Monday, August 29, 2011

An Amazonian Battle

August 28, 2011 8:40 pm

An Amazonian battle

Brazil: A fight over deforestation poses a test for a president struggling to control an unruly coalition – and for a leading agricultural exporter
a São Paulo protest
Dammed if they do: a São Paulo protest against the building of a dam on a tributary of the Amazon river
You cannot miss the spot where the two Amazon activists were murdered.
Three months ago, José Claudio Ribeiro da Silva and his wife, Maria, were on their motorbike, trying to navigate a dilapidated bridge on a remote track outside the town of Nova Ipixuna in Brazil’s Pará state, when gunmen opened fire on them from the rainforest. A bullet went through Maria’s hand as she held her husband’s waist. The killers cut off one of Claudio’s ears as proof of their handiwork. Today, a plaque marking the site says: “The example they set in defending the forest will live on.”




“They were intolerant of people who wanted to clear the forest,” Claudelice Silva dos Santos, Claudio’s sister, says. Human rights lawyers allege their killers were hired by a local rancher who coveted the small jungle reserve they were trying to protect.
After a slowdown in deforestation in recent years, the future of the Amazon rainforest – the world’s largest, most of which falls within Brazil’s borders – is once again hanging in the balance. Before the end of this year, the country’s senate is expected to vote on a bill that, in its present form, promises an amnesty to landowners who illegally cleared land before June 2008. In March and April,deforestation rates surged sixfold as the bill made its way through the lower house, apparently in anticipation that this amnesty might be followed by others. Reports of violent conflict over land, an indicator of deforestation in the Amazon, have increased.
At stake for Brazil – the biggest exporter of coffee, orange juice, sugar and beef; the second largest of soyameal; and one of the countries most capable of supplying the increasingly voracious appetites of China and other Asian giants – is its reputation both as an emerging agricultural superpower and as a guardian of the global environment.
The Amazon “is part of Brazil’s status as a rising power along with its agricultural strength”, says João Augusto de Castro Neves, a Washington-based analyst and political editor of The Brazilian Economy magazine. “When you look at China, it has manufacturing; India has information technology. When you think of Brazil, you think of land, agriculture and food production.”
Lined up for battle are farmers in favour of the amnesty, worried about the cost of compliance with environmental laws. Ranged against them are environmentalists concerned that an amnesty will prove damaging in Brazil and beyond; as well a nascent sector of the investment industry seeking to monetise conservation of the forest.
Brazil map
For President Dilma Rousseff – the centre-left Workers’ party president who has pledged to veto the amnesty, taking on her country’s powerful agricultural lobby – the issue poses a decisive early test. Her ability to manage a rebellious coalition as she seeks to match the performance of Luiz Inácio Lula da Silva, her successful and popular predecessor, will be watched closely by voters and investors alike.
One of Brazil’s successes in recent years has been a significant reduction in Amazon deforestation, combined with an increase in agricultural production achieved through technological advances. About 17 per cent of the forest has been cleared since the 1960s, the result mostly of cattle ranching. But after peaking at about 27,000 square kilometres in 2004, the annual deforestation rate declined to nearly 6,500 sq km last year (an area about four times the size of London).
Farmers’ advocates say convoluted changes in forest law imposed without consultation by successive governments have imposed heavy costs, financial and otherwise, on landowners. The Amazon forest cover requirement was increased from 50 per cent in 1995, for example. Without the amnesty, farmers will have to pay billions of Brazilian real in fines and reforest 60m hectares, compared with only 10m ha under the proposals, say lobbyists.

HYDROELECTRIC DAM PROJECT: Locals flee to the jungle as migrant workers flock to their town

