Once a symbol of growth and rising confidence, the sprawling suburbs outside Brazil’s urban centers are feeling the pinch as the economy nosedives. And there are few places in the country where it is so obvious how out of touch the bickering politicians in Brasilia are with the realities of daily life.

By James Young
Belo Horizonte

Aside from the humdrum backdrop of harrowing, everyday tragedy, three subjects have dominated the headlines in Brazil in recent months – the enormous Petrobras corruption scandal, the country’s economic downturn, and the political game of thrones being played out on a seemingly infinite loop in the capital of Brasilia.

The narratives inevitably intertwine – as Brazil’s very own Frank Underwood, the speaker of the country’s lower house, Eduardo Cunha, wages war on Dilma Rousseff’s struggling government, the Petrobras investigation appears certain to involve many leading political figures, including now Cunha himself, while the acrid climate of squabbling and corruption, coupled with Rousseff’s toxic approval ratings, torpedoes any attempts to keep a seemingly sinking ship afloat.

Observing such events unfold from afar, however, lends a detached, surreal air to proceedings, like watching an episode of House of Cards with the actors replaced by Rousseff, Cunha, former presidential candidate Aécio Neves and the rest. It is often hard to reconcile the self-serving manoeuvres of such hardened players of the jogo do poder (“the power game”) with the tough reality of life in Brazil’s working class bairros.

One such hard-knock neighbourhood is Jordão, tucked behind the airport in the southern periferia of Recife, and home to around 20,000 people. Divided between the municipal authorities of Recife and neighbouring Jaboatão dos Guararapes, Jordão suffers from the familiar problems of many of Brazil’s lower class neighbourhoods, particularly in the nordeste – an unreliable public transport system, low quality housing, limited accessibility to healthcare and schools, an intermittent electricity and water supply, poor sewerage, and high levels of urban violence.

Meanwhile residents do their best to fill the gaps in the services supplied by the government or city council. Ten years ago sisters Raquel and Rozeli Santos opened the Educandário Amara Maurício primary school in a tiny three room building, as neither Recife nor Jaboatão provided a public school for young children in the immediate area. “For years an up and coming local politician financially supported us,” Raquel told me, “making sure that local people knew all about his generosity. Once he was elected, the donations stopped.”

A new building has been constructed with eight classrooms, big enough for 300 children, and now the school survives (barely) on monthly fees of around U$27 per pupil, not enough to pay the ten teachers, all of whom are from the bairro, much more than the minimum monthly wage of U$240. When I visited the school just over a year ago, the yard was filled with jagged bricks left over from the building work, and there was nowhere for the children to play.

Jordão is often affected by water shortages and power cuts. “Some months the electricity is off for a few hours nearly every day,” said Jessica Santos, Rozeli’s daughter, at the time a teacher at the school.

“It feels like we’re forgotten,” said Raquel. “Recife forgets about us and Jaboatão forgets about us.” Drug addiction is a major problem in the neighbourhood, as is lawlessness. “They killed a young boy a few weeks ago,” Raquel said. “He hit someone’s motorbike, just a scrape. Someone pulled out a gun and shot him.” It is not a rare occurrence. Stories such as those of Klébson Gomes da Costa, the ten year old boy hit by a stray bullet during a shootout between police and traficantes (drug dealers) in May 2013, or Taísa Priscila Rodrigues da Cruz, a 20-year-old drug user who was shot and killed a few months later, are common.

In recent years residents of neighbourhoods such as Jordão have seen considerable improvements in quality of life, due to Brazil’s expanded Bolsa Familia welfare system, an increased minimum salary, and overall economic growth. Two years ago I sat in a scruffy bar and watched what seemed like half the bairro make its way to that essential staple of middle class Brazilian life, a plush new gym. It looked like better times lay ahead.

But now the government is introducing austerity measures and the growth has gone into reverse. According to research institute IBGE, the national unemployment rate last month was 6.9%, the highest June rate since 2010. The same study put the jobless level in Recife at 8.8%, although other surveys are even more negative – the Diario de Pernambuco, the oldest newspaper in South America still in circulation, stated that 12.9% of Recife’s workforce was unemployed in March.

Part of this statistic is Edilson Alves da Silva, a 36-year-old mechanic and factory worker. Edilson lives with his wife Elma and her daughter in a typically cramped Jordão house, with an imposing metal front door protecting a small bedroom, living room and kitchen. Another bedroom has been fashioned from a lean-to by the front entrance, and a tiny bathroom takes up one corner of the kitchen.

For the last eight years Edilson was part of the production line in a factory that makes the tin-foil plates used to hold quentinhas – the take-away lunches that are so popular in Brazil. His and Elma’s salary put the family firmly in the heart of the country’s swelling “new” middle class – Classe C and D, one of the groups that has suffered most during Brazil’s economic troubles.

Last October, just as campaigning in Brazil’s presidential elections entered its final straight, Edilson was made redundant, along with a number of his colleagues. “I think the company saw that the crisis was on the way,” he says. “When I lost my job I thought I’d find another one easily, but it hasn’t turned out that way. I’ve had around 20 interviews, but every time there’s a line of people like me looking for work.”

After working all his life, Edilson says it is difficult to get used to being unemployed. “It’s hard to survive, but at least my wife is working. My redundancy money was gone after three months – I wish the crisis had ended so quickly. Prices keep going up (some reports have put inflation at 8.47% over the last 12 months, but the price of many goods has increased at a considerably faster rate) which means what little money we have doesn’t go far.”

Edilson says he sees the results of Brazil’s economic woes everywhere he goes in Jordão. “There are lots of people standing around in the street, doing nothing, at 10 o’clock in the morning. They’re tired of going out every day delivering their CVs, having interviews, and not getting hired.”

Like many of his countrymen, he is scathing of the politicians’ attempts to solve Brazil’s problems, and their apparently greater interest in the jogo do poder.

“My hopes for the future are in the hands of the vultures in Brasilia,” he says. “The business leaders and politicians are supposed to have the influence and knowledge to find a way out of the situation. Those down below don’t have that option. All we can do is sit and wait.”

Respondents are given three options. They can rate the government “good/great,” “regular,” or “bad/terrible.” Well, there are actually four, as you can say you don’t know. But by now (she was elected in 2010), pretty much everyone has an opinion.

Observe that her “good/great” numbers were quite high until 2013 (when protests broke out), and now they are at a pitiful 10%. But the people essentially saying “meh” has not dropped so much. Those two groups add up to 34%, while a whopping 65% actively disapprove of her government.

So her numbers are terrible, just terrible. But it’s not accurate to say that everyone in the country hates her, either.

What if they put on Carnaval, and nobody came? A short work of fiction
By James Young

It was a glorious Saturday morning in Recife. A statue in the form of a multicolored rooster, the Galo da Madrugada, towered over the Duarte Coelho Bridge, streamers hung from the lampposts and on every street corner someone was selling beer, snacks or carnaval paraphernalia – rainbow-colored frevo parasols, wigs or whistles.

The VIP boxes that overlooked Avenida Guararapes were packed with local politicians and minor celebrities. In a box sponsored by one of Brazil’s giant beer companies, the mayor of Recife was talking to a young woman dressed in a halter top and a pair of very tight shorts.

“Being on Big Brother Brasil was just the beginning for me,” the young woman was saying. “Really I’m an actress. It’s my dream to be in a novela.”

