The Rising Star: All Eyes on Brazil

In a country where people give any excuse to party, soccer is considered a religion, and much of life is spent on the beach, Brazil is not only an attractive destination for tourists, but also for foreign investment. In 2007, total foreign direct investment in Brazil amounted to a new record of $34.6 billion. Unlike the other BRIC nations, Brazil differentiates itself with its stability, democracy, neutrality with other countries, and a lower GDP growth rate of 5.3%; the reason for this smaller number is due to the fact that it is wealthier and more urbanized than India and China. Under the presidency of Luiz Inácio Lula da Silva, as seen in the graphic to the right, since 2002, Brazil has benefited from a period of political and economic stability. As a result, president Lula has received a high approval rating of 66.8% from voting-age Brazilians. Much of this support has come from the poorer classes of society that have experienced heightened standards of living largely due to governmental handouts. On an economic level, the inflation rate has remained relatively low at around 4%, which has been implemented to allow Brazil to maintain levels of long-term sustainable growth. Its main source of international influence derives from its vast reserves of natural resources, which enable it to be an export-driven nation that ships goods, such as soya, ethanol, iron ore, beef, and machinery. Over the past couple of years, Brazil's success in exports was helped in part by productivity gains coupled with high commodity prices around the world. As the global demand for natural resources continues to escalate, this South American superpower sits in a secure and advantageous position to meet these needs for years to come. However, in order to capitalize on its foreseeable prosperity in the future, Brazil must address some of the major issues confronting it, such as the endangered Amazon rain forest, corruption, crime, and insufficient infrastructure.

With one of the largest reservoirs of carbon dioxide, Brazil's Amazon rain forest plays a critical role in regulating earth's ecosystem by abating the effects of global warming. Unfortunately, the Amazon is being deforested at an alarming rate as it is seen as a source of inexpensive land for farmers to cultivate sugar cane and soybeans on, and for ranchers to use as pastures for cattle. It is not surprising that 75% of Brazil's carbon emissions are attributed to the destruction of the rain forest. The irrevocable costs of environmental devastation do not justify further expansion into the country's northwest to satisfy demands for grazing land and agriculture.The prevention of illegal deforestation must be made a priority not only for Brazil, but also for the rest of the world because the worldwide effects will take a much more serious toll on planet earth than on this single nation alone. To resolve this problem, the Brazilian government and forest preservation organizations around the world have to realize that the net environmental benefits of preventing further annihilation of the Amazon outweigh any economics profits in the long-term. One solution would be to create carbon-credit markets, whereby the government sequesters intact areas of the forest while selling carbon credits to individuals, companies, and countries interested in lowering their carbon footprints. Meanwhile, Brazil must take more stringent measures to avert and penalize the bribing of Amazonian governors for allowing tracts of land in the Amazon to be illegally sold off.

In relation to bribery, corruption remains a major challenge facing Brazil's development. Similar to other third world countries, government officials are often paid to permit the occurrence of illegal activities or to expedite otherwise time-consuming procedures, such as the processing of official documents. In order to reduce the amount of corruption, it is in the nation's best interest to simultaneously minimize the amount of bureaucracy that impinges on the efficiency of doing business in Brazil. The general mentality in Brazil is that people are rewarded for their "ability to navigate around the bureaucracy," summarizes economist Simeon Djankov. By implanting fewer bureaucratic controls, there will be less of an incentive for businessmen and officials to break the law in order to carry out deals. In correlation with corruption is the issue of crime, which has plagued the nation's largest cities. One of the most crime-ridden areas is Rocinha, the favela (shantytown) pictured to the left, which is violently ruled by gangs of drug dealers. Through a stronger educational system, more employment opportunities, and a greater effort to dissolve gang related activities, the number of prison entrants will assuredly decrease as crime falls. The overpopulated penitentiaries, where gang chiefs operate and make orders from inside, are "human warehouses, universities for crime, factories for revolt," comments prosecutor Fernando Capez. It is clear that eliminating corruption and crime go hand in hand and will require bold steps on the government's behalf to ensure a safe and ethical society in Brazil's future.

