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After months in the international spotlight, the cameras are gone, the fans have cleared out and Brazil is slowly returning to its own internal struggles: a stagnant economy, poor infrastructure and a looming Presidential election. Kojo explores the challenges ahead for the United States’ biggest South American trade partner.
- Robert Muggah Research Director of Igarape (Ee-gah-rah-pay) Institute
- Joao Augusto De Castro Neves Latin America Director, Eurasia Group
- Paulo Sotero Director, Brazil Institute at the Wilson Center
MS. JENNIFER GOLBECKNow that the crowds are gone and the brand new soccer stadiums are empty, Brazil is returning to reality. When the country began preparing for the World Cup more than seven years ago, its economy was booming and its national soccer team topped the world rankings. Fast forward to today and things don't look quite as bright. Over the last few years, the economy has slowed to a crawl.
MS. JENNIFER GOLBECKProtests against the government have increased and the soccer team fell short, crushed 7 to 1 by Germany in the tournament semifinals. The question is now how to move forward. Joining me to discuss the challenges facing the United States' largest South American trading partner are Paulo Sotero, director of the Brazil Institute at the Wilson Center. Good to have you here.
MR. PAULO SOTEROPleasure to be with you.
GOLBECKJoao Augusto De Castro Neves, Latin American director for the Eurasia Group. Nice to have you here.
MR. JOAO AUGUSTO DE CASTRO NEVESThank you. Pleasure to be here.
GOLBECKAnd joining us by phone from Rio is Robert Muggah, research director of Igarape Institute. Good to have you here, Robert.
MR. ROBERT MUGGAHHi. It's a pleasure.
GOLBECKDid I say your name right?
MUGGAHYou got it.
GOLBECKThank you. Listeners can also join this conversation. How do you think countries benefit from hosting a major sporting event like the World Cup? You can join us by calling 1-800-433-8850 or send us an email to email@example.com. Joao, I'd like to start with you.
GOLBECKAmericans who watched the World Cup saw some of the most exciting soccer in recent memory, record-breaking goal totals, late-game drama, but also protests leading up to the tournament and a crushing defeat for the Brazilian team. What's the difference between Brazil as we saw it on TV and the reality of everyday life there?
NEVESWell, I think that the first takeaway from the World Cup was that the event was successful. I think many people were doubting Brazil's capacity to host an international event like the World Cup. And, you know, because of the protests and because of delays on constructions, I think that on that front, you know, and also helped from the pitch by some of the teams that played really well, I think that it was a successful World Cup.
NEVESBut it doesn't -- but that will not conceal the fact that there are many challenges that Brazil still needs to face. You know, that it's a slowing economy. When Brazil decided to host the World Cup and the Olympics a few years ago, the country was booming, right? The economy was growing. Everything was working for Brazil. Everyone was talking about booming Brazil, rising Brazil.
NEVESBut now, given the fact that the economy is slowing down, you do see the many challenges that Brazil faces in terms of inequality. And we're headed into an election, and that's going to be the big issue. And middle class discontent that we saw last year and during the World Cup is here to stay. That's going to be a big challenge for new leaders in Brazil.
GOLBECKThere's a lot of debate over whether hosting the World Cup would help the Brazilian economy. Protesters were angry that the country was building expensive soccer stadiums but not roads or schools or hospitals. Did Brazilians feel like hosting the World Cup was worth it?
NEVESI think if you took a poll now, they'd probably say no. If you took the poll -- the same people five years ago they'd probably say yes. I think that the government promised a lot of things in addition to the stadiums, right, infrastructure and everything around the stadium is not there, the promises that they made. But I do think that now the scrutiny on hosting these events, like the Olympics that will be in Rio in two years' time, there's going to be greater public scrutiny regarding that.
NEVESAnd I think that that's going to be really challenging for a country that has a huge middle class to attend to with less resources given that the economy is growing that much.
