I WANTED TO KEEP track of what was happening on the streets of Sao Paulo. Taxi drivers are a great source to find out what happens on the streets and Mauricio, who retired a few years ago as an IT manager at the bank. The fact that both of us fans of the same soccer team, Corinthians, made the conversation easier. Especially since our team once again qualified for the division one.
THE FINANCIAL CRISIS was at the very top of Mauricio’s agenda.
“How was Brazil affected?” I asked.
“Look around” Mauricio said. “Have you seen the traffic? It’s getting worse everyday. In Sao Paulo, there is still 200 cars registered every day. We already have more than six million cars in the city and the number of cars increases”
“Has it not become more difficult to finance purchases now with the financial crisis?”
“So far we have not seen much of that. Certainly the conditions have tightened a bit but I don’t think it has a major impact. The banks make a lot of profit. I don’t think it will decrease much. Everyone wants a car and as long as subway systems are not expanded, most people have no choice. By the way, did you know that people in Russia created the subway system at the end of the 1800s. Today, there are hundreds of stations. In Sao Paulo, which is one of the lagest cities in the world we have about thirty stations. There are some new stations built every year, but it will take a long time before we have a well established subway system here. And what if the ring road project could finish, they have been building it for almost ten years, and they are just about half way through. It is weird that it takes such a long time. I also heard that they decided to build a new airport in Campinas and also a high speed train that will run between Rio and Sao Paulo. What if we could do what the Chinese did, they worked really hard prior to the 2008 Olymics. The Soccer World Cup will take place here in 2014. There is a chance that everything will be ready five years after the World Cup. The problem with Brazil is that we were colonized by the Portugese... What if the Italians came first....”
WHEN I FIRST CAME TO Sao Paulo in the early 90s, the conversations in the taxi were different. At that time, Brazil was a country with almost no foreign trade. Now the foreign trade represents nearly 30 percent of the GDP which is approximately the same level as the United States. Another major difference, may be the biggest of them all is that today Brazil has a strong democracy that has reach a relativly high political standard. Populism has been replaced by a better economic policy. The previous inflation in the mid 90s is now under control even though the interest rates have been high. However, some things are the same. The bureacracy is heavy, there is still corruption, political scandals, and the tax system is very complicated.
TODAY, WHEN THE WORLD economy goes through a major crisis and recession is present you can clearly see how Brazil has changed over the last couple of years. However, it was worse before. Surely, the Brazilian economy is affected by what is happening in the world, but not to the same extent.
MANY FOREIGN COMPANIES and institutions have sold their assets in Brazil to cover losses elsewhere which has resulted in that the stock market has fallen dramaticly and the currency weakened. At the same time, the export sector is affected by the lower commodity prices. Since there is less access to credit, we will see a decrease in investment next year. However, there are many positive things as well. Brazil has pursued a stable financial policy for many years. The foreign dept is now almost non-existent and the exchange reserves are relatively high, which was not the case in past crisis. The banks are doing well and nobody is really worried about a general banking crisis. Never the less, the Lula government declared that state banks can take over ailing private banks if necessary. The fact that the companies have had high rates for many years is now an advantage. The companies are accustomed to finance themselves. When economists add up all the factors the GDP is expected to grow 2-4 percent in 2009. Not as high as it could be but clearly better than many other countries.
EVEN THOUGH IT WAS towards the end, there was still time for one last question.
“Who will win the Soccer World Cup in 2014?” I asked again.
“Brazil” Mauricio said while doing a thumbs-up.
How it will turn out remains to be seen but personally I am convinced that Brazil will be a winning country in the next 5-10 years with a GDP growth above a world average.