The last key success factor that Brazil encounters is improving its infrastructure. The money that is received from its export-driven revenue should be reinvested into the roads, ports, and other foundations that help transport these same goods. Infrastructure investment does not even account for 2% of its GDP, which ideally should be at least 3%. Transportation costs amount to nearly 13% of Brazil's GDP compared to 8% in the US, a clear indicator that room for improvement exists. To emphasize the gravity of this issue, an interesting statistic predicts that by 2013, the consumption of ethanol in Brazil will double. If this is true, the country will need to invest $90 billion in new mills as well as $2 billion for railways, pipelines, and storage. As a byproduct to build up its framework, not only will greater transportation efficiencies arise, but also the creation of jobs that will help shrink its high unemployment rate of around 10%. Brazil's international influence can be attributed to the currently inflated commodity prices; however, its long run success depends on the critical infrastructure needed to accommodate this future prosperity. The country's extensive exigencies for road and rail networks is just one of several proposals needed for Brazil to maintain sustainable growth throughout this century. Bestowed with a plethora of natural resources, evidence verifies there is much untapped potential to ensure its emergence as a global superpower. While it is important for Brazil to strategically develop its infrastructure, lower corruption and crime rates, and preserve the Amazon, perhaps the latter is the most difficult challenge confronting Brazil. An undesirable consequence shared by all the flourishing BRICs is the inevitable depletion of resources and the environment. For Brazil, the fate of its long-term success depends on how well it can support its accelerated growth while concurrently making strenuous efforts to prevent the destruction of its rain forest.

Critical Resources: Diversifying BRIC Knowledge with Think Tanks

This week, I chose to further explore the internet in search of additional resources that will compliment the content I publish in my blog posts as well as provide you, my reader, with alternative sources of data that may be useful for your further explorations of the BRIC nations. Using the Webby and IMSA criteria when selecting the various websites and blogs, I have added ten more links to the linkroll on the right. I will now briefly evaluate each of these distinguished webpages, which primarily consist of think tanks that serve as a great tool for information gathering. The Center for Global Development, one of its photos to the left, clearly has a diverse scope of research concerning global poverty and inequality, but lacks a comprehensive regions section that could benefit from an ability to search on a per country basis. An interactive section that strengthens the site is its public blog, where intellectuals actively discuss their opinions and ideas. A think tank that actually produces most of its content via its blog is the Globalisation Institute, which compares and contrasts the effects of globalization on developing countries. Although new posts are made almost bi-weekly, the entries are made exclusively by only a couple writers while no dialogue is encouraged through a comments section. Aesthetically the site appears unsophisticated, especially with the detracting Google ads on the right column. Foreign Direct Investment is the online portal for its magazine that covers themes relating to cross-border investments. While this think tank releases priceless insight relevant to the BRICs, it should definitely consider revamping its lackluster visual design. An example of a clean and modern looking webpage is that of the Institute of Economic Affairs. I highly recommend this site because it relays issues of concern in a manner that is sensitive to a broad group of readers, such as politicians, students, journalists, and businessmen. The Peterson Institute for International Economics is a well established organization that divulges several forms of publication regarding global economics. Despite a homepage that creatively introduces leading hot topics around the world, its follow-up links should be better optimized to ensure that nuances are fixed, such as making readings chronological. A website with a similar theme is The World Economic Forum, which discusses international economic policies at its worldwide conferences. It has a superb layout with effective pull down menus and a refined navigation tool. The World Resources Institute provides a more humanitarian and environmental outlook on global trends which is imperative to consider when combating the negative byproducts of developing nations. In addition to focusing more on pinpointing regional issues, I feel the site should more importantly focus on reorganizing the awkwardly placed sections on its homepage. The Center for Strategic & International Studies releases a plethora of research regarding global challenges, all of which come from highly credible sources. The only rant I have about the site is that it lacks interactivity in any form between its writers and viewers.

Aside from eight think tank recommendations that I gave above, I have added a news publication and blog link that will also help diversify my readers' research options on the BRICs. The Financial Times Emerging Markets is a site that I often frequent and constantly rely on to learn of new developments in the marketplace. This webpage compiles in depth content and interactive features that are not easily located by a reader's eyes, which could be relocated through a succinct sections menu. An excellent blog that I stumbled up mistakenly when exploring the web is NextBillion.net, which discusses sustainable business in underdeveloped countries. While it is clear that this is a professionally executed blog with superior content, it could probably appear even more credible with a layout that has a more serious tone and is more horizontally spread to eliminate excessive vertical scrolling. Overall, I believe this week's focus on locating informative think tanks to further my research on the BRICs was a success.

A New President: Future Changes in Russia?

