Brazil that 2015 will wind up being a “middling year” – worse than 2014 but not nearly as bad as 2016! The combined effects of the fiscal imbalance, the ineffectiveness of the policies directed against it, and the plethora of smaller problems that result from the crisis at the state and municipal levels have led to a disintegration of the economy at all levels and in a wide array of areas and sectors.

Everything from public safety and law enforcement to the provision of public health services, sanitation, education, etc. have been compromised at state and local levels.

When I first came to Brazil in 1965, delays in the payment of public sector wages were common. Companies that rendered services or sold product to the public sector faced constant payment delays as well. We are now back to that kind of environment. And there is little hope in the market that the measures recently announced to restore growth and employment will serve to alleviate the disintegration of the economy.

Survival of the enterprise is the battle cry of Brazil’s private sector.