Brasil-Investigating Crimes Against Indigenous Peoples

 

Left Behind

BRAZIL

The Brazilian government ordered an investigation into the potential crimes of genocide against Brazil’s Yanomami people this week, as the Indigenous community grapples with malnutrition and disease that officials have directly linked to illegal mining, the Washington Post reported.

Justice Minister Flávio Dino said he had requested federal police to investigate possible genocide, environmental offenses and also the embezzlement and “siphoning of public funds meant for Indigenous health care.”

His announcement came days after the government declared a medical emergency in Yanomami territory, the country’s largest Indigenous reserve and which is located between the northern Roraima and Amazonas states.

Since then, the government has sent aid and personnel to the area which hosts 30,000 Indigenous people.

President Luiz Inácio Lula da Silva visited the area over the weekend after a local news outlet published photos of malnourished children from the Yanomami community.

Lula said the limited available data showed that at least 570 children younger than five had died of preventable illness in the area over the past four years.

He and his officials blamed the previous government for the crisis.

Former Brazilian President Jair Bolsonaro rejected the accusations as a “left-wing farce.” During his 2019-2023 term, the conservative leader allowed mining in Indigenous territories, while deforestation in the Amazon hit a 15-year high.

A report by the Brazilian nonprofit Socio-Environmental Institute said the total area of Yanomami land destroyed by mining increased from about 3,000 acres noted in October 2018 – when monitoring began – to 8,085 acres in December 2021.

The institute added that the region has been associated with infectious diseases and mercury contaminating water supplies. There have also been complaints that medicine intended for the Indigenous community has been diverted.

Argentina and Brasil-One Currency????

 

The Dreamy Union

BRAZIL-ARGENTINA

Argentina and Brazil are mulling the creation of a common currency for the two nations, an ambitious plan that has been met with skepticism from economists, CNBC reported Tuesday.

The proposal was unveiled during a meeting in Argentina this week between Brazilian President Luiz Inácio Lula da Silva and his Argentinian counterpart Alberto Fernández.

Lula said the common currency would be designed for trade and transactions between the neighbors, which are also Latin America’s largest economies. He added that the currency could later be adapted by other members of Mercosur, South America’s major trading bloc.

The two leaders explained that the goal is to reduce the dependence on the US dollar and other foreign currencies, which they describe as harmful, the Associated Press noted.

Still, details of the plan remain unclear, as the currency does not yet have a name or deadline. Brazil’s Finance Minister Fernando Haddad noted that the two nations were not looking for a euro-style monetary union.

Analysts quickly shot down the proposal as “pie in the sky,” noting that there were major distinctions between the two economies while highlighting the rapid shift of political winds in the region.

Argentina has been experiencing economic issues with an inflation rate last year of 95 percent and a depreciating currency. Nearly four in 10 Argentinians live in poverty.

Brazil has been faring better but saw its inflation rate in 2022 exceeding the ceiling set by the central bank for a second straight year. The country’s development prospects are still bleak, and it hasn’t had a primary budget surplus since 2013.

Observers added that the initiative appears to be more about politics, as Fernández will seek reelection this year amid ongoing economic woes.

Brazil and Argentina Are Talking About a Common Currency. It Won’t Work.

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COMMENTARY

By 

Barry Eichengreen

Jan. 24, 2023 1:28 pm ET

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Inflation is running at less than 6% in Brazil but at nearly 100% in Argentina. The two country’s presidents have said they’re considering creating a common currency.

Anita Pouchard Serra/Bloomberg

About the author: Barry Eichengreen is professor of economics and political science at the University of California, Berkeley.

Luiz Inacio Lula da Silva and Alberto Fernández, the leaders of Brazil and Argentina, are talking to one another. That’s the good news. The bad news is that they’re talking about a common currency.

Brazil and Argentina are natural trading partners because of their geographical proximity and complementary resource endowments. Unfortunately, their political and commercial relations were less than warm during Jair Bolsonaro’s presidency in Brazil, which ended last month. Bridging this gulf could help to mend the two countries’ economic rift and allow them to recapture exports lost to China. Growing their bilateral trade could provide a much-needed boost to their stagnant economies.

But talking about a common currency is not the right way of going about this. Say “common currency” and most people immediately start thinking about the euro. Clearly, the idea of a South American euro is ludicrous. Monetary and financial conditions in the two countries could not be more different. Inflation is running at less than 6% in Brazil but at nearly 100% in Argentina.

The hope, presumably, is that Argentine inflation would fall to Brazilian levels, not the opposite. But we know from Argentina’s history that efforts to tame inflation by tying the government’s monetary hands inevitably end in grief. The last time that Argentina tried this, with the Convertibility Plan in 1991, the currency collapsed within a decade. The economy collapsed along with it.

