WEBVTT - Brazil's Real Problem Is Economics -- Not Graft 0:00:00.280 --> 0:00:02.599 So down. Before we get started today, we just wanted 0:00:02.600 --> 0:00:05.320 to take a moment to let everyone know about something 0:00:05.440 --> 0:00:07.400 new from Bloomberg. Do you want to hear what it is? 0:00:07.680 --> 0:00:11.520 Go for it? Well. Starting now, you can actually use 0:00:11.560 --> 0:00:15.320 our Io s app or Bloomberg's Google Chrome extension to 0:00:15.480 --> 0:00:20.640 scan any news story on any website, instantly revealing relevant 0:00:20.640 --> 0:00:24.280 news and market data from Bloomberg and other sources related 0:00:24.320 --> 0:00:28.160 to the companies and the people you're reading about. So really, 0:00:28.320 --> 0:00:30.680 no matter where you're reading the news, you can bring 0:00:30.720 --> 0:00:33.680 the power of Bloomberg's news and data with you. It's 0:00:33.720 --> 0:00:37.440 pretty amazing. Download our Io s app or search for 0:00:37.440 --> 0:00:40.599 the Bloomberg extension on the Chrome Store to try it out. 0:00:41.240 --> 0:00:48.479 Learn more at Bloomberg dot com, backslash lens. What the 0:00:48.560 --> 0:00:51.720 heck is going on in Brazil? Didn't they just remove 0:00:51.960 --> 0:00:56.600 one president amid alleged corruption, Then the vice president took over. 0:00:56.720 --> 0:01:01.720 Now he's facing demands he quit. He reportedly okayed hush 0:01:01.800 --> 0:01:05.280 money to a former House speaker, who of course is 0:01:05.480 --> 0:01:11.319 himself in jail for graft impeaching. Dil Marussef, the previous president, 0:01:11.720 --> 0:01:14.920 was supposed to put an end to the country's problems 0:01:15.400 --> 0:01:18.639 at least according to one narrative, and all the while 0:01:18.720 --> 0:01:22.800 the economy, one of the world's largest, continues to contract 0:01:23.360 --> 0:01:36.959 the country's worst recession. Welcome to Bloomberg Benchmark, a show 0:01:37.000 --> 0:01:41.120 about the global economy. I'm Daniel Moss, executive editor for 0:01:41.160 --> 0:01:44.640 Economics in New York, and I'm Scott Landman, an aclothic 0:01:44.800 --> 0:01:48.240 editor with Bloomberg in Washington. You know, Scott, you thought 0:01:48.280 --> 0:01:52.400 politics in the US had become divisive. Yet here we are, 0:01:52.560 --> 0:01:55.360 for the second time in a year, we have to 0:01:55.520 --> 0:01:59.880 sort through this Brazilian thicket of economic and political difficulties. 0:02:00.040 --> 0:02:04.280 Thank god we have Viviani Rodriguez here with us, managing 0:02:04.400 --> 0:02:08.520 editor at Bloomberg for Latin American economic and government news. 0:02:09.120 --> 0:02:11.520 In a way, I'm sorry to say, we're welcoming you 0:02:11.560 --> 0:02:14.680 back a second time to talk about this. Yes, it 0:02:14.800 --> 0:02:18.520 is almost like stranger than fiction than I mean. To 0:02:18.560 --> 0:02:21.200 be honest, I finally difficult to believe that both Brazilians 0:02:21.240 --> 0:02:26.240 expected to be living the situation again just about twelve 0:02:26.320 --> 0:02:29.640 months after you impeach the president in a very traumatic form. 0:02:30.000 --> 0:02:34.639 Now you're probably the best person of Bloomberg to decipher 0:02:34.720 --> 0:02:37.720 all this for us. You were born in sal Polo. 0:02:38.560 --> 0:02:45.560 You reside in New York, You've lived and reported in Brazil, Argentina, Mexico, 0:02:45.800 --> 0:02:49.320 and now you're in change of not just Latin American economics, 0:02:49.400 --> 0:02:53.040 but Latin American government as well. So look, help us 0:02:53.040 --> 0:02:56.840 out here. The narrative went, once we get rid of 0:02:56.880 --> 0:03:01.200 President Dilma Russov, all the country problems will be solved 0:03:01.200 --> 0:03:05.639 and the economy can take off. What. Yes, there's there's 0:03:05.639 --> 0:03:09.000 two waste of seeing this question, right. I mean, there 0:03:09.120 --> 0:03:13.400 was a lot of instability, giving the situation of Russef 0:03:13.520 --> 0:03:15.320 and the Workers Party in the build up for the 0:03:15.760 --> 0:03:19.440 for the impeachment, actually the country was just completely unmanageable 