The mayor bit his lip pensively and said nothing. He looked at his watch – it was already nine o’clock. What was going on? Normally by this time the streets were thronged with hundreds of thousands of revelers, but this morning there were only the beer sellers and a group of blonde-haired, pink-skinned tourists dressed in German football shirts. He gave an involuntary shudder.

He sipped his caipirinha. It was probably nothing. Perhaps everybody had drunk a little too much cachaça the night before. A few sore heads this morning. They would be here. The people loved carnaval. Everything would be fine.

By ten o’clock the Germans had been joined by a Japanese family and an American couple draped in the stars and stripes. Other than that, Avenida Guararapes was entirely empty. The mayor called his counterpart in the neighboring town of Olinda.

“I don’t understand it,” said the mayor of Olinda. “There’s no one here either. The streets are deserted.”

By eleven o’clock, even with free beer and caipirinhas, the VIP box had begun to empty. In Rio de Janeiro, the organizers of the Cordão da Bola Preta bloco, which usually attracted over two million partygoers, reluctantly announced that this year’s event had been called off as no one had shown up. In the afternoon the trio elétricos rumbled through the deserted streets of Salvador for a few hours before returning to their garages in defeat.

On Jornal Nacional that night, an ashen-faced newsreader described similar scenes across the country – cancelled blocos, deserted sambodromos and empty streets. For the first time that anyone could remember, on the opening day of carnaval, the people had decided to stay at home.

***

In Brasília, the president stared glumly at the TV. No carnaval? She couldn’t understand it. Sure, the economy had tanked, there were the usual corruption scandals, and there were water and electricity shortages, but was that really enough to cancel carnaval? The people loved carnaval! Goddamn it, she loved carnaval – axé, frevo, and most of all samba. Samba was her favorite.

Later that night she addressed the nation. She told the people that even though times were hard, they couldn’t let things get them down. There had always been carnaval. Carnaval was in their blood. Goddamn it, it was their duty to celebrate carnaval! She said “o povo Brasileiro” as often as possible, hoping to stir up a sense of patriotism, and finished off by saying that “God was Brazilian, and carnaval was Brazilian, so get out there tomorrow and party!”

The next day, however, the streets, the blocos and the sambodromos once again lay empty and silent. A survey showed that the president’s approval rating had fallen from 44% to 24% following her speech.

The opposition party was naturally delighted by the president’s woes. A television commercial was hastily put together where the leader of the party, a man from a wealthy family who had trouble connecting with less-well off voters, discussed the crisis. “The boycotting of carnaval is a clear sign that the Brazilian people have rejected this corrupt government, and the president’s message last night shows just how far out of touch she is! Carnaval belongs to the people, not the government!” The commercial ended with an exhortation to vote for the opposition in the next elections.

A survey the next day revealed that the opposition leader’s popularity had also dropped by half.

The crisis continued. Hundreds of foreign journalists arrived to cover the situation, and the Brazilian media reported with pride that the carnaval crisis was making international headlines. A group of well-known soap opera stars, footballers and musicians made a TV commercial in which they sang songs, danced and smiled at the camera, and begged people to come out into the streets and party.

In a darkened underground bunker in Mato Grosso, a group of generals from the Brazilian army discussed what action might be required on their part should the government fail to resolve the situation. Nothing, they decided, was too extreme. In some cities, the police attempted to make Brazilians celebrate carnaval by force – twelve people were shot in two days.

Meanwhile the main TV network attempted to coax people into the streets by showing carnaval footage from the year before and packaging it as live. It did not take long, however, before an observant viewer noticed a banner labeled “Carnaval 2014” and spread the news of his discovery via Twitter. The TV network pulled the footage (though neglected to apologize or admit any wrongdoing). The stock market and the currency both crashed as tourists demanded refunds from their airline companies and hotels and the billion reais carnaval industry ground to a halt.

Monday brought more empty streets. The carnaval cities of Brazil, normally filled with the sound of music and partying, had fallen silent. But then on Tuesday morning something surprising happened. An elderly man, his step frail and uncertain, climbed slowly up the Ladeira da Misericórdia in Olinda. He led a little girl, dressed in a traditional frevo costume, by the hand.

Immediately he was surrounded by TV crews, journalists thrust microphones under his nose and helicopters circled overhead. A nearby frevo orchestra started playing “Vassourinhas” and hired dancers filled the street, leaping in the air and twirling their parasols.

Watching on TV, the president smiled and quickly arranged a conference call with senior party officials. “This will show that playboy from the opposition!” she shouted triumphantly down the phone. “The Brazilian people never give up! Carnaval is back!” She hung up and told an assistant to dig out her old samba records. She was in the mood for a little celebrating herself.

On her TV the elderly man in Olinda was being interviewed. “Sir,” cried one journalist “why do you think no one wanted to celebrate carnaval this year?”

“Hum?” said the elderly man, who was a little deaf.

“Carnaval!” yelled the journalist. “There was no party, no blocos, no Galo. What happened?”

“Oh, I wouldn’t know anything about that,” said the elderly man.

“Come on sir,” pressed the journalist, “you must have an opinion.”

“Well, I can only really speak for myself,” said the old man. He looked down at the little girl, who stared up at him with a worried expression. He squeezed her hand gently.

“Of course! Please do!” yelled the journalists.

“Well, personally, it just seemed a bit silly this year. With all that’s going on, I mean. To go out and jump around, though I don’t do much jumping around these days, he he, not with my hip, I’m not as young…”

“Yes, yes,” shouted the journalists impatiently, “but what about carnaval?”

“Oh, well, like I was saying, it didn’t really seem right, with things as they are, to go into the streets and celebrate, and drink, and laugh, and pretend that everything is great. How does the song go? “Sadness has no end, but happiness does…the great illusion of carnaval, we work all year for one moment of joy”, something like that? Like I say, I can’t speak for anyone else, but…”

The journalists looked perplexed. They stood quietly and tried to digest what the old man had said. Finally, someone asked another question.

“But you’re here now, aren’t you? Have you changed your mind? Do you think there are others coming? Is carnaval back on?”

“Well,” said the old man. “I wouldn’t know about that. And anyway, I’m not here for carnaval. I live around the corner, and I’m on my way to the bakery. My granddaughter here is hungry and wants a snack. Do you know if it’s open?”

Slowly, the journalists lowered their cameras and their microphones. The frevo orchestra fell silent and the helicopters drifted away. In the president’s office, the television screen went blank.

*

Disclaimer – this is a work of pure imagination with no relation to the reality of 2015 Brazil. Tens of thousands of Brazilians have already taken to the streets for Carnaval. Some Folha coverage of that here. Any resemblance to real persons, living or dead, is purely coincidental. (With thanks and apologies from James Young to Jose Saramago’s “Ensaio Sobre a Lucidez”)

Not long ago, Dilma Rousseff and Maria das Graças Foster were widely praised as the new faces of Latin America. Now, the billion-dollar corruption scandal has finally brought down Petrobras CEO Maria das Graças Foster (above). She had to go. But with President Dilma Rousseff also against the wall, 2015 is shaping up to be very difficult for the region’s few female leaders. 

By Nathan Walters

After months of speculation and some high-profile back-and-forth, Maria das Gracas Foster, Petrobras chief executive since 2012, resigned on Tuesday along with five other directors. The news sent Petrobras stock prices soaring; the rebound made up for losses that came last week after the company released unaudited and incomplete statements.