On a slope overlooking the town of Altamira, in Brazil’s Pará state, an invasion of the forest is taking place. Giant Amazon rainforest trees lie felled as fires burn to clear vegetation. The area has been crudely divided into zones marked by handwritten signs displaying people’s names.
Poor people have invaded this patch of jungle to build houses, saying rents in the town have become unaffordable after an influx of migrants was drawn into Altamira by Belo Monte, a giant dam project. “The police are asking us to leave but we are not leaving until we see a legal document,” says one of the settlers in response to claims that someone already owns the area.
The incident is an example of the unintended consequences that often accompany large projects in the Amazon region.
The R$25.8bn (US$16.1bn) Belo Monte dam is being built on the Xingu river, an Amazon tributary, by a consortium of mostly state-controlled companies known as Norte Energia. Despite opposition from environmentalists around the world, including Hollywood director James Cameron, this year it received the green light from Dilma Rousseff’s government.
It symbolises a dilemma facing energy-hungry emerging markets such as Brazil: how to ensure development while retaining the integrity of a crucial natural resource such as the Amazon forest.
João Pimentel, head of Norte Energia, argues the project is carefully designed to address any concerns. The proposed size of the reservoir to be created by the dam has been reduced by about two-thirds to 503 square kilometres. “The original project was much bigger in terms of energy, and would have impacted severely the jungle and the Indian lands. This project does not at all,” he says.
Mr Pimentel says the design of the dam will ensure Indians living nearby will still be able travel through the region by boat. He also rejects environmentalists’ claims that the project will require more dams in the giant Indian reservations upriver to help keep it running in the dry season. “There is a commitment by the government that no more dams will be built in the Xingu river,” says Mr Pimentel. Nearly R$4bn will be spent on environmental and social projects.
But in Altamira, distrust remains. According to a group of Indians in town to see Norte Energia, Belo Monte adds to the problem of defending reservations from farmers and smallholders. “We didn’t know that the dam was going to start construction this year,” says one. His group was so angry, he adds, it walked out of the gathering. “Our biggest concern is that the dam will dry up the river.”
Meanwhile, the project is proving a mixed blessing for the town. As well as a boom in rentals, the influx of migrant workers has led to a rise in violence. “Altamira works by itself. It does not need Belo Monte,” says Lúcia Ferreira, a property agent. “To develop it needs access roads for cocoa producers and ranchers.”
Satellite monitoring of forests, backed up by stronger law enforcement – particularly against larger farmers – was used to bring about the reduction. Agribusiness, such as soyabean exporters, followed up with a moratorium on produce from illegally cleared forest areas in 2006. Big beef exporters are following suit.
Environmentalists say further re­ductions will be harder to achieve. A clampdown on state loans to farmers who deforest, for instance, has not affected many smallholders, says Paulo Barreto of Imazon, a non-profit environmental research institution based in Brazil. “We are going to have to change our strategy on how to deal with the smaller offenders,” he says.
It was in the name of smallholders that Aldo Rebelo, a Communist party representative in the lower house, authored the bill. The proposals leave unchanged previous requirements for maintaining forest cover – 80 per cent in the Amazon and 20 per cent elsewhere. It is an amnesty for those who illegally cleared land before June 22 2008 that is proving to be the most controversial section.
“The fact that these changes were made by executive order turned farmers into criminals,” says Kátia Abreu, an independent senator and president of the Brazil’s agriculture and livestock confederation. Big agribusiness wants a unifiedforestry code to increase certainty for investors.
Few farmers groups advocate clearing the Amazon. Brazil’s emergence as an agricultural power has been focused in areas far from the region, as technological improvements have enabled cultivation of parts previously considered unsuitable. Grain output in the past 20 years has risen by just over 150 per cent, while the planted area has increased only 25 per cent. Analysts say that Brazil has at least another 20m ha of existing degraded land that could be farmed for crops, enough to cover what the world will need in the next decade without denuding the rainforest.
But environmentalists fear that the amnesty will embolden those who have already ignored limits on reducing tree cover to take more land. “In colonial times, you would deal with unrealistic decrees from Portugal by ignoring them and see if you could get away with it, and that’s continued till now,” says Philip Fearnside of the national institute for research in the Amazon (Inpa).
The debate comes amid rising uncertainty over changing weather patterns in the Amazon. Severe drought in 2005 was followed by record flooding in 2009 and drought last year. “If it gets a little bit drier and warmer, the forest here can disappear even without human interference,” says Rodolfo Salm of the university of Pará in the Amazon town of Altamira.
Scientists fear clearing could further disrupt the pattern of rain and evaporation by which moisture is recirculated through the region, with far-reaching effects. This system eventually feeds into weather patterns in the soya belt in Mato Grosso state in Brazil’s west; the sugar cane fields of São Paulo in the south; and even parts of Argentina.
The Amazon’s crucial role in regulating the global climate is strengthening the case for schemes and new business models that reward communities and landowners for sustainable management of their forests. One such project is the Brazilian government’s Amazon Fund, set up in 2008 with financing from Norway and Germany, which has approved 19 projects worth a total of $235m.
Following a different model is BioCarbon, a new company set up by Australia’s Macquarie Bank; the International Finance Corporation, the World Bank’s private sector investment arm; and US-based Global Forest Partners. The business will invest its $25m of equity in conservation projects that qualify for the UN’s Reducing Emissions from Deforestation and Forest Degradation scheme, starting with forests in Indonesia but also possibly including Brazil. These projects generate “Redd” forest carbon credits that BioCarbon can sell to third-party companies or investors seeking to offset their emissions.
Such schemes face many challenges – there is no global carbon trading system, for instance. Nonetheless, says Brer Adams, Macquarie Global Investments associate director: “Reducing deforestation is one of the most economically efficient things that can be done to cut emissions.”
In the near term, however, the Amazon’s future depends on Ms Rousseff`s ability to influence the coming senate vote. After the government was roundly beaten in the lower house, defeating the amnesty will pose a particularly tough challenge for a leader seen as a capable technocrat but holding elected office for the first time. Her last option will be to use her presidential veto. Izabela Teixeira, environment minister, says the proposed amnesty “sends a negative signal to society”. The federal government, she says, “is working hard to get adjustments and improvements in the text of the law and thus reduce the need to use the presidential veto”.
A global resource
Ms Rousseff will have to calculate whether this is a political battle worth fighting. She already faces problems controlling her unruly multiparty coalition, having lost four ministers since taking office in January, amid ethics and corruption scandals.
In addition the president, a developmental economist by training, has her own plans for the region – including building a dam system to boost the potential to generate hydroelectricity and drive economic growth. She will have to balance these concerns against environmental concerns at home and in export markets in developed economies.
“This bill is a big political test for Dilma. It will send signals to the world on where Brazil stands on the Amazon and the environment,” says Mr Castro Neves, the political analyst.
Yet no matter how it is achieved, better management of land in the Brazilian Amazon is an urgent priority not just for the environment but also for the region’s 24m inhabitants, a mix of Indians, ranchers, smallholders and poor labourers who have lived with constant conflict for decades.
No one knows this better than the families of the da Silvas, the slain activists. The municipality of Marabá, next to Nova Ipixuna, was in 2008 the fourth most violent in Brazil with a homicide rate six times that of the city of Rio de Janeiro, or 25 times that of the US. Most of these crimes go unpunished. Police identified two suspects in the da Silvas’ case but they es­caped before a local judge issued a warrant for their arrest, the family says. According to human rights groups, since the da Silvas’ murder, four more people have been killed in land conflicts in in Marabá.
One of the da Silvas’ relatives, wearing a T-shirt with a picture of the deceased couple and the words “the forest is crying”, begins weeping herself as she appeals for justice. “We live in a Brazil where people can kill with impunity,” she says.
Additional reporting by Iona Teixeira Stevens