0:03:19.480 --> 0:03:23.359 and governable. So people really wanted to see that situation addressed, 0:03:23.680 --> 0:03:26.360 and a lot of people, especially markets, right said, while 0:03:26.400 --> 0:03:29.359 the moment Roussef goes, the moment the Workers Parties goes 0:03:29.400 --> 0:03:33.400 from Brazil presidency, I mean, everything will be served in 0:03:33.480 --> 0:03:37.840 the markets will take off, Everything would be just fine. Obviously, 0:03:38.160 --> 0:03:41.280 what happened is that the state of poor state of 0:03:41.320 --> 0:03:45.120 Brazil economy was so tremendous, right, that the lift back 0:03:45.480 --> 0:03:49.400 that economy from the depths of a horrific recession proved 0:03:49.560 --> 0:03:53.040 way more difficult than anyone has anticipated, especially in the 0:03:53.080 --> 0:03:56.920 absence of some sort of commodity boom helping in economy 0:03:57.280 --> 0:04:01.560 like Brazil. But also the fact that the Brazilian political 0:04:01.640 --> 0:04:06.480 system it's really flawed, and that that corruption has been 0:04:06.600 --> 0:04:09.800 running rampant in the system, and that is not something 0:04:09.840 --> 0:04:13.520 that you eradicate. So in one go, Viv, can you 0:04:13.560 --> 0:04:16.120 elaborate on that for a minute and put all that 0:04:16.160 --> 0:04:19.919 in some historical context for us? I mean, what is 0:04:20.000 --> 0:04:23.839 it deep in the political and economic structure of Brazil 0:04:23.960 --> 0:04:27.400 that produces these lurches from crisis to crisis and it 0:04:27.520 --> 0:04:30.919 produces so much corruption as you just mentioned, well, I 0:04:30.920 --> 0:04:34.040 mean crisis to crisis, I would say, I mean, obviously 0:04:34.080 --> 0:04:37.159 these are emerging market economies, I mean heavily dependent on 0:04:37.200 --> 0:04:40.560 commodity prices. So if you once you want to lie 0:04:40.680 --> 0:04:43.359 just economically speaking, I mean it's it's Brazil is not 0:04:43.440 --> 0:04:47.599 alone in that dependence of externalist stimulus, right, But I 0:04:47.600 --> 0:04:49.599 believe your question is more related to the fact is 0:04:49.600 --> 0:04:53.479 there's something in Brazil and the political system that put 0:04:53.720 --> 0:04:57.560 us uh in this situation? Again? Yes, I know, right, 0:04:57.560 --> 0:05:00.400 I mean it is still pretty much you and say 0:05:00.400 --> 0:05:03.640 a new democracy, new democracy, giving that the country has 0:05:03.680 --> 0:05:08.760 got back from from the dictatorship in right, some of 0:05:08.800 --> 0:05:11.800 these governments and some of these party systems, is we 0:05:11.880 --> 0:05:14.520 have that thirty five parties in Brazil. It's it's a 0:05:14.640 --> 0:05:18.280 very fractured congress. And there's just a way of doing 0:05:18.320 --> 0:05:21.920 business in the countries that has always meddled and and 0:05:21.920 --> 0:05:25.440 and put you big money, big government and big companies together, 0:05:26.040 --> 0:05:28.120 right and and for a lot of people in Brazil, 0:05:28.279 --> 0:05:31.279 especially people in the political class in congress, just just 0:05:31.320 --> 0:05:33.760 the way business has always been done. Can this be 0:05:33.880 --> 0:05:37.840 traced back to its time as a Portuguese colony? Well, 0:05:38.080 --> 0:05:40.200 perhaps it's a little bit of a stretch. I mean, 0:05:40.440 --> 0:05:44.760 there is a culture obviously of the very big states 0:05:44.920 --> 0:05:49.279 owning very big companies and big enterprise, a system whereas 0:05:49.440 --> 0:05:53.040 where bureaucracy is very large and everywhere you go, you 0:05:53.120 --> 0:05:55.839 turn and you have a government arm there. So it's 0:05:56.560 --> 0:05:59.479 it's probably fair to say that you a system of 0:05:59.640 --> 0:06:03.000 you know, buying someone to issue a stamp for you 0:06:03.080 --> 0:06:05.840 to get something done. I mean it's probably happening for 0:06:06.400 --> 0:06:10.359 the past five years, but in this particular case, I 0:06:10.400 --> 0:06:13.880 mean it's it's just that in the last ten fifting years, 0:06:13.880 --> 0:06:17.159 I mean, it became really institutionalized as you involved, pretty 