Investors are right to want new leadership at the company, which is facing serious problems on all fronts. Dilma Rousseff, who is close to Foster, likely did all she could to stave off the CEO’s departure.

But what should we make of news that former Brazilian president Luiz Inácio “Lula” da Silva was reportedly pressuring Rousseff to accept Foster’s resignation (which is said to have already been thrice offered and thrice refused). It’s no secret Lula may be thinking of staging a comeback in 2018. But is former guerrilla Rousseff not her own woman? The leader of Brazil?

In 2012, closer to the height of the euphoria surrounding Brazil, Foster had been appointed not only because as a Petrobras lifer (rumored to bleed green and yellow [and not on account of exposure to fracking fluid]) she had the technical chops, but because she could be a symbol of the country’s economic and social progress.

Brazil is well known for its machismo, and the storybook ascent of a female who had pulled herself out of very real poverty to become the leader of the country’s most important company was a loud retort to all those who claimed Brazil’s gender relations were antiquated.

At the same time, Mr. Eike Batista, the white son of Brazilian privilege, was creating his own “up by his own bootstraps” myth, which was also peddled around the country in response to claims that it lacked a culture of entrepreneurship. The legend was as inflated as OGX’s prospects, and both eventually collapsed.

Foster’s arrival at the top belied very real gender equality issues in Brazil the same way Barack Obama’s ascent distorted the reality of race relations in the U.S. At a time when people were complaining that Brazil was applying a new paint job, rather than going through a process of fundamental change, Foster was the brightest coat on the market.

Though an icon for the company and the country’s quick development in economic and social issues, Foster was also given the reigns in an attempt to steer the company away from the good ol’ boy culture that created the conditions for all of the corruption that is alleged to have happened…starting long before she took over.

Foster was faced with tough decisions left over after the departure of previous CEO Jose Sergio Gabrielli. The well-connected Gabrielli  exited when Petrobras image was near its strongest, though there were a host of problems waiting to be uncovered.

Brazilian president Dilma Rousseff is another classic figure of the same type – a donna, in Brazil’s patriarchal vocabulary, a firm woman who would get the house in order. Like Foster, she has been counted on to fix problems that were partially caused by men.

In the public’s mind, Foster failed to complete her task—though efficiency programs introduced during her time at the head of the firm produced some real results — and must be jettisoned to make way for the next leader, like another white male. The same fate awaits Rousseff in 2018, if not even before.

Female directors in Brazil account for a paltry 7%, on par with Argentina but well below the Colombia and Peru. Since July 2014, “the number of women CEOs in the Global 500 has dropped from 17 to 14. Non-American CEOs, like Foster, have led the exodus,” according to Fortune magazine. But Foster’s directorship was even more spectacular because it was an oil company, an industry not known for its minority leaders. The importance of her position was not limited to Brazil, but was an accomplishment celebrated around the world.

Nearby, in Argentina, President Cristina Kirchner has problems of her own.

Foster’s legacy may not fare well. She may have failed to quell the chaos unleashed by very necessary investigations into shady dealings at Petrobras, but, based on information disclosed thus far, did not engage in dealings herself.

In a time like this, when the market gods require a sacrifice, everyone must go. There is a long list of heads that could, and may still, roll for what’s allegedly transpired. Foster may be the big name that will calm the hysteria in the short-term, but it’s unlikely to fix a much bigger problem that has dogged Brazil for ages.

Next week, Cariocas will don a Gracas Foster-inspired Carnaval mask, which have been flying off the shelves as the Petrolão heats up. An honor, or that’s how it was sold when a mask of Joaquim Barbosa, the Afro-Brazilian supreme court judge of Mensalão fame, was the must-have mask of 2012. Foster may be reduced to a Carnaval novelty, but let’s hope the change she represented for women does not go the same way she went.

I’ve left the bitterness of São Paulo on a brief vacation outside of Brazil, but I wanted to share insights into the country’s current situation from two excellent commentators that generally hold the “pro-market” viewpoint.

The first is from Tony Volpon of Nomura Securities:

Structurally, the end of the commodity boom can now be dated to 2011, one year into [Dilma’s] first term, as Brazil’s terms of trade began to deteriorate and the country began to see a marked economic deterioration.

Though the opposition, often with reason, blames Rousseff’s policies for economic underperformance, these policies were, however inadequate, genuine attempts to respond to a much less supportive external environment.

Unfortunately, it is unlikely that the external factors are going to be better over the next four years; it seems that the years in which all Brazilians could improve their lot in life are over, for now. Choices will have to be made and priorities will have to be set.

President Rousseff will now have to look beyond the class struggle rhetoric of her campaign and show whether she can regain the trust of the south and southeast of the country that voted for the opposition by a 2:1 margin, and is responsible for around 70% or more of the country’s GDP. Without their support there is little chance that Brazil will see investment rates – which at a paltry 17% of GDP are the lowest of any of the major emerging market economies – rise.

For me, three eminently reasonable things stand out here that are intentionally excluded from the hyperbolic partisan rhetoric dominating the country on both sides right now. First, just as the economy under Lula was boosted hugely by the Chinese-led commodities boom, the end of the boom explains most of the economic problems since 2011. Dilma’s very real “interventionist” errors are only one part of this.

Secondly, Dilma wanted and wants conventional economic success. Measures taken since 2011 very often misfired, but to paint her administration as dangerously radical or anti-growth is just campaign rhetoric or noise from the radical fringe.

Third, whether Dilma voters like it or not, we need the confidence and participation of international capital as well as local investors to make this economy grow again. If the PT actually had some kind of a plan to fully nationalize Petrobras, create socialist firms, or massively expand public investment, we might take that plan seriously. They most certainly do not. So despite the excitement on the left at Dilma’s guerrilla campaign themes, the short-term hard truth is that investors must be placated, and soon.

The second comment comes from Helen Joyce, International Editor at The Economist, who served as Brazil Correspondent until the end of 2013.

“I am absolutely sure Aecio’s economic platform was better – for all Brazilians. But when I see the prejudiced comments about stupid or lazy nordestinos sucking the state dry, I understand why so many didn’t turn to him.

Do these people have no idea that (a) a democratic government must seek to govern for all, and (b) that it’s corporate welfare and the vast privileges of Brazil’s elite that are sucking the country dry, not the very modest handouts for the poor??”

The Bolsa Familia program is only 0.5% of Brazil’s GDP. And the election was not only about policy, but ended up being about cultural, class and regional battles.

So, in the short term, our pressing problem is economic. But the long-term problem is much bigger, and it is social.

Photo above is of street vendors outside a new mall in Minas Gerais. All links inserted by me.

If Brazil is such a macho, backwards country, how has it managed to put on a major presidential race between two progressive women*, with barely a sexist protest in the national media? It may take decades before something like that could happen in the United States.

By Anna Jean Kaiser

On the heels of Chile’s Presidential election last year, Marina Silva and Dilma Rousseff’s battle in Brazil is the only other presidential election I can find where the two principal candidates are women. This milestone for gender equality seems to comes from an unlikely place, as Brazil and Latin America are infamously “machista” and sexist. But Dilma’s gender barely made ripples when she was first elected in 2010, and the topic has gone practically unmentioned as Marina and Dilma go at each other a month before the first round of this year’s elections.

