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Brazil: Lula and Obama meet as economic crisis hits Brazil

Brazilian President Luiz Inacio Lula da Silva is the first Latin American leader to have met the US President Barack Obama. The meeting took place in Washington, this Saturday March 14. The leaders talked about the global economic crisis, trade, environment, energy and biofuel technology, and building a more constructive relationship with neighbouring countries — especially with Venezuela and Bolivia.

The meeting was described by Obama as “a wonderful meeting of the minds”. Lula was the third head of state to be invited to the White House, following visits by the Japanese Prime Minister Taro Aso and British Prime Minister Gordon Brown. This may show how the U.S. relations with the largest economy in South America — Brazil is one of the top 10 trade partners for the U.S. and a country that is still better off than most nations amidst the economic turmoil — seems to have become a priority for the U.S. In the past, under Bush's government, the relations between the two countries were friendly, but it is believed they could both have benefited from a greater partnership.

obama_silva_resized

President Barack Obama greets President Lula da Silva of Brazil on Saturday, March 14, 2009 in the Oval Office. White House Photo/Pete Souza, published under a Creative Commons license

After nearly two hours of private conversation, the last half hour of the meeting was open to the press and broadcast live in Brazil. Many bloggers have reacted quickly to the meeting and not without a pinch of sarcasm. This has been the predominant tone when it comes to talking about the financial trouble since President Lula claimed that the world's worst economic crisis since the 1930s would hit other countries like a tsunami but would just be like a “tiny wave” at home. José Pires [pt] is among them, commenting on the “lessons Lula has taught Obama”:

Eu estava bastante preocupado com a crise econômica global, mas acho que a partir do encontro de hoje as coisas vão melhorar. Vejam o que o Lula foi fazer lá. São palavras dele: “Nós não podemos esperar 10 anos. Essa crise tem que terminar este ano. Portanto, tem coisas que precisam ser feitas com urgência. Eu sei algumas coisas que precisam ser feitas, vou conversar com Obama”.

Ufa! Até que enfim apareceu alguém para dar jeito nessa marolinha. A pessoa que vem logo atrás de Lula é o tradutor dele. Espero que ele tenha passado direito as determinações de Lula para o presidente Barack Obama.

I was quite concerned about the global economic crisis, but after the meeting today, I think things will improve. Look what Lula was doing there. These are his words: “We can not wait 10 years. This crisis has to end this year. So, there are issues that need to be dealt with urgently. I know a few things that need to be done, I will talk to Obama.”

Phew! At last someone has arrived to sort this “tiny wave” out. The person you see behind Lula is his interpreter. I hope he managed to pass on Lula's message to President Barack Obama correctly.

Antônio Santos [pt] summarizes the meeting, which has had a positive outcome according to both presidents:

Na coversa com Barack Obama, o presidente Lula disse que a economia brasileira foi a última a entrar na crise e será a primeira a sair. Por sua vez Obama defende também a manutenção da demanda entre os países afetados pelo desmoronamente financeiro. O presidente americano quer, notoriamente, nações submissas, porém com condições de resolver seus problemas, principalmente os econômicos. O tão falado Etanol também foi tocado no encontro entre Lula e Obama. Nos parece que o americano ficou um tanto entusiasmado com a idéia de fazer parcerias no sentido da utilização do biocombustível. Isso é bom para o Brasil.

In the chat with Barack Obama, President Lula said the Brazilian economy was the last one to fall into the crisis and it will be the first out. In his turn, Obama also advocates the maintenance of trade between the countries affected by the financial collapse. The U.S. president wants, well, that nations be submissive but with the ability to solve their problems, mainly economic, on their own. The much talked about ethanol was also mentioned in the meeting between Lula and Obama. It seems that the U.S. president was somewhat excited about the idea of partnering on the use of biofuel. This is good for Brazil.

A week of bad news – The crisis hits hard at last

Meanwhile, the worst news since the beginning of the economic crisis last year has made headlines in the country for the past week. After boasting impressive growth in 2008 and despite Brazil's cautious economic policies that have helped the country to hold stronger than most major economies, it seems that the global crisis has eventually started to bite.

The media has reported that industrial output has fallen, while unemployment is on the rise. More than half a million people have lost their jobs since December, with unemployment rates reaching 8.2 percent in January. Credit has dried up. According to news made available by Sao Paulo's Industry Federation, Brazil is the second most hit country by the crisis. The Brazilian Institute of Geography and Statistics (IBGE) also made available its latest economic indicators, the worst results in 10 years: the economy has registered a 3.6% drop in gross domestic product from October to December.

