Checking in on the Brazilian Elections (May 2018)

Yesterday, the Financial Times provided a helpful point-in-time overview of the Brazilian elections. As I’ve mentioned in the past, this year’s Presidential elections will be Brazil’s most consequential since the election of Lula in 2003, and will be the basis for Brazil’s turnaround in the next decade and beyond.

In my conversations with colleagues, friends, and taxi drivers (usually the best heuristic for a particular pulse of the population), the only consensus I’ve manage to glean is that no one knows what will happen. Recent polling shows that more than 45 per cent of voters are still undecided, with less than five months before the first round of the general elections. Of the presumptive candidates, the largest vote-getter has yet to reach 20%. The race appears to be wide open, with no incumbent, front-running candidate, or presumptive heir to the Presidency / throne.

By all accounts, polls in early 2018 showed Lula as the strong favorite, with approximately 40% of prospective voters opting for the former President. In large part, this was due to Lula’s name recognition and cult of personality, as well as the hope that Lula would be able to recreate the success of his tenure (macroeconomic and exogenous factors aside). After Lula’s arrest in March, which barred him from running in the coming election, many in Brazil’s middle and poorer classes were left without a candidate to put their support behind. Despite Lula’s arrest, a large portion of the Brazilian population still supports Lula, and broadly claim a ‘politicization’ or political motivation behind his arrest. While there is no obvious successor to carry Lula’s mantel, it is likely that whomever he anoints and endorses (whether from within his own party, the Worker’s Party [PT]), or outside of it, will immediately be given a huge lift.

More broadly, whereas recent Presidential elections have made use of via well-organized and -funded political parties, led by the Lula’s PT in recent history, the Lavo Jato corruption scandal has exposed the vast graft and corruption at the heart of the PT, as well as within the other major Brazilian parties, including the Brazilian Democratic Movement (MDB) and Brazilian Social Democracy (PSDB). Far-and-away the consenus amongst all Brazilians (rich, poor, and in between) is removing the incidence and broader culture of corruption in Brazilian politics. This increases the likelihood of th election of an ‘outsider’ or ‘third party’ candidate without the “taint” of corruption on the candidate themselves or the party they represent.

The FT does a good job of outlining the likely leading candidates, including the current frontrunner, the far-right Jair Bolsonaro, the left-leaning Ciro Gomes, the centrist Geraldo Alckmin and the well-known Green Party candidate, Marina Silva. Behind these contenders are entrenched candidates from the current Temer administration, including Finance Minister Henrique Meirelles, and Temer himself, who decided to give up on his first election campaign today (he assumed power after Dilma’s impeachment). None of these candidates provide much in the way of innovative or inspired thinking, and even less so in the way of concrete policy objectives. As an example, Bolsonaro has focused his campaign on improving security in Brazil amidst a sky-high murder rate and concerns about day-to-day safety. His solution? Killing all of the criminals in Brazil.

The backdrop of this election is a country teetering on the brink of an economic turnaround, or a tumble further down the depths of the longest recession in its history. As the FT explains, Brazil’s two key economic issues, resolving its unsustainably bloated pension system and shrinking the role of government to improve Budget deficits (one of the most inefficient in the world relative to its tax collection) must be addressed by the next President. Unfortunately, neither of these are particularly sexy issues, nor are they politically popular, akin to asking the Brazilian voter to “take their medicine” with the hopes of a medium- or long-term payoff (GDP expansion, investor confidence, etc.).

On the other hand, the failure to act on either of these issues will impact public equity and debt markets well before it makes its way to the average Brazilian. As I understand it, the key voting issues of the Brazilian voter were neatly summed up in a recent conversation I had with a political scientist: (s)he want to have a job to go to (employment), wants to get to work in a timely fashion (transportation), and doesn’t want their wallet to be stolen in the process (security). These issues all fit neatly near the base of Maslow’s Pyramid, and reflect the need for Brazil to improve on base-level indicators before it can think about re-assuming the mantle of regional or global political leadership.

Looking from the outside in, it’s fairly easy to imagine the unimaginable here in Brazil: the victory of the brash, violent, homophobic and misogynistic Bolsonaro. While Bolsonaro continues to lead in the polls, the feeling that he will be unseated by a more sane, middle-of-the-round candidate continues, even though no name comes to mind when asked who that candidate might be. The common reaction of Brazilians that I’ve spoken with when I’ve raised this likelihood has been eerily similar to the one that I would’ve had leading up to Trump’s election: It couldn’t happen. He’s an incredibly loose cannon. He’s an interventionist, and someone who has actively called for a return of Brazil’s military dictatorship. And have you heard the things he’s said about women, gay people, criminals, etc. etc.? He’ll bring the country back to the dark ages! Americans are likely to find these appeals and rationales familiar, and remember the odd, surreal feeling to wake up the morning after the election to seemingly dystopic newspaper headlines: Trump Wins in Historic Upset.

One thing that I’ve been pondering quite a bit is how to think about Democratice Presidential elections in the wake of Trump’s victory. By all accounts, Trump’s victory was a failure of polling, and data more broadly. Just one election after 538 founder Nate Silver’s victory lap and his proclamation on the inevitability of data in understanding political elections, data was proven to be wholly inadequate in capturing the outcome of the election. I’ll never forget following the election online and on television, beginning the night with Kellyanne Conway’s near-concession  speech, only to witness a complete reversal of the odds as the evening wore on. This graphic from the NYTimes accurately captures the dramatic one-eighty.


Source: NYTimes Live Presidential Forecast


While I do think it is important to translate the experience and lessons learned in the US (and the UK) elsewhere, there is always a certain danger in conflating different countries, political systems, and situations. As Nassim Taleb has explained over and over again, ‘black swans’ take place much more often than they’re probabilistically assumed to occur, and should therefore be considered, to the extent that they’re known ahead of time. In this case, there’s a strange cognitive dissonance taking place, whereby the actual data is showing a most-likely outcome that the general public has to-date refused to accept as possible, unlike the more commonly occuring reverse: an unlikely outcome that people irrationally believe to be more likely that it actually is.

There are several principle dynamics that differentiate Brazil’s Presidential election from the United States that are worthy of consideration:

1. Compulsory voting: Brazil is the largest country in the world to impose compulsory voting on its citizens. Despite penalities levied against non-voters, around 80% of the population votes in the Presidential election. This means that the complacent or uninformed voter plays a larger role than in non-compulsory situations such as the US.