Putting the candidates’ politics and criticisms aside, it’s a huge feat for women in politics that Marina and Dilma are facing off to be the president of the world’s fifth largest country. This is something I don’t see happening in my country, the U.S., for decades, if not centuries.

The paradox is that I, like many others, generally regard the United States as more progressive on women’s rights than Brazil. In the World Economic Forum’s “Global Gender Report” which measures gender equality based on economic participation, educational attainment, health and survival and political empowerment in 135 countries, the United States was ranked 22 and Brazil is ranked 62.

In 2011, Newsweek/The Daily Beast published a study on the best and worst places for women among 165 countries, and the US was ranked 8th and Brazil was ranked 84.

Sexism in Brazil exists in all forms, from domestic violence and rape, to objectifying women’s bodies and inequality in the workforce. It exists in everyday language, from cat-calls on the street to the popular expressions like “da para casar” which means “you’ll do to marry,” which is used to compliment a young woman’s cooking.

Yet despite these realities, two women are running to be the head of state of the world’s seventh largest economy, and there’s a refreshing lack of sexist questions like the ones we see when women run for president of the United States, such as, “will she be too emotional to govern a country?”

What explains this discrepancy?

Furthermore, if you take a look at the backgrounds of these two women – though completely different – both reflect a progressive electorate. Marina Silva is a mixed-race woman from the rural Amazon, the daughter of poor rubber tappers. She used to work as a housemaid and was illiterate until she was 16. She’s now made a name for herself as a fierce environmentalist and politician. Dilma Rousseff joined a radical left-wing guerrilla movement when she was a young adult during Brazil’s right-wing military dictatorship. In 1970, the regime arrested and tortured her for two years.

Meanwhile in the U.S.A., the thought of electing a woman like Hillary Clinton – who, by the way, fits the exact narrow profile of the majority of U.S. presidents in almost every way except her gender (i.e. she is white, has an elite education and experience in the Senate and White House) – raises a sexist and misogynistic media uproar.

Despite a few questions raised about Dilma early in first her presidential bid, she was never subject to the same misogyny as Hillary Clinton was and still is. Perhaps the fact that Dilma was the hand-picked successor of Luiz Inácio “Lula” da Silva (the most popular president in Brazilian history) helped her bypass some sexist hurdles. Lula himself, though, recently admitted he thought Dilma has suffered from sexism while in office.

While Hillary spoke in New Hampshire, a heckler began chanting, “iron my shirt,” and held up a sign with the same message. She was constantly referred to as being “bitchy,” “shrill” “emotional” and “hysterical” by commentators and media outlets, who also paid meticulous attention to her looks and how well she was aging. The analogue that comes to mind in the case of Dilma is that she is constantly referred to as “mandona,” which you might loosely translate as “bossy.” Many have asked, would a male president be criticized for being “tough” and giving orders?

Sexism exists in many different forms across the world – in almost every country – but where I come from, this Marina-Dilma race looks quite progressive.

Follow Anna Jean Kaiser on Twitter. Above, a photo from a recent debate.

[*Editor’s note – Of course, the Dilma camp contests that Marina is “progressive” while Marina insists that Dilma is not. By global feminist standards, it may to difficult to consider either ‘progressive’ objectively, as both oppose legal abortions and gay marriage. However, they are most certainly progressive in the relative sense, in that they both claim to be progressive (no one here is a declared conservative) and are to the left of Brazil’s political center. Also, an earlier version of this article failed to adequately discuss the importance of Chile 2013]

What’s going on with the Brazilian currency? Like many ’emerging market’ countries around the world, Brazil has recently been unpleasantly reminded just how linked its fortune is to the decisions of the United States, and the Federal Reserve. The real has been all over the place since 2008, making things quite difficult here, and that has relatively little to do with what Brazilian politicians have done.

Take a look at the chart above to get an idea what a headache running a developing country has been since the 2008 financial crisis, and especially since the US Federal Reserve, which controls the global supply of dollars, began talk of ‘tapering’ earlier this year. ‘Tapering’ is Federal Reserve-speak for going back to the way the US Central Bank used to do things before 2008, which in practice means much less cheap money floating around the globe, since the Fed will slow down its direct asset purchase program (background here). The process of tapering is the first step towards stopping the Fed pumping extra money into the US economy, and (probably) the first step towards raising interest rates.

Just the possibility that the tapering might happen crushed the Brazilian real down to 2.45 against the dollar, from a high of 1.55 just two years ago. How can you create economic policy in a country in which the cost of both your exports and imports swings so violently, and how do you explain to your citizens that yesterday they could traipse around Argentina (and Miami and New York) buying everything, but now, really won’t be able to afford that trip to Europe (or even to Paraguay)?

Since 2008, Brazil’s currency became much too strong for its own good, and then also lost value much too quickly. As if Brazil needed further proof of how dominant the influence of the Fed is here, when we got wind that the ‘tapering’ wasn’t actually going to happen as soon as had been thought, the real jumped back up to 2.2. Maybe it will stay around there. Some credibly think it will have to hit 2.65. We don’t know.

Brazil’s government has made some very real economic mistakes in the last few years. But the pseudo-tapering debacle has reinforced the uncomfortable fact that at least in terms of the currency, Brazil has been on a roller-coaster since 2008. And except for small interventions, it is not President Rousseff or Finance Minister Guido Mantega doing the driving. The real protagonists here are huge flows of international capital, swooshing around the world, guided by the noises coming from the central bank of the United States.

Recent history

But of course banks aren’t required to invest in the US, and many quickly caught on that they could make a killing getting free money in the US, and then investing in growing emerging market countries where they could earn easy returns. This was especially true in Brazil, where interest rates have long been punishingly high for borrowers and a free meal ticket for investors. Brazil was also riding high on a decade-long Chinese commodity boom, and the government had a card up its sleeve to pump up the economy further in response to the crisis (basically, pump credit into the economy so that new middle class Brazilians could buy consumer items and pay the super-high interest rates), and so dollars poured into the economy.

By 2010 the economy was growing by 7.5% annually and was a darling of international investors (and those of us in the international economic press), and by 2011 the currency hit a high of 1.55 reais to the dollar. This meant it was extremely, extremely overvalued and virtually guaranteed to kill off Brazilian manufacturers that now found their goods too expensive to sell abroad – Mantega had railed against the US dumping so many dollars into his country and started the largely ineffective ‘currency war’ as a response in 2010. Nevertheless, the super-strong real generated a lot of positive press and confidence here in Brazil. Travelers felt rich. The Brazilian stock exchange had some spectacular years ‘in dollar terms.’ Brazil’s economy got larger than the UK’s. Eike Batista got far too rich as excited and cash-flush foreigners bet on his slightly exaggerated dream.

Since then, the realities of the Brazilian economy (not actually so dynamic outside of agricultural exports and credit growth) combined with some major mistakes in the Dilma administration (which of course got much more attention than they would have had they happened during the upswing) and growth inevitably slowed back to previously normal levels, and then almost ground to a halt last year. In the background, the US began to feel confident in its own recovery, and it became increasingly clear that a whole bunch of shale gas in the ground could power an energy boom.

Despite the solid long-term foundations of the Brazilian economy, the chaos in Brazil’s currency in the last few months has been about the Fed switching its strategy back to normal. The money river is drying up and the money went pouring back the other way, to the US. Or at least ‘markets’ remembered that they will. The peaks in dollar strength in that chart correspond exactly to those two points.

