Brazil Is the New America: How Brazil Offers Upward Mobility in a Collapsing World (45 page)

Even better, as I write, CEMIG paid a dividend of 11.14 percent. Compare this to the 3.75 percent yield (again, as I write) on the U.S. 30-year Treasury bond. I personally don't happen to believe that President Obama is right about very much. But I do think he hit the nail on the head when he said, “We know the country that harnesses the power of clean, renewable energy will lead the twenty-first century.” The trouble is that the United States is ill-positioned to take more than trivial steps toward meeting its liquid fuels and electricity needs from renewables. Brazil, on the other hand, will.

Looking out over the next several decades, it seems quite likely that the return on a 30-year IOU issued by a bankrupt government is likely to be a lot lower than the return on an equivalent investment in one of the world's leading renewable electricity generators, especially given that the yield on CEMIG is three times that of the Treasury bond.

While in the past, Brazil has often seemed to be disadvantaged by its tropical climate, energy is one area where it benefits tremendously. For one thing, in a world getting colder, Brazil is a huge beneficiary of old-fashioned solar energy. As I write this sentence in August, the expected high temperature in Belo Horizonte, capital of Minas Gerais, is 77 degrees Fahrenheit. This is the dead of winter in Brazil. Because of weather like this, Brazilians do not have to spend money buying heating oil to warm their homes

All countries and economies have drawbacks and weaknesses, Brazil no less than others. The key to successful investment is to find places where life will get better and problems will be solved. No one should labor under the illusion that Brazil is paradise. It isn't. People grow as old and ludicrous and fat here as they do anywhere else, but while many wealthier economies shrank during the global financial crisis, Brazil grew 5 percent with growth surging to 7.5 percent in 2010. It grew in spite of higher real interest rates and the fickle withdrawal of hot money.

Notwithstanding high real interest rates, and the dangers of growing consumer debt, Brazil enjoys the considerable advantage of being a more deleveraged, solvent economy. While dependable data on aggregate debt to GDP are hard to come by, total debt in Brazil appears to be at least 50 percent lower as a percentage of GDP than debt in the United States. (McKinsey's 2010 study put aggregate debt in Brazil at 142 percent of GDP with aggregate debt in the United States at 296 percent.) Brazil's external indebtedness is also much lower relative to GDP than that in the United States In fact, Brazil is the fourth largest external creditor and holder of U.S. government debt.
36

Updating the vision of Brazil that Stefan Zweig spelled out in 1940, “its development is still in its initial stages, and no degree of imagination suffices to concede that what this country, this world will mean to the next generation. Anyone who describes Brazil's present unconsciously already describes its past.”
37

For all its problems, Brazil remains, as Zweig perceived, “one of the most important, if not perhaps
the
most important future reserve in the world.”
38

If there is a future for prosperity anywhere, it is in Brazil. In the next and final chapter, we discuss taking part in Brazil's bright future.

1
Jim O'Neill, “Panic Measures Will Ruin the BRIC Recovery,”
Financial Times
, August 10, 2011, 6.

2
Carlos A. Monteiro, “Is Obesity Replacing or Adding to Undernutrition? Evidence from Different Social Classes in Brazil,”
Public Health Nutrition
5, no. 1A (2002): 105–112.

3
“Almost 40 Million Brazilians Climbed to Middle Class in the Last Eight Years,” MercoPress, June 28, 2011,
http://en.mercopress.com/2011/06/28/almost-40-million-brazilians-climbed-to-middle-class-in-the-last-eight-years
.

4
See Dana Flavin, “Metabolic Danger of High-Fructose Corn Syrup,”
Life Extension
, December 2008,
www.lef.org/magazine/mag2008/dec2008_Metabolic-Dangers-of-High-Fructose-Corn-Syrup_01.htm
.

5
Sugar and Sweeteners Outlook
/SSS-249, Economic Research Service, USDA, June 4, 2007, 31.

6
Kerry A. Dolan, “The Burger King Deal Winners: Three Brazilian Billionaires,”
Forbes
, April 4, 2012,
www.forbes.com/sites/k2012/2012/04/04/three-brazilian-billionaires-cash-out-some-of-burger-king-stake
.