GOLBECKRobert, the protests in Brazil started about a year ago, frustration over lavish spending on soccer stadiums was one reason, but there were other less well-publicized concerns, too. What else were Brazilians angry about?
MUGGAHWell, Brazil, the actual protests that began in essentially June 2013 last year were started off by a little known student movement called the Free Pass Association, a free fare movement, which is essentially a small group that had been around for a decade or so of students who are complaining about a rise, a price hike, the equivalent of about nine or ten cents in public transport. And this was something that's been, you know, complained about in the past.
MUGGAHAnd there have been protests around it. But for whatever set of reasons, I think the combination of growing inflation, a sense that Brazil wasn't achieving its potential, a number of scandals that were rolling through Congress, as well as, you know, growing discontent and disenchantment of the middle class, these small protests went viral. And they started in Sao Paolo and they spread across the country to more than 300 cities.
MUGGAHThey've got over a million people marching the streets. And it was the first time, I think, in a generation that you've seen this kind of mass movement around a constellation of issues. And as you say -- I mean, the first primary trigger or the spark, if you will, was this hike in public transport, which I think signaled the wider discontent with the state of public services.
MUGGAHAnd then you saw a whole range of issues come out of the table from grievances with inequality to issues around crime and insecurity to issues around the World Cup and, of course, the spending on these 12 stadiums, to the quality of health and education services. So what you saw was a whole range of grievances that were summoned up by people across the country and really electrified the nation for a period.
GOLBECKBut, Robert, on the positive side, Brazil's poverty rate has declined in recent years. What are some of the government-assistance programs that seem to be working well? And are people satisfied with the efforts?
MUGGAHOh, absolutely. I mean, I think that Brazil -- I think that's probably one of the great, not-so-hidden stories, but it's certainly one of the great stories of Brazil in the last two decades, really. And I wouldn't necessarily put it down to the current administration of Dilma Rousseff or even necessarily her predecessor. Although they were very, very much pro-poverty reduction, but also can be traced back to Fernando Henrique Cardoso, the previous president in the '90s and into the early 2000s and some of the efforts that were put in place back then.
MUGGAHAnd basically, what we have in Brazil are a number of very large social programs that are seeking to bring enormous numbers of people, specifically in the north and northeast of the country out of eviscerating poverty into sort of the lower and into the middle classes. And there's something in the order and there's a lot of dispute.
MUGGAHRemember, it's something in the order of 40 million people in a country of 200 million people who have been pulled out of poverty over the last two decades through programs like, for example, Bolsa Familia, which basically the family fund, which is effectively a conditional cash transfer to encourage, incentivize families to put their kids in school in exchange for a small stipend on a monthly basis.
MUGGAHOther programs were seeking to provide subsidized housing for people who didn't have security of tenure. There are still more programs focused literacy and education and provision of primary health. So I think there's been some extraordinary successes. And I don't think that the issues around the economy or some of the protests around the World Cup should detract from that.
MUGGAHBut I do think what's interesting is that of the 40 million people who've moved out of poverty and into the lower middle classes, what you saw, I think, was increasingly a sense that it wasn't so much the quality of services the people were upset about, it was the quality of services. And I think you saw the very same people who have been pulled out of poverty today also beginning to rumble and complain about the quality of service provision and becoming more aware of the entitlements that they're allotted, but also that they need to improve the quality of those entitlements.
GOLBECKListeners, you can join the conversation as well. What are your impressions of Brazil after watching the World Cup? And do you think countries with high poverty rates should host big sporting events? Give us a call at 1-800-433-8850. Or you can send us a tweet to @kojoshow.
GOLBECKPaulo, last year Brazilian President Dilma Rousseff canceled her visit to Washington after learning the U.S. was spying on Brazilian leaders. She called the NSA's actions a breach of international law. What's the economic relationship between the U.S. and Brazil? And how did the spying allegations affect that relationship?