Much to the chagrin of everyone down here, we’ve been reminded that Brazil’s place in the global economic system is often more important than the national headlines we’ve been chasing. Even worse, they’ve realized it’s all about Uncle Sam all over again.

What can be done

Many thought Rousseff and Mantega were making excuses and picking fights by decrying the inflow of dollars into Brazil after 2008. They were, a little. But they were also right that Brazil was suffering due to the flood of foreign capital, and Brazil is now suffering at the way things have changed directions so rapidly.

Unfortunately, given the state of the international economic and monetary system, there’s little emerging market countries can easily do to avoid huge swings in the value of their currencies. The dollar is the international reserve currency, and the vast majority of Brazil’s trade is conducted in dollars, too. Some hope for a world in which neither of these things is true, and the US stops dominating global monetary conditions, but that is a long way off. In the mean time, one can only watch the Fed, or take comfort that the US may not be able to dominate forever if it keeps shutting down its own government.

It’s easy to see why the Brazilian government likely sees this as a “Obama 0 – 1 Dilma” situation

It’s clear that Obama had nothing to gain from being stood up by Brazil’s President Dilma. He has been given another little kick for being caught spying. At best, he continues to be embarrassed that one of the many security professionals in the US has absconded with secrets and is airing Uncle Sam’s dirty laundry around the world. At worst, he has just been a little humiliated by a more assertive Brazil, during what is already arguably the foreign policy low point of his presidency, due to Syria and Snowden.

But does Dilma come out ahead here? The benefits of cancelling seem to have outweighed the risks of showing up. 

Sure, she would have been on TV in the US on October 23 had she not cancelled (oops, I mean, “postponed”) the visit. But other than the symbolism of the dinner, what was likely to be accomplished there? In both countries, spying allegations were likely to dominate the coverage of the events. And what if the two presidents came to an agreement now, only to wake up to a new spying story leaked on October 22?

On the other hand, there are real some political points to be scored for Dilma.  In diplomacy, just like in personal relationships, there are usually advantages to be had when you catch the other party doing something wrong. This is especially true for Latin Americans taking on Washington. As Fabio Zanini put it on Folha.com: “No one has ever heard of a Latin American leader that loses political points by snubbing the Yankees.” This is especially true when the Yankees quite demonstrably made a mistake, at least by public standards.

Of course, it’s entirely possible that Dilma already knew, or supposed, that the US had been spying in all three ways reported by Glenn Greenwald for Globo – on citizens, on her, and on Petrobras. But the calculus changes when things become public. The calculus changes when Snowden is on Globo on Sunday night. Electoral politics enter into the mix.

As it turns out, few of us civilians know much about how the sexy world of government intrigue and international spying really work, but one assumes that everyone knows everyone else is trying to get as much information as possible. And everyone knows that the US is probably the best at this kind of thing. But, if you get caught, you still have to pay a price.

So Brazil had two very decent options – either try to extract a pound of flesh from the White House, or get to righteously stand up to stand up to Obama. We don’t know what happened during the Obama-Dilma phone call late last night, but Brazil ended up taking the latter route. More than a few on Brazilian Twitter exploded with glee at their president taking on the world’s most powerful man. I can’t imagine this wasn’t expected. This may shore up the base in a tough moment for Dilma. And there’s still the chance that – if there is any truth to talk the meeting was only delayed – Brazil can save face and still get something out of all of this in the future.

This year, the country didn’t deliver on everything international observers thought the country had promised, but Brazil still remains one of the 21st century’s most remarkable success stories. 2013 could be decisive.

For those paying attention to Brazil headlines, 2012 was mostly a bad year. For some, it was enough to re-evaluate the status as an emerging power that the country has euphorically held for years now.

The economy barely grew, and government involvement in the economy has surprised some international investors. The ruling Worker’s Party was dragged through the mud repeatedly as the Supreme Court handed down sentence after sentence for a vote-buying scandal from Lula’s first term. The PCC returned to the scene in São Paulo, and a small-scale war broke out between police and the gang. New laws dismayed environmentalists concerned for the Amazon.

But Brazil still remains one of the most remarkable success stories of the 21st century. This is true for a few simple reasons. 40 million people have risen out of poverty, and inequality has decreased. Despite the slowdown, unemployment is at record lows, and wages have continued to rise. Perhaps most importantly, we saw last week that President Dilma has an eye-popping 78 percent approval rating.

In short, the vast majority of the population support the way the country is being run, people are better off than ever, and society is more just. It’s important to remember that this is the whole point of economic growth and democracy in the first place. The results are there. We shouldn’t confuse means with ends, as is so easy to do when we journalists get caught up in the latest GDP numbers, or scandal.

Even some of the the year’s worst stories have a positive flip-side. As ugly as the corruption trial was, many believe that the tough sentences handed down to high-level politicians could signal an end to political impunity in the country. And despite the tragedy of a spike in violence in São Paulo’s periphery, the state’s murder rate is still much lower than it was a few years ago.

When Brazilians and observers (justifiably) complain about the country at the moment, a little context can be uplifting. What has the world been going through for the last 12 years, especially since 2007? How many countries in the world can you point to with: rising standards of living, reduced inequality, and widespread, long-lasting contentment with leadership? This is certainly not how things feel in my native California, or in Europe. And all of this in an open, liberal democracy? I can’t think of many examples.

But of course, nothing guarantees this will continue, and 2013 could be a decisive year. We can’t expect wages to rise forever without economic growth returning, and so the world will be holding their breath until it does, as expected next year.  But if instead there is more stagnation, or more of what the international community sees as state meddling in the economy, international investors could finally give up and concentrate on countries like Mexico or Colombia. And it’s hard to imagine how the PT would be seen by the people if any of the party’s social gains were reversed.

I personally don’t think either of those doom scenarios will come to pass. We’ll see. But for now, here are some of the bad, the good, and the interesting stories from 2012.

These are summaries – click the links for more in-depth info.

The bad

Corruption –

We watched all year as high-level politician after high-level politician was brought down for the ‘mensalão’ scandal from 2003, and a new hero of the opposition (and anti-corruption movements) was born in the form of Joaquim Barbosa (pictured above).

Violence –

War broke out for the first since 2006 in São Paulo. Again, the major parties were the PCC, the state’s main gang, and the military police. The latter lost over 100 officers to (mostly) targeted executions, while the murder rate in SP jumped.

The economy –

This is the big one. After growing 7.5% in 2010 (and causing us in the international press to rush here), then slowing to 2.7% in 2011, we may not do much better than 1% in 2012. Even more awkward was the moment when Finance Minister Guido Mantega joined the rest of analysts in wildly overestimating third-quarter growth, leading The Economist to call for his dismissal. Needless to say, President Dilma was not pleased to hear this from the British magazine.

But the economy is expected to pick up in 2013, thanks not only in part to the huge cut in interest rates carried out this year, which have finally come down to the levels of a normal country. And in reality, the 7.5% growth year was a statistical blip after -0.3% in crisis-hit 2009. Taken together, the economy had been growing at 3.6% a year, close to the average over the last 20 years, and to what we’re likely to see over the next few years.

But more worrying is that some investors believe, whether rightly or wrongly, that the government has begun to micro-manage the economy and that the possibility of intervention may be unpredictable. Much of this has to do with the decision to lower energy prices. I personally think they’re wrong, or at least that this was a problem of the government’s way of communicating the changes rather than the changes themselves. But some people are on edge, and this is especially important, as a drop in investment is the real culprit for the bad numbers.