7
“The Chubby Girl from Ipanema? Brazil Puts on Weight,” Reuters, August 27, 2010,
www.reuters.com/article/2010/08/27/us-brazil-obesity-idUSTRE67Q3UK20100827
.

8
“Dieta, estilo de vida e gaanho de peso,”
CartaCapital
, July 27, 2011, 65.

9
Maryn McKenna, “A Diabetes Cliffhanger”
Scientific American
306, no. 2 (2012): 26–28.

10
Monteiro, “Is Obesity Replacing or Adding to Undernutrition?”

11
See Kaizô Iwakami Beltrão and Sonoe Sugahara, “Permanentemente temporário:
dekasseguis
brasileiros no Japão,”
Revista Brasileira de Estudos de População
23 (1) (Portuguese); available at bases.bireme.br/cgi-bin/wxislind.exe/iah/online/?IsisScript=iah/iah.xis&src=google& base=LILACS&lang=p&nextAction=lnk&expr Search=447388&indexSearch=ID.

12
Stefan Zweig,
Brazil: A Land of the Future
, trans. Lowell A. Bangerter (Riverside, CA: Ariadne Press, 2000), 10–11, 122.

13
“Arab Americans,” Arab American Institute,
www.aaiusa.org/pages/arab-americans
.

14
CIA World Factbook,
www.cia.gov/library/publications/the-world-factbook/geos/us.html
.

15
“Arab Roots Grow Deep in Brazil's Rich Melting Pot,”
Washington Times
, July 11, 2005.

16
Washington Times
, July 11, 2005.

17
John Lyons, “Brazil Mourns the 12 Killed by Gunman,”
Wall Street Journal
, April 9, 2011,
http://online.wsj.com/article/SB10001424052748704843404576251182737094852.html
.

18
Internet World Stats,
www.internetworldstats.com
.

19
Rosemary Righter, “Italy Is Venal, but It's Not Greece: Rome's Balance Sheet Looks Awful. There Is, However, a Bright Side,”
Newsweek
, August 1 & 8, 2011, 13.

20
“Brazil's Transport Minister Quits in Corruption Scandal,” BBC News, July 7, 2011,
www.bbc.co.uk/news/world-latin-america-14055768
.

21
“Treasury securities,” Bankrate.com,
www.bankrate.com/rates/interest-rates/treasury.aspx?ec_id=m1104762
.

22
Diego Escosteguy, “Agencia da Nacional da Propina,”
Epoca
, July 25, 2011 (Edicao 688): 40–46.

23
“What Country in the World Has the Most Lawyers per Capita?,” Answers.com,
http://wiki.answers.com/Q/WHAT_COUNTRY_IN_THE_WORLD_HAS_MOST_LAWYERS_PER_CAPITA
.

24
Jonathan Wheatley, “Brazil's Dentists Continue to Innovate in the Face of Stultifying Bureaucracy,”
Financial Times
, January 7, 2011, 16.

25
Wheatley, “Brazil's Dentists Continue to Innovate in the Face of Stultifying Bureaucracy.”

26
Moises Naim, “End the Party before Brazil's Bubble Bursts,”
Financial Times
, June 1, 2011, 10.

27
Joseph Leahy, “The High Price of Booming Brazil,”
Financial Times
, February 20, 2012.

28
Joe Leahy, “Brazil: Credit to Redeem,”
Financial Times
, July 12, 2011.

29
Shannon O'Neil, “Why Can't Brazil Grow as Fast as China?”
LatIntelligence
,
www.latintelligence.com/2011/06/24/why-can%E2%80%99t-brazil-grow-as-fast-as-china/
.

30
Transparency International, Worldwide Corruption Perceptions Index (CPI), Ranking of Countries,
http://cpi.transparency.org/cpi2011/results/#CountryResults
.