0:06:17.200 --> 0:06:20.120 much everybody and every branch in the government has been 0:06:20.279 --> 0:06:25.840 very especially financing the big conceptions to the big business. Uh. 0:06:26.160 --> 0:06:28.800 I mean you could see, you know, all these companies 0:06:28.800 --> 0:06:32.960 ocuatives and just paying so many deputies and and and 0:06:33.200 --> 0:06:36.160 ministers and everybody just in order to get things done. Now, 0:06:36.200 --> 0:06:39.600 this is a very fast moving story. Put us inside 0:06:39.680 --> 0:06:43.480 the room. What supposedly happened and you just talked about 0:06:43.520 --> 0:06:46.080 getting a stamp for something, all of a sudden we're 0:06:46.120 --> 0:06:49.800 talking about a meat packing company. Well, what what happened 0:06:49.800 --> 0:06:53.039 in this particular situation. Let's contextualize this. I mean, you 0:06:53.080 --> 0:06:55.039 have to remember that for the last three years in 0:06:55.080 --> 0:07:01.440 Brazil you have an ongoing and massive probe Old car Wash. 0:07:01.680 --> 0:07:06.080 We can discuss the name shortly, but this this basically 0:07:06.080 --> 0:07:09.120 what happened here is that there's a group of prosecutors 0:07:09.120 --> 0:07:12.960 of federal prosecutors started really unearthing and prosecuting and going 0:07:13.000 --> 0:07:17.960 after big cover up schemes and kickback schemes, initially involving 0:07:18.200 --> 0:07:22.520 mostly the state oil company Petrol Brass right, But as 0:07:22.560 --> 0:07:24.800 they started digging forward, I mean he started seeing that 0:07:25.040 --> 0:07:28.800 this type of kickback scheme, you know, it was almost 0:07:29.200 --> 0:07:31.520 major companies in Brazil were involved with all of this 0:07:31.680 --> 0:07:34.400 and with the government, you know, with the bags of 0:07:34.400 --> 0:07:38.360 money following in both directions. Here in this particular case, 0:07:38.800 --> 0:07:40.680 I made it. What happened last week is that you 0:07:40.760 --> 0:07:44.640 had two executives connected to JBS, which is the world's 0:07:44.680 --> 0:07:48.640 largest meat producing company. Um. These men are billionaires and 0:07:48.640 --> 0:07:52.560 and as you can imagine, run a a immensely large 0:07:52.680 --> 0:07:57.240 and powerful company in Brazil, like Brazilian stake precisely, and 0:07:57.280 --> 0:08:01.800 they basically recorded a conversation sation with with the president 0:08:02.320 --> 0:08:08.200 in which allegedly the president gave his endorsement for these 0:08:08.240 --> 0:08:12.360 executives to keep paying hush money to the menu sited 0:08:12.400 --> 0:08:15.840 earlier on the former Speaker of the House at Lord Laconia, 0:08:15.840 --> 0:08:19.320 who is now in jail, to just keep quiet, right uh. 0:08:19.360 --> 0:08:23.400 And they presented this recording to prosecutors in car wash 0:08:23.800 --> 0:08:26.640 as evidence trying to cut some sort of plea bargain 0:08:27.200 --> 0:08:31.520 agreements here to avoid prosecution or you know, or avoid jail. 0:08:32.040 --> 0:08:35.240 Vivn Dan, you know, I'm old enough to remember when 0:08:35.640 --> 0:08:40.240 we covered Brazil as one of the four Brick countries Brazil, Russia, 0:08:40.400 --> 0:08:44.160 India and China that were known as the emerging markets 0:08:44.200 --> 0:08:48.040 where you get pretty solid economic growth driven in part 0:08:48.080 --> 0:08:52.559 by commodity boom. And uh. You know, Brazil's economy had 0:08:52.600 --> 0:08:56.040 been growing at a pretty nice rate some years ago. 0:08:56.240 --> 0:08:59.840 And you know, I wonder how much of this corruption 0:09:00.160 --> 0:09:03.120 or how much of this is coming to light because 0:09:03.160 --> 0:09:07.760 you have an economic situation now where Brazil's economy has 0:09:07.760 --> 0:09:11.280 actually been shrinking and it's just not the leading light 0:09:11.480 --> 0:09:14.560 that it used to be. Well, it's definitely part of 0:09:14.600 --> 0:09:17.000 the problem. The economy started to slow a couple of 0:09:17.160 --> 0:09:20.199 years ago, and this aggravated the problems of doom or 0:09:20.280 --> 0:09:24.640 receive for sure. I mean she had to handle unemployment 0:09:24.920 --> 0:09:28.000 and death sits and so on and so forth. But 0:09:28.360 --> 0:09:32.600 there's no doubt also that the crisis itself aggravated the problem. Right, 0:09:32.600 --> 0:09:34.040 So now we're in a situation a little bit the 0:09:34.120 --> 0:09:36.440 chicken and the egg, right. I mean, the tragedy in 0:09:36.440 --> 0:09:38.960 all of this is that we were beginning to see 0:09:39.200 --> 0:09:42.560 after we're near for the first time, uh at last month, 0:09:42.640 --> 0:09:45.040 the beginning of some green shoots here. I mean, there's 0:09:45.040 --> 0:09:48.920 been some progress, especially in inflation front. The central bank 0:09:48.960 --> 0:09:52.160 has been very aggressive to contain inflation. Interest rates were 0:09:52.200 --> 0:09:54.920 going down, so you were seeing people beginning to feel 0:09:54.960 --> 0:09:59.160 more comfortable in taking longer term financing, for example, and 0:09:59.360 --> 0:10:01.560 right now you have brought the country again to a 0:10:01.559 --> 0:10:04.800 complete stand still. We were on the verge of voting 0:10:04.960 --> 0:10:09.199 very key important reforms, especially the pension reformer, was expected 0:10:09.240 --> 0:10:12.800 to be put to to a vote incoming days, and 0:10:12.840 --> 0:10:14.800 now the finance minister just said it's going to take 0:10:14.800 --> 0:10:18.440 it to very least weeks if I mean at all, 0:10:18.520 --> 0:10:21.160 we're going to see these passing. What's some shape or 0:10:21.160 --> 0:10:24.400 form so obviously just does not bode well at all 0:10:24.480 --> 0:10:27.959 for Brazil, So viv just so we can be completely 0:10:28.120 --> 0:10:34.240 clear about this. What troubles Brazil's political class is not 0:10:34.400 --> 0:10:40.240 corruption per se, but poor economic performance. If you want 0:10:40.240 --> 0:10:44.440 to extrapolate mid seventies in the US, the economy wasn't 0:10:44.440 --> 0:10:51.080 doing well. Nixon left late nineties, economy doing well, Bill 0:10:51.120 --> 0:10:57.880 Clinton stays, Brazil economy doing poorly, ruceph leaves economy is 0:10:57.920 --> 0:11:02.960 still doing poorly. Tema question mark, well, I mean, it's 0:11:03.000 --> 0:11:06.559 harder to put together a position right and to get 0:11:06.600 --> 0:11:09.400 your voice heard. If the economy is booming, you know, 0:11:09.480 --> 0:11:12.640 you better have things they are very very strong in 0:11:12.720 --> 0:11:16.480 order to get people's attention right. But when economies are weak, 0:11:16.920 --> 0:11:19.640 I mean, people started going they're going to start investigating 0:11:19.640 --> 0:11:21.600 why they're a weak to begin with, and people want 0:11:21.600 --> 0:11:24.600 to be they want more accountability of the money that 0:11:24.800 --> 0:11:27.320 is out there, and that's when they started poking around 0:11:27.360 --> 0:11:28.920 and realized that a lot of the money. In the 0:11:28.960 --> 0:11:32.960 case of Brazil, it started disappearing. Right Remember Dilma was 0:11:33.080 --> 0:11:36.320 impeached by and large by the meddling with the country's 0:11:36.320 --> 0:11:40.800 physicals accounts. I think it's we shouldn't say that, you know, 0:11:41.040 --> 0:11:45.640 they wouldn't be corruption in Brazil, it's just the weak economy. 0:11:45.679 --> 0:11:48.679 I I disagree with you in that one. I do 0:11:48.800 --> 0:11:52.280 think that it was easier to hide that much easier 0:11:52.280 --> 0:11:55.720 to hide that when things are going fine. Right now 0:11:55.760 --> 0:11:58.040 that things are not going well, I mean, it's it's 0:11:58.080 --> 0:12:01.559 just become way more difficult to uh to high that 0:12:01.600 --> 0:12:05.320 you were stealing villions and villions from from taxpayers. Viv 0:12:05.360 --> 0:12:08.040 can you talk a little bit about the divisions we've 0:12:08.080 --> 0:12:11.520 seen between the what the markets are saying and what 0:12:11.640 --> 0:12:15.120 the public thinks. I mean, you had a pretty significant 0:12:15.200 --> 0:12:17.640 run up in the country's stock market over the past 0:12:17.760 --> 0:12:22.320 year as markets saw the new president's reform plans as 0:12:22.400 --> 0:12:24.480 as a way to boost the economy, and you know, 0:12:24.520 --> 0:12:27.880 the contraction of the economy hasn't been as bad as 0:12:27.920 --> 0:12:30.960 it was before. And the markets took a pretty big 0:12:31.000 --> 0:12:34.680 plunge on the news of this latest uh, the latest 0:12:34.720 --> 0:12:38.400 tape and investigation. And on the other hand, the public 0:12:38.440 --> 0:12:43.520 perception of Timor's policy has been completely a complete disaster. 