Although President Lula remains confident and has said that the “worst of the crisis has passed”, bloggers like Ligia Muccillo [pt] declare the end of the optimism:

De repente, toda aquela história que Deus é brasileiro e que a crise está longe de chegar aqui acabou, o otimismo do governo diminui a cada índice.

Suddenly, all that story that God is Brazilian and that the crisis is far away from here has eventually come to an end, and the government's optimism goes down with each index.

pibemqueda

“Free fall GDP”. A cartoon by Benett, used with permission

Sociologist Rudá Ricci [pt] says that up to now the issues were just a matter of interpretation, but this week's news confirms that the South American giant too is on the verge of recession. The National Confederation of Industry (CNI) has pointed to a decrease in turnover, down 4.3% from the already depressed level of December. He publishes some numbers:

(A crise) Já atinge parte significativa da indústria e afetou a percepção dos empresários brasileiros. A Confederação Nacional da Indústria (CNI) divulgou nesta quinta que, entre as 431 empresas consultadas, 80% disseram ter adotado alguma ação em relação a seus trabalhadores por conta da crise. Desse total, 54% (43% do total de entrevistados) informaram ter demitido empregados ou suspendido serviços terceirizados. Mais da metade (53%) disseram que suspenderam contratações planejadas, 32% informaram que concederam férias coletivas e 27% disseram ter adotado banco de horas. Sobre a possibilidade de adoção de outras ações para conter os efeitos da crise, 36% das que informaram que vão adotar alguma precaução responderam que vão demitir empregados ou suspender serviços terceirizados. Outros 24% disseram que vão diminuir a jornada de trabalho e os salários e 22% responderam que vão suspender contratações planejadas.

(The crisis) has already hit a significant part of the industry and affected Brazilian business people's perceptions. The National Confederation of Industry (CNI) announced this Thursday that 80% of 431 companies consulted said they had taken some action regarding their employees because of the crisis. Of these, 54% (43% of total respondents) reported having fired employees or suspended outsourced services. More than half (53%) said they halted hiring as they had planned, 32% reported that they granted collective holidays and 27% said they applied flexible working hours. On the possibility of taking more action to contain the effects of the crisis, it was reported that 36% of the companies which had said that they would take some precautions replied that they would dismiss employees or suspend outsourced services. Another 24% said they would reduce working hours and wages and 22% said they would suspend previously planned recruitment.

According to the Federation of Industries from the State of São Paulo (FIESP), the gross domestic product in Brazil fell last year  more than in virtually every other country in the world. The organization has compared the GDP patterns of many economies, including the United States, Japan, Germany, Spain, the United Kingdom, Canada, South Korea, China, Mexico, and concluded that Brazil had the second largest cumulative shrinkage of gross domestic product since the beginning of world economy deceleration, after only South Korea. Jesse [pt] contests the feasibility of news headlines that claimed that, because of this, Brazil is the second most affected country by the crisis [pt]:

Qualquer que seja a notícia negativa, ganha logo as headlines dos sites e jornais, diferente das positivas. A FIESP declarou que o Brasil é o 2º país a mais sentir a crise. Então essa crise tá menos que marola mundo afora, hein? Curioso é ver a crise nos EUA. Acampamentos enormes de pessoas que tinham casa, carro, família e dignidade e agora não conseguem nem carregar seus pertences. Empresas especializadas não conseguem dar conta da quantidade de coisas que as pessoas largam em casas desapropriadas. Uma fatalidade. Mas, segundo a FIESP, o Brasil sentiu bem mais a crise. A nova do dia é que SP perdeu 200 mil postos de trabalho em 5 meses. Bora fazer o levantamento desse primeiro trimestre? Uma coisa que eu não entendo, de verdade, é a torcida para que a crise chegue com força. (…) TODOS os jornalistas, de TODOS os jornais, não escondem nada o tom de torcida, de ” olha, esa crise vem sim, pode esperar que se não for agora, mais tarde vem dicunforça”.
A parte Burra e imediatista do nosso empresariado, com certeza, torce pela crise. Um dos meus melhores amigos trabalha numa famosa empresa de cosméticos, e disse que a crise é boa para o setor; pois você, dona de casa, ao invés de comprar uma geladeira nas Casas Bahia, compra um batãozinho, um creminhu, uma coloniazinha; porque, dinheirinho, a sra continuará tendo.