My hypothesis would be that this could result in a larger-than-expected turnout for the candidates that get the most media attention (including social media) and / or offer the most ‘sound-bite-able’ clips.

ADVANTAGE: Bolsonaro

2. Two Round system: Somewhat differently than the primary system, Brazil has a two-round Presidential election whereby the electorate chooses between a broad field of candidates from across the political spectrum in the first round (October 7, 2018), with the top two victors vying for the Presidency just three weeks later in the same month (October 28, 2018) (interestingly, in the unlikely scenario that the top candidate in the first round receives >50% of the overall vote, he or she is declared elected, without a second round. In that short timespan, the unelected Presidential candidates will throw their weight behind one of the two victors, and begin the process of coalition building.

My hypothesis would be that the more centrist, and well-established of the remaining two candidates would be able to leverage their existing connections and party infrastructure to reign in votes from the first round field. In the event that Bolsonaro makes it to the second round, he will likely be more extreme and less organized than the opposing candidate, and thereby stands a lower chance of success.


3. Mandatory TV time: Brazilian elections, like many across the developing world, make extensive use of television time and public funds as a part of the campaign. As The Economist explains, how much public money and free television time each Presidential candidate receives depends on the congressional strength of his or her coalition and / or party. This would dampen the bullhorn of an outsider candidate with little political infrastructure, who would have comparatively much less television time and funds to campaign with. One caveat is that this does not account for social media, however, of which Brazilians are significantly active relative to other countries.

My hypothesis would significantly weigh the importance of social media, and therefore would more or less nullify the importance of this impact.



It will be interesting to see how things proceed from here – how the populace’s disposition changes and how the market reacts as the elections come closer. The Brazilian Real exchange rate to the Euro and Dollar have moved more-or-less in lockstep up until recently, which indicates to me there is a “Trump” effect from his actions to strengthen the Dollar, as well as a broader consensus on the precieved weakness of the Brazilian economy and / or the ongoing political uncertainty. Personally, I expect there to only be further devaluation in the coming months (NB: I’m far from a knowledage FX trader / investor).

brleur brlusd

Source: Yahoo Finance


One wild card to add to the mix is the upcoming World Cup this summer, which will likely serve as a distraction that will keep the media and average Brazilian away from the political newscycle for the majority of the summer. I’m curious to continue to track this election over the next few months, and am excited to continue to document things as they evolve.

Brazilian Corruption and the 2018 Elections

Over the weekend, the New York Times Magazine asked whether the recent anti-corruption surges in Brazil, South Korea, and South Africa will have a sustainable, ongoing impact on the government and economies of these countries, and their regions more broadly.

The article presents an even handed appeal: while there are certainly reasons to be cynical (among them, flagrant corruption and nepotism at the highest levels of US government, as well as recent extrajudicial actions taken by China and Saudi Arabia in the name of “anticorruption”), there is reason for hope as well, most notably in the decline of the “fatalism” surrounding corruption long felt by citizens of these countries.

Here in Brazil, corruption is far-and-away the number one concern raised by Brazilians in my unscientific polling of Uber / Taxi drivers, especially in relation to the upcoming October / November Presidential elections. Brazilians have long grown accustomed to the types of “inefficiencies” surrounding the allocation of public resources, until recently the fight against corruption, enshrined through the Brazilian proverb of “rouba mas faz” ([s]he steals, but [s]he gets it done) had many antagonists, but very few protagonists.

Considering the noise I’ve grown accustomed to in the run-up to US elections, I have been incredibly surprised by the minimal amount of campaigning and media attention given to Presidential aspirants, now less than 5 months leading up to the first round of elections. Since Dilma Rousseff, Brazil’s last democratically-elected President, was elected in 2014, there has been a very public impeachment (read: hers), her predecessor, Lula da Silva, has been arrested and placed behind bars, and more broadly the public-private backbone of some of Brazil’s foremost companies (Odebrecht, JBS) has been blown open. The country has been ensnared in a real life soap opera that has already been dramatized into a movie and television series, yet there seems to be no outspoken connection by any of the candidates being drawn between this hugely dramatic shift and the upcoming the Presidential elections.

Considering the primary preoccupation of many Brazilians, one would consider Sergio Mora, the Brazilian federal judge who has become the public face of the Lavo Jato scandal, an incredibly viable and popular candidate. However, to date there has been no formal indication that Mora will run, as critiques of the politicization of his judicial position have partially drowned out the incredibly herculean task already achieved by Mora and his team in rooting out much of the power structure behind the Lavo Jato scandal. Similarly, Joaquim Barbosa, the former Chief Justice of Brazil, was seen as a candidate with little chance of attaining the Presidency before he formally bowed out of contention this week.

Instead, the Brazilian military, whose history of deposing a Leftist leader in the face of inflation and lagging growth presents a troubling precedent for the health of Brazilian democracy, has returned as a loud and problematic voice in the battle against corruption. In the lead-up to Lula’s arrest, in which doubt was cast as to the conviction of the Brazilian judiciary and police to carry out the arrest in the face of resistance, the Commander of the Brazilian Army, Eduardo Villas Bôas, took to Twitter to express the views of the broader Brazilian military and its role in preserving “respect for the Constitution, social peace and democracy.” Given the military’s historic role and the relative youth of Brazilian democracy, this strikes me as a disturbing signal sent to the broader Brazilian population of the military’s ongoing vigilance and propensity to step in the event that the situation does not improve.

Despite the well-documented abuses of the Brazilian military, it feels like there is a bit of nuance amongst the Brazilian populace in their attitudes towards the military, and its historic role in creating efficiency and stamping out corruption. While the tweets by the General were subject to rebuke, it doesn’t seem as if there is a broader concern of the military’s outspoken stance. The military seems to be considered a “last resort,” or a backstop against an incompetent or irrevocably corrupt democratically-elected candidate. How far Brazilians are willing to go in to ensure that corruption is rooted out remains to be seen. One troubling indicator is the continued polling prominence of the right-wing candidate Jair Bolsonaro, now the leading candidate following the arrest of Lula. Bolsonaro is primarily known for his status as a former military officer, and is largely seen as incorruptible, above reproach, and coming from outside the system. This may prove to be the keys to his success, despite his long-documented streak of hateful and ignorant views that urban Brazilians seem to think make him unelectable (sound familiar?).