Gonzalo Lira: What Distinguishes the Rich from the Poor Today, P...

Gonzalo Lira: What Distinguishes the Rich from the Poor Today, P...: In Part II of this series, I’ll be covering education. In Part III, I’ll be covering something I call “structural pliancy”. —GL One of my ...

Friday, August 26, 2011

Protests Continue In Chile

show details 9:09 AM (4 hours ago)
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Chilean Students, Workers Continue Protests

August 26, 2011 | 1537 GMT
Chilean Students, Workers Continue Protests
Protesters supporting Chilean students march toward the Chilean Consulate in Buenos Aires on Aug. 25
Chilean students and workers took to the streets for a second day Aug. 25 to protest government policies. More than 1,000 have been arrested during the protests, with more than 200 injuries and one civilian death reported. The protests are being driven by a downturn in the Chilean economy and a spike in the number of college-age youths, and while these factors could ultimately be self-limiting, in the short term the government will have to make changes to keep the protests from growing.
Violence erupted Aug. 25 during the second day of national strikes in Chile as  students and workers protested the Chilean government’s policies. Gunfire was reported in several locations around the country, and reports indicate that 1,394 people have been arrested, 153 police and 53 civilians have been injured, and one civilian was killed. Sponsored by the Workers’ United Center labor union, the protests have merged wage disputes with ongoing student demonstrations against Chilean President Sebastian Pinera’s government policies. The protesters demand sweeping education reform and wage hikes, and some environmentalists are protesting a dam planned for Patagonia.
The protests pose a serious political challenge for Chile, which had been one of the region’s most stable countries over the past two decades. Pinera, a right-wing leader, businessman and Harvard-educated economist, ran on an election platform of education reform and a promise to run the country like a business. Pinera’s is the first right-wing government to hold power in Chile since the country returned to democracy in 1990, and Pinera’s approval ratings — which have plummeted to 26 percent from 44 percent in late 2010 — are the lowest in that same time period. Given that Pinera’s policies have not shown much of a change from the previous administration, it seems clear that the protests stem from the population’s desire for significant change as represented by the 2009 election of Pinera’s party after two decades of continuity.
The students involved in the protests across Chile have numerous complaints. They want education to be completely subsidized — a reflection of the financial strain created by a 26 percent increase in the price of public education since 2005. The increased costs affect a greater portion of the population than before; the number of college students in Chile has grown from around 200,000 two decades ago to approximately 1 million. Legally, private universities can compete alongside public institutions, and students are protesting the idea of universities making a profit by charging higher tuition. Students are also protesting strict loan repayment rules. Since previous protests attempting to pressure the government to make structural changes to the education system have triggered only limited concessions from the government, the students now want a national referendum on the issue.
At the same time, the government is facing opposition from workers at state-owned copper company Codelco. A workers strike in July — the largest such strike in 28 years — caused millions of dollars in losses and forced Pinera to reconsider a proposal to privatize the company. An agreement was reached in early August, but the size and intensity of the strike lent considerable weight to growing unrest throughout the country.
A couple of structural factors are contributing to the current unrest. First is Chile’s economy. The country has done relatively well in the wake of the global economic downturn, with the growth rate for 2011 initially projected to be 6 percent. However, in combination with the effects of the 2010 earthquake, the global downturn triggered a rise in Chile’s poverty rate — from 14 percent in 2006 to more than 19 percent in 2010. This is still a significant decrease compared to the dictatorship-era rate of nearly 40 percent in 1989, but it is a sharp rise for a country that, in recent years, has grown accustomed to a consistently narrowing gap between rich and poor.
The second major structural factor is a population surge of people in their late teens and early 20s, many of whom are the first in their families to attend college. Not only is there a bump in the youth population, but it is also the first generation of students to have grown up entirely in post-dictatorship Chile. With more students enrolling in college, there are more students looking ahead to unprecedented (for Chile) levels of indebtedness when they graduate. This is also a generation that has grown accustomed to economic stability and mostly participatory democracy, with none of the fears of their parents’ generation. This population cohort’s increased willingness to use protests to push for political change has been a notable phenomenon over the past several years.
Ultimately, these factors could be self-limiting. Government policies are likely to remain fiscally responsible and relatively responsive to public demands. Chile’s copper-funded coffers are deep, and the government’s options for expanded spending to combat the economic downturn are more numerous than in many other countries in the region facing civil unrest. Furthermore, youth cohorts ultimately grow up, get jobs — assuming a continued economic recovery — and have families.
However, in the short term, Pinera will have to make greater educational and wage reforms to placate the protesters. His calculations likely will be tempered by the concern that the government’s capitulation would only prove the effectiveness of protests and could spur a secular shift toward more protests in Chile. If, however, Pinera refuses to make changes, the protests will grow, possibly affecting key industries and economic activities.
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President Hugo Chavez Of Venezuela To Purchase $4 Billion Worth Of Weapons from Russia