SOTEROWell, it's affected it very badly. She canceled a visit that was supposed to take the bilateral relationship to a new, much better level. As a direct consequence of the spying two major contracts benefitting American companies, Boeing, that's going to sell jet fighters to the Brazilian air force, $4.5 billion, Microsoft, provided internet services in Brazil government, those have been canceled. So -- and the relationship was in a jam for a while.
SOTEROThe dialogue has restarted. And it is now where it normally is. It's good, nice, friendly and pretty shallow. So we have now to start working on, you know, making it deeper, making it a more consequential dialogue, but there was and there is some bad consequences of this. A poll just out says that although most Brazilians appreciate the United States, approve of, are sympathetic to President Obama, the proportion is lower than it was before those spying allegations were revealed.
GOLBECKYou're listening to "The Kojo Nnamdi Show." I'm Jen Golbeck, sitting in for Kojo. We'll continue our conversation about what's next for Brazil in a moment. Stay with us.
GOLBECKWelcome back. I'm Jen Golbeck, from the University of Maryland sitting in for Kojo Nnamdi. We're talking with Paulo Sotero, Joao Augusto De Castro Neves, and Robert Muggah about what's next for Brazil after the World Cup. If you'd like to join us, give us a call at 1-800-433-8850. Paulo, I'd like to come back to you. When Brazil was chosen seven years ago to host the World Cup, its economy was doing really well. But since then the economy has slowed significantly. What caused the stagnation?
SOTEROWell, it is an exhaustion of a certain economic model based on consumption, in a world that's still recovering from a major economic crisis in 2008. This is an open, debated in Brazil now. Brazil needs to create change. It's economic model, its economic policies in order to give more incentive to investments. Investments in infrastructure, investment in higher value added activities. Brazil has done this. We have, for instance, the third largest airplane builder in the world, Embraer.
SOTEROSo we know what to do, but the current policies, and the policies adopted in the recent past are contrary to that. And I think even President Dilma Rousseff has realized that it started a change. But it is really a slow growth. The growth is at now barely at -- for this year -- 1 percent. If that is confirmed, Dilma Rousseff's government, the first four years, will have the lowest rate of growth -- I think the third lowest rate of growing in Brazilian's republican history.
SOTEROSo this is pretty bad in a country that has always been a little bit accelerated. Our -- historically we have had record growth over more than a century. And this is bad news. And this is what feeds this malaise that exists now in Brazil.
SOTEROThere is a discontent that was there before the World Cup, bated a bit during the World Cup, but first polls after the end of the tournament showed that discontent is back and that people are pretty anxious about the state of the economy, rising inflation, slow GDP growth, employment. Now people start to be concerned about employment and other issues that are also of concern to Brazilian people.
GOLBECKAnd following up on that I'd like to take a call from Edison, in Reston, Va. Edison, you're on the air. Go ahead.
EDISONHello. I was in Brazil for the World Cup. And I wanted to comment on a couple of things about the state of affairs and why people have been protesting there for so long. Before I think it had more to do with the World Cup being the straw that broke the camel's back. Because corruption has been an issue with Brazil for many, many years. People feel like their tax dollars go nowhere, except to the beneficiaries of these big contracts.
EDISONAnd another point I wanted to make was that a lot of the economic growth came from the social programs, just distributing money to people from the tax coffers that allowed them to buy more food, more clothing, just consume more. And of course once that cycle of people receiving money ends, there is a stagnation. And that's what we're seeing now.
EDISONAlso, the thing that is going to keep Brazil from ever achieving any sort of first class world status is the stifling and choking bureaucracy that that country has.
GOLBECKEdison, thanks for your call. Let's get thoughts from our guests on this. Joao, how about you?
NEVESYes. Thank you. I think that -- well, corruption has always been a problem in Brazil. I do think that of course when -- in a moment where growth slows down and you have these huge amounts of money being spent on state and some questionable projects, it does exacerbate the -- this debate on corruption. But I do think, as well, that, you know, this growth of last decade or so, that Brazil went through a very positive cycle.
