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Brazilintel : Comment 1.1 October 2009

Rio2016:
More than a coming out party?
R io de Janeiro and Brazil have earnt the right
to host the Olympic Games in 2016. That was
New poles emerge

the view of President Lula as he spoke to the The last ten years has seen Brazil lay the founda-
IOC in Copenhagen. His compelling argument tions for its growing global significance with sound
put forward a vision of a country that deserved economic management, an investor friendly at-
its seat at the table. titude (despite initial concerns about the former
union leader turned President Lula from currency
But who would want to host an Olympics in these traders in New York), and a globally feted redis-
times of crisis? It has become de rigeur for the tribution programme, the Bolsa Família.
Games to be associated with scandal, massive
overspend, managerial incompetence and for all Hosting the Games will further the country’s de-
the hot air, a lack of a lasting social legacy. sire to be a leader on the world stage – an ambi-
tion that will see it continue to press for a seat
This award for Rio de Janeiro – despite the social on the UN Security Council, become a key actor
and infrastructure improvements sorely needed in climate negotiations as protector of the Ama-
by the city - is much more than a coming out zon rainforest, maintain its leadership in biofuel
party with local legacy attached. production and engineering, and grow into the
key supplier of food and other commodities to
The key to this prize is intimately linked to shift- the global economy.
ing global economic and geopolitical balances.
As new poles of influence emerge across the Brazil seems very likely to emerge out of the
world, Brazil is competing with other nations recession earlier than its western counterparts.
that have shrugged off the ‘emerging’ moniker. As an indicator of its relative health, recent data
The new battle for influence is part of what the for sales of new vehicles in September broke re-
OECD Development Centre has described as the cords, up 14% from the same month last year
now pronounced shift of power and influence for (albeit in part due to an imminent duty increase),
the North to the South and from the West to the with over 2.3 million new vehicles sold this year.
East. The country has worked hard to build confidence
and stability into its historically volatile economy.
And whilst Rio may face difficulties at a munici- Its currency, the Real, was finally tamed by the
pal level in the same way that Athens did, and former President Fernando Henrique Cardoso,
potentially London will, in terms of financing and whom in 1994 as Finance Minister introduced his
administrative incompetence, it is the wider con- stabilisation plan to control hyperinflation. This
text of competing for influence in the new global set the country on a predictable course -much to
economic order and the challenge of embedding the relief of its weary citizens and the standoffish
new imagery into the world’s collective conscious international community.
that is at stake.
Following the success of the plan, stability be-
came the watchword. Its banks are required to
be well capitalised (yes- it’s true!) and prudent,
not dabbling in risky assets like their northern
i-see global research Brazilintel : Comment 1.1 October 2009
counterparts.
Brazil – unlike China, is a big exporter of com-
modities, not consumer goods. Pre-crash, it
formed part of a supply chain that provided the
raw material inputs to China, which were then
part of the exchange of dollars for consumer
goods with the US.
And although the bankrupt US consumer is be-
ginning to save, now painfully aware that their
real wealth is not all it appears, China still needs
the inputs to fulfil its high growth strategy re-
quired to absorb the millions migrating from a
rural to urban setting.
In contrast to China and the US, Brazil’s already
predominantly urban population are relatively
enthusiastic consumers, and not indebted to the
point of no return. Credit – which due the hyper-
inflation of the past had been very difficult to se-
cure, is becoming more widespread and increas-
ing numbers of people have income to spend.
Bigger shifts post-crisis
A recent editorial in the Financial Times declared
the term ‘emerging’ as obsolete when used to
describe so called ‘late industrializing nations’.
Whilst this headline grabbing statement may be
a step too far for some, countries such as Brazil,
India and China now drive the global economy
and contrary to popular perception have less vol-
atile, more stable (and less ageing), economies
than their once all conquering Western counter-
parts , now relegated to the role of onlooker.
Indeed, the global shift of economic and political
influence from West to East and from North to
South has been underway since before the crisis.
Whilst derailed for a certain period, it appears
that within the ‘new, new’ normal, these shifts
will continue to move the spheres of influence
to different poles across the globe. That the G20
meetings have become the global economic fo-
rum – belatedly replacing the G-7 as the de-facto
forum for navigating the post-crisis path, attests
to this.
Anecdotal evidence bears witness to this as well.
It was at the G20 Summit held in London as the
world teetered on the brink looking for divine
intervention from the new US President, that
Obama paid homage to Lula saying: ‘this is my
man right here… the most popular politician on
earth’.
Luiz Inácio Lula da Silva’s magic, which brought
him to the presidency on the fourth time of ask-
ing in 2002, has evolved from hard-edged union
leader carved in the working class districts of
São Paulo during military rule to huggable na-
tional emblem. Often emerging unscathed from
his party’s problems, he has long been used to
being the star attraction.
Obama’s platitudes were no joke - Lula’s approv-
al rating in an official poll in September (after 7
years at the helm) was over 80%. And although
unable to run for a third consecutive term, he
may well be a candidate in the 2014 general
election – in time to welcome the Olympics to
his country.
Lula’s pitch but is Rio ready?
Lula’s pitch for the Games was compelling. Brazil
has earned the right to stage the Olympics and
are holding it on behalf of Latin America and the
entire developing world. The Games are to have
the effect of supercharging the nation’s devel-
opment, providing the world with the opportu-
nity to rediscover Brazil and leaving a legacy of
committed investment for a city (and country) in
need of a kick-start to infrastructure projects.
Images of the city prepared for the bid show sys-
tems such a single lane Bus Rapid Transit system
– pioneered by architect Jamie Lerner in his re-
design of the southern city of Curitiba and in use
in places such as Bogota, and Mexico City, cou-
pled with the stunning landscapes and beaches
of the Zona Sul (south of the city) – images
embedded in global collective memory since the
times of Carmen Miranda and the heyday of the
Copacabana Palace Hotel.
i-see global research Brazilintel : Comment 1.1 October 2009

