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Coming Up in Brazil - Serra Versus Dilma? PDF Print E-mail
Written by John Fitzpatrick   
Thursday, 11 September 2008 20:33

Dilma Rousseff and President LulaThe world's eye may be on the presidential contest in the United States but here in Brazil, preparations are being made for the race in 2010. Unlike American voters, Brazilians are unlikely to have a black candidate but there is a fair chance that they might, at least, have a woman candidate in the shape of Dilma Rousseff, President Luiz Inácio Lula da Silva's chief of staff. 

For almost a year Lula has been parading her up and down the country, lavishing her with praise and acting more like her publicity agent than her boss. However, she is still barely known among the population and has no political muscle and would find it hard to compete on her own merits against someone like the São Paulo governor, José Serra, who looks like being the main opposition candidate.

Serra versus Dilma should be a no contest. There is no doubt that Serra has all the qualifications for the job. He has held a number of senior posts, including health and planning minister in the Fernando Henrique Cardoso administration, and has been a Senator and mayor of São Paulo. As a minister, he was constantly moaning about the economic policies of the finance minister, Pedro Malan, which he claimed were holding back growth.

Despite all his barking he never got round to biting and he even became the PSDB candidate to replace Cardoso in the 2002 election. However, the electorate was a bit jaded after eight years of rule by Cardoso and his team and Serra, with his long face and impatient attitude, proved no match for Lula who put aside three previous defeats and finally became president.

Serra was replaced by Geraldo Alckmin as the PSDB's candidate in the second election and was duly trounced by Lula who was so far ahead of the field that he almost won the race in the first round.  Since then Alckmin has been doing nothing much and is currently lagging miles behind in the São Paulo mayoral election. Serra has practically ignored his fellow PSDB member and been cozying up to his rival, Gilberto Kassab of the DEMs, formerly the PFL. It will obviously be a long time before Serra forgives Alckmin for grabbing the nomination from under his nose the last time round.

Serra is definitely back in the driving seat and Alckmin is yesterday's man. A possible threat could come from the governor of Minas Gerais, Aécio Neves, but for the moment the PSDB nomination is in Serra's pocket. Although Serra has none of Lula's charisma, he is widely respected across the political divide.

He is also one of those rare politicians who is not tainted by scandal. In his younger days he was a student leader and fled to Chile when the military seized power in Brazil. However, that is not enough to guarantee that he will win the election even against a relative novice like Dilma especially if she has Lula and his allies - ranging from Communists to reactionary nationalists - standing behind her. 

As for Dilma, she comes across as a rather humorless apparatchik. Quite what she does in her office is not known but she is probably the most powerful person in the country after Lula himself and the chairman of the Central Bank, Henrique Meirelles. Dilma was also a rebel in her younger days and is said to have been a quartermaster for an armed group. Unlike Serra, she did not get away. She was captured, imprisoned and tortured by the military regime.

She was the minister for energy and mines for two years until she became chief of staff in June 2006. She gained a reputation for truculence rather than efficiency during her period in charge of energy and when she left had not allayed fears that the Brazil could face a shortage of electricity in the future to power its growing economy.

A foreign reader might regard energy and mines as a backwater in political terms but in Brazil it is one of the most important positions. The main political debate at the moment centers on how the country is going to deal with the massive oil reserves which are being discovered offshore. Dilma is believed to be in favor of the state expanding its role. This could be done by raising its equity stake in Petrobras or setting up a separate company which would be 100% state owned which would own the oil reserves and decide how they were to be exploited.

Lula wants to get it resolved and see the oil and gas reserves flowing within four to five years. This would be exactly when he would be in a position to stand again for President should he wish to do so. In this case, he may well be grooming Dilma to keep his seat in the presidential palace warm until he comes back.

John Fitzpatrick is a Scottish writer and consultant with long experience of Brazil. He is based in São Paulo and runs his own company Celtic Comunicações. This article originally appeared on his site www.brazilpoliticalcomment.com.br. He can be contacted at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

© John Fitzpatrick 2008

Comments (23)Add Comment
Petrobras nationalization ? Why not also Cia Vale as per R.A.. ?
written by ch.c., September 11, 2008
That would be great for all nations Brazilians companies have bought companies there.

Yessssss, just one example : Canada should nationalize INCO, the company bought by Cia Vale 2 years ago for US$ 20 billion.