show details 11:37 PM (5 hours ago)

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Venezuela: Russian Loan Ready For Weapons Purchase

August 26, 2011
Russia is ready to loan Venezuela $4 billion to purchase military weapons and equipment, according to a Russian diplomatic source, Kommersant reported Aug. 26. The source said the loan is an opportunity for Moscow to support a key regional ally during Venezuela’s upcoming election campaign.
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Thursday, August 25, 2011

vovo e bi no "pula pula" My Grand Daughter

BTG Pactual Merges With Celfin Capital To Create A Super Investment Bank

August 24, 2011 11:09 pm

Brazil’s Pactual and Chile broker in deal talks

Brazil’s BTG Pactual is in talks to merge with Chilean brokerage Celfín Capital to create Latin America’s largest investment bank, its boldest move yet to consolidate its position in the region and become a global force.
Pactual, run by young billionaire André Esteves, has been expanding aggressively since it was bought back from Switzerland’s UBS in 2009, with analysts betting the bank could soon turn its attention to targets in Europe or the US.



The proposed deal with Celfín, announced on Wednesday, would bring together more than $70bn in assets under management and help Pactual conquer the Latin American market, which has become a hot spot for investment and cross-border deals.
The terms of the merger were not announced but the deal is expected to be completed in the second half of this year, Juan Andrés Camus, president of Celfín Capital, told the Financial Times.
“It makes a lot of sense. We all need to have regional cover and size to be able to compete with international banks.”
Pactual “visited us some time ago. We have been talking about benefits and costs and now we have agreed to start more serious negotiations,” said Mr Camus. He declined to discuss financial details.
Celfín is Chile’s biggest brokerage and has operations in Peru and Colombia. Although the deal was announced as a “merger”, the terms are more likely to resemble those of an acquisition, given that Pactual dwarfs Celfín with more than $64.5bn in assets under management, analysts said.
The two groups are initially expected to maintain their respective brands.
“Pactual just keeps growing and growing ... it could end up being a global player of the emerging markets,” said Luis Miguel Santacreu, an analyst at Austin Asis, a banking sector consultancy in São Paulo.


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After buying failed local bank PanAmericanoearlier this year, Pactual has also pushed into non-financial sectors, partially funding retailer Pão de Açúcar ’s recent merger offer for Carrefour’s Brazilian business.
Last week, Pactual also took the first step towards a possible initial public offering by filing a request with regulators to become a publicly listed company.
“With this latest deal, Pactual will be able to better cover capital markets in the region,” said Mr Santacreu, adding that the bank may now look to opportunities in Brazilian retail banking or potential acquisitions in the US.
Latin America’s rapid economic growth and a surge of interest from retail investors and sovereign wealth funds, particularly those in Asia, have made the region an attractive target for local and foreign banks. M&A deal activity in Brazil surged 167 per cent in the second quarter from the previous year, according to IntraLinks, a secure data provider.