As financial markets advisor Sergio Goldman wrote today in a Linkedin post, there seems to be little innovation or enthusiasm amongst the Brazilian Presidential candidates so far. Whether this is due to the fact that the television campaign season doesn’t begin until August, or that there are still inspiring candidates like Mora yet to announce their intentions, remains to be seen. Regardless, it will be very interesting to view firsthand the anti-corruption mandate handed down by the Brazilian populace following the October/November elections, and any further actions taken by Brazil’s next President as a result.

Coffee / Café

Sometimes, some of the more obvious ideas or conclusions can take a long time to come together and congeal in one’s head. For the past several years, I have increasingly grown interested in coffee: its cultivation, importation, and ultimate business around its consumption.

In college, I graduated from drinking Wawa’s French Vanilla coffee, usually imbibed with a further sweetener (though Wawa has now released a [surprisingly good] Kenya AA premium blend) to drinking coffee black. In State College, I increasingly sought out different types of coffees at various local coffeeshops: the dark roasted coffee served at Irving’s and the acidic and always-interesting coffee at Saint’s Coffee.

Arriving in Philadelphia post-college, I continued to indulge this nascent interest, buying an Aeropress and manual burr grinder for home brewing and exploring Philadelphia’s upstarts (Ultimo Coffee) and classics (La Colombe, continuing to take over the world) in the Philly coffee scene. These coffee habits went on the road with me as well: as I traveled around the country for work (oftentimes at the expense of my sleep schedule), I would survey the city’s area coffee shops to learn about the different coffees offered and any quirks associated with the shop, such as the seemingly all-mustachioed baristas at Intelligensia in Chicago, or Philz baristas pouring the brewed coffee into the cup at an almost comical, hibatchi-chef-like distance (which I was informed helps to bring out the scent / character of the coffee).

My move to New York helped solidify this passion – while Oslo was my “local” neighborhood spot, I traveled up to Greenpoint to try the infamous $10 coffee at Budin, and sought out different coffees brands, blends, and origins at coffeeshops across New York to consume at home or at their shops.

During this 5-year span, the market for single origin coffees and the coffeeshop chains serving these coffees (Blue Bottle, Bluestone Lane, Blue-something-else), exploded. It seemed like people’s coffee consumption habits changed dramatically (remember when Keurig was going to take over the world?) and our pallets became more accustomed to the wide variety of origins and extraction methods beyond the humble 12-cup Black & Decker.

My coffee crazy was cemented by a trip to Japan, where like many other non-Japanese innovations, coffee has been elevated into an art form. Coffee was an essential part of my daily routine in Japan, and served the all-important role of providing me with much-needed respites, and an essential energy boost during 15 mile+ days, as well as providing me with a survey of some of Japan’s foremost cafes: including the legendary Café de l’Ambre (Ginza), with its vast library of bean offerings (pic), and Norwegian Fulgen Coffee (Tomigaya) in Tokyo, Kurasu and Vermillion Cafe and the legendarily gorgeous % Arabica situated right off the Katsura River in Arashiyama in Kyoto, and LiLo Coffee Roasters in Osaka. The Japanenese clearly held coffee — its cultivation, the best extraction methods, and the ideal conditions to serve it — in incredibly high esteem and with an obvious level of respect.

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Brazil, the world’s largest exporter of coffee, has a much more nuanced relationship with coffee. Colloquially, Brazilian coffee is served sweet, oftentimes with mounts of sugar or the eyewatering-sweetness of the eye-dropper ‘adocante’ to a single cup of espresso-sized “cafezinha.” This has taken the form of a saying:

“Negro como o diabo, quente como o inferno, puro como um anjo e doce como o amor”

Black as the devil, hot as hell, pure as an angel and sweet as love.

Economically, the story of Brazil’s coffee trade has been a longstanding saga of export-based commodity dependency, and a strong desire to seek out industrial independence and make themselves less beholden to exogenous global shocks. Coffee production exploded in Brazil in the 1800s, accounting for 75% of all growth globally and unseating the slave-labor dependent sugar and cotton to become 60% of all Brazilian exports by 1913.


Following the winding down and eventual end of the slave trade in Brazil, the capital accumulated by slave owners was used to fund banks, invest in railways, and build coffee plantations. Railways and coffee grew hand in hand, as the coffee fazendeiros, or plantation owners, saw the railways as a necessary investment to replace slave-abetted muleteers, creating necessary infrastructure in the country and creating Brazil’s global coffee trade.

In the process, the plantation owners grew into a powerful political interest, and played a formative role in the development of Brazilian economic and social policy in the states of São Paulo and Minas Gerais, whose wealth concentration and disproportionately strong indicator performance continues to date. As Brazil’s share of the global coffee trade increased, coffee production began to dictate monetary policy in Brazil as well. Brazilian finance ministers pursued a policy of valorization to stabilize, subsidize, and insulate Brazilian coffee barons from global shocks in price. Brazil’s coffee trade was an extremely important aspect of Brazilian historic inflation, and its turn to state-led industrialization to reduce Brazilian dependence on extremely expensive imports given the relatively expensive, propped up currency.

In the 1910s, this resulted in a price “floor” being created, whereby the Brazilian government would buy up and store the depressed coffee crop. This only served to increase Brazilian dependence on global coffee whims, as it prevented the fazendeiros from pursuing other more lucrative agricultural opportunities in favor of the artificially inflated coffee price.

During the global depression of the 1920s and 1930s, the global price of coffee crashed as incomes and demand fell. This resulted in an overall reduction of Brazilian exports by 60%, and leading the Brazilian government to buy up and destroy 78 million bags of coffee between 1931 and 1044 to try and push up the price, as well as wrote off the growing debts of the prominent and politically-powerful coffee fazendeiros.

Brazilian coffee exports as share of total exports valueCoffee exports as share of total exports value, 1928-1940

from The Great Depression in Brazil

Through the 1960s, Brazil’s dominant share in the global coffee market remained, and the cost of producing coffee in Brazil increasingly determined the global price. This prevented Brazil’s finance ministers from devaluing the Brazilian currency, the cruzeiro, making other imports more competitive, lest they displease the all-important coffee fazendeiros.