And of course, there remains so much that Brazil should and could do to increase productivity and upgrade its growth model.

Infrastructure –

We are still waiting on this one. This is one part of Brazil’s economy that most desperately needs to be resolved, and we’ve still only seen baby steps.

The environment –

My visit to the Amazon this year was not pretty, both because of the persistence of slave labor and the obvious destruction of the rain forest. Things took a turn for the depressing for environmental activists as the government rolled back protections in 2012.

The good

Politics –

Whatever you think of the ruling Worker’s Party (PT), it is undeniable that if you use the standard most often applied to political parties, Lula and Dilma’s have overseen a truly remarkable success story since 2003. Lula left office one of the most popular leaders in the world, and two years into her term, Dilma is already widely supported. 78 per cent approval is a breathtaking figure. And this after everything that happened in 2012.

Despite the mensalão mess, the PT did very well in municipal elections this year, and took back São Paulo, South America’s largest city. If 2014 elections were held today, all polls indicate Dilma would win by a landslide.

And without a doubt, the country plays a much larger role on the world stage than it did in 2002.

The PT, like everyone else, could improve greatly, but widespread support and a rising nation means you are winning, big. This is a tough act to follow.

The real economy –

As I mentioned above, for all the dismal numbers, life on the ground still feels better than ever. Families are still rising out of poverty. The explanation for this is a little complicated, but the reality is there. It can’t last forever like this, of course, but forever hasn’t happened yet.

Justice –

The flip side to the mensalão mess is a justice system which really has teeth for the first time anyone can remember. This has always been the case for the poor, but now politicians can be on the hook, too. This has many hoping they will think twice in the future.

Even some police are being held to account. Some of those that gunned down suspected members of the PCC and, by all accounts, set off this year’s wave of violence, are now in jail.

World Cup preparations –

For years we wondered if Brazil would be ready to host the World Cup. We haven’t sorted out our infrastructure problems, but it looks like at least the stadiums will be ready.

My personal take is the following: The World Cup will go the way Brazil does for most visitors. Something or another will go wrong. They’ll be stuck in traffic, or miss a flight, or end up spending more than they expected on this or that. But those things will be heavily outweighed by the charm of the country and the fun of the event, and most will go home raving about Brazil.

Cost of living –

For us foreigners, it’s been good news that the real has come down significantly this year. Brazil is no longer so maddeningly expensive. For Brazilians, the cost of living hasn’t changed much.

Corinthians –

“The people’s team” from São Paulo took the world club championship, and gave Brazilian football a much-needed boost. This also meant lots of traffic and nonstop fireworks in the city, but overall it was very good for the country, and for South America.

The unexpected and interesting

Lula back on the scene –

I suppose it was more of an anomaly that he was actually gone for a while. But after recovering quickly from cancer, the former president was given a grand welcome back and got to work quickly, helping out in this year’s municipal elections. Crucially, he has so far floated above the mess of the mensalão scandal, and insisting he know nothing of the scheme. We’ll see if he can keep this up in 2013.

Music –

2012 was a much more interesting year musically than 2011, in my opinion. We saw the rise of Brazilian hip hop to the mainstream, “techno brega” from the Amazon in the form of Gaby Amarantos, and funky pop from the likes of Tulipa Ruiz. Here’s our full interview with Emicida, and Criolo’s will be posted next year.

Eike Batista –

He did not have a good year. There was the unfortunate incident with his son, Thor. Then he attracted lots of negative attention, and fell quite dramatically from his position as Brazil’s richest man.

Race –

Hard to categorize this one as good or bad, but the country stared two deep-seated problems in the face this year: relations with indigenous populations, and the government’s approach to black Brazilians.

Tourism –

The sector is doing quite well, but it has nothing to do with the gringos. The sector is almost entirely powered by Brazilians moving around their own country.

The rebirth of the center –

Long more famous for being “Crack land” than anything else, we saw interesting new movements coming up from the street.

Evangelical power –

Much to the dismay of bien-pensant liberals, Brazil’s numerous, and often unsettling, Evangelical Christian churches revealed themselves as an ever more potent political force.

Exhibitionist turn –

We saw Brazil’s sub-celebrity realitytainment industry power into the same bizarre gears we’ve been accustomed to around the world. First, there was the sex, or perhaps rape, transmitted live on Big Brother Brasil. Then we had the young girl who auctioned off her virginity for $800,000.

Petrobras – Graça Foster –

One of South America’s largest companies inherited a true rags-to-riches story as Graça Foster took over. Here’s hoping she can help navigate Petrobras out of its current mess.

Niemeyer –

And finally, we bid a sad farewell to nation-defining visionary architect Oscar Niemeyer, who passed at 104 years old. Here’s an interview I did with him last year, and perhaps next year I’ll post my pictures from his 104^th birthday party.

Here’s hoping 2013 goes better. Happy New Year.

Follow @Vinncent

Guido Mantega – Taking heat. In the last 3-4 days, international opinion on the Brazilian economy has turned.

It all started last week, when Guido Mantega, Brazil’s Finance Minister, predicted the beginning of a turnaround in the country’s economy. Then the actual third quarter results came out, far below what he, and even the most pessimistic economists, had predicted.

This has set off a wave of doubt, head-scratching, and criticism, especially abroad. It’s a significant moment, as people are beginning to really question what is going on here, where there had recently been almost miracular economic growth.

As always, I think the propensity of those of us in the media is to exaggerate and then indeed exacerbate short-term swings in economic cycles (we as probably did on the way up in 2010). Unfortunately (we) foreign correspondents can actually matter on these kinds of issues, affecting investment flows. So this conversation is an event in itself.

For the record, I think Brazil’s long-term fundamentals are still very strong, a rebound will come, and that some of the current problems are over-stated, specifically the worries that the state is becoming dangerously interventionist or that rules and contracts here aren’t clear. That criticism to me seems ideological – if China and Korea are allowed to be so different from the US or the UK, why can’t Brazil do things their own way? There are more ways than one to run an economy. The state plays a big role here, and it has been that way for a long time. Dilma has changed very little. Let’s not forget another little fact: during this period of stagnation, no is one losing jobs and wages have continued to rise. But since this isn’t about me, let’s let them talk:

Washington Post – Amid slowdown, Brazil turns inward – Echoes Washington’s accusations of protectionism

Reuters – A case study in Brazil’s economic troubles – a company hurt by Dilma’s move to lower the price of electricity

Nomura – Brazil, the confidence paradox (PDF) – The most in-depth and, for my money, the best analysis. Says – the Brazilian government is solving the right problems, but in ways that make international investors uncomfortable. Is it worth it?

Reuters – Brazil’s economy, five strengths and weaknesses – Right on the money about high costs, and on how we haven’t yet seen the (significant, positive) effects of lower interest rates

Financial Times – Beware membership of this elite club – This one may hurt the most. Argues that it’s a very bad time to be a BRIC

Financial Times – Downturn shakes Brazil from its dream – A good overview. What is going on? What can be done?

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A mostly pointless post in which I quickly and subjectively compare the two countries, and share some (slightly) juicy, but meaningless, gossip about glamorous Argentine President Cristina Kirchner.