Russia experienced a solid annual GDP growth rate of 7% during the last eight years under the control of former president, Vladimir Putin. With public approval ratings as high as 81%, Russians claim him responsible for the rise in higher living standards and the reemergence of Russia onto the world scene. On March 1, Dmitry Medvedev, seen with Putin in the image to the right, was elected to be the presidential successor after winning over 70% of the votes. Being handpicked and directly supported by Putin to inherit the throne, Medvedev has much to prove that he is competent to continue and build on the legacy that Putin has established. However, there are some prevalent shortcomings with Russia that Medvedev must consider and amend during his tenure, such as its legal structure, overreliance on petrodollars, and development of its infrastructure. Whether he does exercise power that is independent from the influence of Putin and how effective he is in implementing his policies will determine the extent to which Russia will be a world power.

In 2003 the destruction of Yukos, Russia’s largest oil company, and the imprisonment of its owner, Mikhail Khodorkovsky, on accounts of fraud and tax evasion negated any moves to strengthen Russia’s legal system. Consequently, this symbolic move to crackdown on Russia’s oligarchs has instilled a sense of trepidation in many business owners. Putin’s economic advisor, Andrei Illarionov, best summarizes the past and current feelings toward its judicial system when he states, “Instead of cultivating the rule of law, as Mr. Putin promised, Russia was subjected to the rule of thugs.” A byproduct of the backward legal system is the rampant corruption that has risen to worse levels since the 1990s. Unfortunately, it is still common to read news of the mafia carrying out illegal operations and making mob hits. Although the Kremlin acts as an activist against corruption, media headlines often verify the inextricable link between the government and the mafia. On the corruption perceptions index, Russia ranks a mere 143 out of the 179 countries surveyed. At such a poor standing, eradicating corruption is an imperative step for Russia to become a more globally reputable nation.

Reforms have to be made to Russia’s judicial system to infuse a stronger sense of trust between the business people and its leaders, which will assuredly promote economic growth and healthy competition. Widespread corruption has served as a hindrance to reaching the country’s full potential. One of the primary reasons why corruption is so pervasive stems from the high levels of regulation and bureaucracy that have remained with Russia since the fall of the Soviet Union. In Russia it is accepted that in order to get anything done, forms of bribery have to be given to officials to turn a blind eye to the rules, as seen in the following quote from a citizen, “If everyone followed every rule and instruction in Russia, the country would grind to a halt.” The more insidious form of bribery comes directly from the Kremlin, which entails state officials and their friends acting in collusion in unscrupulous business deals. The extent to which Medvedev and his administration can abate corruption is a fundamental challenge that the rest of the world will be expecting him to stand up to, in hopes of being perceived as a more lawful and first world superpower.

The collapse of the Soviet Union led to the privatization of large scale state run corporations, usually in the oil, gas, mining, and metal production industries. The ability of powerful businesspeople to acquire, reorganize, and turn poorly run Soviet-era assets into lucrative entities is the primary reason for Russia’s influential economic position today. The fact that its economy is still supported by a few of these giant companies poses a problem in terms of insufficient competition, bureaucracy, and lack of diversification. According to the World Bank, small and medium sized businesses make up less than 15% of the GDP, while only 5% of firms have been newly formed in the past ten years. The limited effect that these startup companies have on large incumbents to generate greater productivity is a clear factor of weak competition. Despite foreign direct investment doubling to $27.8 billion last year, this amount accounts for only 2.2% of its GDP. Investment from overseas investors could be significantly increased if Russia were to eliminate the unnecessary red tape that is deterring them from recognizing its true value.

According to the Institute of Economic Analysis, oil and gas made up 31.6% of Russia’s GDP in 2007, up from 12.7% in 1999. Oil, being refined in the graphic to the left, has saturated its economy due to its overdependence on natural resources, which make up 80% of the nation’s exports. A major problem is occurring as petrodollars are flowing into Russia and are raising the disposable income of consumers; however, domestic manufacturing is growing at a much slower rate. The ruble has been appreciating rapidly and as a result, has hurt Russian producers. In addition, there is a lower demand for Russian produced goods that are often seen as low quality, compared to the highly desired foreign brands. The emergence of Russia’s state capitalism is attributed mainly to a combination of its appreciating currency and rising oil prices around the world. The reality is that no economy can have sustainable growth in the long run if it is over reliant on oil; the nature of this commodity creates instability because it is highly volatile in the global markets, especially for a natural resource that will eventually be depleted. In order to capture the vision of a promising economic outlook, Russia must make every effort to diversify from petrodollars and concentrate on developing its domestic manufacturing, which will serve as an alternative stimulus to its economy. To build upon its domestic production capabilities, Russia should focus on developing its infrastructure.