0:12:43.600 --> 0:12:46.280 I mean, they hate him, don't they. What's going on here? 0:12:46.840 --> 0:12:50.400 You're right? I mean he's an extremely unpopular president. He's 0:12:50.640 --> 0:12:53.920 approval ratings have been hovering around the ten percent mark, 0:12:54.360 --> 0:12:57.120 which to try to again to rule on a congress 0:12:57.160 --> 0:13:00.640 with so many parties is just like almost impossible. And 0:13:00.640 --> 0:13:02.720 and and you touched on a very interesting point. It 0:13:02.760 --> 0:13:05.400 has been a big question market for us here as 0:13:05.480 --> 0:13:09.240 journalists too. I mean, people on the streets hate him. 0:13:09.360 --> 0:13:11.760 People on the streets by and large do not support 0:13:11.880 --> 0:13:16.000 his reforms. People are still feeling the pinch of of 0:13:16.160 --> 0:13:21.040 economic recession. But yet markets just love him, right, and 0:13:21.120 --> 0:13:24.240 we see these fantastic rally I mean predicated on on 0:13:24.559 --> 0:13:28.920 the future Brazil boom that have yet to come back, right, 0:13:29.240 --> 0:13:31.320 I mean, so we we actually even wrote a couple 0:13:31.360 --> 0:13:33.480 of stories and say, well, our our markets a little 0:13:33.480 --> 0:13:37.240 bit overshooting here are going a little bit too too aggressive, 0:13:37.280 --> 0:13:41.520 to too bullish on Brazil, giving that the underlying fundamentals 0:13:41.559 --> 0:13:45.160 of the country are still far from from where they 0:13:45.200 --> 0:13:48.080 should be to justify some asset prices, write some asset 0:13:48.160 --> 0:13:51.880 valuations here, I mean, especially the agrily business sector is 0:13:52.240 --> 0:13:55.600 doing very well or has recovered considerably, but you have 0:13:55.720 --> 0:13:59.600 yet to see some portions of Brazilian industry really rebounding. 0:13:59.840 --> 0:14:02.560 And again that that consumption what we even had a 0:14:02.640 --> 0:14:05.319 name for it in Brazil, which called milagri but alto, 0:14:05.600 --> 0:14:08.559 which was the Brazilian miracle. When you started seeing people, 0:14:09.000 --> 0:14:13.079 you know, using credit cards and buying homes, cars, frades, traveling. 0:14:13.280 --> 0:14:16.600 I mean, this is we're far from our repeat. So I, 0:14:16.760 --> 0:14:21.440 like you, I asked myself, where is that optimism coming from? 0:14:21.520 --> 0:14:24.080 And and again we've been saying that this is a 0:14:24.120 --> 0:14:28.400 fragile government, and we had proof of this last Wednesday 0:14:28.400 --> 0:14:31.640 when the first news first were reported about these tapes. 0:14:31.680 --> 0:14:35.200 I mean, in one hour, this this rally, this bonanza, 0:14:35.320 --> 0:14:39.960 this belief in Brazil just completely disappeared. Right, So our 0:14:40.080 --> 0:14:43.200 suspicion and when we talk to people who really analyzed 0:14:43.280 --> 0:14:46.600 and and and investigate Brazil is that until we actually 0:14:46.640 --> 0:14:53.400 have new direct elections with very legitimate, incredible candidates and 0:14:53.400 --> 0:14:58.200 in a very legitimate, incredible government, right voted again directly 0:14:58.280 --> 0:15:01.480 by by by people. All I mean you, you will 0:15:01.520 --> 0:15:05.080 see anyone in power to to to be really under attack. 