I just got back from Buenos Aires, and it has occurred to me to do a very quick post on the (very significant) differences between the two countries. But this is all based on cursory investigation, stereotypes and first impressions, and is extremely subjective. I know a lot about Brazil but much less about Argentina. Actually, I am just comparing Brazil to Buenos Aires. I will also share some stories about Cristina (reportedly) acting a bit important.

This post isn’t journalism – just a blog. Don’t take it too seriously, if you even read it.

Argentines care more about politics. A lot more. One could call Argentina a place where your man on the street is extremely politicized. Extremely. One could not say the same for Brazil. You stumble across all kinds of protests in Buenos Aires, and quite earnest ones – I saw a large one complete with Che flags, covered faces, and clubs – and barroom conversations turn to politics quickly. Brazilians are indeed tuned into the social issues they live with daily, but the response to them and the ongoing conversation are not as explicitly political.

As one Brazilian said in Argentina: “It’s incredible. All the graffiti here is political. In Brazil, most of the graffiti is the name of the tagger or his gang.”

Or as another said: “It’s crazy here. These people talk about politics like we talk about football.”

Argentines take themselves more seriously. This one smacks you in the face quite quickly and is one of the most often-repeated stereotypes. I find it’s broadly true. Brazilians are laid back and extremely unpretentious. Argentines are many things. Unpretentious is not one of them. Even for the most intellectual Brazilians, being able to laugh off your ego and hang out in an extremely laid-back manner with absolutely anyone is a prerequisite to social behavior. In Argentina, you’ll come across a remarkable amount of people with purposefully challenging haircuts who want to talk about all the very difficult books they read.

I’m not sure which I like better. Something in the middle, is probably the easiest answer.

Argentines only eat red meat and red wine. That is the only thing they eat. The only thing. This makes for a fun couple of meals, kind of like having ice cream for breakfast, but it didn’t do my system much good in the long term. In Brazil, yes, steak is central, but it will invariably be served with rice, beans, lettuce, tomatoes, and onions. In Buenos Aires you are lucky to get some french fries on the side.

Brazilians aren’t anti-American. At least, not like that. Perhaps the clumsy, sunburnt, fat American tourist is viewed as an idiot (where isn’t he?), but not so much as a representative of Empire. In Buenos Aires I was called bourgeois and yankee a few times, and only as a half-joke. Most everyone liked me, but thought I was Brazilian at first, and most were often a little let down when I was American. They were quick, though, to insist, relieved, that it must have been because I realized my country sucks and decided to leave forever. This stirred fond memories of my time living elsewhere in Spanish-speaking Latin America.

Buenos Aires is nicer. São Paulo is a terrifying mega-city which brings to mind 20th-century visions of a post-apocalyptic future. Blade Runner, most notably. I love it, and I love its energy, but it is not nice. In São Paulo, you need a lot of money to live well, and for a large section of that (hyper) rich population, living well just means hanging out in impossibly tacky shopping malls.

In Buenos Aires, you can cheaply enjoy a very high quality of life in a sophisticated environment that reminds of Paris. It’s neat urban space with stunning architecture and natural interactions with other people in public areas. São Paulo is totally closed and private.

Rio is set within a stunning natural environment, but the city itself is not nearly as nice as Buenos Aires. The inequality gnaws at the conscience of most foreigners in Rio, and it’s also deadly expensive.

I’d personally rather live in São Paulo. It is more exciting, more is happening, and the city and Brazil suit me, especially at the moment. But Buenos Aires is nicer, hands down.

Brazil is more “investor friendly”. Brazil has emerged as an economic and global power, during a period in which the government established macroeconomic stability. It’s an environment in which citizens and investors know more or less what to expect. It’s a vision much more in line with what the US-educated banker or economist thinks a country should do to grow. In Argentina, you are immediately struck with the realities of a more heterodox, more old-school Latin American, approach to development.

As a foreigner you can change your dollars at the official rate, or you can go to a black market dealer, who will pay you more, because the government is currently limiting the amount of dollars Argentines can buy with their pesos. So those who need more than they are allotted go to the black market. And there was of course the famous debt default a decade ago, which cut off access to capital markets. Locals don’t trust the system, either – you have to buy your home in dollars, and nowhere takes credit cards as payment.

In Brazil, if you tried to tell a favela resident that they couldn’t change their money to dollars, or that they couldn’t use plastic to pay for lunch, they’d stare at you in disbelief.

I’m not taking sides – a lot of smart and earnest people support the current economic policies in Argentina, and the default, few would disagree, worked out fairly well. But Brazil certainly feels more like the US in the way the economy works.

They treat the government differently. Argentina is a classic republic – like most of the rest of Latin America, a nation originally founded through struggle and bloodshed, inspired by 19th-century republican ideals. Brazil is a different, more subtle story. It is a huge piece of territory that was handed down from monarchy to empire to democracy, to dictatorship, and back to democracy. And all of this, remarkably, happened with comparatively little direct confrontation. Brazil is not a revolutionary country, like Mexico or the US or France or Argentina.

This may or not be related to the fact that the government and its symbols are treated with more reverence and seriousness in Argentina. Or that may just be an issue of national personality. Or, it may be an issue of the personality of the current president of Argentina, who is rumored to, as it turns out, take herself a bit more seriously than Dilma or Lula.

According to two figures in the São Paulo business and political community, Cristina acted a bit funny on a trip here. It is totally harmless, pointless stuff, but serves to illustrate the way Brazilians see Argentina. The story comes from two figures high enough in the Brazilian business and political community that their opinions matter, but not high enough that you can figure out who they are. I can’t confirm they are telling the truth.

They say that when the food was served at the first official lunch with then president Lula, Cristina presented a problem. She would not be having the Brazilian food which had been elaborately prepared for the foreign visitors. She had brought her own from Argentina, they said. This caused great offense until Lula smoothed things out.

Then, they had planned to shuffle her into a helicopter to the next event – this is extremely common in São Paulo. She refused. Doing that would mess up her hair, the story goes, and she was going to be photographed later. So she preferred to go by car. Everyone had to wait three hours to be able to shut down massive Avenida Paulista and bring her a motorcade.

As they told the story, it was clear the Brazilians thought this was a little bit annoying, but very hilarious and mostly, preciously Argentine.

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Anyone with a feel for Brazilian soccer should tune into Wednesday night’s final: Argentina’s Boca Juniors against São Paulo’s Corinthians. This heavyweight title fight is the first leg in a two-game final to decide the Libertadores South America-wide club competition – the continent’s equivalent of Europe’s Champions League.

All eyes in Brazil will be on Corinthians, the country’s second most popular team, who have never even made the final, never mind actually won the trophy. This is a deeply emotional matter to their 30 million fans. And a cause of great amusement and incessant jibing for everybody else in Brazil.

In 2010, when veteran defender Roberto Carlos joined the great attacker Ronaldo in the team, he promised to win the Libertadores trophy for Corinthians. It looked good. Both were former members of Brazil’s 2002 World Cup winning team. It was Corinthians’ 100th anniversary. But then Corinthians lost 1-0 to Flamengo under torrential April rain in Rio de Janeiro, when the faulty drainage at the Maracanã stadium turned it into an ankle-deep swamp.

Corinthians won 2-1 on the return leg in São Paulo, but as away goals count double in a draw, Flamengo went through. Roberto Carlos left for Russia the following February. The joke had already gone around Brazil: 2010 wasn’t the team’s centenário – or centenary. It was their centenada (nada means nothing in Portuguese).