The other necessary conditions for a smoothly functioning common currency are also missing in the Southern Cone. Economically, there is no harmonization or integration of the two countries’ fiscal systems. Labor mobility between Argentina and Brazil is close to nonexistent. Politically, the situation is, if anything, even more dicey. Will votes on the Monetary Policy Committee of their imaginary central bank be split evenly between the two countries, as Argentina presumably prefers, or will they be proportional to population, as Brazil undoubtedly will insist?

It is not surprising that the two presidents’ joint letter, published on Sunday, was met with astonishment, if not derision. This led other officials, such as Brazilian Finance Minister Fernando Haddad, to clarify his government’s intentions. The goal is not to phase out Brazil’s real and Argentina’s peso in favor of a common currency, he and other officials explained, or to create a new central bank. Rather, it is to create a common “unit of account” in which bilateral trade can be invoiced. It is to allow trade between the two countries to be financed and settled in their respective national currencies rather than the U.S. dollar.

These ideas remain to be fleshed out. That common unit of account would presumably just be an average, maybe a weighted average, of Brazilian and Argentine currencies. Credit for trade invoiced in reals or pesos would be provided by banks, whose loans would be guaranteed by their respective governments.

These ideas at least are not wacky. The fact that Brazilian companies importing from Argentina have to first buy dollars with reals and then sell those dollars for pesos in order to pay their peso import bills saddles them with additional costs. Better would be a direct market on which pesos and reals could be traded for one another. It would be simpler. It would allow one transaction to be substituted for two.

Similarly, that importers have to obtain trade credit from U.S. bank—since most trade credit is in dollars—is a further source of costs. It is also a source of vulnerability, since dollar credit can dry up abruptly if the Federal Reserve raises interest rates faster than expected, or something goes wrong in U.S. financial markets, or the Congress, heaven forbid, fails to raise the debt ceiling.

But talking about a “common South American currency” and additional government guarantees for banks providing local-currency financing is the wrong way to go about this. Brazil and Argentina don’t need a common unit of account; they need a foreign-exchange market on which their currencies can be traded for one another. They don’t need government guarantees for banks providing trade credit. They need well-capitalized banks with reason to expect they’ll be paid back what they lend. 

A more stable exchange rate between the two currencies would also foster bilateral trade. Here the onus is on Argentina, which needs to bring down its triple-digit inflation. Research has shown that when two countries have credible, inflation-targeting central banks, their bilateral exchange rate will be relatively stable. This relative stable exchange rate would provide much of the trade-promoting benefit of a common currency.

In addition, Argentina needs to loosen the capital controls imposed by its government to preserve scarce foreign reserves. Exporters from other countries complain that those controls prevent their Argentina customers from obtaining the foreign currency needed to pay their bills. Of course, it would be suicidal for Argentina to lift its controls before correcting the monetary and fiscal imbalances that are at the root of its runaway inflation. 

In other words, the first order of business is “own house in order.” Discussions of common currencies, common units of account, and common policies should proceed later—much later.

Guest commentaries like this one are written by authors outside the Barron’s and MarketWatch newsroom. They reflect the perspective and opinions of the authors. Submit commentary proposals and other feedback to ideas@barrons.com.

Cleaning House In Brasil

 

Spring Cleaning

BRAZIL

Brazilian President Luiz Inácio Lula da Silva sacked the head of Brazil’s military Saturday over his alleged involvement in the Jan. 8 riots, when supporters of former President Jair Bolsonaro stormed the country’s main government buildings in the capital, the Washington Post reported.

The removal of General Júlio Cesar de Arruda comes as Brazil’s judicial authorities continue to investigate the alleged dereliction of duty and possible collusion with rioters by the military and security forces.

Arruda had initially refused an order by senior government officials to detain rioters and Bolsonaro supporters sheltering near army headquarters following the protests. The general later relented.

Another reason cited for Arruda’s dismissal was his refusal to fire Colonel Mauro Cid, a former senior Bolsonaro aide and the commander of an army battalion in the city of Goiânia.

Tensions between the military and Lula’s administration have increased following Jan. 8, which saw thousands of protesters storming the Three Powers Plaza – it hosts the Presidential Palace, the Supreme Court and Congress – over the results of the Oct. 30 presidential runoff.

Leftist Lula won against Bolsonaro, the conservative incumbent, by a thin margin. As a result, many of the former leader’s supporters rejected the results and urged the military to take over.

Analysts warned that Arruda’s removal could exacerbate the poor relationship between the leftist president and the security forces: Many Brazilians believe the military and police harbor sympathies for Bolsonaro.

At least 40 rank-and-file soldiers of the military who were involved in security at the Presidential Palace on Jan. 8 have already been fired or forced to retire by the administration.