Is Rio ready to be host? In many ways - whilst abundant resources. They have also been lucky.
7 years away - the Games could be viewed as Buoyant commodity prices have eased the fi-
Brazil’s coming out party in the same way that nancing of social provision and delayed tough
Beijing was for China. There is no doubt that the legislative decision-making – making marked
Beijing Games were great success but Brazil is near term improvements to the lot of many of
no China. It has neither the $20 billion to spend, Brazil’s poorest, and helping to create a large dy-
nor the kind of one-party leadership needed to namic middle class.
shut down factories and focus everyone’s mind
on the main event. Competition for influence in a redrawn
world
Brazilian politics, noted for its byzantine frame-
works and dalliances with patronage are often In these post-crisis times where new global axes
paralysed by tactical manoeuvring when not of influence are emerging, the Olympics is pre-
fighting off allegations of corruption. Equally, cisely the kind of event that Rio and Brazil need
there are concerns that Brazil, and Rio de Janeiro to host. Embedding ideas and imagery around
in particular with its pronounced inequality, could the world of Brazil as a country that is open for
spend its time and money better by focusing on business, strong, dynamic and modern, will give
social improvements and educational attain- it the one up on India, the rest of Asia and the
ment. Will this be a Games for the haves, or the struggling developed economies.
have-nots? Will the only supercharged growth be
the rush for government contracts to be shared A recent study by the Reserve Bank of San Fran-
among friends behind closed doors? cisco – ‘The Olympic Effect’, highlighted the ben-
efits of hosting a games when these types of
In spite of these concerns, the Olympics will be considerations are at the fore. It demonstrated
seen in the light of the new global realities. Rio that trade is 30% higher for countries that have
de Janeiro may not be Beijing, but it certainly hosted the Olympics. It also suggested that by
isn’t Athens either. Securing the Games is a part showing a willingness to host a mega-event
of Brazil’s continued progress on the new world countries signal to the world they are ready to
stage. do business.

Long-term stability (and fate) This is quite clearly Brazil’s plan – and with Rio
itself perhaps offering up a potential means of
Brazil’s development strategy over the past de- funding from the newly discovered Tupi oil field
cade - started by Cardoso, maintained by Lula just off the city’s coast, alongside a returned
and not likely to deviate with the next President Lula, the Games should provide a legacy of more
– (though look out for movements around the jobs, more growth, and greater international
massive Tupi oil field off the coast of Rio), has recognition, drawing business and investment to
been one of steady, stable growth with increas- this new pole in a newly defined world.
ing social provision. Often criticised from both To receive the Brazilintel Comment series free of
left and right either for not opening up enough charge email news@i-seeglobal.com
and achieving a higher rate growth or reneging •inserting
Rose, A &‘Brazilintel
Speigel, M. ’The Olympic Effect’,
Comment’ in theMarch 2009.
subject (www.
line.
on promises of implementing a more socialist frbsf.org/publications/economics/papers/2009/wp09-06bk.pdf )
agenda, Lula’s government committed itself to Brazilintel is part of i-see global, a consultancy spe-
a happy medium. So far, in light of the global cialising in integrated social, economic and environ-
crisis, their stance has been vindicated. mental thinking for a rebalancing world.

They have worked hard to present investors with To find out more contact Jimmy Greer:
a predictable home for their capital in a land of e: jimmygreer@i-seeglobal.com t: +447843560399
or visit http://i-seeglobal.com