A common theme amongst the BRIC nations is the necessity of solid public services that should be able to support high levels of growth in developing nations. Although it has been seventeen years since the demise of the Soviet Union, Russia’s infrastructure is still the key piece of the puzzle that is missing. Encompassing the largest land mass of any country, Russia faces a colossal challenge to renovating and constructing roads and highways that will allow for the efficient transportation of goods and humans. One initiative, that the government has proposed to spend $170 billion on, is its long-term Modernization of the Transportation Infrastructure in Russia program. This proposal led to a 80% increase from 2006 to 2007 in the federal budget for road building. The Kremlin’s ambitious plans for improving its streets and highways is just one of the many initiatives needed for Russia to sustain its future growth through diversifying its oil dependent economy and ensure its emergence as a global superpower. Hopefully under the reign of Medvedev will Russia be able to reform its legal system, diversify its economy, and develop its infrastructure.

Building BRICs: Gathering Essential Knowledge for the Future

As I was exploring the Web in search for new material, I decided to share some of the superlative resources regarding the BRIC countries that would also serve as a repository for my blog. I selected ten websites that are a combination of organizations, news sites, and blogs that I have included to my linkroll on the right hand column of my blog. The first arena of information that I will address are the global organizations that provide more broad content and statistics about the BRIC nations. First is the Asian Development Bank, which disseminates news and publications about fighting poverty in developing Asian countries. The statistics and reports on the future outlook of two of the BRICs, India and China, contain detailed data with supporting graphs and charts. Another organization with a similar objective of combating poverty is the Department for International Development, which has profiles for each of the BRICs. Despite its ease of navigation and user friendly layout, the website lacks sufficient and up-to-date news and publications for each country. If it could maintain its site with current issues, this association would be a more solid and reliable resource to refer to. The well renown International Monetary Fund has a superb website with a great user interface. It is consistently well organized and the amount of information is not visually overwhelming throughout the website. In addition, it offers an extensive database of publications, news, and data which is why I prioritize this website when searching for information. Rounding up the organizations is the World Bank, which allows for valuable interaction for its users. The e-discussions, blogs, and polls act as mediums of communication to foster meaningful discussion on the latest developments of the BRICs. These arenas of user involvement could be improved if they were linked on the navigation bar instead of being situated towards the bottom of the homepage. The news website, Emerging Markets, is a great hub that connects its viewers with financial news about developing economies; however, it requires a free subscription which is a deterrence for many news readers. Moreover, the site prevents in depth navigation while its appearance is too bland. It was difficult to locate websites that solely publish news on the BRICs. Nevertheless, I did come across Russia BRIC Countries News which acts as a type of web crawler for news articles about the BRIC nations. While this is not a succinct and well established website, it does release highly relevant and current news. A weekly published journal that I have read for several years is The Economist, which provides accurate and compelling insight on developments around the world with frequent witty caricatures, such as the image to the right. Its website is an indispensible tool for gathering information and for encouraging healthy debate in its opinions section. In a personal effort to promote the growing use of blogs as a useful resource, I chose three blogs discussing financial developments in emerging markets. The Analysis of Economies, Financial Markets, and Stock Markets Around the World blog has thought provoking opinions with numerous statistics to support it. With a large archive of information, this blog would generate more traffic if it had more frequent posts and if consideration was put into changing the site’s layout and heading. ETFolio.com is a blog that emphasizes its slogan, “Smart, Global, Powerful.” Its sharp design and supporting side columns verify the feeling and purpose of this blog, which is also used as a marketing platform to attract potential customers to the company’s financial services. A similar valuable resource to collecting data on the BRICs is the JetFin Emerging Markets Blog, which serves as a forum for interactive commentary on important global issues. In my opinion, the blog has useful labels, linkroll, and archive sections, but could benefit aesthetically if it incorporated vivid graphics into its posts. Perusing the web and successfully locating informative websites relating to the BRIC nations was a worthy learning experience. Not only were the homepages of organizations, news sites, and blogs helpful tools to me, but I hope they will serve as convenient external resources for you as well.