Meanwhile, Brazilian authorities have launched a probe over Bolsonaro’s involvement in the riots. Bolsonaro – who is currently residing in Florida – has rejected any links to the rioters and condemned the violence.

Even so, the conservative leader never publicly conceded his loss and called the results unfair. He had previously questioned the legitimacy of Brazil’s electoral system amid allegations of fraud.

The Brasilian Amazon-Fertilizing Low-Fertility Soil

 

DISCOVERIES

Dark and Rich

The Amazon might appear to be lush, but its soil is actually not so fertile.

That’s why the region’s Indigenous peoples have been fertilizing the land to use it for agriculture for thousands of years, according to a new study reported in Science News.

Archaeologists have long come across these mysterious patches of “dark earth” – soil patches that are unusually fertile and richer in carbon and darker in color – at a number of sites across the Amazon River basin. They have wondered whether the Amazonians did it themselves – long before the arrival of Europeans – or if it was a natural geological process.

Now, however, a new study on the Kuikuro people of southeastern Brazil found that they produce a special fertilizer – which they called “eegepe” – using ash, food scraps and controlled burns.

The study also found that the recipe for this ground treatment has been passed down from their ancestors: When a research team collected dark earth samples from around Kuikuro villages and archaeological sites in Brazil’s Xingu River basin, they discovered “striking similarities” between soil samples from the ancient and the modern sites.

But aside from showing that ancient Amazonians have been altering their land for millennia, the study also found that the dark soil can help fight against climate change because it holds more carbon than the other surrounding, untouched earth.

While the specific amount is still yet to be determined, the team indicated that the unique soil might spur more research into techniques to permanently store atmospheric carbon in tropical soils.

President Bolsonaro-The Exile And The Mob

 

The Exile and the Mob

BRAZIL

The former president of Brazil, Jair Bolsonaro, might finally be planning to return to his native country after decamping for Florida in late December, shortly before his successor, the now incumbent Brazilian President Luiz Inácio Lula da Silva, took the oath of office.

Bolsonaro’s time in the Sunshine State was not stress-free. As the Associated Press reported, he claimed he was also undergoing treatment for problems associated with injuries sustained when he was stabbed nearly five years ago. But the conservative, populist politician also happened to be out of the country when thousands of his supporters stormed Brazil’s Congress, Supreme Court and presidential palace on Jan. 8, an incident he described as a “sad episode.”

Analysts have warned for months that his supporters in Brazil were planning a riot in the capital Brasília that resembled the unrest at the US Capitol in Washington, DC on Jan. 6, 2021, wrote Wired magazine. Others like the Council on Foreign Relations have drawn similar parallels, but wrote that occurring after Lula’s inauguration, it was unclear what the purpose of the protests was.

The cause of the unrest stems from anger and also conspiracy theories related to Lula’s victory over Bolsonaro that have emerged since last year’s October presidential election, the New York Times added. Many of the rioters claim left-wing agents within their ranks caused the destruction, for example, not the right-wing folks who marched on the capital.

Meanwhile, they say they are patriots who remain true to their cause, the Washington Post wrote.

“The media treats them as terrorists,” said the Rev. Geraldo Gama, a Catholic priest, in an interview with the newspaper. “They’re not. They’re heroes.”

Regardless, it seems as if Brazil’s democracy has passed this stress test, wrote the Wall Street Journal. Tens of thousands of Brazilians recently took to the streets to celebrate and show their support for a peaceful democratic transition of power, the BBC reported. But now the fallout is also occurring as police process around 1,500 protesters who were detained during the earlier riots as well as those who might have organized or financed them, CNN explained.

Last week, authorities requested the freezing of $1.3 million in assets belonging to 52 people and seven companies alleged to have helped fund the buses that brought protesters to the capital.

Meanwhile, a judge recently ordered the arrest of Anderson Torres, the police chief of Brasília, the capital, for allegedly hampering law enforcement’s response to the demonstration in order to foment a coup against Lula’s democratically elected government, according to Reuters. Torres happens to be Bolsonaro’s former justice minister. Lula bypassed Torres and deployed federal forces to put down the riots, a move his allies said demonstrated his “decisive” leadership, the Guardian noted.

Even so, authorities are examining the role of police and military in hindering the arrest of protesters. Meanwhile, prosecutors are investigating Bolsonaro’s role in the riots. They are also seeking to audit and seize Bolsonaro’s assets as they investigate whether or not he had a hand in the events, the Financial Times wrote.

The former president presumably would need to appear in court to keep his belongings, a risky move considering that he also might lose everything if he submits to the law.

Regardless, the protests were over quickly, in less than a day. The aftermath, however, promises to last much longer.