Tag Archives: economy

Dilma to the Legislature- Wages will go up

3 Feb

President Dilma Rousseff addressed Brazil’s National Legislature on its opening yesterday. The next few posts will address a few concrete policies to expect in the coming years, as well as a few aspects of the speech that are worth further consideration:

MINIMUM WAGE

The minimum wage was $510 Reales per month in 2010 and the proposal—an executive decree issued by Lula and awaiting approval in Congress—is to raise it to $545 per month. Unions are demanding $580 and employers are silently pushing for the minimum. Given that inflation in 2010 ran at about 6 percent by official figures, the increase appears to be justified on the grounds of the rise in prices alone.

What is important to remember in Brazil is that very few people make minimum wage. Most make multiples of minimum wages, two or three minimum wages. It is also important to remember that if people have a formal sector job (about half) employers have to pay for transport and one meal. Labor rules are draconian for business owners; not only in terms of contributions, taxes, bonuses (workers in the formal sector receive a thirteenth monthly salary), but also in terms of hiring and firing. The market for labor is so rigid that it often costs more to fire than to keep an employee on the payroll and minimize their pay and responsibilities.

The Heritage Foundation’s Economic Freedom Index is a questionable instrument, but solely in terms of rankings, it is telling that Brazil falls in the nether-regions of Mali and Azerbaijan, at 113th overall. The labor market has much to do with this.

From a basic political perspective, the minimum wage is perhaps Brazil’s  biggest political question of the moment, and always a tough issue to mediate. The two largest “factor” groups are represented: labor means votes and popularity (which often translates into legislative support), the other is capital, cooperation among the business community, and the reaction of the media, which tends to side with business and can also affect the president’s legislative fortunes in the legislature.

Does the Rise of Economic Optimism Lead to More Charity?

22 Jan

Booming Brazil and Buoyant Brazilians

An Ipsos Public Affairs poll measuring national economic optimism in 24 countries placed Brazil far ahead of the pack, with 78 percent of people optimistic about the country’s economy, according to today’s Globo newspaper. India came a distant second at 61 percent and France a gloomy last, with just 3 percent buoyant about the country’s economic outlook.

Charitable Potential

Today the Folha de São Paulo reported on a McKinsey Consulting study that placed Brazil’s potential for philanthropy at 9.4 billion dollars per year (how did they get that number anyhow?). Charitable giving in Brazil currently stands at 4.7 billion, and only 25 percent of people claim they donate money to charity. By contrast, Australia, New Zealand, and Canada placed among the top three, with between 64 and 70 percent donating money to charity. The world average for charitable giving amounts to 0.6 percent of GDP,  in Latin America it is 0.4, and in Brazil it stands below the regional average at 0.3 percent of GDP.

Given Economic Gains, will Charity Blossom in Brazil?

Will more disposable income–thanks to Brazil’s recent economic windfalls–prompt greater charitable giving relative to increases in GDP? This is a tough question to answer, so please comment. I’ll start with a “yes” and a “no”.

“YES”:

The economy is booming and Brazilians like their fellow countrymen, which is more than can be said for most countries. Government, always the paternal hand on everyone’s head here in Brazil, could easily promote philanthropy as a form of promoting social solidarity. They might achieve gains with their pals over at Globo, the third largest TV network in the world and Brazilians’ first source for everything TV. Globo has used an annual campaign, Esperança Criança (Hope Child), to raise approximately 190 million Reais ($115 million US) since 1986.

“NO”:

Below is a Brazilian introduction and courtesy, a custom, really, that is repeated more times a day than probably any other phrase in the Portuguese language.

Question: “Tudo bom?” (everything good?)            Answer: “Tudo bem” [or "tudo bom"] (all is well.)

The same goes for “tudo joia?” “tudo bem?” and others– point being, Brazilians are just fine. And if they’re fine, what’s the need to get charitable? This whole “yes” “no” exercise is really an inquiry into what drives charity, if not economic progress, and the above logic is pretty silly (albeit fun to think about).

Seriously considered, however, there are clearly some logistical challenges to greater philanthropy. How to give, for example. There simply are not that many well-publicized, easily accessible mechanisms for giving. This may change with greater wealth, but as it stands, outlets for giving do not jump out at you the way they do in the north. Another issue is trust. A lot of charities are suspect and suspected. Rightly so, apparently; fraud in charities and other types of NGOs is common.

The Paradox of Charity

Much social charity constitutes a form of empathy with fellow citizens. In rich countries, citizens might give because they wish to subsidize those social sectors unreached by government services. If government services are weak to begin with, however, you might assume that people would give more to charity– in order to pick up the slack left by the state. Unfortunately, this is one of the paradoxes of many emerging countries– the “have” classes tend to distance themselves from the “have-nots”–with gated communities, exclusive clubs, private schools, cars rather than public transport or bicycles, etc. Just maybe, though, charity implies an empathetic journey into the terrain of the have-nots, which is simply too much guilt and displacement for most “haves” to comfortably undertake.

#5 Credit: Brazilians Debtor despondency rises by 3.9% Over A Year Ago

14 Aug

Use your coconut to think about that one.

CREDIT CRAZY——The current upswing in consumer debt despondency has much to do with government policy.

First, a buoyant economy has permitted the Brazilian Central Bank to lavish  favorable terms for commercial lenders, who issue credit with some of the highest interest rates in the world. Because profits and legislation permit greater risk, Brazilian banks have been putting credit cards and loans in the hands of the emerging lower-middle class. Unexperienced with credit, many are clueless about how to manage their affairs.

What makes the situation even trickier is the way Brazilians pay for things. One can buy clothing, gifts, even prescriptions, and pay in parcels over several months by credit card or check (e.g. 12 X $47R). Similar to financing, this method ensures that consumers account balances don’t suffer big one-time dents, but at the same time it creates the illusion that more money is available for  purchases, which generate greater obligations and greater potential for despondency.

MUITO CARO—-The second issue is the cost of living. Last entry I spoke about the cost of consumer durables. But as any tourist will agree, virtually everything is expensive. How do we explain all-round expensiveness? Perhaps it’s the explanation I provided about copy-cat pricing: imports are expensive so domestic producers follow suit. Perhaps it’s just a collective greed that has set in during high economic times; the economy is doing well and everyone is demanding more money for everything… I am not exactly sure how to explain the disordinate cost of living here in Brazil. The latter is my “collusion” explanation. As we will see in future entries, Brazil has a long and inglorious tradition of collusive politics. But that story is for another time.