Or may be Australia should also nationalize BHP Billiton, or should it be the countries were the mines are located that should nationalize the mines ?

After all, Brazil had already taken over some banks in the past, even Varig !!!!! smiles
And...and...and the U.K has taken over Northern Rock.
And...and...and the USA have just taken over Fannie Mae and Freddie Mac, after having taken over Bear Stearns and IndyMac and others.
Looks like their next nationalization could be Lehman Brothers !

Hurrah....in my view all companies listed should be taken over by their respective governments.
Exxon, IBM, Apple, Google, Nestlé, BMW, LVMH, UBS, etc etc is the country wealth of the respective company. Thus should be nationalized and shared with ALL citizens, including those who have not invested ONE cent in the companies. And of course the price will be determined unilaterally by the governments. Namely
a) ZERO if the company is worth ZERO ! For failed companies.
b) ONE if the company is worth THREE ! For successful companies.

Welll that is what your cousin Chavez did and still do for sucessful companies and you applaude.
Welll that was what your other cousin Morales did for sucessful companies and.... YOU DID NOT APPLAUDE !!!!!!!

Now you want to copy them both !

In my view the USA should also NOW nationalize ALL coal mines and ALL farms because NOW they are profitable, as opposed to not long ago !
While they also should, but not yet, think of nationalizing General Motors and Ford if their stock prices go closer to zero. By doing so they would preserve hundreds of thousands jobs working on a non competitive basis !

Hmmmmmm........so it was, so it is and so it will be !

Lack of common sense is generalized where ever you look at. North or South. East or West. In China they even susbisize their textiles or appliances companies, as well as their agriculture. But they criticize the agriculture subsidizes in developed countries. So does Brazil : you subsidize your coffee farmers that dont compete with developed nations farmers, but disagree that we subsidize our farmers when they compete with your farmers, despite you also subsidize your grains farmers.

What a strange world.
But...but....knowing it always provide opportunities for nice profits to investors.

smilies/cheesy.gif smilies/grin.gif smilies/cheesy.gif smilies/grin.gif
...
written by João da Silva, September 11, 2008
What a strange world.


Not only strange world, but a Mad, Mad, Mad one. smilies/grin.gif
...
written by João da Silva, September 11, 2008
Petrobras nationalization ? Why not also Cia Vale as per R.A.. ?


Why not brothels too?
Question for CH-C
written by Augustus, September 12, 2008
Joao / ch-c
I have expressed my views on this issue.
While I would not oppose nationalization of Vale or Petrobras, because and ONLY BECAUSE they deal with crucial raw materials, I'm strongly against any other type of nationalization!

Yet, in my perhaps naïve, misinformed notions on the economy, I would have expected that even ch-c would have supported the US and British nationalizations under the “unusual circumstances”. Since in both cases UK (NORTHERN ROCK) and US (Fannie Mae and Freddie Mac), I was viewing these events as necessary, extraordinary steps designed solely as “temporary measures” in order to rescue the financial markets and to prevent a near collapse of the stock markets.

According to interviews I have watched by economists in the American media, it appeared to be their shared opinion that, in case Fannie Mae and Freddie Mac were not taken over, than the US would surely enter a Depression not unlike the famous disaster of the 1930’s…
CH-C could you please clarify? This is definitely your field

Cheers
...
written by João da Silva, September 12, 2008
According to interviews I have watched by economists in the American media, it appeared to be their shared opinion that, in case Fannie Mae and Freddie Mac were not taken over, than the US would surely enter a Depression not unlike the famous disaster of the 1930’s…
CH-C could you please clarify? This is definitely your field


I am also interested in hearing Ch.c´s opinion ASAP, unless he is spending his week end in Morocco and does not wish to be bothered!

Come on, Ch.c, be a sport and speak out your mind. smilies/cheesy.gif smilies/grin.gif
Dirty Dangerous Dilma
written by Joseph, September 13, 2008
Dilma is a menace to clean government and civility. Her office has already been exposed for illegal schemes, creating illegal dossiers and more...and yet, she will run for president and maybe more. Scary...as long as they give some rice and the beans to the poor, they can keep control of the govt for ever w/o any real progress being made for those who are of a more independent fram of mind...
notelpmiS
written by João da Silva, September 13, 2008
Young Joseph is correct as usual.
who is Dilma?
written by Augustus, September 13, 2008
An inquiring mind wants to know...
She was a tough lady in 1960's
written by Dimitria, September 13, 2008
She participated in the resistence against dictatorship, along with Carlos Minc, and others.
She was involved in some robberies.
Sorry I don't have links.
I wonder where her last name -Roussef- comes from.
Anyone?
Augustus
written by João da Silva, September 13, 2008
An inquiring mind wants to know...


