Brazil Is the New America: How Brazil Offers Upward Mobility in a Collapsing World (41 page)

8
Hayutin, “Population Age Shifts Will Reshape Global Workforce.”

9
Therese Hesketh, Li Lu, and Zhu Wei Xing, “The Effect of China's One Child Family Policy after 25 Years,”
New England Journal of Medicine
, September 15, 2005.

10
Ibid.

11
Ibid.

12
Bloomberg, “Ageing Population to Limit Growth in BRIC Countries,”
Economic Times
, January 4, 2012.

13
Ibid.

14
Nicholas Vital, “Twenty Years to Become Rich,”
Exame
, no. 980, 2011.

15
Maria Shao, “Don't Invest in Russia Today, Warns Bill Browder,” October 1, 2009,
www.gsb.stanford.edu/news/headlines/browder09.html
.

16
Sabu George, Rajaratnam Abel, and B. D. Miller, “Female Infanticide in Rural South India,”
Economic and Political Weekly
, 27, no. 22 (1992): 1153–1156.

17
Vital, “Twenty Years to Become Rich.”

18
Dean Newman, “Demographic Changes to Boost Brazil's Investment Appeal,”
Interactive Investor
, July 4, 2011.

19
Vital, “Twenty Years to Become Rich.”

20
Michael R. Czinkota and Ilkka A. Ronkainen,
International Marketing
, 8th ed. (Mason, OH: Thomson South-Western, 2007), 484.

21
Stephen Kanitz, “Brazil: The Future Testing Ground of the World,”
Betting on Brazil
(blog), November 26, 2009,
http://brazil.melhores.com.br/2009/11/brazil-the-future-testing-ground-of-the-world.html
.

22
Stefan Zweig,
Brazil: A Land of the Future
, trans. Lowell A. Bangerter (Riverside, CA: Ariadne Press, 2000), 10, 11, 122.

Brazil is no country for beginners
.

—Antônio Carlos Jobim

Vinícius de Moraes, the Oxford-educated Brazilian poet who wrote “The Girl from Ipanema,” was an unabashed lover of Brazilian women. He married seven of them.

De Moraes knew a good thing when he saw one, and he was unapologetic in his devotion to feminine beauty. He famously declared, “Ugly women, forgive me, but beauty is fundamental.” Through his writing he did much to incite the imaginations of men across the globe about the allure of Brazilian beach culture. There was an actual “Girl from Ipanema,” Heloísa Eneida Menezes Paes Pinto, a supermodel-beautiful 17-year-old with emerald green eyes, and a walk like poetry, whom de Moraes spotted in 1962 from his girl-watching perch at the Veloso Bar, a block from the beach at Ipanema.

“The Girl from Ipanema” won a Grammy for Record of the Year in 1965 on its way to becoming the second-most-widely-recorded popular song in history. More than any other single influence, it probably helped shape Rio de Janeiro's reputation as home to some of the world's most beautiful women. As
Victoria's Secret
proclaimed in its “The Girls of Brazil” advertisement, “No country has produced more Victoria's Secret models than Brazil.”

I freely admit that I was one of many men who fell under the spell that de Moraes cast. Before I ever set foot in Rio de Janeiro, I was completely sold on the attraction of scantily clad Brazilian women cavorting on white sand beaches. Indeed, as I have previously confessed, I married a Brazilian girl who made the
Sports Illustrated
swimsuit models seem like slobs. With her as a goad and a guide, I spent much of the past decade getting to know Brazil.

As upcoming details explain, not everything I learned is good. Brazil is a complicated country. Like every country, it has its snares as well as allures. To be sure, I found myself more interested in the allures of Brazil, especially its beautiful women than in some of its less attractive features. As I got to know Brazil, however, I became excited about its economic prospects, with gratifying results. In recent years, the model portfolio I recommend to investors in
Strategic Investment
has been heavily tilted toward Brazilian equities and bonds with returns that far exceeded the “risk-free” gains you could have made in U.S. Treasury obligations, much less the U.S. stock market as measured by returns on the S&P 500.

