tv Keiser Report RT December 26, 2019 3:30pm-4:01pm EST
guys are this is the kaiser report max and stacey are continuing on our south american tour and as you can see behind me we are in rio de janeiro mike so beautiful so much going on this is a country in transition i think stacy well that of course is sugarloaf back there behind you one of the most famous scenes of rio de janeiro we are here just as strong slap those tariffs on brazil for a legend really manipulating their currency but just like argentina of course they aren't manipulating their currency they're having a hard time maintaining the value of their currency not as bad as argentina here of course but of course but also narrow their new president you know he's been in office for a year he's a huge family of trump so the word on the street is how much he was humiliated by
trump tweeting this out without informing him 1st yeah he was totally in shock with those tariffs that were applied and that's the world of trumps of also don is to get with the program i also want to say like when we arrived at the airport here in rio de janeiro it like 3 in the afternoon i was surprised that we route literally the only 2 in the immigration line quite a few behind us had you know gone through the international transfer line but nevertheless it was much quieter than i thought it would be i expected like boomtown this is a southern hemisphere for their summer are winter up north i thought it would be more people here more tourists and something that i wasn't sure where that was about but it was quite shocking yeah i was shocked to learn that actually in rio de janeiro it's not really a big boom we touristy place and that would be an area of potential growth right i mean it's very famous people the idea of coming to rio and on the beach and all this stuff is very in people's minds and they would dream of coming here but in
fact the tourism industry. it is not really work could be due to a certain lack of infrastructure etc so that could be an area of big growth it could also be all the headlines in the news about the violence throughout rio it is one of the deadliest i believe the deadliest states of brazil and there's like 22 states here and i think there were something like 6000 or 6000 murders in 2019 so i mean big from chicago and come down here during the winter and the murder rate would be roughly equivalent yes a lot sunnier but also there has been an ongoing corruption case number the carwash case that poll then. and other major figures here so when we landed there was this headline this could be really interesting rio de janeiro's ex governor currently facing about is illian years in jail for corruption has reportedly signed a plea bargain deal just imagine the size of the fishes he must be involved in this whistleblowing for that have been offered he's been sentenced so something like 266 years in prison for you know corruption and he's giving back hundreds of millions
of ryall that he stole and he looks like he's going to finger some judges that were involved in this mass corruption case so this has been a problem of course stifling growth in this economy because of course with foreign direct investment and other sort of investors they do get concerned that you have to pay off and this guy was paid off millions of dollars and cut kickbacks for you know allocating various contracts for example building infrastructure in rio right so is there an attempt to really crack down on the corruption and if so it could be like a court of scaf the moment remember during russia's transition to a more free market. country they got rid of the oligarchs are trying to get rid of the oligarchs and course coffee was a high profile example that this could be similar there are dozens and dozens and dozens and dozens of people it's not just this guy was a politician so they're cracking down on politicians and the politicians receiving the kickbacks from major multinationals and various powerful corp. creations that
control various sectors of the economy here it is a 2 trillion dollar economy a car according to the world bank 2017 data that gives it a g.d.p. per capita of $9800.00 so it's a pretty big economy and a huge economy with p.p.p. you know when they adjust for purchasing power it's a really massive economy it's got a lot of resources it's got a lot of potential be a slick so much of south america the colonial past as has been created a lot of the legacy problems and also during the seventy's and eighty's a lot of the the the interference from abroad particularly from the u.s. has caused a lot of problems so this is the mountain that needs to be climbed yes our guest in the 2nd half robert wilson can go over some of the cone things because there is a specific structure formed in this economy because that dates back hundreds of years from the portuguese empire so it is unusual wiki pedia says that the economy
of brazil is a developing free market economy it is the 9th largest in the world by a nominal g.d.p. and the 8th largest by purchasing power parity the country has an estimated $21.00 trillion dollars worth of natural resources which include vast amounts of gold iron and timber of course timber we'll talk about in the next episode that's the amazon it's a resource rich country and but they are saddled with a lot of debt and because they have to play ball with the debt sellers the bond sellers the the i.m.f. and these other multi global the global institutions that love to straddle people with debt and so this is going to be another impediment to get to a place of sustained growth more than debt their debt is quite manageable here certainly compared to argentina where we are by argentina as much better infrastructure than here brazil does not have much infrastructure robert wilson who
we talked to in the 2nd half you know he's done a lot of research on the. he's been a banker here for a year as in years and years and part of it is the government has an investment nor have private investors and that's because interest rates have generally been about 14 and a half percent over the past few decades so they make more money lending risk closely rather than resting in huge infrastructure projects but now interest rates are 4 and a half percent here. and inflation is 3 percent so you would expect a boom but that hasn't happened they did have a lot of a local rio de janeiro investment with the olympics so they extended for example that the metro system out to the beach much to the disdain of a lot of wealthy people living in places like i've been ema and level on but here's a story from reuters about the ongoing economic situation here because they've only been growing at one percent for the past few years this in a situation of the global g.d.p. booming and markets booming and they're only grown by one percent here brazil economic stars align turning 2020 into make or break year unprecedented monetary