I mentioned to you before that she is the future President of our republic selected by our current President, without consulting the voters. The lady on the left of the picture. The last name is Rousseff and the brief biography given by "Dimitiria" is 100% correct. I think the last name is of East European origin. Comrade in Arms of Carlos Baumfeld Minc.
Still time to watch and sea
written by notelpmiS, September 13, 2008
Haven't you noticed what's happening right next door / on our borders me irmaos? Think tranquility and the riches in the deep near to our shores is a given? Maybe undoing the travassuras de Waldir P. and putting up with a one term military convert is a better idea than the Dilma factor.
Thanks
written by Augustus, September 13, 2008
Joao - you had told me... I remember her by the last name - ROUSSEFF (an interesting name, by the way)
notelpmiS
written by João da Silva, September 13, 2008
Maybe undoing the travassuras de Waldir P. and putting up with a one term military convert is a better idea than the Dilma factor.


What is the name of the person whom you have in mind? W.P and D.R are unacceptable to Septembrus and me. Don´t mince words!
Acordo
written by notelpmiS, September 13, 2008
and I don't think you will find anyone disagreeing with the unacceptability of W.P / D.R. You will, however, have to wait a bit. 2010 is a long way off for the winning horse to be named and come out of the gate. There's still too big a supply of soma tablets in the mill and in use with the greater populace. Give things time. With what is brewing and other avenues to garner more of a following as we get closer to 2012 / 2014 / 2016 events, the decent journalists and non-indecent media controllers (what few there presently are) can establish a bit better of a foot hold and reach. We would not want them to risk their own disappearance or demise too far in advance.
notelpmiS
written by João da Silva, September 13, 2008
You are far ahead of your tender age. A man of wisdom and knowledge. I salute you, Sir, if you really don't mind my humble and SIMPLE compliments!
To all !
written by CH.C., September 14, 2008
- Augusutus your "ONLY BECAUSE they deal with crucial raw materials" !
Then the USA should also nationalize farms, far more crucial raw material than oil. Better yet...they should nationalize Nuclear power plants technology, mainframe computers. And charge a national tax for every export.

Are they not to some extent also nationalizing the Real Estate Mortgages Industry ? the tax was included in their original selling price
smilies/cheesy.gif smilies/grin.gif smilies/cheesy.gif smilies/grin.gif

To Joao regarding Fannie Mae and Freddie Mac.
- what few people realize is that during the first 6 months of 2007 (not 200smilies/cool.gif there were already 50 companies in the industry that went bankrupt. Agreed none of large size.
- Then there was the biggest by then end of 2007......Countrywide...but taken over by Bancamerica not
the government.
- then the largest was IndyMac, recently, taken over by the government.

- Now Freddie Mac and Fannie Mae providing around 40-50 % of all the US mortgages.

As to your specific question of Depression or not, let me refer you to a clever guy comments named Shiller. He predicted the dot/com burst.
He predicted the housing burst.
He created the Shiller/Case Index on housing price !
What he is saying now is...... just read or watch & listen, but be open enough to understand his various views of home prices, home builders, mortgage mess, etc :

1) home builders
http://www.thestreet.com/_yaho...A#10435990

2) Depression ? article April 2008
http://www.msnbc.msn.com/id/24257182/

3) Depression ? video sept 4, 2008
http://finance.yahoo.com/tech-...Depression


Around $ 500 billion writeoffs/writedowns have beem taken...so far.
Some smart people predict we should go to $ 1 trillion. Therefore we are "only" half way...today !
My own fears (because not in my scenario) ? Japanese style long term deflation with a long term (multi-multi years stock bear market).
Remember that the Nikkei peaked at 40'000 in december 1989 and went down to 7'000 in 2002 ! then went back up to 18'000. Now 12'000 !
Reason for the bubble ? Real estate, but mostly commercial Real Estate.
Believe it or not but some Japanese commercial real estate went down by up to 80 % !!!!!!!