0:15:05.720 --> 0:15:09.440 That we have elections in Brazil every four years, just 0:15:09.520 --> 0:15:13.640 like the United States. It's also a fixed term. It's 0:15:13.680 --> 0:15:17.480 easy to forget this. But Dilma Roussef was elected twice 0:15:18.320 --> 0:15:22.480 quite comfortably. So if we have fresh elections in Brazil 0:15:23.560 --> 0:15:27.560 and the economy is still contracting, the car Wash investigation 0:15:27.680 --> 0:15:33.400 is still alive rattling around, where does that leave us. Well, 0:15:33.480 --> 0:15:35.520 the first time that she was elected, yes, she was 0:15:35.600 --> 0:15:38.960 elected quite comfortably. Second time it was a much tighter margin, 0:15:39.520 --> 0:15:42.400 And that in Brazil is a problem, especially because, as 0:15:42.440 --> 0:15:45.320 I told you a couple of times, the shake up 0:15:45.360 --> 0:15:49.280 and in the makeup of the Brazilian Congress. Right. Uh. Also, 0:15:49.320 --> 0:15:53.800 there's been questions that surfaced throughout the impeachment process about 0:15:54.040 --> 0:15:57.480 the way that they portray doing the financing, for doing 0:15:57.480 --> 0:16:01.240 the campaign. The true state of Brazil therese economy and 0:16:01.240 --> 0:16:03.320 and and it has been agreed by some people and 0:16:03.360 --> 0:16:06.080 by some of the authorities that the government kind of 0:16:06.360 --> 0:16:09.040 fiddled with the numbers there, right, so that the economy 0:16:09.120 --> 0:16:11.720 wasn't doing nearly as well as it was in the 0:16:11.760 --> 0:16:15.600 build up to the to her re election. So I 0:16:15.640 --> 0:16:18.360 mean going forward, I mean, and this is what it's 0:16:18.360 --> 0:16:21.360 really interesting. We were we all thought that this was 0:16:21.360 --> 0:16:23.880 going to be a transition government, that Tamer was going 0:16:23.880 --> 0:16:26.720 to be the guy who is going to lay the foundations, 0:16:26.800 --> 0:16:31.360 and you know, uh, and the bleeding of Brazil stabilized 0:16:31.360 --> 0:16:33.840 the economy, lay the grounds, force a couple of big, 0:16:33.880 --> 0:16:37.160 big reforms, and the next group right income to TuS 0:16:37.240 --> 0:16:39.960 any team, you bring the people to the streets, you 0:16:40.080 --> 0:16:42.480 vote for the new new president, and you and you 0:16:42.560 --> 0:16:45.920 have a new country. But now it's all, you know, 0:16:46.000 --> 0:16:50.480 a big question mark again. But let's say then we 0:16:50.600 --> 0:16:53.800 get a great election result, a great slate of candidates, 0:16:54.560 --> 0:16:59.920 whoever they may be, and commodities are still where they are, right, 0:17:00.360 --> 0:17:05.120 can Brazil be great without commodities? And by the way, 0:17:05.200 --> 0:17:09.240 why is it still so dependent on commodities? Well, several 0:17:09.320 --> 0:17:14.040 questions here. First, we don't know if we're going to 0:17:14.080 --> 0:17:16.160 have elections in two thousand and eighteen or if we're 0:17:16.160 --> 0:17:18.760 going to have elections much earlier. We've got to see 0:17:18.800 --> 0:17:22.000 what comes and what happens with these investigations on the president. 0:17:22.080 --> 0:17:26.119 He's now really hanging by by a thread there, right, 0:17:26.119 --> 0:17:29.560 but assuming you know, somehow he pulls straight and then 0:17:29.600 --> 0:17:32.080 we really just get to to the to the earns 0:17:32.080 --> 0:17:34.879 in two thousand and eighteen, I mean, why are we 0:17:34.920 --> 0:17:37.359 so dependent in commodity? I mean, look at the makeup 0:17:37.400 --> 0:17:39.280 of Brazil's as a country. I mean, it's not a 0:17:39.359 --> 0:17:43.720 problem per said to be dependent on on commodities. I mean, 0:17:43.800 --> 0:17:47.760 is you're exploring a natural advantages in Actually Brazil's agree 0:17:47.800 --> 0:17:52.639 business sector is extremely efficient and competitive. So the question 0:17:52.680 --> 0:17:57.159 here is not whether Brazil should diminish these dependence on commodities, 0:17:57.400 --> 0:18:00.119 but should what does Brazil do with the money that 0:18:00.200 --> 0:18:03.560 it generates with the ugly business sector and with the 0:18:03.600 --> 0:18:06.600 commodity Do we invest in education? Do we promote other 0:18:06.680 --> 0:18:11.520 industries and services? Now precisely right, where is it going? 