Wednesday, August 24, 2011

Latin America's Toxic TRade

August 23, 2011 11:08 pm

Latin America: A toxic trade

Latin America: While many of the region’s economies are booming, the battle against illegal drugs cartels is placing severe strain on resources and institutions, write John Paul Rathbone and Adam Thomson
Alleged drug trafficker of the gang "La Familia Michoacana"
Handcuffed: a woman under arrest in Mexico City for alleged drug trafficking. Police are routinely masked to avoid becoming targets for gang reprisals
Amid the dizzying rise in commodities prices of the past decade, there are two notable exceptions: heroin and cocaine.
Both products have defied inflation in ways only computer microprocessors can match: narcotics are cheaper in real terms than they were 20 years ago.



This is just one illustration of a global failure to restrict the supply of illegal drugs. Though the fight has cost billions of dollars and thousands of lives, the trade – and its effects on those who take the products – has barely been dented. Production has increased, and global consumption with it. Of an estimated 272m users of illegal drugs worldwide, about 250,000 consumers lose their lives every year.
America remains the world’s largest drug market, and Europe is catching up fast. It is increasingly accepted that the prohibition policy known as the war on drugs launched 40 years ago by US president Richard Nixon “has failed” – as a recent report by theGlobal Commission on Drug Policy (endorsed by three former Latin American presidents, a former UN chief and a former US Federal Reserve head) bluntly put it.
This is prompting hand-wringing in Washington and other western capitals. But in Latin America, the biggest production and trading centre, the consequences of this failure continue to mount in ways barely appreciated elsewhere.