Today, coffee plays an important, but significantly less prominent role in Brazilian agricultural production, and its economy. It remains the home of much of the world’s “commoditized” coffee, i.e., the coffee that you find with ubiquitous brand names like Folgers and Nestle. Whereas Brazilians has seemingly resisted the entrance of Starbucks (I remember there was just one, comically overpriced Starbucks on Avenida Paulista when I first arrived to Brazil in 2011), today Starbucks’ aggressive expansion has resulted in the coffee chain popping up in shopping malls all around the City. Local chains like Suplicy, focused on attentive service and good coffee, have sprung up, and there is even an upswing in “premium” coffee-focused shops serving single origin coffee with your choice of extraction methods, such as Takko Cafe and Um Coffee Co.

These consumption habits and related geekery still exist on the fringes of Brazilian society (I don’t think home brewing coffee is much of a thing in Brazil, aside from Nespresso-like dispensers), but it’s growing in popularity, and given Brazil’s propensity to oftentimes be 3-5 years behind the Americans in the adoption of popular habits, I could see coffee’s popularity as an expensive, premium diversion only increasing over the next few years.

For my part, I plan to connect the dots between my coffee interest and time in Brazil to learn as much as I can about coffee production and the broader trade as it is practiced today. While a trip to Colombia’s Zona Cafetera in December whet my appetite for the beauty and allure of coffee-producing regions, I hope to visit coffee-rich areas within the statest of Sao Paulo, Espirito Santo, and Minas Gerais (and maybe others!) to learn about mass production and smaller concerns. Simultaneously, I hope to continue developing my pallet for different coffee origins and flavors, though I’m certainly not aspiring to reach the heights fo the sommelierlike q-grader status. From there, who knows where this journey will take me. For now, I’m enjoying the recent connecting-of-the-dots, and as always, am eager to learn more.

Note: Brazilian coffee-related history pulled from Michael Reid’s useful (and compact) history of Brazil: Brazil: The Troubled Rise of a Global Power.

Saturday in Rio

As alluded to in a previous entry, one of my favorite ways to get to know a city is through its food, and the local bars and restaurants that lend the city a great deal of its character and charm. In advance of any trip, I normally try to solicit food recommendations from locals or past travelers, and tend to keep a travel guide handy in the even that I find myself without a good option nearby. From there, it’s usually a vague plan that involves a lot of walking, and some meals interspersed in between.

My Saturday in Rio was no exception. I started the day in search of one of my favorite Brazilian exports, açai, the delicious berry often served frozen and pureed with sugar or the sweetening guarana syrup. More seasoned palates than mine have likened the taste of açai to chocolate, with a less heavy / more refreshing aftertaste. As an added bonus (I would eat the stuff on taste alone), açai is purported to have health benefits and be a natural source of energy, though I’m still unclear how much marketing or legend has seeped into this popular conception.

Açai is found in the rainforest-laden, Amazonian region of northern Brazil, and is notoriously difficult to maintain and preserve. This accounts for its absence in restaurants across the world, aside from the occasional comically overpriced version found in urban health food stores. In search of a more authentic style of açai, I walked up from the Botafogo neighborhood I was staying in to the adjacent Flamengo neighborhood and the lunchonette (lanchonete, in Brazilian Portuguese) Tacacá do Norte, which specialized in food from in the Brazilian state of Para, (fact about the Amazon River).

I ordered my açai with very little sugar, which I soon noticed was the way that most of the other morning patrons were ordering it as well. The açai tasted considerably more like the terrain it was picked from than the sugary, sweet version that I was accustomed to, but it retained the essential flavor that makes it so popular here in Brazil. To quell my curiosity more so than accompany my açai, I ordered the house specialty, the tacacá soup. The soup is principally made from tucupi, a yellow sauce of wild manioc root, which seemed to be an accoutrement on nearly everything the patrons were eating, including the acai, and came served with a collards-like stewed green called jambu leaves at the bottom, and some shelled shrimp floating on top. Tacacá is most notable for its distinct taste: a tart sweetness (similar to some Filipino dishes I’ve had) albeit a sweetness that leaves your mouth feeling slightly numb after. The soup gave me the sensation of a low-intensity shot of novacane at the dentist’s office. Though it was better than it sounds, I doubt I would rush to order it again.

tacaca soup_2.jpegTacacá Soup, the specialty of Rio’s Tacacá do Norte lanchonete

After, I made a brief visit to the Museu da Republica (Museum of the Republic) housed in the Palacio de Caetete, the one-time Brazilian “White House.” The museum’s main attraction is the third-floor bedroom of Brazilian President / autocrat Getúlio Vargas, the location of his infamous suicide. The room was eerily preserved to look and feel the same as it was on that date in 1954, including the sparse furniture and the gleaming revolver (under glass) that he used to dramatically shoot himself in the heart. For whatever reason, the accompanying will, in which Vargas preserves his populist appeal for eternity by stating: “if the birds of prey want someone’s blood, if they want to continue bleeding dry the Brazilian people, I offer my life in holocaust” was just a facsimile – maybe the original is kept in one of Brazil’s many history museums. Adjacent to the Palacio are stately gardens, with less shade than you’d expect to protect its current visitors (and the Brazilian political elite, at one point), from Rio’s sweltering heat.

getulio_revolver_2The revolver used by Getulio Vargas to kill himself in 1954, at the Museu da Republica in Rio de Janeiro

From there, I set off for another museum / park combo, climbing up one of Rio’s many steep-inclined sets of concrete steps to reach the Santa Teresa neighborhood, and the Museu de Characa de Ceu and Parque das Ruinas (Ruins Park.) The museum had a beautiful collection of paintings capturing the city of Rio de Janeiro from its colonial origins to more modern depictions of the city. My favorite painting was titled “The Big City,” and I think it managed to more capably depict the improvised, chaotic nature of Brazilian cities better than any photograph.

chacara de ceu_old_2.jpegA painting of Rio de Janeiro in an early stage of development at the Chacara de Ceu Museum

BE468A73-C32A-4F2F-B2F6-83F41CFD7C61The view from the Parque das Ruinas provides an interesting comparison to the painting

