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EFS Informe Especial
 

Brazil : present and future rely on clear rules

 

On the 13th of April, 2011, in Sanya, chinese island of Hainan, was held the most recent meeting of BRICS (Brazil, Russia, India, China and South Africa) members. Among many subjects approached in the meeting, two are of extreme relevance: (1) Creation of a basket of currencies to replace the U.S. currency trades made by the group and (2) the introduction of more transparent international rules, in order to avoid crisis, like the one in 2008, to harm or weaken the performance of the newest players in global economy, among which, the Brazilian market.

In 2010 Brazil reached a GDP of U$ 2,19 trillion. This number is not only surprising because it's almost equal to coutries such as France, that even having only 6,34% of the Brazilian territory, has GDP of U$ 2,16 trillion. The same happens when talking about the United Kingdom, that has only 2,84% of the size of Brazilian territory, has a GDP of U$ 2,189 trillion.

And, are infinitely more productive than Brazil. The USA, for example, that has a territory just as big as Brazil,has a GDP of U$ 14,7 trillion, that is 7 times bigger than Brazil's, even in a post-crisis period. China, in the other hand, has a GDP of U$ 5,88 trillion. Tiny Japan's GDP is U$ 4,33 trillion, India's is U$ 4,04 trillion, Germany's is U$ 2,96 trillion and Russia's GDP is of U$ 2,22 trillion. Preserving the proportions inside global economy, Brazil's GDP seems very modest, even though promising. For that reason, the inset of Brazil as an international player can not disconsider that its economical growth in the last 20 years  is insignificant, corresponding to 50% of the global avarege.

If in 2010 Brazil reached a growth rate of 7,5% per year, we can't forget that in 2009, growth rate was of 0,64% negative. That being, between 2009 and 2011, the average growth kept being the eternal 3,5% per year, rate way lower than the one reached in the BRICS.

Brazilian population is of 190 million, with a terrtory of 8,6 million km². The minimum wage is U$ 342,77, and the per capita income in 2010 was of U$ 10.900, that is 109th place in world ranking, behind Argentina, who is in the 76th  with U$ 14.700, also behind Chile, Uruguay, Mexico, Panama and Costa Rica, for example. That means, Brazil's economical potential is limitted. Five are the possible reasons for such stagnation: (1) Lack of investment in infrastructure and education; (2) Legal uncertainty, the legal decisionsand laws in Brazil are not stable nor show Governmental patronage; (3) High and complex tax burden; (4) Social cost and job creation adds up to 100% of salary; (5) High levels of corruption.

Several are the problems: roads scarce and poorly preserved, prehistoric railways, airports and ports inefficient and lacking in flow capacity. The production and distribution of energy in this collapse with daily blackouts in its major urban centers. Logistics suffers from a lack of hotels, hospitals, high illiteracy, low investment in education and scientific knowledge.

Such factors make impossible a project to predict a still anual growth rate above 4,5%. If such thing happens, certainly there will be a blackout, shortage and high inflation.

For no other reason, Brazilian Government keeps an interest politic of  inhibition of growth and income transfer for the financial sector. The average market interest is 7% per month. Credit cards that should encourage and finance a desired consumption, amazingly, is 11 to 12% per month.

Even with that, the global market keeps optimist about this player. Not to worsen the global economic crisis that post remains fragile by the debt problems of Spain, Greece and Portugal. Whether because he believes that the pre-salt reserves become economically stable in Brazil, even just producing commodities. Without speaking, of course, that such reserves eased soaring oil price in international market.

On the other hand, Brazilian population overcomes the expectations not reached by its Government. The lust for consumption and low value of some goods led to 98% of Brazilians to have cell phones and almost 60% to have personal computers. In other words, it's a market equal to Mexico's population, where 100% of the time receive education and information that makes them potential and eager consumers worldwide. Only in the USA, China, Japan and India, there are so many Internet users, coincidence or not, are now the largest savings in the planet.

Brazilian economy is based (80%) in the production and selling of petroleum, coffee, orange juice, iron, soybeans, aluminum, among other commodities. The Stock Exchange - BOVESPA, which has almost 100% of their operations involving these products, whether in the future market, derivatives and shares and ADRs of companies linked to or dependent on this sector of the following banks, pension funds and private business groups : FUNCEF, PETROS, PREVI, ELETRUS, VALE, PETROBRAS, BANCO DO BRASIL, CAIXA ECONÔMICA FEDERAL, OI-BRASIL TELECOM, EMBRATEL, EMBRAER, JBS FRIBOI, AMBEV-INTERBREW, IPIRANGA, BRASIL FOODS, BRADESCO, ITAÚ/UNIBANCO, GERDAU, companies of the Groupo EBX of businessman Eike Batista. All linked to eachother through financing or investment operations of BNDES and BNDESPAR. The weakness of the sistem is bases in the fact that there is no transparancy  and absence of conflicts of interests regarding the bodies that oversee these operations. The CVM, the Central Bank of Brazil and regulatory agencies, as well as CADE, which should play this role, has its executive officers and chairmen appointed by the same people who indicate the presidents of the major players previously mentioned.

It is almost a colonial economy, both because it is centralized, as it depends essentially commodities. Yet, it surprises. After all, from an engineering organized within this system, Brazil stunned the world with the creation of Brazil Foods - the largest multinational of food;-Interbrew with AmBev - the largest beer and soft drink industry, with Petrobras - the second largest company of petroleum; with Embraer - 3rd largest manufacturing company of planes, with the JBS Friboi - largest meat overall, with the HI-Brazil Telecom - 3rd largest company in telecomunication and Eletrobrás - the third largest in production and distribution of energy.

These companies grew through tag along, mergers and acquisitions involving the largest companies in their sectors, in North America, Europe, Asia and Oceania.

The chart exposed in the link (http://www.edisonsiqueira.com.br/debentures/organograma_english_01.pdf) and the glossary exposed in link (http://www.edisonsiqueira.com.br/debentures/glossario_vrs_english.pdf) portray, superficialy, concrete proof that - from BRICS - it's already necessary to stablish new market rules, otherwise, the facts in crisis of 1929, 2001 and 2008 may be seen again very briefly.

The market must be aware to all experiences.  Global economy is in a timing of recovering, what doesn't justify to ingnor artificial movements that make such crisis come back now when everybody works with great sacrifice.

 

Édison Freitas de Siqueira
Presidente do Instituto de Estudos dos Direitos dos Contribuintes
www.direitosdocontribuinte.com.br
efs_artigo@edisonsiqueira.com.br

Leia este artigo em português.

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