Until recently, the US commercial real estate was still OK. Now it looks like it is infected too. Today Lehman problems are....COMMERCIAL REAL ESTATE !!!!

Where is the end ? NO IDEA !

BUT REMEMBER : the whole world had a bubble in real estate, Europe-Asia-China-Russia-South America !!
Why ? thanks to Greenspan who put rates down to ONE percent, a over 50 years LOW !
That helped all economies to boom, even more so the emerging markets.

Ask your own parents, parents of Brits, parents in European countries, parents of Thais, parents of Chineses, parents of Russians :
even in their own lifetime they never had seen A) rates so low, B) and mortgage credit availability so easy !!!!!

Well....now this is the past ! All excesses must be compensated ! Time to pay the bills !!!!! Not everyone will be able to repay if they over leveraged their debts.
How much and for how long ? NO IDEA !

On the other hand, the first move of the Japanese Yen was downm but then it strentened despite the crisis increased.
Thus far the US$ did the same....until its recent lows. But now it looks like it reversed.

The ones who should not have too many delinquent mortgages is Switzerland !
Nothing self boasting. We have Noooo subprimes. BUYING real estate was and still is 25-30 % down payment and 70 % loans.
When in many countries in the EU, Asia, South America, North Africa it was more 5-10 % down payment, 90-95 % loans.
I heard that in Morocco it was 0 down payment 110 % loans, effectively even loans made for the furnitures of the condos/houses.
Who has ever seen used furnitures prices going up ????? Hmmmmm.

Conclusion ; if it goes too far down in most countries they will cut their interests rates to stimulate their economies and provide support to real estate prices with refinancings.
COSTS ? Lower currency !
Simple...isnt it ?
That is exactly what Greenspan did !
That is exactly what many countries have done but to a lower extent than America. That explains why the US$ went down.
But from now the ones who will lead their rates cuts will be the other ones in my view. Thus they will weaken THEIR currencies against the US$...this round !

Feel free to agree or disagree !!!!!
The past is known to all and we disagree.
The future is unknown to all, then we may even more disagree.
That what makes bulls and bears.
And bull and bears are those who make the markets move ahead of actual news,facts and stats,

smilies/cheesy.gif smilies/grin.gif smilies/cheesy.gif smilies/grin.gif
continued for all !!!!
written by CH.C., September 14, 2008
1) if you refer to my cynical first comments above on nationalization, the date says sept. 11 - I cynically stated why not nationalize GM and Ford !
- Well believe it or not, on 9/12 at CNBC they talked about a possible
government bail out for the 3 U.S. automakers (including Chrysler)

Let me be very clear : PURE COINCIDENCE ! smiles

2) that same day I made 3 bets with friends ($ 500.- each).
I told them I had an inside information and the U.S.stocks markets should close up nicely for the day. I could not tell them the info until the next day. With a big smile they took the bet. Despite the early weakness...the markets closed up nicely mostly due to the last 15 minutes or so.

3) the next day, time to declare who won ! smiles
the question was then what was my inside information,
My answer with a loud smile "what an idiot you were. You had the
same info I had : yesterday was September 11 !!!!!! Dont tell me that the normal human nature of national pride would not be high enough to have an UP market that particular day."
smilies/cheesy.gif smilies/grin.gif smilies/cheesy.gif smilies/grin.gif smilies/cheesy.gif smilies/grin.gif

3) Some of you know how bearish I was for the emerging markets recently. Nooooo...I was not short (unfortunately)....just close to no positions. Therefore due to the collapse of both these stocks markets plus the short term collapse of the currencies, I took these weaknesses as an opportunity to re-enter and be fully invested again.
I simply put the cash (30 %) I had built back to work. I invested that cash mostly in US$ (50 %), Euro (25 %), Emerging markets currencies (25 %) and bought many differents stocks that were washed out, like Petrobras, Cia Vale and a few others for Brazil !

All done on 9/11 due to my gut instincts that could be a tradable low, and why not an intermediate term low, and eventually THE or close to THE LOW ! Time will tell.


smilies/cheesy.gif smilies/grin.gif smilies/cheesy.gif smilies/grin.gif
To Joseph and Augustus
written by CH.C., September 14, 2008
Joseph "Dirty Dangerous Dilma" and "Her office has already been exposed for illegal schemes, creating illegal dossiers and more etc"

- Joseph, could you please tell us who is not Dirty and Dangerous in Brazil ? Who was not exposed to illegal schemes ?
Even Lula was exposed. Hmmmm he was re-elected by a wide margin !

