Betting on Brazil – Where Celebration, the Fate of the Nation, and Opportunity Intersect

BlocoFavorita2The streets of Rio de Janeiro were flooded with young partiers for the week-long celebration of Carnival. As the festivities took off, I found myself at the epicenter of one of the biggest festivals in the world. With most major cities in Brazil taking part, the country effectively shuts down as Brazilians engage in live music, dancing, costumes, parades and of course, customary cuisine and beverages. Rio is regarded as the Carnival capital of the world, and frankly, it did not disappoint!

I discovered that the Carnival tradition is rooted in Brazil’s Roman Catholic influence where it became customary to engage in indulgent celebration prior to the period of sacrifice and abstinence commonly accompanied by Lent. International media coverage typically captures the mainstream ticketed parades held in Rio’s Sambodromo – namely the main center for the Samba Parade and Carnival Balls. While coverage of the main events is elegant and eye-catching, I chose to forgo these formalities for the street parties, commonly referred to as Blocos. The Blocos are where local Brazilians take to the streets and sing and dance accompanied by the heavy drum percussion of traditional samba and even trending pop music mixes.

BlocoFavoritaWith so much party and celebration going on, I was not so naïve to believe that this is how everyday life is here. Sure I enjoyed a Caipirinha or two during the festivities, but I began to uncover more of what has been going on in the country. Brazilians can be quite frank when you ask them their perspective on the economy, current events, and social customs.

The Fate of the Nation

Apart from Carnival, there have been some tremendous developments in the state of Brazil since my departure. In the past weeks, Brazil has wavered from relative order to an eruption of civil strife, protests and full-blown manifestations with over a million people hitting the streets in anti-government rallies.

Protests are nothing new to Brazil, but the intensity and pressure that the populous is placing on the current government under President Dilma Rousseff is unprecedented. Prior to visiting Brazil in January, there was an effort to impeach Rousseff for adjusting government accounts to boost public spending. While this in itself is the equivalent of increasing the national debt ceiling, it is a contentious issue that some argue is illegal especially if there were deceptive practices implemented with the increase in public spending. While controversial, these increases have been exercised by previous Presidents, and elected officials.

scandal.pngIn addition to the initial impeachment effort, the country is facing one of the largest corruption scandals that it has ever faced. Labeled Operation Car Wash (Operação Lava Jato) the equivalent of approximately $3.5 billion USD of public funds were allegedly laundered through the Petrobras, the State-run oil company. And to make matters more complicated, Rousseff sat on the board of Petrobras while she was Brazil’s Energy Minister in the years prior to the scandal. For more information on the scandal, I recommend this Vox article by Zach Beauchamp.

This scandal combined with a harsh downturn in the LATAM economy, heavy devaluation of the Brazilian Real, it is no surprise that the public is outraged and seeking change. With many high-level politicians and businessmen in Brazil being implicated in the scandal, one of the most tumultuous of figures involved is the former President Luiz Inácio Lula da Silva, colloquially referred to as Lula. lula-de-brasilLula’s house was raided and he was brought in for questioning per the Petrobras Federal investigation. Some consider the raid on Lula to be considered illegal as under Brazilian law someone can only be forcefully brought in for questioning if they deny an initial request. While Lula did not explicitly deny the federal requests, he delayed his availability due to “schedule conflicts.” Justice Sergio Moro, who has been handling the investigation used jurisprudential precedent to justify the raid. Also, while many believe that Lula is impacted in the scandal, no direct evidence has been found connecting him with the corruption scheme. There is growing concern that as the investigation continues kickbacks through to Petrobras partner organizations, Odebrecht SA and OAS Empreendimentos SA, will be found. Regardless, the raid on Lula serves as a shot across the bow to those who are engaged in corrupt practices.

Roussef attempted to bring Lula into the executive office as her Chief of Staff. She claimed that this was under the pretenses of Lula being a skilled negotiator and an essential figure in the recovery of Brazil. Many believe that the effort was to shield him from the Federal investigation and provide him an opportunity to run for present in the 2018 elections. Note that when Lula held office from 2003-2010, he was revered for bringing approximately 40 million people from below the poverty line to the poverty line and providing education opportunities to the poor. While there may be conflicting beliefs on the accuracy of those claims, generally people believe he was a positive influence for social change and democracy.

roussefMore public outrage took place when a private conversation between Lula and Roussef was illegally released by Moro where Roussef says “I am sending you the paperwork to show you are already minister in case you need them.” Some feel that the tape confirms the claim that Lula was to be protected from the investigation’s legal proceedings, but upon listening to those words, they seem quite basic. One cannot deny that if Lula were to be appointed, it is highly unlikely that the Supreme court would taken adversarial action against Lula. To date, Lula’s appointment has been blocked, but in the last weeks Brazilians have taken to the streets in protest the appointment, the corruption, and Roussef’s presidency.