Partly because North Americans have tended to hold a low opinion of Latin America, I have sought in this book to open eyes about the opportunities in Brazil. A Brazilian friend who went to school in the United States was literally asked by American schoolmates whether Brazilians have ever seen elevators. In trying to counter this kind of ignorance about Brazil, I may perhaps have inadvertently overstated the case for Brazil, partly by downplaying the drawbacks and difficulties that Brazil faces and that you might face in trying to do business or live there.

In this chapter, I want to take a second and closer look at some of the troubles with Brazil. Not the least of these is that Brazil seems to be following too closely in the footsteps of the United States.

Russia, China, and India, the other BRIC countries, have little cultural affinity to the United States. Brazil, alone among the emerging powerhouse economies, is an American economy that shares close cultural affinities with the United States. As Jim O'Neill, chairman of Goldman Sachs Asset Management points out, “Demand in the so-called BRIC economies of Brazil, Russia, India, and China is now more important to the world economy than the United States and Europe.”
1

The following main points that I bring to your attention do not contradict O'Neill's observation that Brazil is rapidly becoming one of the world's foremost economies. Indeed, I may even move there. But I do so with my eyes open. I can see that for all its strengths, Brazil also has weaknesses. For better or worse, it really is another different, less arthritic version of the United States. As it matures, many of its “American” similarities to the United States are destined to come more to the fore. Among the worrying signs I explore in this chapter are a surge in obesity, growing abuse of consumer credit, too much American-style, anticompetitive economic regulation. Topping it all is the unequivocally sorry indicator that Brazil trails only the United States among the world's countries in the number of lawyers per capita. Of course, if you can endure these drawbacks in the United States, you should feel right at home in Brazil.

Let's start with “The Girl from Ipanema.” Vinícius de Moraes wrote that song about her heartbreaking beauty around the time that French President Charles de Gaulle was dismissing Brazil. De Gaulle quipped, “Brazil is the country of the future, and it always will be.” I decided to look back to de Gaulle's time to see what I could learn about this beauty who allegedly sucked the air out of the Veloso Bar every time she sauntered past.

Was de Moraes telling the truth? Or did the legend of Brazilian beach culture begin with a hallucination? Was Vinícius de Moraes such a sucker for Brazilian women that he could fall in love with any Brasileira who wasn't dog ugly?

That could conceivably have been difficult to answer, but a few minutes research persuaded me that de Moraes did not exaggerate when he praised the girl named Heloísa. One of the links I discovered in my online research was to a 2003
Playboy
featuring Heloísa Pinheiro, “The Girl from Ipanema,” shot when she was 58 years old. There are few women at that age who would be plausible
Playboy
models, but even with the damaging effects of decades spent in the sun, Heloísa Pinheiro—once, The Girl from Ipanema, and now, The Grandmother from Ipanema—was still gorgeous in 2003.

Seeing Heloísa at 58 makes it easy to believe that she was impossibly beautiful as a 17-year-old girl in 1962. No wonder that de Moraes and his collaborator, composer Antonio Carlos Jobim, became infatuated with her. She embodies what has tended to make Brazil special: not only the legendary beauty of its women, but their ability to hold their beauty late in life. This is reflected further in Brazil's Miss Grandmother contest, which went viral on the Internet a few years ago.

Brazilian women tend to hold their looks well into middle age. And this, unfortunately, punctuates a recent and worrying trend about what is now going wrong in Brazil. Sadly, whereas the original “Girl from Ipanema” was tall, thin, young, and beautiful, her counterpart today has almost a 50 percent chance of being overweight on the way to being obese.

An unhappy side effect of the surge in real income in Brazil has been a surge of obesity. Brazil, like all the BRIC countries is getting fatter as it gets richer. A social indicator of weight gain among Brazilians is the drop in undernourishment that accelerated in the last quarter of the twentieth century. In 1975, four times more Brazilians were underweight from malnutrition than were obese. That changed as incomes grew.