stimulus huge strides in the government's reform agenda to bring public finances under control and open up the economy and a record low exchange rate should help fuel the boom sustained growth is long overdue the economy has struggled to grow much above one percent a year in each of the 3 years since the $2152016.00 crash making it the worst recovery from recession on record that the central bank just cut interest rates to 4 and a half percent which is very very low here so it has one of the most negative rates in the world essentially because of inflation running so low and yet interest rates as well so the right well capital flight is also a big problem so you have a lot of capital leaving the country because of the threat of taxation increased taxation on property and things like this certainly in argentina that was a huge case when since we've been here we saw argentina imposing huge amounts of a 30 percent tax on foreign exchange and things like that here we have an. new free
market. also has is cutting taxes he's removed the public sector from huge parts of the economy and his government has sat back expecting for foreign direct investment expecting private investors to step in where the government has stepped out but not none of that has emerged according to this reuters article about here in brazil so they're basically just stuck you know they're stuck they can't define a spark well my kind of thesis is it is amazing here right and the population is entrepreneurial you see it all over the streets you see it walking around but the headlines of all the danger the same thing happens with much of latin america and mexico you know we've been afraid in the past to go to mexico because all these headlines about danger danger danger cartels are going to get killed here you have the same thing right with a resource or a country about resources autonomy a low margin business yes so for a high margin business like services entertainment financial products you need to
have a story an appealing story you need to have dancing and singing and make it sound appealing right you can't be kind of like a truck driver in the back alley you know calling out somebody like don't dumpster dollar told you that right is like you i don't want to go there for a vacation right you've got to have a. go to liven it up a little bit he would think that would not be a problem in rio but now the reputation as other kind of you know like a teamster convention it's got to be more disney speak in disney of course they make their funds and much of america is a ron j. economy are on the global stage because not only do they have the u.s. dollar but they have intellectual property so thinking of the fact that these huge amazon which is amazing resource totally unexplored still to this day so the fact that they're willing to just chop it down and deforestation is rapidly increasing chop it down and sell it for timber and the fact is you know rainforest soil is
very bad is like it's not nutrient rich at all. also once the rains come it just washes away and it's hard to ever read grow the forest like we did in america like america chopped down their entire forest covering the country as well and then we grew it but you can't read grow the amazon so however with intellectual property there are so many plants and all sorts of wildlife that you could possibly package into pharmaceuticals for example the indigenous people there use these ingredients for their own products in the us sort of and pharmaceutical giants and france and switzerland come here and they they look for these ingredients but you know why not that's a higher value revenue stream that you can as a country collect for generations yet much higher margins on ip intellectual property and the rain forest possesses to actually a lot of pharmaceutical breakthroughs that you can then sell as. such an intellectual property you can scale that into billions and billions of dollars
where is what you chop down the rain forest is gone it's like i come back and it's a one time thing and so you know it doesn't make any sense selling off your gold supply is like gordon brown's are no move as the equivalent of the dumb member gordon brown who is the chancellor of the exchequer the i kingdom sold off half their goal that a global all time low for gold prices yet the same thing is like actually commodity prices there are all time lows as well so why sell off this precious resource of the amazon which will never be able to get back again but it is a sort of resource that you could extract. income for generations to come the current kind of mentality though of the ruling class aims not going down that path i mean i would guess in the leadership circles here in brazil some body to come along and say hey you know you have a greater opportunity here in this rain forest and just shopping the trees down you can actually get involved at a much higher margin business and you can become a global leader and develop some global brands i mean there's not
a lot of aside from the flow. flops there are lots of well it was there and i have like 5 areas that i gave in the sale of brazilian brand i'm not i've got to be honest yes personally and nuts but ratings agency s. and p. by the way did recently upgrade brazil's sovereign credit to positive from neutral but the important thing to note here about this economy much like say france and spain unemployment remains high 11.6 percent and those only is likely to come down gradually more than 12000000 brazilians are out of work the number of underemployed is around double that and the number of private sector informal jobs is now at a record high of 11 point $9000000.00 so many of these new jobs are again just like in america i would say very low paid gig economy sort of work so that's a difficult even despite the low interest rates if essentially negative real rates people aren't spending because they have horrible jobs right i mean china had all
the cheap labor and they were their workshop of the world and they went up the value chain to great brands brazil as the commodities they need to go up value chain brands like everything a break when we come back much more coming your way. and the united states presidential candidates debate the future of the u.s. and the world. mexico is a red state you see her but to get into the burning questions of this election cycle one topic every week will tax student debt trade wars corporate money universal basic. and more. with what's front running this sunday exclusively on our. my name is stuck. on the world social media let's just see what i don't see it's.