GOVERNMENTAL EFFORTS: A war hard to wage when police fail lie detector tests

At the end of last year, enforcers from a drug cartel swaggered up to the new police station in Los Ramones, a rural area east of Monterrey, Mexico’s leading industrial city, writes Adam Thomson. They pumped more than 1,000 rounds of ammunition into its freshly painted exterior.
No one was hurt. But the message – that organised crime can intimidate authority more or less at will – was both clear and effective. The following day the entire local police force resigned in terror.
Los Ramones illustrates the difficulties that Felipe Calderón, Mexico’s centre-right president, has hit since he declared war on organised crime in 2006 when he came to office.
Thanks to its federal system, the country has a patchwork of federal, state and municipal security forces, which co-ordinate haphazardly, are generally underfunded and are often so small that they present organised crime with an easy opportunity to bribe and intimidate.
In Guatemala, a country that in recent years has become a principal transit point and logistics base for Mexican drug smuggling organisations, it is a similar story. Álvaro Colom, the leftist president, says he has had to fire at least two national police chiefs on corruption concerns since he took office in 2008.
The Guatemalan army, which is also used to fight organised crime, has been cut in size by 70 per cent since peace accords were signed in 1996. In spite of Mr Colom’s efforts to boost its numbers, it remains ill-equipped to be a credible threat to the cartels’ operations. In a recent interview with the Financial Times, Mr Colom admitted that some of the armed forces’ equipment, such as aircraft and ships, dated from the second world war.
In both Mexico and central America, work to reform security institutions to deal with well-armed drugs cartels has been slow. Attempts to purge forces of corrupt or inept elements often take time because of the sheer number of officials who fail polygraph and other tests.
In the state of Nuevo León, of which Monterrey and Los Ramones form part, the regional government fired 560 officers – about 40 per cent of its force – when the current regional administration took over.
Since then Nuevo León has started a recruitment drive intended to make the force more professional, dignifying the job through higher salaries and perks. Even so, the state still has less than half the roughly 14,000 police it needs to meet the UN standard of three per 1,000 inhabitants.
At the national level, Mr Calderón has had some success. Mexico has taken steps to overhaul its justice system and is gradually moving to more transparent, jury-based trials. He has also increased the number of federal police from some 6,000 in a country of 112m to about 36,000. More than half the top 37 cartel leaders have been killed or captured and record amounts of narcotics have been seized.
But a bill introduced by Mr Calderón to place municipal police under the command of each of the 32 states – seen as important in fighting crime – has met resistance in Congress. Most experts believe it has little chance of approval.
The few successes have, moreover, not come cheaply: in a country where almost half the population lives in poverty, his government has more than doubled the annual security budget in nominal terms to 128bn pesos ($10.4bn). Yet the drugs continue to flow and the violence keeps growing. Mexico’s statistics agency says there were more than 22 murders per 100,000 inhabitants last year; in 2006, there were just eight.
In a stinging reminder of some drug lords’ continuing prosperity, Forbes magazine last year named Joaquín Guzmán, head of Mexico’s Sinaloa drugs cartel, as the 60th most powerful person on the planet. Mr Calderón was not on the list.
About 40,000 people have been killed in Mexico, mostly by cartels, since president Felipe Calderónlaunched an assault on organised drug crime four and a half years ago. In Central America levels of violence, by some estimates, are worse than in Afghanistan or Iraq.
Social and political peace are under threat. “A drug-trafficking tsunami has befallen the region,” says Kevin Casas-Zamora, a former vice-president of Costa Rica and now an analyst at Brookings, a Washington-based think-tank. General Douglas Fraser, head of US Southern Command, has called organised crime fuelled by drug trafficking Central America’s gravest threat.
Few suggest the region is about to become a collection of narco-states where governments are usurped by cartels, though that must be a risk for Guatemala, Honduras and El Salvador, the worst afflicted Central American countries. Most of the economies of a continent once associated with sovereign default and hyper-inflation are booming. While developed countries are mired in high borrowings and slow growth, Latin America has become a motor of the world economy better known for its booming economies than the cocaine trade.
Even so, most Latin American democracies are young. Mexico, Latin America’s second biggest economy, made its democratic transition just 10 years ago; Brazil, the biggest, barely 25. This makes such nations especially vulnerable to corruption and violence.
At least the days when the US “certified” countries on the basis of their ability to curb drug production are gone. Marijuana is now California’s largest cash crop, with estimated sales of $14bn a year. Most of the 10,000 illegal methamphetamine laboratories seized worldwide in 2009 were also in the US.
Even so, the west continues to im­pose considerable pressure on the region. Latin Americans have compelling reasons of their own to strengthen the rule of law. The economic and political benefits “would be huge”, says Agustin Cars­tens, head of Mexico’s central bank. The World Bank estimates that crime and violence cost Central America 8 per cent of its gross domestic product.
But many in the region have grown weary of the traditional approach, which focuses on criminalisation and repression but has little to show for it. Indeed, local drug consumption is rising; Latin American cocaine use is now almost equal to European levels, although still half the US rate.
For one, the intensity of the violence that always shadows the trade and attempts to curb it is grotesque: beheading, dismembering and the random slaughter of innocents. El Salvador, the region’s bloodiest country, suffered 71 homicides per 100,000 in 2010, according to national statistics; Brazil, 25. By comparison, the US homicide rate was less than six; Europe less than two.
