Doing Business in Brazil, Part 2. What is happening with Key Figures?

What is happening with the macroeconomic key figures and business analysts?

A couple of weeks ago I wrote this post and stopped. I was not satisfied with the content or the polemic, but it must be published, so here it is.

My opinion: Business analysts are completely lost, the numbers are no more reliable, the scenarios are planned with assumptions that can’t be proven, there are many points out of the curve, and they are following general expectations, avoiding personal compromise (Note: I like to analyse markets and businesses, and develop strategies, so maybe I should include myself in this group…).

I would like to ask, with a pragmatic approach, why and how it is possible to change so quickly macroeconomic numbers. We are talking about an economic environment that has a natural inertia and the macroeconomic key figures, usually, don’t change drastically in a couple of days. Can someone explain it, to me?

The scenario:

Beginning of March, I wrote a post talking about key figures of the business environment and the macroeconomic key figures from Brazil, from BRIC group.

I had the concern to highlight only official reports and references to avoid any possible suspicion of the source or veiled interests. But now, I am not so sure about anything, more. I am not an evangelist of the theory of conspiracy, but I also don’t deny it.

One of my references was the report that the Brazilian Central Bank uses as a reference from the financial market. It is made by financial business analysts from the private sector. It is called Focus Report and has 26 variables that are analyzed by financial institutions, consultants and banks, and the resume is used by the Brazilian Central Bank, when evaluates the market and monetary policy. Obviously, many of them are international groups and transnational companies, talking about the financial institutions and banks.

Suddenly, it comes to my mind the ratting agencies that are under investigation, worldwide…

Summarizing, numbers from Focus Report, from March 13th (Brazilian data): the GDP growth rate expectation to 2009 was estimated at 0.59%, a week before was at 1.20, 4 weeks before was 1.50%, and for 2010 it is expected 3.50%.

How, in one week, goes from 1.20 to 0.59?

The currency is stable, the FDI is almost stable, trade balance is stable, also, net public sector debt is stable, prices are stable, and so on, just industrial production when down from –0.04 to -1.59 (a little strange, also, because only 14% of the GDP is related with exportations and the internal demand didn’t slow down so much and consumers’ confidence index is not, also, so bad).

Here is the “Theory of Conspiracy”:

From the BRIC group, we have a frozen Russia with serious internal and international problems; we have India also with serious problems with an economy extremely dependent of USA and Europe, and its internal market I don’t know if it is so strong to balance the international crisis; we have China restructuring internal market (increasing internal demand and recently restructured the banking system) and warning USA about their lack of confidence on the US dollar. Brazil was the only country that had the more stable economic fundaments and was doing an outstanding job dealing with this crisis (here we are “expert” in crisis…), and there wasn’t no reason to be different, because all key figures were under control and Brazil is not a very open economy, and the internal demand is strong (see the old post).

But now with this “expectation” of the financial companies, consultants and banks, I don’t know, more, what will be the scenario for 2009… (Actually, I think I know, and it is different from what they want.)

Why it is not interesting on a geopolitical vision, that Brazil has a strong presence in the region or in the international scenario?

One idea (Business perspective): Here, the bank interests are one the highest worldwide, if it goes to a strong and stable economy they will need to go to a reasonable level, and the unbelievable profits of speculation will be not possible.

Another idea (Political perspective): with a strong economy, Brazil could help all neighbours and change the South America profile, making it a stronger region (Update: Brazil is given money to IMF, International Monetary Fund, to raise its (IMF) fund reserve, couple years ago it would be unbelievable).

Last one: We have strong international partners but the international trade policy is to deal worldwide with everyone and to not depend on one partnership. That policy creates an independency that is not interesting to many points of view, to not say groups.

As I said, I am not a conspiracy apologist, but there are so many things happening simultaneously, you need to pay attention to so many details and information and filter them that become extremely hard to separate what it is truly happening and what it is published to make you believe that it is happening, but actually it isn’t.

We had many proofs of assertiveness of my last sentence in recent events, in the business environment and in the political environment, worldwide…

As I already said, I started this article more than two weeks ago and was not very satisfied with it and its content, but I also needed to say it and ask some help to clarify this brainstorm, so, let it go.