In 2011, the Corinthians Libertadores campaign got even worse. They team went out in the first phase, 2-0 down to a nobody team from Colombia called Deportes Tolima. The jibing intensified. Ronaldo retired that year.

So this is the closest, then, that Corinthians have ever been. They can smell victory, and they can also remember the bitter taste of defeat. Although the Boca team they face at the Bombonera is not what it once was, Argentine clubs have a good Libertadores record against Brazilian teams. When River Plate, another Buenos Aires team, turned a Corinthians 1-0 home lead into a 3-1 defeat in 2006, furious fans stormed the pitch at the Pacaembu municipal stadium the São Paulo team calls home.

This is pretty much the same Corinthians team with which coach Tite won the Brazilian championship with in December 2011. Some of the players to watch are Emerson, our main forward, Chicão, another veteran defender, Danilo, who scored a crucial goal against Santos, and new goalkeeper star Cássio. But Tite hasn’t got to here by playing the ‘beautiful game’ Brazil was once famous for. Instead he has done it by forming an efficient football machine that is as focused on defence as it is attack, that marks its opposition heavily, and that badly lacks a craque – star, or genius player.

“The whole team has the function of marking, not just the defence system. They begin at the front, making it difficult for the ball to go back and the whole team has this function,” Tite told me in a recent interview.

“Much like Chelsea,” quipped the Flamengo fan on my local newsstand the other day, referring to the mixture of dumb luck and heroic defending that saw London’s most hated club defeat the glorious Barcelona and then beat Bayern Munich to win this year’s Champion’s League. On a smaller, less glamorous scale, perhaps it’s a little like how Corinthians defence faced down the fluid, creative attack of Santos and their star players Neymar and Ganso in their recent Libertadores semi-final.

As a gringo Corinthiano, like most of the club’s fans, I couldn’t care less. I just want them to win. This is a results-based team – and we want a result. Resolute, constant defending is, I have decided, a much neglected art. And anyway, it fits the mood in today’s Brazil, with the economic growth of the last years stalling, and a hard-nosed technocrat like Dilma Rousseff as president, instead of her flamboyant predecessor and mentor Lula.

It’s all about number-crunching and bottom-line in this most capitalist of countries – despite an ostensibly left-wing government. On Monday the giant Brazilian state oil company Petrobras, suffering a falling share price and falling production figures, presented a revised business plan for the next four years to a skeptical audience of analysts.

Its new CEO, another hard-line technocrat called Graça Foster, is a friend and former colleague of Dilma’s, and she laid down the law. Petrobras had for nine years promised unrealistic production targets and failed to meet them. Now it was all about the detail, the projects – and the results.

“Here, nobody works with comfort of absolutely anything,” said Foster sternly from behind her glasses at a press conference afterwards. “Comfort is a word absolutely prohibited between us. We work with total discomfort. Here it is discomfort 365 days a year to attend the demand of all our senhores and senhoras.”

Preparing his team for their Bombonera showdown, and the second leg Wednesday July 4^th in São Paulo, and living under the expectations of 30 million rabid fans, Corinthians coach Tite knows exactly what she means.

Game is Wednesday night, 21.50, Brasília time, played in Buenos Aires and aired on Globo. Second leg Wednesday is July 4^th, at Pacaembu, 21.50. Check online to see where it might be streaming or aired in your country.

[Photo – Emerson at a training session in preparation for the game, in front of the famous Corinthians logo]

Links:
The people’s team
Who is Neymar?

Of course on an economic level, this will get the country absolutely nowhere. Though Obama was likely telling the truth when he said he understood Brazil’s concerns, he has plenty of his own. Unfortunately, on the list of considerations that end up dictating US monetary policy, the President’s relationship with Brazil may not be in the top 50.

But politics is about politics, and naming and shaming the US may be worthwhile sometimes. It was indeed the US that caused the financial crisis, and reminding them that the rest of the world suffers as a result could be good for diplomatic leverage.

Back at home, what can be done to save Brazilian manufacturing? What should be done? Fears about the death of industry have become the main political and economic concern in Brazil recently – I explored this issue quickly in the LA Times after workers took the streets last week – but opinion is divided.

Amongst economists, business leaders and government officials, there are three basic schools of thought.

1. Brazil’s manufacturing sector is fundamental to the country, and world-class. If it weren’t for unfair and unexpected developments coming from the US, China, and Europe, we’d be doing fine, and something needs to be done to combat those countries.

2. Brazil’s manufacturing sector is fundamental to the country. But despite the problems caused by the value of the dollar, the real problem is a lack of competitiveness, and the government needs to undertake radical reform to reduce costs in Brazil.

3. Forget it. Brazil doesn’t need to export manufactured products, and even if it did, long-term economic trends will make it impossible. Brazil should focus on managing the transition to a natural resources economy. That doesn’t have to be so bad, they say. Australia and Norway have managed quite well.

Position one is held by the government and by representatives of the industrial sectors. This is especially true if you judge them by their actions rather than their words. Both Dilma and market leaders do agree that reform is necessary, but actually trying to do it has so far been out of reach. It would be costly and politically difficult to improve infrastructure, reform the tax code, and adjust government expenses. What we’ve seen instead is the currency war and a set of stimulus packages for the struggling sectors.

Position two is held by some economists and business leaders that you might say belong to the “development” school. Brazil should be very worried about trying to exist on basic goods alone – the country worked very hard to overcome dependency on selling commodities, and we shouldn’t let that slip away. The government should do all that is possible, including everything listed above, to save the sectors.

Position three is held by a surprising amount of serious commentators, who might be called the “free market” or “comparative advantage” school. Yes, reform is needed all around, they say, but things will be getting even tougher for industrialists. In the long term, the dollar will drop more and more, and the pre-salt reserves will only exaggerate the circumstances in favor of commodities producers. History is not on your side. Deal with it and move on. Unsurprisingly, the fact that serious people even think this does not please either the government or most business leaders.

When Dilma gets back, this will be the debate she will be wading through for probably the rest of her presidency.

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Dilma’s government is willing to stand up to the big powers, it seems, and Brazil’s status on the world stage these days means she can get away with it.

First Dilma attacked rich countries – but specifically the European Central Bank – for unleashing a ‘tsunami’ of cheap money, much of which could make its way to Brazil, further pushing up the value of the currency and exacerbating the currency wars.

Right away, German Chancellor Angela Merkel said she understood Dilma’s concerns, and that they’d discuss them in their March 5 meeting.

Then, shortly after the US Air Force unexpectedly cancelled a contract to purchase Brazilian warplanes, the Ministry of Foreign affairs issued a very strongly worded statement:

“The Brazilian government learnt with surprise of the suspension of the bid process to purchase A-29 Super Tucano aircraft by the United States Air Force, in particular due to its manner and timing,” the communiqué reads.

“This development is not considered conducive to strengthening relations between the two countries on defence affairs.”

But by then General Chief of Staff Norton Schwartz had already said the cancellation was an “embarrassment” for the Air Force.

“There’s no way to put a happy face on this,” he said.

No, this was not a response to Brazil’s official statement, but it was a clear indication that parts of Washington know they gave Brazil a bit of a raw deal.

Of course, it’s one thing for the rich countries to play nice, and another to actually change European monetary policy, or restore the contract to buy the Embraer planes, to please Brazil. Neither is likely to happen.

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