Second, fighting traffickers puts a strain on countries lacking resources the developed world takes for granted. The continent remains one of the world’s most unequal regions. Even in Mexico, a member of the Organisation for Economic Co-operation and Development, the club of rich nations, the government defines its poverty rate at 46 per cent.
Third, it strains law enforcement institutions beyond their ability to cope. Mexico’s police service has been effectively balkanised by the constitution so that there are separate forces for the country’s 32 states, and for each of its 2,300 municipalities. In some Central American forces, officers have to buy bullets out of their own pockets.
Many institutions in wealthier nations would struggle when pitted against a highly sophisticated and ruthless transnational industry that, according to UN estimates, generates $85bn of profits annually from cocaine alone – equivalent to six times Coca-Cola’s pre-tax earnings last year.
“Fighting corruption and drugs is akin to using an Indian rubber eraser,” says Malcolm Deas of Oxford university, a historian of Colombia who has advised the country’s presidents. “The eraser always gets dirty, and some of it rubs off.”
. . .
Worldwide, recognition is dawning that the prohibitionist policies of the past century have not worked – and, as long as the drugs people want to consume are illegal and therefore supplied by criminal entrepreneurs, they are unlikely to work.
Even the presence of 100,000 of the best-trained soldiers with the most sophisticated weapons has done little to help staunch the flow of opiates from Afghanistan, which accounts for about two-thirds of global heroin production. Bad weather and plant disease did more to reduce supplies last year than any efforts by Nato-led troops or Afghan police.
As for Latin America, the only success story so far is Colombia, and only when judged by falling homicide rates rather than the export of illegal drugs. Furthermore, Bogotá’s success was thanks to conditions unrepeatable elsewhere.
First, there was a large flow of funds from the US. The $6bn spent on the ongoing Plan Colombia anti-narcotics and insurgency aid programme amounts to about 6 per cent of Colombia’s GDP for 2000 (the year the scheme began). By contrast, America’s equivalent initiative in Mexico is worth $1.4bn, less than 0.2 per cent of Mexico’s GDP for 2010.
Second, in the past 20 years Bogotá has made a sustained and near-superhuman effort at the cost of the lives of high numbers of police officers and judges. It has benefited from having a unified police force when it began to tackle seriously the problem of organised crime – something lacking in many other countries. “If your police forces are scattered, the narcos simply pick you off,” points out General Oscar Naranjo, head of Colombia’s police.
Third, the US and Europe provided on-the-ground training and intelligence in Colombia, which would be unworkable in most of Latin America. When Alvaro Uribe, then Colombia’s president, agreed in 2009 to let the US military use the country’s air bases to help local forces hunt down traffickers, it triggered protests across the region about “Yanqui” imperialism. Mexico’s constitution prohibits foreign troops from operating in the country, although a handful of retired US army personnel have recently been deployed there to get round such laws, according to The New York Times.
Finally, even when a crackdown is successful it simply pushes the mayhem into other countries. “The more success we have with interdiction, the more organised crime goes elsewhere,” says Laura Chinchilla, president of Costa Rica.
More and more people, and not just libertarians and hippies, are calling for a radical rethink of drug policy. The US, for example, was able to ignore the worst effects of its problem for many years. In practice the attitude was that, so long as there were not bombs going off or bullets flying in Washington, New York or Los Angeles, the violence did not matter. But in a more globalised world, and with bullets being sprayed around in neighbouring Mexico, Washington increasingly finds itself on the back foot, and confronting the possibility of violence spilling over the border.
. . .
What action it should take is unclear. Devoting more money to the problem is hardly likely, given the state of US finances. Drug use prevention campaigns also have a poor record, despite persistently high expectations. They are “cost-effective but not very effective”, points out UCLA professor Mark Kleiman, author of the recently published Drugs and Drug Policy: What Everyone Needs to Know. The legalisation debate is bogged down by legitimate fears about the risk of increased addiction rates; it will take years of study before this is better understood.
One promising, and cheap, alternative would be to slow the flow of arms south from the US. Colombian president Juan Manuel Santos recently lamented the fact that disassembled hand guns can be dispatched by Federal Express to his country, where they are pieced back together. In Mexico, as much as 70 per cent of guns seized come from America.
Yet this debate never gets off the ground because of the sensitivity of the issue for many Americans who assert their constitutional right to bear arms. As President Calderón said on a March visit to Washington: “I respect the Second Amendment, but we are requesting: don’t sell weapons to Mexican criminals.”
Some in the region believe that, while they take steps to deal with the problem, the west appears less willing to make sacrifices. Mexico, for example, has embarked on police reforms that will require constitutional change to come into effect, while a US ban on domestic sales of semi-automatic rifles that expired in 2004 is yet to be reinstated. Many believe the west has also failed to tackle money laundering. As Carlos Slim, the Mexican telecoms magnate who is the world’s richest man, has observed: “It is unfair that the drug-producing countries get to keep all the problems, and the consumer nations all of the profits”.
There is no silver bullet that can solve the drugs problem. But many in the region feel that the longer western consumer countries fail to take a meaningful role in reducing the extreme violence associated with attempts to curb their citizens’ desire to take illicit drugs, the more it will become apparent that they have blood on their hands. Security forces and traffickers have become embroiled in a kind of “arms race”, as the GCDP report put it. “Break the taboo on debate and reform. The time for action is now.”