The great cityThe aptly titled painting The Great City, depicting modern day Rio de Janeiro, at the Chacara de Ceu Museum

Santa Teresa was certainly the most touristy place I visited in Rio – it has the feel of a pacified favela that has since become a popular haunt for visitors to Rio curious about the commotion taking place above the beautiful coastline of beaches and development. I eventually reached the Bar do Mineiro, a restaurant recommended to me for its famous feijoada – a black beans and meat-based stew that has its origins in the cuisine of Brazil’s slave population that has since become Brazil’s national dish, a testament to the strong and ongoing influence of Brazil’s immigrant population on its cultural development. Along with Wednesdays, Saturdays are one of two days of the week that Brazilians indulge in the meat-heavy, fat laden stew, though there are certainly places that serve feijoada any day of the week. Mineiro’s feijoada did not disappoint – it was truly among the best I’ve ever eaten, and the open-air, informal boteco (bar) atmosphere adding to the experience. While the serving “for one,” served with rice, Brazilian greens, and the ubiquitous manioc flavored flour called “farofa,” is normally well beyond the reaches of my appetite, in this case I managed to finish the whole serving.

feijoadaThe hearty feijoada stew, a specialty of the Bar do Mineiro in Santa Teresa, Rio de Janeiro

From there, I made my way down to Copacabana beach via the surprisingly well-run metro system (one of the few useful vestiges of the investments made in the froth-filled run-up to the World Cup / Olympics). After all, a day in Rio without at least a passing acknowledgement of the beach almost seems like a wasted day. Walking down the Copacabana promenade towards Ipanema, I was struck by just how unique, and how much of an international treasure Rio is. With the exception of Tel Aviv, whose beaches are mostly cordoned off by private beachside hotels and developments, I can’t think of a major international city which such a gorgeous and attractive beachfront. Along shoreline that stretches south x southwest across Copacabana, Ipanema, and past Gávea, Rio’s beaches are open and accessible to the public, and one can even rent their own chair and umbrella for the day at any of these beaches for less than $5. Hungry, thirsty, or under-adorned beach goers need not fret either – the beach is teeming with enterprising vendors selling everything from the Brazilian version of grilled cheese to fruity cachaça-based caipirinhas, and there are beach posts every km or so with restrooms, showers, and cafe fare.

I spent the next 2-3 hours sitting by Ipanema’s Post 8, which offers a beautiful view of the Pão de Açúcar Mountain and the sun setting over the mountains. Along with my book, I was able to people-watch my fellow beach-goers, with plenty of diversionary entertainment to be had. Brazilians are truly master beach-goers – they seem to manage to make the beach, and whatever space they have around them, into their temporary home, with the oftentimes revealing thong bikinis and ‘sungas’ (speedo-like swimsuits) testament to the comfort that Brazilians preternaturally feel on the beach.

From there, I made a quick stop at the flagship of the local Livraria da Travessa bookshop, which had a bit less majesty, but was no less functional and interesting, than the fantastic Livraria Cultura outpost in Central Rio. I bought a copy of Bolaño’s Distant Star at the recommendation of a friend who is writing about Bolaño for his doctoral thesis, before yet another meal to cap off my day. Somehow, the exercise and activity of a day filled with possibility manages to be a major appetite generator.

I ended the day at Bar Lagoa, another well-known restaurant recommended by a local in advance of my visit. Worried about my post-beach attire (namely my flip flops, which I think is pushing it, even for Brazil), I changed into sneakers before entering the open air bar adjacent to Rio’s Lagoa Rodrigo de Freitas. The first page of the menu explained the old-style feel of the restaurant, replete with waiters dressed in coats and ties. The restaurant was at one time a haunt for German immigrants to enjoy fare of their Fatherland and obligatory accompanying lager. The restaurant was initially called Bar de Berlim (Berlin), before changing its name during World War II (but unlikely changing the allegiance of its attendees), as Brazil was the only South American country to participate (fighting for the Allies). I was charmed by the prospect of eating German fare in such a tropical setting, and opted for an afpelstrudel and schlag (cream) to cap off my day, as well as a couple chopp (lagers), with the obligatory top quarter of the glass filled with a refreshing froth.

apfelstrudel.jpegBar da Lagoa’s apfelstrudel, with a healthy portion of schlag / crème

In all, it was an exhausting but rewarding day (as the best ones are), without incident. However, it must be stated that on that very Saturday, eight people were killed by the police in Rio’s Rocinha favela, an upsetting and important reminder that Rio continues to be in the midst of a violent war between the city’s police force and its poorer citizens. The activities of the day, in stark contrast to the events taking place miles away, provide a useful juxtpoisition of the very real contradiction that the city of Rio de Janeiro present to its tourists and diverse inhabitants.

Heading to Rio

This weekend, I’ll be heading to Rio de Janeiro to visit our office there. In truth, despite my longstanding love of Brazil, its language, and its people, Rio is a place that I don’t particularly know well at all. It’s not that São Paulistanos see Rio with particular disdain or derision, but that it’s thought of as a world apart, almost an alternate of Brazil where the beach and the ocean are as integral a part of life as traffic is here in São Paulo. Further, I was surprised to learn how many lifelong São Paulistanos had never been to Rio – like New Yorkers never visiting Washington DC or Boston (if they were tropical and beach-abutting.)

Of course, it’s impossible to talk about Rio without addressing the long standing endemical violence and broader strife that exists there, especially for poorer residents of color. The recent devolution of the State into insolvency has further imperiled the ability of the state to meet its basic commitments, including paying its police. The recent murder of Rio politician and activist Mariella Franco, which has deservedly become international news, is particularly notable for its impunity and the likelihood of corrupt police involvement, given her outspoken stance against the police and the forensic findings of police-issued ammunition being used in the attack.

Politically-motivated assassinations are hardly restricted to Rio, as capably explained by Gregory Duff Morton in the New York Review of Books, who recounts the spate of land conflict assassinations that have taken place in Brazil’s countryside against activists from the Brazilian Landless Movement (MST), and reflects a larger picture of the use of hired assassins to silence or intimidate.