Whatever the negative news, it makes the headlines of newspapers and websites, contrary to positive news. Sao Paulo's Industry Federation (FIESP) has said that Brazil is the country to be hit second hardest by the crisis. So abroad this crisis is less than a “tiny wave”, huh? It is interesting to watch the crisis in the U.S. They have huge camps of people who used to have homes, cars, families and dignity and now can not even take their belongings with them. The specialized companies can not deal with the amount of things that people need to leave behind in repossessed houses. A real fatality. But according to FIESP, Brazil felt the crisis much more strongly. The news of the day is that Sao Paulo has lost 200,000 jobs in 5 months. Shall we check the data for this first quarter? I do not understand at all this rooting for the crisis to hit hard. (…) All journalists from all newspapers don't conceal the fact that they are rooting for it: “look, this crisis is coming for sure, you can expect it; if not right now, it will hit hard later.
The most stupid and immediate part of our business people surely root for the crisis. One of my best friends works for a famous brand of cosmetics, and he said that the crisis is good for the industry, because a housewife, rather than buying a refrigerator in the [retail chain] Casas Bahia, will purchase a little lipstick, a small pot of cream, a perfume; because she will still have small change.

Also, sarcastically, on the same subject, Luiz Antonio Magalhães [pt] too believes that there is a strong media manipulation of news:

É um absurdo tão grande que só rindo mesmo para aguentar tamanha manipulação. Não demora e a grande imprensa vai começar a vender a coisa direito: a crise no Brasil é a mais grave no planeta e é tudo culpa do Lula. Se colar, colou (…) O ridículo tem limites, mas a mídia os desconhece.

It is such an absurdity that I can only laugh at enduring such manipulation. Shortly, the mainstream media will begin to put it right: the crisis in Brazil is the biggest on the planet and everything is Lula's fault. If people believe it, great (…) There are limits to being ridiculous, but the media ignores them.

chargetempestaderaios

“Lightning Storm”. The clouds read: GDP, growth and jobs. Lula's umbrella reads popularity. A cartoon by Benett, used with permission

There was even more bad news in the past week. According to the government statistics agency IBGE, Brazil has lost 3.6% in gross domestic product in the first quarter of 2008 and it will be difficult to meet its 4% growth target for 2009. Marcos V confronts these economic indicators with the comforting words of the president, who at the beginning of the tsunami crisis said it would hit Brazil as hard as a “tiny wave”:

Pois bem, ainda em setembro de 2008 ficou claro que a crise estava por aqui. As empresas e bancos brasileiros não conseguiam mais financiamentos no exterior e, por consequência, o crédito interno sumiu. E o pouco que havia era oferecido com taxas proibitivas. As exportações, como era de se esperar, cairam fortemente.

Deu em todos os lugares, o Brasil teve no último trimestre de 2008 um dos piores desempenhos do mundo e o PIB em relação ao trimeste anterior desabou 3,6%. A queda foi tão grande que se espera estabilização para o primeito trimestre de 2009. Como a variação é medida em relação ao trimestre anterior, o fato de já ter caido muito tende a fornecer um piso.

A questão principal é a reação do governo brasileiro ao longo da crise. Esse período de reajusto econômico teve seu momento filme-catástrofe com a quebra do banco americano de investimentos Lehman Brothers (setembro/2008), mas na verdade começa com a crise imobiliária americana ainda em 2007. Ou seja, estamos já há um ano e meio em crise. E qual foi a reação do messias de Garanhuns , da equipe econômica e da senhoura Dilma Rousseff? Desdenharam publicamente da crise.

Well, even back in September 2008 it was clear that the crisis was around. Brazilian companies and banks could no longer borrow money from abroad and, consequently, domestic credit disappeared. And the little available had prohibitive rates. Exports, as it was to be expected, fell sharply.

It has been news everywhere, Brazil had one of the worst performances in GDP worldwide in in the last quarter of 2008 and, compared to the previous quarter, it had a 3.6% fall. The fall was so great that the GDP is expected to stabilize in the first quarter of 2009. As the variation is measured against the previous quarter, the fact it has fallen a lot tends to provide stabilization.

The main issue is the Brazilian government's reaction over the crisis. This period of economic adjustment saw its disaster-movie climax with the fall of investment bank Lehman Brothers (September/2008) in the U.S., but it actually began with the U.S. real estate crisis in 2007. That is, we have a year and a half of crisis. And what was the reaction of the messiah of Garanhuns [translation note: the blogger refers to President Lula, who was born in a city called Garanhuns], his economic team and [Chief of State] Ms Dilma Rousseff? They disdained the crisis in public.

chargebenettfspLula with Subtitles – A cartoon by Benett, used with permission

– Crisis? Here it will be a tiny wave! / Translation: Here comes a tsunami!!!
– This crisis belongs to Bush / It belongs to him, to me, to the world.