Tuesday, August 23, 2011

Brasil Hosts A Homecoming

ugust 22, 2011 9:18 pm

Brazil hosts a homecoming

cassio calil
Return of the native: Cassio Calil says that having connections in Brazil is as important as actually being Brazilian
Cassio Calil recalls how he watched the recent rise of Brazil while working in the skyscrapers of New York.
After joining JPMorgan’s investment bank in 2005, having first left Brazil in 1987 for more promising climes, he noticed more and more representatives of ambitious Brazilian companies intent on international expansion turning up in his office. After decades of missed opportunities, Latin America’s largest economy was on the move.



“I was watching Brazil growing and growing from the camarote of New York,” says Mr Calil, referring to the private boxes used by spectators during Carnival. “I was participating [in that] by helping our Brazilian clients with solutions, but I was sitting in Park Avenue and watching Faria Lima grow,” he says.
He began to ponder a return to his native country and, today, he is one of those sitting in an office in Faria Lima – the avenue most popular with investment banks in São Paulo – after being appointed head of JPMorgan Asset Management in Brazil this year.
Mr Calil is among a growing number of Brazilians with international expertise and experience who are returning to Brazil. They are helping Latin America’s largest economy deal with a shortage of managerial talent as it becomes ever more entwined in the global economy, particularly after China overtook the US as its biggest trading partner in 2009.
Brazil’s distinctive culture, the lack of English spoken at street level and the country’s labyrinthine politics and bureaucracy make it hard to import foreign talent. Meanwhile, the global financial crisis is also prompting more Brazilian expatriates to consider going back, according to executive search consultants.
“We are seeing senior expatriates returning home because of the great opportunities here, and others who are also coming back because of the downturn in the US and Europe,” says Daniel Santiago Faria, country manager of Brazil for Marks Sattin, an executive search consultancy.
Popular sectors include banking and engineering. There are even specific schemes to attract and retain Brazilians with international experience. Citigroup, for example, has implemented programmes at US MBA colleges to recruit Brazilian graduates.
The shortage of managerial talent is reflected in soaring salaries. A study by Dasein Executive Search last December found that company bosses in São Paulo were the world’s highest paid, with a chief executive in Brazil’s financial capital earning an average of $620,000 excluding bonuses, compared with $574,000 in New York and $550,000 for top bosses in London. The trend has been accentuated by the strengthening of Brazil’s currency, the real against the dollar, but has primarily been driven by demand for talent.
Other recent returnees include Reinaldo Garcia, Latin America chief executive of General Electric, Sergio Leifert, chief operating officer of Société Générale, and Charles Ferraz, chief investment officer at Brazil’s largest private bank, Itaú.
“You read a lot about opportunities in Latin America, but when you’re there you actually feel it,” says Mr Garcia, who grew up in Ribeirão Preto amid the sugar cane fields of São Paulo state before leaving 31 years ago for the US. “It is one thing to go and visit [Brazil] and another to actually live there.”
For most long-term expatriates, the subsequent rise of Brazil was almost inconceivable when they left the country. Thirty years ago, Brazil was governed by a military dictatorship presiding over a crisis-prone economy. The Chinese economic miracle was still in the future and China would only emerge as thegreat engine for Brazil’s commodity export sector in the mid-2000s. The ascent of Brazil’s so-called “C classes” – the lower middle class fostered by social welfare reforms and increases in the minimum wage over the past decade – was also still years away.
When Mr Calil left the old Brazil as a young man 24 years ago, he was meant to be visiting Hong Kong for only three months as part of a traineeship with IBM. Following stints in Japan, Australia and Ireland, he ended up in New York and switched to JPMorgan in 2005. By then, some of Brazil’s own companies were emerging on the international stage, led by the likes of Anheuser-Busch InBev, the world’s largest brewer, JBS, the world’s biggest meat processing company, and state-owned giants Petrobras and Vale.
Mr Garcia quit law school in São Paulo in 1980 to study economics in North Carolina. “There was a military government, inflation was very high, prospects for the future were not very great and there was not a feeling that you could control your own future,” he says.

Banking on talent

 Investment banks in Brazil have been particularly challenged by the general scarcity of managerial talent. Industry leaders such as Citigroup, Goldman Sachs and JPMorgan have stepped up hiring to cope with increasing deal and trading flows.
 Citi says it is looking to attract expatriate Brazilians and other Latin Americans working for the group abroad back home.
 Citi’s headcount had reached 7,000 as of April, the last figure available, double that of five years ago. JPMorgan, meanwhile, has increased its headcount by about sixfold.
 Citi is also looking to hire Latin Americans graduating from MBA schools in the US. They are usually rotated through the group’s global network before eventually being redeployed back home in the fast-growing markets of South America, particularly Brazil.
He joined GE straight out of college and went on to head its important healthcare division, a career path that involved moving to different positions in the US and Europe, including the UK.
“I didn’t think I would actually ever work in Brazil,” he says.
But in December last year, Jeffrey Immelt, GE’s chief executive, asked Mr Garcia to return to Brazil to lead the Latin American operation. The move was part of GE’s efforts to allocate more autonomy to fast-growing regional markets.
Asked whether he feels Brazilians with international experience such as himself are in danger of being press-ganged into returning home to fill the talent gap because they are familiar with the language and the culture, Mr Garcia says his nationality “helped” but it was not the deciding factor.
“It has got to be putting the right person in the right job,” says Mr Garcia. “Jeff asked me: ‘I’d like you to go but you can say no.’ I really felt that I could absolutely say no, but I also felt that this is definitely the right place to be right now so I don’t think it’s a matter of forcing. There is a natural magnetic attraction to these markets now.”
Like Mr Garcia, Mr Calil rejects suggestions that Brazilians with international experience are in danger of being pigeonholed. He points out that the connections he had with Brazil as part of his working life were as important as actually being Brazilian:“Had I been outside Brazil and not connecting to Brazil – even though being Brazilian – I would have been less effective.”
Both men note how life in São Paulo has changed. The city is a more attractive place to live, although security is worse than 30 years ago, says Mr Garcia. Both mention the national sport – soccer – as one thing that kept them “Brazilian” during the long years away. “If I was watching a soccer World Cup, who would I cheer for?“ says Mr Calil. “It has been Brazil from the day I left.”