Know one knows for sure what will occur with the impeachment proceedings or the overall political direction of the country, but the impetus for change is strong. At the latest, we will see what transpires in the next election in 2018. While controversial, there is a chance that Lula will be able to run for office again as some Brazilians still have faith in his leadership abilities. Furthermore, Representative Bolsonaro, an even more controversial candidate who represents the extreme right is making headlines and gaining political traction. Bolsonaro’s political character has been compared with that of an extreme version of Donald Trump…

Insights on Corruption and the Economic Landscape

Corruption Overview. To add some confirmation to the corruption landscape, Transparency International ranks Brazil at 69th place out of 175 countries based on how corrupt their public sectors appear to be (1 being least corrupt and 175 being most corrupt). While there is widespread disgust with corruption, “polls have also found that 70 percent of Brazilian citizens would take illegal benefits if they were in a public job and had the chance.”

Although I cannot personally condone such behavior on behalf of the populous majority, I can understand how the society has been conditioned to skew itself in this direction, lacking a robust enforcement system and strong examples in business and government.

Unemployment. With the risk of a global recession looming on the horizon, this past year’s crash in oil and commodity prices have severely impacted Latin American economies, especially that of Brazil. In early-2015 Brazil’s unemployment sat at 5.3% and now, one year later unemployment has spiked to 7.6%. Brazil is a country of nearly 209 million people and that 2.3% increase is indicative of an addition 4.8 million people who are now unemployed. These numbers are staggering, especially since they have occurred over a short period of time. It really hit home with me when I heard stories of friends and friends of friends being unemployed or underemployed. Their stories were more than statistics to me.

reaisCurrency. Regarding the Brazilian Real (BRL), the national currency – there has been a significant loss in value when compared to the USD. In the summer of 2011 the exchange rate was 0.60 US Dollars (USD) to 1 Real. In late 2014 just before oil and other commodities started to fall, that figure was 0.40 to 1 Real. And now, it is approximately 0.25 USD to 1 Real. Simply put, if you had a 100 USD worth of Reals in 2011, it would be worth approximate 65 USD in 2014 and only 40 USD today. Compared with 2011, this represents a 140% appreciation of USD when compared to Real or conversely a 60% of depreciation of the Real when compared with the USD. As a traveler from the United States, it’s a delight to be spending money where your home currency is valued much higher than that of country you are visiting. And while that might seem like the case from the outsider’s view, I did not feel as if items in restaurants and grocery stores were that inexpensive. I didn’t even want to imagine bearing those costs while earning a salary in Reals.

A Dash of Jeitinho

In response to being put at a disadvantage by bureaucratic processes, resource constrictions, and the occasional overbearing rule or social convention, a culture of Jeitinho has developed. It’s a way of being “creative” to invent simpler ways to do things they need to do in life. It’s no surprise that the meaning of this expression stems from dar um jeito – meaning, “find a way.” While seemingly harmless, the practicer of Jeitinho may appeal to emotion, family ties, promises, rewards, favors, or even blackmail to gain an advantage. One might get told, “Não,” or “Não é possível,” but it’s very possible that the one being refused will resort to a form of Jeitinho negotiation and try to turn that “No” into a “Yes.”

Just this past month a blog post by Mark Manson titled “An Open Letter to Brazil” served as an unbalanced punch in the face to Brazilians at large. If this were an ordinary post complaining about exaggerated events and perspectives on the challenges and problems that exist in Brazil, it would have most likely not gotten a lot of attention. But Manson has brought to light aspects of Brazilian culture and business-as-usual customs that are for the most part undeniable and have left many Brazilians lowering their heads in shameful acknowledgement. With quotes such as “Why is Brazil so screwed up?” and blatantly pointing the finger at Brazilians themselves as being the problem, he has hit a nerve that many Brazilians would have preferred to continue ignoring.