Augustus : with some cynism I could answer you : developed nations government take over only the very bad companies, and emerging nations governments take over the too good & very bad companies !
But on Freddie Mac, Fannie Mae and other financial companies you can read hundreds and hundreds of opponents to government seizures.
Their analysis is relatively simple and clever in my view : let the market clean itself. Government intervention is never good in up or down markets. On top, government intervention implies tax payers money.
Governments are not supposed to bail out those who did WRONG !!!!!!

And look specifically what Freddie and Fannie did wrong years earliers, well before the mess hit the fan : WRONG ACCOUNTING...which ended up with "punishments" they had 30 % PENALTY FOR SEVERAL YEARS.
By penalty it meant they needed 30 % more capital to issue new loans than earlier. I repeat this was years BEFORE the mess hit the fan.

Penatly gone.......by lawmakers decision first part of 2008, so that the companies could issue more loans....just a few months ago. Meaning MORE MORE MORE leverage on an already VERY HIGH LEVERAGE.....legally blessed by the lawmakers.

What a shame to
A) the companies for years of WRONG ACCOUNTINGS !
B) to the lawmakers allowing AND BLESSING EVEN MORE LEVERAGE for these 2 companies specifically, the more the amplitude the crisis went, DESPITE all the others financials companies were AT THE SAME TIME......de-leveraging their own balance sheets and taking hundreds of billions of losses.

Is de-leveraging at one side and increasing the leverage at the other side....very smart ????
Welll...this is exactly what they did, to some extent. A decision from the LAWMAKERS !!!!!

YEAHHHHH !!!!!!!!

Ohhh but the mess will be settle. No one knows from what bottom.
We may be at the bottom ! I simply have no idea. Bulls have accumulated at lower and lower price.
The SWF even had the prime and sole exclusivity during the first round of capital raising. Yeahhhhh
Have they been taken for a ride ??????
What is your view ?????
Smiles
Their animosity deserve some respect !
last but not least
written by CH.C., September 14, 2008
Sunday 10:47 PM NYT
Monday 04:47 AM Geneva Time

Still working...watching the markets.

A DISASTER SO FAR, A REAL OVERNIGHT SELL OFF !!!!!
- PROBLEM WITH AIG...ASKING GOVERNMENT ASSISTANCE...FOR BRIDGE FINANCING.
- MERRILL LYNCH......SOLD TO BANCAMERICA !!!!
- LEHMAN.....EVEN CLOSER TO BANKRUPTCY, interested buyers quit the negotiations.
- 10 BANKS CREATE A LIQUIDITY POOL FOR $ 70 BILLION

Could be a dark Monday, may be a black Monday !!!!!

Glad I am NOT leveraged...yet !!!!!!
Have therefore some reserves to add during this gaping hole looming ahead !!!!

smilies/cheesy.gif smilies/grin.gif smilies/cheesy.gif smilies/grin.gif smilies/cheesy.gif smilies/grin.gif smilies/cheesy.gif smilies/grin.gif
Equities:Down; But The
written by Ric, September 15, 2008
Dollar´s up in Brazil this morning.
RIC !!!!!!
written by CH.C., September 15, 2008
NORMAL !!!!!!

If you have 2 residences, and the main one has a problem, you sell the second residence, not the main !
But then the area of the second residence, has its real price coming down more...that the main residence !

Emerging markets are the second residence of the developed nations.
And the developed nations are the second residence of the emerging nations.

Except that the developed nations have far more money, thus when they sell their second residence, it has a far more impact that when the emerging nations sell their second residence in developed nations.

The flow of the worlwide stock markets and currencies are not any different !

Right...or not ?
smilies/cheesy.gif smilies/grin.gif
Ch.c
written by João da Silva, September 15, 2008
If you have 2 residences, and the main one has a problem, you sell the second residence, not the main !
But then the area of the second residence, has its real price coming down more...that the main residence !


An apt analogy, Ch.c. I have had personal experience regarding main and second residences-believe it or not.
JOAO
written by Augustus, October 01, 2008
What is the actual list of presidential candidates for Brazil?
Although it's a bit early for especulation, it appears that some "positioning" is already under development...

It should be interesting to see a black and a female candidates...

Who would be the likely nominee for the party of Fendando Henrique? Serra?

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