NEVESNow it's in more negative cycle, but there is a big political elephant in the room. It's the middle class. It's a huge middle class. And a huge middle class where that before the main concerns of this new middle class were poor economic issues, employment and wage. Right? And now they're shifting to what we call the quality of life agenda. Things that have to do with health care, quality of health care, education and even corruption. Right?
NEVESSo it's not a matter of only having access to goods. They have. Everyone is able to buy a cell phone. A lot of people are able to buy cars. But now they want to buy cell phones that work. Or cars that do not get stuck in traffic jams. So it's a matter of the debate shifting towards the services that make those goods useful. Right? So that's the big difference today.
SOTEROWell, I think the image I used is the Promised Land image of Martin Luther King's speech, final speech. That, you know, Brazilians -- Brazil has been through a transformation -- is going through a transformation. The rising middle class has seen the Promised Land, wants to get there, will not accept not getting there.
NEVESBut sees now that the economy is stagnating, that the dream is kind of compromised and that will be, as Joao mentioned, that will have enormous consequences in Brazil. I don't think that we will accept going back. And one of the messages, to me, that underlies the World Cup -- and it's a very positive message -- is that Brazil received the world with an open arm, was really appreciated by the world.
NEVESActually of the estimated half a million foreign tourists that came to Brazil to follow their national teams, 85 percent said in a poll that they want to return as tourists, because they like the country. And I think this is a very important message for a country that needs to open itself up to the world. Brazil always benefit.
NEVESWe have had this very insular development. And Brazil has always -- always improves as a nation when we open up to the world and get more connections. And I think that is also be -- will be a very important theme. I don't know if candidates will dare to go there, but there is the World Cup, in my reading, left this very important message for the country.
GOLBECKRobert, some people say the key to getting Brazil back on track is to make significant policy changes, like opening up markets to more free trade from other countries, and investing in infrastructure projects. What needs to happen at the government level?
MUGGAHI mean there's many things. And some of your guests have eluded to it, as did your caller. I mean I -- some of them are well known. And I think within the government, for example, we have -- we have a government that's a little bit conflicted, in terms of the Labor Party, the P.T. Party, which on the one hand is seeking to continue the legacy a little bit of the previous president, which was to have a more open approach to the world and to open more embassies and to seek more trade partnerships abroad.
MUGGAHBut also with a strong protectionist instinct. And in a way, also, coveting relations with let's say states within the region that aren't so open, such as Cuba, Bolivia, Venezuela and others. So there is a kind of in-built, I would say almost schizophrenia within the P.T. that goes back many, many years, probably since its founding. But domestically, in terms of things that need to happen I think to jumpstart the economy -- and, you know, there's certain things it can effect, such as the price of commodities.
MUGGAHChina's demand and other things that were really driving the boom of Brazil in the previous years. But infrastructure is a major issue, in particular transport, rail and ports. A lot of Brazil's economy -- in addition to light manufacturing and airplanes and other things -- is around agro industry. And there's extraordinary difficulties in getting the soy and other products to market, just literally getting it from the interior to the coast.
MUGGAHAnother issue that needs to be dealt with is the ease of doing business. Brazil ranks about 120 out of about 140 states with the -- in terms of the ease of opening business. To give you an example, I was speaking with a colleague opening a business yesterday night, and he said it took 167 days to get the papers organized, in order for him to actually get the right license to open his very small carbon-emissions trading scheme business.
MUGGAHIt takes about an hour in the United States to do an equivalent type of exercise. Another big issue is around labor. There's very, very strong and, I think, formidable legacy around labor movements. And a heavy tendency toward strikes in litigation within the labor sector. And I think this is a big challenge because it, I think, frightens domestic and foreign-directed investments. And the final issue I'd say is just the heavy, heavy tax burden and issues around entitlement reform.