I myself didn’t know how much of a phenomenon this was until my 1st full day of my trip in Brazil. My friend was at work for the day, and I was recovering from some heavy jet lag when I heard a stiff knock on the apartment door. I came to find the building’s doorman at the apartment entrance telling me that the power was going to be cut off. My Portuguese is a work in progress, and sadly I could understand very little of what was being said. I tried to respond with my best Portungol (Portuguese where Spanish words or accents are repeatedly interspersed in the communication). The result was that I had to come downstairs to deal with two representatives from the Light SA power company. They had uniforms, the proper equipment and had their hands on the power box ready to cut the power to my friend’s apartment. The idea of going without power, losing the perishables in the fridge, not having air conditioning, and living without Wifi seemed horrifying…

powerWhat I could gather was that the bill was not paid and that they wanted money. But surprisingly, they could not provide me a bill or tell me how much was owed on the account. When I offered to pay the power bill they refused as if this was a completely foreign request. I was frustrated, and they seemed quite confused with me. I asked if their was some way that we could arrive at a solution or work together so that the power doesn’t get turned off. With a smug grin, they asked for 250 Reals… I asked to see a bill for this amount. They shook their heads disapprovingly. Confused I looked to the Doorman who whispered to me in Portuguese, “You have to negotiate. “ He urged me to counter with 150 Reals. I went with it and within a few short minutes the power company representatives put their equipment down, split the cash amongst themselves, and returned to their utility truck, leaving the power in tact. Clearly, this was a win-win! Or did we all just engage in a dash of Jeitinho?!

It is my hope that Brazil is on the cusp of a social, political, and governmental transformation. The country is in need of reform and the influence of strong honest leaders at throughout government and within local communities. I believe that with the advent of better communication, education, transparency, technology and the growth in the middle class, that this change is inevitable.

Silver Lining

While all of the struggle described above, it may sound as if the fate of Brazil has been sealed, but I feel there is a silver lining… the Brazilian people!

I have found that Brazilians are at large  resilient, creative, and relationship-driven people. They tend to be optimistic, expressive, cordial, and relaxed. The foundation of Brazilian culture is rooted in strong traditional family values that even extend to close friendships. On this trip to Brazil, I was warmly received by close group of friends in Rio. While most of the group knows each other from grade school, my commitment to them has earned me an honorary seat amongst the group. It is through their lives that I feel I received a first hand experience and an appreciation for the true nature of Brazilian culture.

I also noticed that Brazilians are seldom in a rush, and they do not tend to stress out. Being on time is often considered optional. I also know that Brazilians have weathered storms before, and I have no doubt they will find a way through their current struggle.

A Service Industry Snapshot

rEatingAs admirable as a number of those social customs are, the service industry in Brazil leaves something to be desired. Although it is uncommon to encounter rude restaurant servers, don’t expect attentive service. If you get your food, drink, and bill in a timely manner, consider your dining experience a success. You may find yourself waiting to the complete steps in that process, but as long as you show face, your server will smile each time he passes and reassure you that he will be right back. And yes, it is important to continue to show face, because the alternative is that you just won’t be served.

After a number of fine dining experiences similar to that depicted above, I was beginning to lose faith in Brazilian work ethic. But like many westerners with transportation needs, I would often pull out my smart phone and dial up the nearest Uber. Expecting a similar experience to that provided by wait staff, I was amazed to find that my Uber experience was top notch… And when I say that, I mean really top notch.

UBER4In the last years, I have used Uber in countless American cities, various countries in Western Europe, India, Thailand, Colombia and now Brazil. With my Uber-sommelier apprenticeship nearly complete, Brazil was the icing on the cake. I had 5-star experiences on almost every trip regardless of whether I chose UberX or Uber Black. Here are a few highlights:

  • The drivers were very polite and were receptive to conversation
  • They will wait for you without question and address you by Sir or Ma’am
  • Many will get out of the the car and open the door for you upon entrance and exit
  • Nearly everyone offered candy, some even offered chilled water
  • They knew where they were going and were astute, calm drivers
  • Their cars were well maintained and the drivers were well dressed

I questioned that how a country that has some of the worst taxi services, could have one of the world’s best Uber services. Uber’s 4.6 star rule has paid dividends in Brazil’s largest cities where it operates. My short analysis led me to the following conclusion; create rule-based incentive-driven entrepreneurial opportunities for Brazilians, and they will thrive. With this newfound wisdom, the entrepreneurial wheels in me continued to spin, and I brainstormed where else technology could afford room for economic and social innovation.

Parting Words

IpanemaSunsetIf someone were to ask what the future of Brazil holds, my first response would be “Well… it’s complicated,” but looking further down the road, following today’s murky waters, I am optimistic. I believe in the Brazilian people, and I believe in the future of Brazil!

Political and economic strife cannot hold the Brazilian people back, and I believe this generation of progressive thinkers will fight for their futures and use their skill, creativity, and access to information and technology to their benefit. Their time is now!

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