0:18:11.920 --> 0:18:14.080 I mean a good chunk of it. Apparently it has 0:18:14.119 --> 0:18:17.399 been siphoned to to you know, to just subsidize some 0:18:17.480 --> 0:18:20.480 of these so called national champions, right, and I mean 0:18:20.520 --> 0:18:23.640 in massive works and massive corruption that took a lot 0:18:23.640 --> 0:18:26.560 of money from Brazil's economy. I mean, are we in 0:18:26.640 --> 0:18:29.719 the business? Are are we really competitive in some for 0:18:29.760 --> 0:18:33.320 example the auto industry, which is to be very, very 0:18:33.359 --> 0:18:35.840 big in Brazil. Can we do this better than Mexico 0:18:35.960 --> 0:18:39.000 for example? Big question? I honestly don't know the answer. 0:18:39.000 --> 0:18:40.960 But is this work? We want to be competitive for 0:18:41.000 --> 0:18:44.480 example in Brazil? I mean and again I mean do 0:18:44.560 --> 0:18:47.440 we Why don't we invest more in bio technology? Why 0:18:47.640 --> 0:18:50.679 don't we invest more in software and services? With with 0:18:50.760 --> 0:18:54.800 the society so so large and diverse as Brazil society 0:18:54.800 --> 0:18:58.440 with so many large cities in Brazil, do people own 0:18:58.480 --> 0:19:01.959 their houses? Do they? Again? Do they go to school 0:19:01.960 --> 0:19:06.640 and high school and universities? And not nearly as much 0:19:06.680 --> 0:19:09.840 as a country the size of Brazil and with the 0:19:09.840 --> 0:19:13.000 the overall GDP that the country processes. No, this is 0:19:13.040 --> 0:19:15.480 one of the world's stands largest economies, you know, over 0:19:15.560 --> 0:19:19.520 three in dollars GDP? Why is Brazil not richer right 0:19:19.640 --> 0:19:23.440 or wealthier in a certain way? Before we wrap this up, 0:19:23.960 --> 0:19:28.960 I'm just dying to have you remind our listeners what 0:19:29.280 --> 0:19:32.720 is car wash? How did this investigation get to be 0:19:32.840 --> 0:19:36.320 called car wash? Now? I've actually been to the gas 0:19:36.359 --> 0:19:42.040 station that where all this action supposedly unfolded. It's next 0:19:42.040 --> 0:19:45.439 to a steakhouse, but there's not actually a car wash there. 0:19:45.560 --> 0:19:48.000 Help us out with them. It's a bit of a mystery, 0:19:48.080 --> 0:19:50.640 to be honest with you. Yes, I mean the name 0:19:50.720 --> 0:19:54.440 just stuck and stayed. But it relates to this gas 0:19:54.720 --> 0:19:57.040 It relates to the gas station in Brazili where some 0:19:57.119 --> 0:20:00.440 of these people will take you in a car and 0:20:00.640 --> 0:20:03.480 uh and give you know, all these bags of money 0:20:03.520 --> 0:20:06.080 and you know, as part of these kickback scheme. And 0:20:06.080 --> 0:20:08.120 then one day someone also said that, you know, where 0:20:08.119 --> 0:20:09.720 are you going on, I'm just going to the car wash. 0:20:09.960 --> 0:20:13.240 So but there's it's all kind of urban legend or 0:20:13.320 --> 0:20:15.760 lore and on how the name kind of came to 0:20:15.840 --> 0:20:19.280 be and then now it really stuck, uh and it 0:20:19.320 --> 0:20:22.720 became car wash. Let me finish with a question that's 0:20:22.760 --> 0:20:26.520 on my mind of at what point does this become 0:20:26.760 --> 0:20:31.760 a danger to democracy itself in Brazil all these corruption 0:20:31.920 --> 0:20:37.000 investigations too. Is the country going to backslide into military rules? 0:20:37.000 --> 0:20:40.480 There a possibility of electing uh, somebody who's a real 0:20:41.200 --> 0:20:45.320 you know, more authoritarian than the current system provides, or 0:20:45.440 --> 0:20:48.879 or does Brazil have a fairly strong system kind of 0:20:48.920 --> 0:20:53.560 parliamentary system at its core that that will afford such protections. 0:20:53.600 --> 0:20:56.040 I do think that from from the risks that you 0:20:56.440 --> 0:21:00.840 are raised here, the one that is potentially, uh you know, 0:21:01.080 --> 0:21:03.159 with with more of a chance of taking places, is 0:21:03.200 --> 0:21:07.560 that we could potentially choose a maverick or a very outsider. 