The incidence of these murders in Brazil, and the lack of justice associated with these acts of violence, reflects an alarming and upsetting reality that exists beneath Brazil’s alluring surface. It is a profoundly unequal and unsafe place for Brazil’s poorer residents, and not a place that one should take lightly. A remark made by a Brazilian acquaintance in a recent conversation sums it up best: “Brazil is likely a less dangerous place than Brazilians make it out to be, but it’s certainly more dangerous than gringos (read: non-Brazilians from the developing world) make it out to be.”

Despite this lengthy and necessary caveat, I am looking forward to being on the ground in Rio this weekend, and beginning to expand my relationship with the city. Despite my usual reticence for Airbnb’s live-in rented rooms, I’ve opted to rent a room in an apartment in Botafogo from a 50-something Carioca (person from Rio). I’m incredibly curious to get his perspective on the current state of Rio, as well as the all important ‘dicas’ (tips) – what to do, and maybe more importantly, what not to do, as well as his advice for getting to know the city better. I’m hopeful to report back with positive impressions and little incident.

Learning by (losing): Getting up-to-speed on personal finance in Brazil

One of the things that’s consumed some of my free thinking and time of late has been how to translate well-trodden personal finance concepts that are easily facilitated and can be nearly automated at this point to the experience of living in another countrry, especially one with a history of inflation, a dynamic foreign exchange, rate, and a protectionist and nationalist approach to investing.

While the concept of the modern stock market originated in the Netherlands, well before the founding of the United States, through the issuance of bonds and shares of stock in the Dutch East India Company to the general public, the US has long usurped its European counterparts as the largest concentration of markets and market capitalization. As pension schemes have been increasingly rescinded from the typical American private sector employee, the privatization of retirement savings became a huge, trillion dollar+ industry, propped up by legislation leading to the creation of tax-advantageous vehicles like the 401(k) and IRA that incentivize saving (and not touching that savings). And while it’s shocking to me how much lower American stock market participation is than the television and print media would lead you to believe, given sub-inflation level interest rates and the advent of exchange-traded funds that remove much of the diversification risk from the investing puzzle, those with the means, wherewithal, and luck to invest should do so.

I was first acquainted with the market and its infinite puzzles through books like Liar’s Poker and The Snowball, books that captured the seductive allure and nearly-unquantifiable potential of the markets. The publication of Ramit Sethi’s I Will Teach You to Be Rich, handed to me by a benevolent older cousin, seemed almost written to my 19-year-old self. The book implored its readers that it’s never too late to start, and participating, learning, and (sometimes) losing was better than feeling lost and unexperienced when it came to your money. I tried to build credit and develop my personal finance infrastructure as much as possible for someone earning very little, to reap the benefits of compounding interest and dividend reinvestment, with as much patience and humility towards the markets as I could muster.

Moving to a new country, with its own market and personal finance culture, has been an exploration of my philosophy towards money and the very real benefits that living in a market-driven, inflation-controlled economy provides. Brazil’s historic inflation, mostly tamed since the implementation of the Plano Real in the 90s, still seeps into the popular culture and attitude towards consumption here in Brazil. If my money will be worth half of what it’s currently worth if I leave it in the bank, what wouldn’t I spent it and reap the benefit of its value, now? Similarly, despite a longstanding (and ongoing) tradition of monthly payment-based purchases for everything from airline tickets to sneakers, credit cards are still a nascent industry, far from ubiquitious and leagues from the points-maximizing culture that exists in the United States.

As an American living in Brazil, I’m only now beginning to be acquainted with the advantages, disadvantages, and vast differences that exists between the US and other parts of the world when it comes to personal finance and its relationship to the broader economy. For example, Brazilian consumer banks pay a significantly higher interest rate on its holdings than the US, reflecting a significantly higher base risk in the Brazilian economy, and the need to incentivize consumers to save and leave their money subject to exogenous risk. The Brazilian state, through its rigorous labor laws, takes a large role in inducing retirement and other savings onto the Brazilian worker. Interestingly, Brazilian personal income taxes seem to be more evolved and efficient than their US counterparts, completed via “several clicks, all online” (though here, I’m not talking about the broader tax code.)

Market investment participations seems to be restricted to Brazilian stocks and financial products, and the range of products offered appear to be much smaller than the United States, with comparatively higher expense ratios reflecting the lesser role of automation, and competition, in the financial services market. The recent all-time high in the Brazilian stock exchange (called the Bovespa), does not seem to reflect an increase in partipation by Brazilians, but rather of yield-seeking foreign money, which can be removed from the market at the click of a mouse, or increasingly, automatically via servers in unspecified locations, leaving Brazilian investors left with the result.

Whether or not I dive into this frenzy is a topic left to be explored over time as I begin to think about how to optimize this experience, more broadly but also from a financial standpoint (with mistakes sure to be made along the way), all the while learning and expanding my perspective on markets. As always when I find myself away from the US for a period of time, I remind myself of Warren Buffett’s now classic adage of winning the ovarian lottery – a constantly useful reminder whenever I find myself in doubt or in a moment of self-pity.

Trump, China, and the Americas – Part 2

The day after I wrote on Trump’s alienating stance towards Latin America inviting a further opening from China, an article was published in the NYTimes outlining the attempts underway to further the Mercosur and Pacific Alliance trade agreements, including Asian countries as well as Pacific Ocean-abutting Chile, Colombia, Mexico, and Peru, in an attempt to diversify trade outside of the increasingly protectionist United States trade policies.

“Trump has inadvertently done more for commercial integration in Latin America than many Latin American leaders managed to accomplish,” said Patricio Navia, a political scientist at New York University.

In addition, the article looks at the two most powerful economies in Latin America, Brazil and Argentina, who are the two economies (post-exemption) projected to be most impacted by Trump’s steel tariffs.

Rather than seeking a one-upmanship strategy of solely levying tariffs and ramping up protectionism, Brazil is scrambling to do the opposite – open up an economy to trade that has been notoriously protectionist. A blueprint of this plan, entitled ‘Commercial Opening for Economic Growth’ was published by the President earlier this month.

“Our vision is the opposite of what is happening in the United States,” said Marcos Jorge de Lima, Brazil’s minister of industry and foreign trade. “We want more and more trade openings.”

Lastly, the article touches on the concerns raised by Chilean President Sebastián Piñera in an interviewing following the Davos Forum on the very different visions outlined by the American and Chinese leadership in their ongoing attempts at leading the world order. However, in stark contrast to decades of free trade-advocating by the United States, foreign leaders found themselves listening to Chinese leadership calling for the opening of markets and closer trade ties globally.