31
Leahy, “Credit to Redeem.”

32
See credit card rates at
www.indexcreditcards.com/credit-card-rates-monitor
.

33
Jonathan Wheatley, “Brazilian credit: big threat to growth,”
Financial Times
, beyondbrics (blog), July 12, 2011,
http://blogs.ft.com/beyond-brics/2011/07/12/brazils-credit-bubble-big-threat-to-growth/#axzz1xUnGWOJF
.

34
Paul Marshall, “Brazil Risks Tumbling from Boom to Bust,”
Financial Times
, July 5, 2011, 22.

35
See
www.whitehouse.gov/the_press_offfice/Remarks-of-President-Barack-Obama-Address-to-Joint-Session-of-Congress
.

36
“Debt and Deleveraging, “McKinsey & Company,
www.mckinsey.com/Insights/MGI/Research/Financial_Markets/Debt_and_deleveraging_The_global_credit_bubble_Update
.

37
Zweig,
Brazil: A Land of the Future
, 70–71.

38
Ibid.

For us, it was like sitting on a sinking ship, waiting for it to go down.

—Scott and Mandy Harker, on why they left the United States for Brazil

The thought that haunts the imaginations of middle-class people in North America and throughout the developed world is the fear that the new normal living standard for middle-class jobs in the future will be normalized at the income and lifestyle of the middle-class Indian or Chinese. A frightening thought for Americans in particular.

The prospect of being reduced to the living standards of the Brazilian middle class would be somewhat less daunting. Brazil's population of 203 million as of July 2011 and nominal per capita income of $12,917 (IMF 2011) are roughly those of the United States four decades ago. Since then, per capita income in the United States has soared, but the average income for males employed full time has dropped by $800.

This points toward the need to make some unsettling decisions. In a collapsing world, facing an energy transition, running away from home may be a rational response to an upheaval in prospects.

In his widely-hailed book,
The Collapse of Complex Societies
(1988), Joseph A. Tainter sketched out a thesis on the economics of problem solving. It is an argument with great importance for people in today's circumstances, pointing toward some sobering conclusions that the mainstream media and most investment advisors have relegated to the shadows.

One of the more crucial of these is that it is most unlikely that the United States will rapidly or painlessly recover the charmed position it enjoyed in the world economy during the nineteenth and twentieth centuries. With the United States already suffering from declining, or even negative, marginal returns from complexity, it is more likely to collapse than to prosper.

As highlighted earlier in this book, the United States seems to face a future of static or declining energy inputs. Global oil production appears to have peaked in the middle of the past decade on the eve of the global debt crisis that culminated in the subprime meltdown and the collapse of Lehman Brothers.

To repeat, with static or falling energy inputs, the United States' economy is closer to collapse than almost anyone suspects. Tainter's argument, when combined with recent developments, brings this frightening possibility into perspective. He writes:

Energy has always been the basis of cultural complexity and it always will be. If our efforts to understand and resolve such matters as global change involve increasing political, technological, economic, and scientific complexity, as it seems they will, then the availability of energy per capita will be a constraining factor. To increase complexity on the basis of static or declining energy supplies would require lowering the standard of living throughout the world. In the absence of a clear crisis very few people would support this. To maintain political support for our current and future investments in complexity thus requires an increase in the effective per capita supply of energy—either by increasing the physical availability of energy, or by technical, political, or economic innovations that lower the energy cost of our standard of living. Of course, to discover such innovations requires energy, which underscores the constraints in the energy-complexity relation.
1

Tainter argues that “complex societies” are prone to declining marginal returns across a broad range of activities. As problems arise, societies try to solve them by increasing complexity (“complexity” in the sense used by Tainter usually means solutions imposed by government), in ways that make for higher costs over long periods. In other words, stable societies tend to proliferate bureaucracies, raise taxes, and deploy costly armies. As the cost curve evolves, (it “may at first increase favorably, as the most simple, general, and inexpensive solutions are adopted”) then “society reaches a point where continued investment in complexity yields higher returns, but at a declining marginal rate.” At such a point “a society has entered the phase where it starts to become vulnerable to collapse.”
2