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i doubt. welcome back to the kaiser report i-max guys are time now to turn to robert well said he's a former banker term private equity investor has lived in rio de janeiro for 20 years robert welcome thank you really great to meet you as i do you want to dig into some of these issues you lived in rio for on 2 separate occasions over the past 2030 or 40 years the last time now here for 23 years describe the evolution you've seen the city said you 1st came here during the military dictatorship. a
huge evolution. when i 1st got here in the late seventy's just to give you an idea there are as you probably noticed on most of the buildings there are guardrails and barriers to entry to the buildings didn't exist and during the winter tension so real is going through a massive change in the past 40 years i mean obviously the lead up to the end of the dictatorship maybe 45 was kind of a precursor to the changes that we all experienced but part of those changes were. i guess you'd have to put part of it on brazil was doorstep was a former governor but the drug trade and a bunch of other things transformed the city dramatically the financial sector which was largely focused here and until the 1980 s. moved migrated to some pollo pretty much on mass real still has a good presence in private equity asset management looking at the economy you know
30000 feet down what's working well for brazil and where is that not working where the sector that's working i would say the best is agriculture that's the sector that you could say is a home grown 1st world sector. at least in terms of the technology and production in terms of infrastructure in terms of getting product to market it's not what you'd call the best logistically brazil's tools still has about i guess well over 80 or 85 percent of its transport of goods by road not by rail not by air not by water so the infrastructure is a bottleneck in brazil but the acceptor is a serious sector. and i think that you know obviously automobiles 'd is a major sector because it's technologically advanced. the aviation said a lot of car companies make factor here absolute there is no brazilian brand car
there is no brazilian very good they have a brazilian brand of car i don't think that would make sense you know i mean the competitively just that make any sense of the technology that the with the factories here have is actually state of the art so for brazil to carry over and try to transport that into a you know a brazilian automotive sector that's a tourist industry it's underdeveloped correct dramatically undeveloped because everyone knows rio de janeiro they know brazil but a same time it would be attracting more tourists it's not tracking more tourist i think the reason i mentioned like a person car company it seems like there's a lack of fabulousness in paris. if you well that's a great way to put it yeah you know there's a lack of sizzle and time in a brand i mean i have a card out every year ok that's that's been around for a while but is there hipster same there is a hipster scene. lamentably that his book hipster scene here which is obviously culturally driven you know the arts cinema it's cetera that's considered today left
wing. and frowned upon so you know that it cuts in a lot of different directions i mean there's no question tourism could be huge in brazil it sure is not here is the global leftwing resurgence they make politically maybe not getting great traction but these millennialism jhansi a are definitely identifying more i don't left side of the spectrum and they've got a lot of discretionary dollars they're having to write i think you're right about that and if brazil put its mind you know to really opening up the country to tourism and creating the infrastructure for tourism and infrastructure is really the bottleneck for everything but if they get if they could do that this country would be absolutely fabulous for infrastructure and it's a cultural legacy kind of overhanging the ability to break out of a legacy mentality if you will is there a legacy a mentality that stops some dynamic rother dynamism i think there is i think that the colonial history of the country is more a mindset. that manifests itself in the lack of things in the country i mean
there's a you know the tendency here is to always think about the idea of doing this but the practical measures to make it happen are you know lost in the bureaucracy let's talk about some nuts and bolts of the economy here so interest rates are brazil been cut down to 4 happier sat down from an average of over 14 percent over the past few decades and place of just 3 percent where's the investment boom but that's a great question right because everybody is expecting the investment boom to happen i think that the current administration under bill some that is expecting to have enough reforms in the current in the course of pension reform tax reform privatizations they're hoping that those tools will open the country for private sector investment that hasn't happened yet. the last time that we had a major serve was actually what brought me to brazil which is the 1990 s. when brazil was able to marshal a stabilization program with the new up with with with the new currency the real.