Piñera: “I think that with this attitude the United States is leaving a void, and that void may be filled by China. The president of the United States was defending protectionism, and the president of China was defending free trade. It felt a little like the world upside down.

Trump, China, and the Americas

Reading through the NYTimes editorial written by Ben Raderstorf in advance of this year’s Summit of the Americas, I’m struck by the daunting (and growing) disadvantage of the US versus its Chinese counterparts, and the incompatibility that can exist between democracies in the developed and developing world.

Trump’s Latin America agenda, with the exception of his ongoing rows against illegal (and legal) immigration from the South and gang violence on US soil borne of Central American gangs, has been non-existent one year into his term. And though Obama’s pro-democracy and trade rhetoric was hardly the Monroe Doctrine, Trump is faced with the growing encroachment of China into the Western Hemisphere, who are seeking to fill the void left by the US as it retreats into nationalism and its continued attention to warfare and nation building in the Middle East. As seen by this useful map compiled by the NYTimes Interpreter blog (titled ‘How China is Challenging American Dominance in Asia’), the Chinese have actively expanded their sphere of influence across the Asian continent, and increasingly are moving westward (through the ambitious One Belt One Road Initiative), and into Africa and Latin America.

While China’s activity in the developing world perpetuates the age-old story of commodity exploitation, they have built much-needed infrastructure in the process, including schools and hospitals, engendering goodwill in the process (though one could cynically see this as an inexpensive step carried out based on lessons learned from previous incursions into the region by colonial powers.) Meanwhile, Trump continues to shill America First rhetoric, rip up painstakingly negotiated regional trade agreements, and alienate our most powerful partners in Latin America through fruitless confrontation and expensive and quixotic tariffs. Through his actions, Trump is not only imperiling US relations and setting longstanding alliances backwards, but also expanding the vacuum for the Chinese to step into our place.

Over the past 10 years, Venezuela has devolved into a failed state due to gross fiscal mismanagement and a concurrent cratering of oil prices. All the while, its leaders have railed against the “imperialist” Yankees, oftentimes resorting to decades-old actions carried out by the United States to combat the westward growth of international communism, while accepting the entreaties and financial support of modern day imperialists, Russia and China. Trump’s return to a defiant and unapologetic American posture to its Southern neighbors only serves Venezuela’s continued rhetoric, at the expense of its starving and increasingly fleeing population. And it’s not just in Venezuela: according to Gallup, and cited in the editorial, Trump’s approval rating across Latin America is a paltry 16% (although its interestingly highest in Venezuela at 37%, reflecting the increasingly right wing stance of its population in the face Chavez and Maduro’s left wing populism), as he seems to reflect everything that’s stereotypically reviled about US and its stance towards Latin America.

And while one must doubt the ability of a single speech or participation in a conference to change the perception of the region, it is increasingly unlikely that any progress will be made due to the continued disarray at the State Department, where the Assistant Secretary of State for Western Hemisphere Affairs remains unfilled. Though that assumes that our President concerns himself with the expertise of the State Department at all, which he’s shown himself to be entirely above to date.

More broadly, I think this speaks to a growing concern in the increasingly bipolar competition for global supremacy being waged between the United States and China, and the additional attention and diplomacy required by democracies seeking diplomacy-based cooperation. Whereas China’s promise of infrastructure investment and financial support is predicated on their 20-/50-/100-year view of the world, and the long term survival of the Communist Party of China, the United States is increasingly operating in highly polarized, 4- or 8-year cycles, whereby the democratically elected successor oftentimes seeks to undo, restore, or repair the actions taken by his predecessor to fulfill political promises or party obligations.

Further, Latin America boasts a panoply of democracies which oftentimes swing wildly between ultra-left and right wing leaders, adding to the powder keg of uncertainty between the US and the region. Looking ahead to the coming Brazilian elections, where a centrist and a right wing cnaidance seem increasingly likely to square off, there is little telling how relations will evolve between the US and its most important ally in Latin America. While one could have predicted a fairly rote, cooperation-rhetoric heavy partnership between Alckmin and Clinton, it’s entirely likely that the centrist Alckmin would take a more defiant, populist stance against Trump. In Bolsonaro, Trump may have found a strong ally and potential partner in his quest to restore security and order to the world.

It’s easy to envision Trump and Bolsonaro, a former military man (Trump loves his generals), partnering on military incursions into drug-producing parts of the region, as well as an increasingly muscular stance towards Venezuela, including the possibility of military action, something that Trump has already publically mulled over to his regional counterparts. Further, one could imagine covert operations taking place in violent parts of Central America as well, reverting the US back to the era of CIA interference in Latin American affairs that has taken decades of goodwill and diplomacy to repair. And while our UN representative seems to be conducting a political campaign for the US Presidency from New York, demonstrating an almost-proud level of ignorance as US Representative (the most baffling quote of the entire article: “National security experts from both parties say that the depth of her knowledge of foreign-policy matters remains relatively shallow — about “one inch deep,” quips one Republican national security specialist.”), she is hardly serving the role of the “conscious” of US foreign policy and discouraging military action in favor of diplomacy, a role capably served by her predecessor.

All the while, China will no doubt continue its expansion into the region, offering seemingly-free and apolitical support, in stark contrast to Trump’s flag waving and gallingly patriotic presence. As I believe we will increasingly see in the coming decades, China’s slow, methodical incursion into the Western Hemisphere will prove to be significantly more consequential than actions taken by the Soviet Comintern. All the while, the US and its allies will continue to play from behind, as it restores (and re-ignites) relations in the region over concurrent election cycles.

The return of the global caudillo

For the past two months, I’ve been living in Sao Paulo, Brazil. Brazil has long been a country of interest to me, dating back to my early fascination with samba, tropicalia, and bossa nova music, influenced by some of my favorite hip hop producers and musicians (Madlib, Cut Chemist, etc.)