0:21:07.840 --> 0:21:11.600 I wouldn't say an authoritarian, because the checks and balances 0:21:11.600 --> 0:21:15.000 now in Brazil constitution will prevent a lot of things 0:21:15.000 --> 0:21:18.439 from happening, for example, But it's just a very populist guy, 0:21:18.640 --> 0:21:21.440 right or woman who could potentially again, I mean, I'm 0:21:21.480 --> 0:21:23.439 going to like myself and I'm going to do this. 0:21:23.560 --> 0:21:26.080 I'm going to hunt everybody down. I'm going to fix 0:21:26.119 --> 0:21:29.040 all this by taking money from here and distributing. So, 0:21:29.440 --> 0:21:33.199 I mean, the disenchantment with the political class and the 0:21:33.240 --> 0:21:37.040 political establishment in Brazil is a reality. So so we 0:21:37.080 --> 0:21:40.320 are prone now from an outsider to come in and 0:21:40.359 --> 0:21:46.080 potentially sweep the election, someone with completely unprepared to be 0:21:46.920 --> 0:21:51.400 sitting at the top place, which, by the way, it's 0:21:51.440 --> 0:21:54.920 happening elsewhere in the globe right now, so as pert 0:21:54.960 --> 0:21:59.520 the democracy and military and the army on the street. Again, 0:21:59.600 --> 0:22:02.520 it's it's just not the conditions in Brazil right now. 0:22:02.760 --> 0:22:05.879 It isn't people are not going that way. They're not 0:22:05.920 --> 0:22:08.840 saying only the military can solve this or at least, 0:22:09.119 --> 0:22:11.880 you know, in a in a consistent form. Brazilians are 0:22:11.960 --> 0:22:15.480 very attached now to the democratic process, and it will 0:22:15.520 --> 0:22:19.359 be really difficult for the society to backslide to that 0:22:19.480 --> 0:22:24.240 degree that they would, uh, you know, endorse in favor 0:22:24.720 --> 0:22:27.439 you know, such such type of regime. And honestly, not 0:22:27.520 --> 0:22:30.240 even the army wants that. And and and we don't 0:22:30.240 --> 0:22:33.480 have a system of armed forces in Brazil organized to 0:22:33.600 --> 0:22:36.920 take over the country even if they wanted, for example, 0:22:37.280 --> 0:22:41.720 who wants a shrinking economy on their hands? Precisely, Viviani, 0:22:41.920 --> 0:22:45.639 great to talk to you. And as Brazil just struggles 0:22:45.680 --> 0:22:49.520 in this thicket of political and economic chaos, we're probably 0:22:49.520 --> 0:22:58.560 going to come back to again. Thank you. Then, you know, 0:22:58.640 --> 0:23:01.239 I thought the points Scott that Viviani made at the 0:23:01.400 --> 0:23:04.439 end about the army remaining in its barracks is a 0:23:04.480 --> 0:23:08.080 really critical one. I'm so glad you asked that. That's 0:23:08.160 --> 0:23:10.439 kind of the key point in the end. You know, 0:23:10.480 --> 0:23:14.639 we've we've seen some other emerging markets actually go back 0:23:14.720 --> 0:23:18.240 from democracy into military rule, or at least the one 0:23:18.280 --> 0:23:22.359 on my mind for example, is is Thailand, so they're 0:23:22.400 --> 0:23:25.479 you know, they're still being ruled by the military several 0:23:25.560 --> 0:23:29.520 years into into that regime. You know, it's a it's 0:23:29.520 --> 0:23:32.800 a really fascinating situation and with all the populism and 0:23:33.480 --> 0:23:36.199 new leaders around the world, something to keep an eye on. 0:23:37.000 --> 0:23:41.080 This actual gas station is a source of endless fascination 0:23:41.200 --> 0:23:43.879 for me. There is no car wash there, but I 0:23:43.920 --> 0:23:46.960 will say this, Scott. It is a massive gas station 0:23:47.560 --> 0:23:51.480 and at night it's bathed in a bright, bright white light. 0:23:51.600 --> 0:23:55.199 I mean, there is plenty of scope for stuff to 0:23:55.280 --> 0:23:59.280 go on at this gas station because it's vast. It's massive, 0:24:00.320 --> 0:24:03.880 makes you wonder right. Benchmark will be back next week 0:24:03.960 --> 0:24:06.480 and until then, you can find us on the Bloomberg terminal, 0:24:06.480 --> 0:24:09.480 Bloomberg dot com, or Bloomberg app, as well as on 0:24:09.560 --> 0:24:13.639 Apple podcast, Pocketcasts, and Stitcher. While you're there, take a 0:24:13.640 --> 0:24:16.040 minute to rate and review the show so more listeners 0:24:16.040 --> 0:24:18.520 can find us and let us know what you thought 0:24:18.560 --> 0:24:20.960 of the show. You can follow me on Twitter at 0:24:21.160 --> 0:24:25.719 Scott Landman Dan you are at Moss Underscore Echo and 0:24:25.880 --> 0:24:30.160 Viv You are at I Am at viv Underscore Rod thirteen. 0:24:30.720 --> 0:24:33.320