well and that actually set the stage for the private act we enter instance of the country it's a bit ironic because private equity here actually surged as an outgrowth of basic m. and a mathematics and and the other key factor was interest rates i mean the interest rates just mentioned were incredibly high until recently and those interest rates created a situation where the fed funds rate for brazil's called the set leak that interest rate was in the high teens for years for decades the banking sector made a fortune but it also laid the groundwork for private equity because companies couldn't borrow for working capital and so you had huge sectors of the economy that needed capital for growth and private equity basically fill the gap the banking sector in the united states or europe would normally feel for lending so let's talk
a moment about this infrastructure gap and that seems like a great opportunity for china to step in the same like that they're good at they come all over the world now they're building up one row about one road i'd be all over your asia and china asia russia i mean that's the thing that they're good at. is china moving in to fill that gap china has moved in directly into infrastructure in a big way yet but they're certainly knocking on the door i mean china you know was brazil's leading trading partners of basically supplanted the united states in the past and in that case says that mostly agriculture it's not necessarily agriculture i mean it's you know it's sun infrastructure but it's not the kind of massive infrastructure that the country needs and to give you an example last year 2018 the amount of infrastructure in terms of dollars it was about $31000000000.00 about $124000000000.00 or a i wish just to put it in perspective then this is you know 30 years ago
new york city alone went to the capital markets 30 years ago for about $5000000000.00 of infrastructure debt per quarter. so when you try to juxtapose a developing world country with 1st world development it really is kind of stark there's not a lot of money going into infrastructure in brazil let's talk region he said that the finance sector has moved to san pablo and i would guess that would include the private equity sector and writing that would be interesting only enough and asset management are relatively speaking split between the 2 cities i mean the commercial banking sector has headquartered dissolved in some pollo i think permanently that's not going to come back the private equity and an asset management are still they still have a presence here a decent presence obviously the the muscle is in some polish but there's a decent presence in the area is there like a high tech how about like you say in other cities around the world lot of support
for enterprise zones for tax startups as are startup culture here there's a startup culture here it's headquartered largely in sao paulo there are few ancillary places like food in the office and the word is on she that are playing some kind of minor roles but some parlor really as the juggernaut for startups. but even that and some paula mean if you took the 3 or 4 pedigree of venture capital firms and some follow up and up rooted them and took them away some paul wouldn't feel it and there's really it's a it's a small piece of the puzzle and so on paul i'm whereas something like that in rio potentially could be big and that's i think what rio should be doing should be thinking about terms of future really of the attack and science future not just for real but for brazil generally so it will play theoretically or the finance minister has just been named finest best or brazil and adulations and your 1st week in office what would you do pathetically what would be your 1st 2 or 3 steps that you would take to bootstrap some of the sectors or what would you do i would do
something radical i mean i would i would carve out the state of rio to create in israel. inside the country of brazil but have it literally marshalled and structured in a way that was apart from the rest of the country. we have to you know recognize a fact that the country itself is stagnated largely because we are and i think israel as a tactic of tech hub right right because they have now a tremendous amount of tech products coming out of israel absolutely and i think that's something that latin america can do there's no there's no real tech in latin america in the closest city is really monterrey and that really doesn't doesn't cut it there's no silicon valley in latin america there's that because lack of capital or lack of enterprise or lack of or a mental shift is needed i think it's all 3 i mean i think it's a you know it's a conjunction obviously part of it has to do too with university infrastructure how
much we're producing in terms of human capital. but you know i think that the future for the country is largely tech and science driven and that's probably where it's weakest in terms of industry sectors is the education system how is it about all is it free or is what's going on there you can go through the educational system for free or for very little in terms of cost of its public education but even public education has what amounts to be a barrier in terms of testing so most of the wealthy here in brazil go to a very well and private schools get very well trained and lower school and high school then graduate and go to public university because it's so cheap needless to say the people at the bottom of the pyramid can't afford those kinds of private lessons for 10 or 12 years so they basically have a barrier when they get to the to the you know the university strata of education it's very difficult to enter so i'm learning
a lot this is fantastic you're giving me an education i'm going to take a break on another segment they get in more of the resilient phenomenon thanks so much manic eyes report thank you and that's going to do it for this edition of the . as a reporter with regular skies or stacy i would like the area robert well so they'd like to get in touch tweet us a kaiser report i like signed by. physicists is a stick from the water bottle phone in the stomach of a fish the brand is spawns of the coca-cola company which sells millions of bottles of soda every day the idea was that let's tell consumers they're the bad ones they're the litter bugs are throwing this away industry should be blamed for all this waste the company has long promised to reuse the plastic. stickle capsules excuse. that seems cool set their plastic.
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