Brazil’s brand is battered, but it’s no Turkey

MEXICO CITY, Mexico — The unrest that shook Brazil as it strained to host one of world soccer’s greatest pageants, the Confederations Cup, drew unwelcomed attention to the Latin American giant at a moment when the legs holding up its rise to global prominence have also gone wobbly.

When as many as a million people clogged the streets of Brazil’s largest cities to protest a rise in transit fares and other grievances, the violence that followed, some of it sparked by an unrestrained police response, came as a nasty surprise to investors, diplomats and FIFA, soccer’s world governing body and organizers of the current tournament.

To say FIFA may be worrying about Brazil’s ability to pull off the 2014 World Cup is an understatement, and the International Olympic Committee (IOC) — looking to the 2016 summer games planned for Rio de Janeiro — cannot be thrilled, either.

Yet no one seemed as shocked as the Brazilian government of President Dilma Rousseff itself. Accustomed to years of strong economic growth, favorable opinion poll ratings, positive international press and relative stability in its region, the governing elites had grown accustomed to the idea that Brazil’s ascent to a major world power was all but assured.

While Brazil celebrated victory Sunday in the tournament final (an impressive 3-0 rout of reigning World Cup champion Spain), the weekend brought more sobering news for Rousseff: Her once healthy approval ratings sank precipitously in the wake of the protests, registering at a paltry 30 percent in a poll released Friday.

Rousseff’s complacency might be excused. Her nation is, after all, the “B” in BRICS, the grouping of emerging market economies that also includes Russia, India, China and South Africa. Brazil has the world’s fifth largest population, a land of vast natural riches and untapped energy reserves, including one of the 21st century’s largest oil discoveries, the so-called pre-salt reserves located deep below its Atlantic coast. That find, set to be auctioned this autumn, is estimated to contain some 50 billion barrels worth of oil.

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That oil find is proof “God is Brazilian,” then-President Luiz Inacio Lula da Silva said in 2007 after the discovery — a refrain his successor Rousseff also has grown fond of using.

This sense of destiny has led Brazil to demand a permanent seat on the United Nations Security Council, to shed a tradition of reticence in forums like the International Monetary Fund or the Organization of American States, and to announce plans to acquire one of the ultimate symbols of great power bling: a fleet of nuclear powered attack submarines.

Festus interruptus

With Brazil straining every muscle to meet the construction deadlines FIFA and the Olympics’ IOC demanded of it in exchange for the high-profile honor of hosting the 2014 and 2016 events, the light the protests shined on basic infrastructure and social failings has embarrassed the government.

More seriously, though, it coincides with a distinct economic performance falloff that has some emerging market specialists in the financial world wondering if Brazil is just the latest in a series of post-Cold War bubbles. While the country has never tamed inflation (to be fair, in part because of the tsunami of cheap capital unleashed by the US Federal Reserve and other central banks after 2008), its economic indicators have been impressive in the past decade. Annual GDP growth, for instance, averaged about 3.6 percent during the period from 2001 to 2011.

For the moment, those now look like the good old days. On Friday, Brazil’s Central Bank raised its 2013 inflation estimate to 5.4 percent and cut its growth forecast to 2.7 percent from an initial projection of 3.1 percent.

Even that may be optimistic. Economic output in the first three months of this year was under 2 percent, following a disastrous 2012, when annual growth nearly flatlined at 0.9 percent.

This is not to say Brazil’s emergence is an illusion: The demands of its growing middle class are in keeping with the raised expectations of an emerging powerhouse. The real question is whether Brazil’s government, its corruption-riddled bureaucracy and an educational system that compares very poorly with other emerging market powers, can meet those demands.

And while Brazil may or may not have all the paint dry on its super-stadiums for the opening of the big sports festivals of the next few years, even more troubling would be if its recent travails dampen enthusiasm for its all-important offshore oil tenders in October and November. Rousseff’s government is not only counting on that revenue, but already earmarking it for major infrastructure and other spending in years to come.

Good by comparison

Turkish protesters clash with Turkish riot policemen on Taksim Square in Istanbul, Turkey on June 22. Bulent Kilic/AFP/Getty Images

Indeed, the surge of urban anger drew immediate comparisons to the explosion of discontent that shook Turkey earlier this month, and some comparisons are apt. Both are relatively young democracies, leaders in their regions, and looked to as models by their neighbors. Both regard themselves as erstwhile US allies, and while Turkey is no BRIC in scale, its recent economic performance prompted its inclusion in a second grouping of up-and-coming emerging markets, the MISTs (Mexico, Indonesia, South Korea and Turkey).

But in spite of the ham-handed initial response of Brazil’s security forces, the differences with Turkey became immediately apparent — a difference that speaks to the quality of Brazilian democracy and its respect for the right of its citizens to dissent.

Michael Werz, a Turkey analyst at the Center for American Progress, said the reaction of Turkish President Recep Tayyip Erdogan verged on maniacal by comparison to Brazil. Erdogan and his ministers portrayed the peaceful ecological protest that sparked Istanbul’s initial demonstrations as terrorists and traitors. His security services acted accordingly.

In weeks of clashes, five people have died in both Brazil and Turkey. Yet in Turkey, thousands have been arrested and the resulting political crisis has only deepened Turkey’s already deep divide and permanently damaged Erdogan’s once promising legacy.

In contrast, Rousseff, herself a former leftist guerrilla, quickly embraced the right of her fellow citizens to protest what are undeniably major problems in Brazil: fetid living conditions in many urban neighborhoods, a hefty tax levy that produces anemic, sometimes nonexistent public services, rampant criminality and profound corruption and unaccountability in the highest ranks of government.

“At virtually every level,” Werz writes, “officials have echoed the message of President Rousseff, who conceded that it was ‘befitting of youth to protest.’”

On Friday, the Brazilian Senate showed it, too, got the message, passing a bill aimed at speeding corruption prosecutions and making state officials more accountable. The protesters may not yet be satiated, but the sense of national crisis has abated.

All this speaks well of Brazil’s ability to adapt and — quite possibly — to meet some of the demands of its burgeoning middle class and hard-pressed working masses. With all that’s happened since the New Year, Brazil’s brand is indeed somewhat battered. But so far its better instincts have guaranteed that Brazil is no Turkey.

Michael Moran is a New York-based author and vice president of Global Risk Analysis at Control Risks, a global risk management company.