My first time in Brazil was in 2011, the height of the Brazilian success story. Lula had left the Presidency as one of the most popular politicians in the world, and his hand-picked predecessor and former Chief of Staff, Dilma Rousseff, seemed primed to benefit from his political goodwill. By merely continuing Lula’s tightrope agenda of addressing the concerns of the Workers Party (PT) electorate and Brazil’s poorer population, while simultaneously appasing global investors, who were clamoring to get in on the Brazilian success story through emerging market and country-specific index funds and direct private equity investment, a successful, if uneventful, Presidency could have been easily predicted. The Brazilian real was at a near-high relative to the Dollar, increasing the purchasing power of both ordinary Brazilians and the ultra rich, who were flocking to Miami to invest in real estate, art, and other “safe” investment (all capably recounted in Alex Cuadros’ essential Brazilionaires, a helpful guide to foreigners seeking to better understand Brazilian society.)


Life in Brazil was great for a 21 year old American student living in Sao Paulo, if not expensive, and the optimism of Brazil and its future permeated my own life, as I began to contemplate a future working at the intersection of the United States and Brazil, either in the public or private sector. I distinctly remember discussing this newfound optimism with Brazilian I met or had been professionally connected to, and being surprised by their reluctance to fully buy into this Brazilian success story, suggesting that they reality of Brazil lay below the surface – it was a country on a commodities “high,” still hopelessly corrupt and unproductive as it had been before Lula’s wave of success. That the Brazilian society was still an extremely unequal place, with poor educational system and a bloated pension system that provided Brazilian politicians and former military men obnoxiously generous benefits at the expense of ordinary Brazilians.

Maybe it was youthful naivety, maybe it was a childlike desire to believe in a nice story, but I had a hard time fully absorbing their dour realities. Global capital markets, who were betting heavily on companies like Petrobras, Vale, and JBS, as well as FIFA and the IOC, both of whom had chosen Brazil as the sites of their premier events, couldn’t all be wrong. And, Brazil, unlike its BRIC counterparts China and Russia, was a true democracy – the will of the people would propel truth and root out corruption via elections and the broader democratic process.

Seven years later, having seen much of the ensuing strife and judicial action from a distance, watching formerly prominent business leaders and politicians being led in handcuffs, and seeing Paulista Avenue (a symbol of cosmopolitan Latin America) become the sight of political protests (led by the middle class, no less), my youthful optimism has seemingly transformed into a curmudgeonly cynicism. For the past year and half prior to my arrival, Brazil had been led by an illegitimate President, Michel Temer, brought to power by a technicality-induced impeachment of Dilma, marking the end of the longstanding reign of the PT and the return of a certain type of “strongman”-led, entrenched politics in Brazil. This fact was borne out by Temer’s single digit approval rating and the nearly ubiquitous graffiti of “Fora Temer” (out, Temer) scrawled in graffiti on the walls of any major Brazilian city. The country is slightly less corrupt than my Brazilian friends had previously deemed it (owning to a strong and independent judicial system), but its poor education system and inefficient pension system remain. Much of the foreign emerging market money left (only to return again), and the Real had settled into a middling level of strength relative to the dollar.

Though not a coincidence, the impeachment of the female Rousseff and replacement by Temer, an old, white man “of the institution,” portended our own US election just several months following. I, and many of my compatriots, were shocked that the US electorate could cede power of the world’s sole superpower to a comically underqualified (being generous) symbol of grassroots anger and a desire for a US return to prominence. Watching The Final Year, it’s amazing to watch the reaction of Obama’s staff, who were just as shocked as the media pundits and financial markets by Trump’s victory (though maybe this speaks to the disenfranchised attitude of the electorate.)

However, across the world, it seems like the reaction was less chock and more a resigned acceptance of a global return to nativist politic, and a renewed era of strongmen, as evidenced by the UK’s vote to exit the EU, the power grab and consolidation of power seen by leaders in the Middle East in the wake of the Arab Spring, and the assumption of Michel Temer in Brazil, soon followed by a new breed of financial-caudillo in Latin America – Macri in Argentina and Piñera in Chile (all of whom, incidentally, replaced women previously in power.) Somehow, it seems easier to evaluate the political pulse of a country from the outside, or as an outsider, than it does to be swept up in the daily news cycle and invisibly-shifting taking place among the populace on the ground.

Ironically, my return to Brazil is in an election year, arguably the most consequential election for Brazil since Lula’s first electoral victory 15 years ago. As the pace of the Lava Jato corruption scandal has slowed, and much (though certainly not all) of the political corruption having been exposed, Brazil finds itself with a nearly blank slate to set its political and economic future, with no entrenched incumbent or heir apparent to assume the Presidency. The opportunity is wide open, the potential (though again, the word potential, continuing Zweig’s assessment of the 1930s) is immense. Yet from where I’m standing, as an outsider looking in on another country’s election, the outcome looks to be bleak, a combination of the global trend of strongmen playing on the fears of the populace, and a populist desire to shrink away from the global stage.

Six months from Brazilian general elections, and the pool of candidates vying for the Presidential election has hardly been set. Lula, long rumored to be seeking a return to the Presidency, remains embroiled in his own corruption scandal that will likely keep him off the ballot, with no well-known candidate to replace him and the PT vote. The Green Party candidate, always a long shot but well known to the electorate, seems unlikely to run. The only candidate who’s both well known and certain to be on the ballot in October is Jair Bolsonaro, a former military officer who advocates for more guns and military intervention on the path to law and order, and extrajudicial action (again, being generous) to combat urban crime and security concerns.

As familiar as this story sounds, the Brazilian people that I’ve spoken with aren’t yet convinced of the inevitable ascendance of Bolsonaro. As if seeking to validate my hypothesis on the ability of outsiders to evaluate a political temperature, they claim that cooler / more sensible heads will prevail, and that a more palatable, middle-of-the-round candidate (such as former Governor of Sao Paulo Geraldo Alckmin, or former Governor of Ceara Ciro Gomes) will rise above the fray to become the next President of Brazil, as if asking a populace to eat its vegetables, as opposed to the more immediate and attractive short-term “sweets” of Bolsonaro – the law and order, by any means necessary, candidate. To me, this seems like an inevitable outcome and a continuation of the global populist trend.

I’m oftentimes reluctant to offer predictions with any level of certainty, given my conviction in the occurrence of Black Swans and the reality that in fact no one really knows much, but in this case, considering my status as an outsider looking in, I feel like this diagnosis is appropriate. Regardless, an exciting year to come.