MUGGAHI mean Brazil has -- spends more of its GDP on pensions and covering its own bureaucracy than I think virtually any other country, middle income or industrialized nation country. So there's a big issue around entitlement reform that I -- you could almost say was a legacy of the pre-democratic era. But needs to be addressed and is extremely difficult to address.
MUGGAHAnd I -- the final issue I'd say is around protectionism. Really, there's a strong tendency and there's historically a strong tendency towards protectionism of domestic production of manufacture goods. And as a result, prices are high and quality tends to not be perhaps as good as it could be. There's a lack of competition. So efforts to try to stimulate some internal competition, but also to perhaps protectionism I think would go a long way.
GOLBECKWe have a couple minutes left, but, Paulo, you've mentioned a couple times that Brazil has a presidential election coming up. President Rousseff's Labor Party, which has been in power for 12 years, has been declining in popularity. How does she look as a candidate right now?
SOTEROWell, she's still favored to win, but a poll just out suggests that if she doesn't make it in the first round of vote, which is October 5th, she would have a very hard time winning in the second round vote because the leading opposition candidate is technically -- appears technically tied with her on a simulation of a second round on October 26th. So, you know, Brazil always does what you least expect. We did it twice in the World Cup. We lost when we were supposed to win, which was the soccer.
SOTEROWe did a very good job in doing the event, hosting, which we were supposed not to do or not expected to do. Here comes the presidential election. The seventh free election in Brazil since the reinstatement of democracy in 1985. And you may have a big surprise there, too.
GOLBECKJoao, do you have a quick thought on the election?
NEVESYes. Well, first of all, just a silver lining to all of this. I mean even though the situation in Brazil has been, you know, it's more complicated today from an economic perspective, when you talk about the protest that happened last year, you know, a lot of people compare it to what's happening in the Middle East back then, you know, the Arab Spring and all that.
NEVESAnd I think that in Brazil the silver lining is that it is a vibrant democracy. Those weren't protests about government oppression. They could have been about government incompetence, which is a whole other ballgame. But I do think that the election itself, it's the most important that Brazil is facing over the last 20 years. It might be the most competitive one over the last 20 years.
NEVESAnd I agree with Paulo. I think Rousseff is still a favorite to win, even though the risks are increasing as we speak. But she -- I think that she will win. But even if she wins, I think that she'll have to make some very important policy options in her second term.
GOLBECKRobert, less than a minute left, but one final question for you. We've seen a tremendous amount of growth in Brazil in recent decades, but also a lot of struggles we've talked about today. How do you think Brazil sees its role in the world in coming years?
MUGGAHBrazil's a really important, I think, global actor in world affairs. And for a variety of reasons. But one of which I think is that it's seeking I think actively through its foreign policy, to present almost a third way to thinking about global cooperation. It -- I think it resents, in some ways, unilateralist world views, say, that it sees maybe some Western countries as pursuing. And it's seeking to identify a more multilateral, cosmopolitan-shared global order.
MUGGAHSo Brazil's involvement in a variety, an alphabet soup of regional organizations, from BRICS to the IBSA to UNISOL to (word?) to a whole range of different organizations. Its efforts to set up recently a BRIC bank, along with China and India and Russia and South Africa. It's worked on the go around and trade talks, seeking to create more equitable trading relationships.
MUGGAHI think Brazil sees itself in a way as trying to balance out some of the courser edges of unilateralist Western policy. And try to promote a kind of vision that incorporates more of the South in global decisions that are previously, and have been typically, dominated by the North. So I think its investment in the United Nations, as a key actor in multilateral and global relations I think is a promising contribution and we need, in a way, more of Brazil globally, not less. And I…
GOLBECKI think we're going to have to leave it there, Robert. We're right at the end of our time, but thank you. Thanks to all of our guests for being here. It was a great discussion. And congratulations to Brazil on well-hosted World Cup. I'm Jen Golbeck, sitting in on "The Kojo Nnamdi Show." Thanks for listening.
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