– The economy will not be affected / Good bye to 2009's GDP…
– In 2010, I'll not run for office for the 3rd time / Well, it is not a bad idea, no?

Bruno Kazuhiro wonders if the positive attitude with which the government is treating the crisis has political interests at heart:

Se o Brasil não está sofrendo golpes mortais com a crise, também não está ileso. O governo deveria, simplesmente, admitir isso e partir para a ação possível. Nada de negar o que já é sabido. Nada de pensar em ganhos eleitorais e políticos desprestigiando o prejuízo já ocorre de verdade.

Parece que o governo ainda não entendeu que ele, de qualquer forma, não será culpado pela crise ter existido. Não se precisa ter medo de perder votos admitindo que ela existe. O que o povo quer ver, para não se decepcionar, é um governo que trabalha para minimizar os efeitos internos, assumindo o que está ocorrendo e jogando limpo. Se isso não for feito é que o governo será criticado. Como já está sendo.

If Brazil is not being hard hit by the crisis, it will not escape unharmed. The government should simply admit it and start to act on a plan. Let's not deny what is already known. Let's not think about electoral and political gains, discrediting the fact that the damage is already happening.

It seems that the government has not understood yet, anyway, that it will not be blamed for the crisis having happened. They need not to be afraid of losing votes if they admit it exists. What the people want, in order not to be disappointed, is a government that works to minimize the internal effects, accepting what is happening and coming clean. The government will be criticized if they don't do so, as they have already been.

Luiz Carlos Azenha too believes that President Lula lacks the courage to admit the real damage of the crisis:

Eu vivia em Washington quando comecei a acompanhar a crise. E não é preciso ser um gênio para constatar que, diante da globalização e da financeirização do mundo — dois fenômenos que se entrelaçam — uma crise profunda nos países centrais afeta as economias ditas “periféricas”, por mais que elas estejam preparadas. O risco de os maiores bancos dos Estados Unidos falirem é um sinal da profundidade da crise.

Sim, o Brasil tem um mercado interno, mas não vive só dele. Vive, também, da exportação de seus produtos. A crise atingiu não apenas os Estados Unidos, mas também a União Européia. Dois grandes mercados brasileiros. Reduziu o crescimento na China, outro mercado importante. “Marolinha”, como definiu o presidente da República? Até entendo que Lula faça o papel de “dourar a pílula”. Nos Estados Unidos, Barack Obama tem sido criticado pelo tom catastrofista que adotou. O governo brasileiro já admite que o crescimento do Brasil não atingirá a meta de 4% em 2009. (…)

Vai ficar cada vez mais óbvio, no Brasil, que o governo Lula demorou a agir. Só posso especular que os quadros governamentais não se deram conta da gravidade da crise que teriam pela frente. O conservadorismo do Banco Central é típico de quem não se deu conta de que estamos vivendo um momento de transformação. Não se trata, apenas, de mais uma crise, mas “da crise” de nossa geração. Não dá para aplicar velhas receitas em problemas novos.

A doença que acometeu os governos Sarney e FHC também pegou o governo Lula: a falta de coragem política.

I was living in Washington when I started to follow news on the crisis.  You don't need to be a genius to see that, after the globalization and financialisation of the world – two interlinked phenomena – a deep crisis in the core countries would affect the so called “peripheral” economies, no matter how ready they are. The risk of the two largest banks in the United States going bankrupted is a sign of the depth of the crisis.

Yes, Brazil has a domestic market, but it doesn't survive on this alone. It also subsists on the export of its products. The crisis has reached not only the U.S. but also the European Union. Two large Brazilian markets. It has reduced the growth in China, another important market. Is it a “tiny wave”, as defined by the president? I do understand that Lula takes on the role of “sweetening the pill.” In the United States, Barack Obama has been criticized for his chosen tone of catastrophy. The Brazilian government now admits that Brazil will not reach its growth target of 4% in 2009. (…)

It will become increasingly obvious, in Brazil, that the Lula government took too long to act. I can only speculate that the government staff did not foresee the seriousness of the crisis that they would face. The conservatism of the Central Bank [of Brazil] is typical of someone who has not realized that we are living at a moment of transformation. It is not just one more crisis, but “the crisis” of our generation. We can not apply old medicine to new problems.

Lula has also caught the disease that affected [former presidents] Sarney and FHC governments: the lack of political courage.

pibversaook

A cartoon by Benett, used with permission

Lula and Obama will meet again at the G20 summit of leading industrial and developing countries in London, on April 2. Most Latin American leaders with have their first opportunity to meet with the new U.S. president at the Fifith Summit of the Americas, to be held on April 17-19 in Trinidad and Tobago.

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