Part of the issue is that poor people who reach middle class income levels tend to have status anxieties. In particular, they know that rich people seldom prepare their own food. Consequently, a surge in income can lead a formerly poor family to completely abandon the traditional diet. Rather than prepare their own meals from higher quality fresher, natural ingredients, they prefer to abandon cooking altogether and buy ready-made meals, such as store-bought breads and cakes, frozen dinners, and fast food. The move away from the traditional cooking to more processed foods tends to make people fatter.

Another reason that surging wealth may tend to make people fatter, in addition to eliminating undernourishment and deflecting people away from the traditional diet, is the effect it has in contributing to more sedentary leisure activity. In per capita terms, Brazil was by far the richest of the BRIC countries in 1970. Yet even Brazil has experienced an enormous increase in the proportion of households with TV sets, from 24 percent in 1970 to 88 percent in 1999.
2
That percentage would now be above 90 percent after a jump in real income that brought 39.5 million Brazilians out of poverty and into the middle class in the nine years ending in May 2011.
3
People who spend a greater percentage of their leisure time in sedentary pursuits like watching television tend to gain weight.

There are no doubt other factors in addition to greater caloric intake and more sedentary leisure pursuits that contribute to an unwholesome weight gain as incomes rise. I am convinced that consuming more highly-processed fast foods laden with unnatural ingredients such as trans fats and high fructose corn syrup contributes significantly to the obesity epidemic.

If you don't understand the dangers of high fructose corn syrup, it is a highly refined, unnatural product that cannot be metabolized readily into ATP for cellular energy like sucrose. Scientists and natural foods advocates believe that the 1,000 percent increase in consumption of HFCS between 1970 and 1990 is responsible for the surge in nonalcoholic fatty liver disease in the United States.
4
It turns out that drinking a lot of soft drinks loaded with high fructose corn syrup can be as harmful to your liver as swilling vodka or cachaça
,
the Brazilian rum that is the third most widely drunk spirit in the world.

Of course, as the world's largest and most efficient sugar producer, Brazil suffers less with high fructose corn syrup than does the United States; Brazil produces 20 percent of the world's sugar at a cost of production “on the order of $170 to $210 per ton,” as compared to $525 per ton in the United States.
5
Presumably, the greater efficiency of Brazil's natural sugar industry will slow the substitution of industrial, high fructose corn syrup for sugar. But the temptation to substitute a cheaper, if metabolically dangerous, sweetener will eventually impinge further on the traditional Brazilian diet.

Almost every group that becomes rich enough to eat fast food quickly gains weight and puts itself on the path toward insulin insensitivity and Type II diabetes. The roughly 40,000,000 Brazilians who escaped poverty over the past decade showed a high propensity to move away from the traditional diet toward prepared foods, including store-bought breads and fast food. The alacrity with which people tend to consume products that frequently create health problems for themselves also creates investment opportunities for others. In our
Strategic Investment
model portfolio we have had a profitable holding in Souza Cruz, the Brazilian tobacco giant. Disinterested observers have known since the days of King James I that smoking is bad for your health. Yet this common-sense observation has not deterred millions of additional smokers from taking up the habit each year.

Equally, three Brazilian billionaires, among them former tennis champion Jorge Paulo Lemann, noticed the growing propensity for fast-food consumption among lower-middle-class Brazilians and decided to do something about it. They bought Burger King Worldwide Holdings for $4 billion and have subsequently announced plans to expand the number of Burger King outlets in Brazil by tenfold, from 108 to more than 1,000.
6
Presumably, they know what they're doing. They are the same shrewd investors who orchestrated a $52 billion takeover of Budweiser through an international vehicle—a fact that brings new perspective to the joke that Americans who want to use their consumption to stimulate the U.S. economy should spend all their money on beer and prostitutes, as those are the only things still made in the United States. Presumably the Brazilian Beer Barrel Billionaires who own Budweiser got a chuckle out of that.

In the likely event that Brazilians escaping poverty continue to lavish their higher incomes on fast foods rather than buying more fresh fruits and vegetables, you can expect to see a growing number of obese people in Brazil.