Brazil’s Giddy Convergence
By ROGER COHEN
Published: July 4, 2011
RIO DE JANEIRO, BRAZIL — Tom Jobim is famous for having written “Girl from Ipanema,” the sensuous, playful anthem of a sensuous, playful land. He’s almost equally famous for having said, “Brazil is not for amateurs.”
I lived a quarter-century ago in that Brazil where if you didn’t have the “jeitinho,” or insider’s knack for circumventing rules, you were toast. It was a Brazil of hyperinflation and runaway violence that mocked the words on the national flag: “Order and Progress.” I went down to the city morgue one day, researching a story about poor kids who “surfed” the tops of trains for kicks, and an official idly lifted the lid of a garbage can in which a young man’s body was twisted like a corkscrew. I asked what had happened. He said he’d been murdered by fellow inmates at a prison and stuffed in there.
No, Brazil was not for amateurs.
Today, in the Brazil of the “Ms. Continuity” leader, President Dilma Rousseff, I’m not so sure. Certainly a lot of people suddenly fancy themselves as Brazil pros.
They’re piling in. They want a piece of the action in the big South American nation that posted 7.5 percent growth last year. Oil discoveries, a commodities boom, sound economic management, political stability, the World Cup in 2014 and the Olympics in 2016 have combined to produce a Brazil fever that feels a touch heady to me.
In Leblon, the area adjacent to Ipanema where I used to live, apartment prices have quadrupled in a year. Sotheby’s International Realty is expecting a quadrupling of real estate sales this year, according to O Globo newspaper. The big price hikes reflect growing interest among foreigners, especially Europeans and Chinese who see opportunity ahead of the two big sporting events.
Take your pick of the head-turning figures. There were 12 new Brazilian billionaires on this year’s Forbes list of the world’s wealthiest people. Foreign direct investment has grown at a compound rate of 26 percent over the past five years and reached close to $48.5 billion in 2010. Consumer credit is taking off. In a land where loans were long hard to get, the net stock of credit increased 21 percent in the past year. Streets are clogged with cars, restaurants full.
A bubble in the making? It’s possible. But Brazilian banks have generally proved prudent, and macroeconomic policies now have a steady track record over three presidencies, one that has contrived to ease the worst extremes of poverty while satisfying international investors eager to put capital behind Brazil’s rapid emergence.
A new buzzword in economic circles is “convergence,” the process by which the developing economies in which five billion people live (194 million of them in Brazil) are closing the gap on developed economies more than 150 years after the Industrial Revolution first opened the gulf. To arrive in Brazil these days from the United States or Europe is to feel the world turned on its head.
Breathless optimism replaces economic gloom. A new $22 billion high-speed train will link Rio and São Paulo. People believe their kids are going to live better than they do. Brazilians talk to the Indians and to the Chinese about investments; they feel the old powers are becoming marginal to the 21st century. China alone has invested $37.1 billion in Brazil since 2003, mainly in mining and oil.
What you think of convergence depends on where you sit. I’d say it’s a good thing — a lot of people are going to live a lot better before too long — but also very disruptive. Brazilians and Indians and Chinese and Indonesians and South Africans do better in part because, thanks to technology, they can do what were once U.S. or European jobs just as efficiently. Their gain is linked in some measure to American and European pain.
I talked here to an executive of a major international cement company who said it had just divested interests in Portugal in order to make investments of over $1 billion in Brazil. Extrapolate from that trend and you see the developed world’s huge economic challenge. Convergence will also place huge strains on the environment and resources — hence those Chinese investments in oil and iron ore.
For now, emergent powers and the developed nations talk more past each other than to each other. Institutions lag a changed world just as the infrastructure of these emergent powers lags the speed at which millions of people are joining the market. Indeed, lack of adequate infrastructure and lack of education are two of the main brakes on countries like Brazil.
I’m bullish on Brazil, but some of the new “pros” are going to get burned. Brazil remains a country of violent inequality. A few days ago a French tourist, Charles Damien Pierson, fell off the tram in Rio at the Lapa viaduct, slipped between a badly installed fence and the bridge, and tumbled to his death. Before the police got there, his wallet was stolen by kids.
Convergence will continue — and in time separate the real pros from the amateurs in the new global economy.