Economy

Chile Eyes Business Opportunities in Bolsonaro's Brazil

If Brazil's new government liberalizes its economy as vowed, it may also seek new and more dynamic trading partners like Chile and the Pacific Alliance.

In central Santiago de Chile
In central Santiago de Chile
Rodolfo Vilches

-Analysis-

SANTIAGO DE CHILE — Brazilians went to the polls on Oct. 28 to elect the president who will run their country for the next four years.

The campaign was overshadowed by several incidents that say a lot about the country's social and political environment in recent years. The sharp polarization of political forces, added to the crushing impact of corruption revelations related to the Workers Party (PT), eventually led to the triumph of Jair Bolsonaro, a former army captain and congressman for Rio de Janeiro for over two decades. He won thanks to a far-right discourse, promising strong-handed policies against crime and corruption, but also to create jobs and more economic growth to bring Brazil out of its recession.

Goodbye to protectionism?

Bolsonaro has put the University of Chicago graduate Pablo Guedes in charge of devising his government's economic plan. There are scant details on it for now but we know the country faces a delicate fiscal situation that must be addressed with spending cuts and increased revenues. This would be possible thanks to the privatization of non-essential government companies, which would exclude oil giant Petrobras and various energy-sector firms.

There is also strong budget pressure from the country's costly pensions system, which threatens to increase the fiscal deficit that is already close to 8% of GDP per year. This makes Brazil's access to international credits more costly, so the new government will likely put a pension reform among its priorities, increasing personal contributions and raising the retirement age with appropriate incentives.

Brazil also has considerable room for growth when it comes to trade. International trade represents for example only 23% of its GDP, in contrast with 44% and 57% for Peru and Chile respectively. Bolsonaro has more than once shown an interest in taking the country closer to the Pacific Alliance, a Latin American liberal trading block that is in clear contrast with the protectionist approach that has dominated Mercosur. Brazil would have to leave behind the protectionist approach if it wishes to develop an open trading policy.

Bolsonaro's economic success would be a boost to the region — Photo: Fabio Rodrigues Pozzebom

The announcement that Bolsonaro's first visit abroad will be to Chile, not Argentina, Brazil's traditional trading partner in the region, shows the new administration's liberal economic inclinations and greater regard for the national interest in seeking pacts and deals. That will mean unshackling itself from the commitments Mercosur membership implies. Brazil will also seek to strengthen its position as a recipient of foreign investments, which requires boosting market confidence in the country. That should help boost internal demand, create jobs and make inroads into a current unemployment rate of 12%.

Relations with Chile

Here in Chile, we are not indifferent to the Brazilian election results, or to how the Bolsonaro administration will put its ideas in practice. Chilean businessmen have been keen on South America's biggest market in recent decades, investing almost $31.7 billion there between 1990 and 2016. This is 27.7% of all Chilean investments abroad in that period and makes Brazil our top investment destination. Bilateral trade furthermore exceeded $9 billion in the year 2017, which is 15% more than our total trade with our Pacific Alliance partners. The figures show the importance of the two countries' economic and trading relations. They also show how important it is for Chile that Bolsonaro's promised reforms succeed.

Here in Chile, we are not indifferent to the Brazilian election results.

The government of President Michel Temer has in recent months moved to consolidate ties by updating the Chile-Mercosur Economic Complementarity Agreement (ACE 35), which currently governs our bilateral trade. While leaving aside some key issues on better market access (like rules of origin or intellectual property norms), the new deal allows both sides to move toward a common set of norms on issues of current concern in international trade. These include internationalization of small and mid-sized businesses, environmental protection and incentives for digital trade, measures which help improve the bilateral trading regime. There is no doubt that the updated agreement will also bring Brazil closer to the Pacific Alliance.

The gigantic size of Brazil's economy, its regional importance, the extent of our economic and trading ties, the evolution of the Bolsonaro government and confirmation of the democratic credentials he promised during the campaign are all issues that matter to Chile. His economic success, which we all want and hope for, would be a strong boost to the region, its citizens, investors and all of us who consider Brazil an essential partner in forging a prosperous, consolidated Latin America.

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Spencer Tunick Nude Installation in Israel

Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

👋 Salam!*

Welcome to Monday, where the UK pays homage to slain MP David Amess, Myanmar frees thousands of prisoners, and Facebook gets ready to build its "metaverse." Please fasten your seatbelts: Worldcrunch also takes stock of the long-lasting effects — good and bad — the pandemic has had on the air travel industry.

[*Azeri - Azerbaijan]

🌎  7 THINGS TO KNOW RIGHT NOW

Myanmar to free political prisoners: Myanmar's junta chief Min Aung Hlaing has announced the release of 5,636 prisoners who had been jailed for protesting the coup that ousted the civilian government in February 2021.

• Powerful Haiti gang behind the kidnapping of U.S. missionaries: The notorious 400 Mawozo gang is believed to be behind the kidnapping in Haiti of a group of Christian missionaries, including 16 U.S. citizens and one Canadian. The brazen kidnapping on Saturday comes as crime is spiking since the killing of President Jovenel Moise in July.

• UK to pay tribute to David Amess: British lawmakers will pay homage in parliament to colleague David Amess, who was stabbed to death Friday in what was described by the police as a "terrorist incident." Officers arrested a 25-year-old suspect whose father, Harbi Ali Kullane, worked as a media adviser to a former prime minister of Somalia.

• COVID update: Russia has registered more than 34,000 cases of new infections in the past 24 hours, a new record since the start of the pandemic. Meanwhile, police in the northeast Italian city of Trieste used water cannons to clear striking dockworkers protesting Italy's new requirements that all employees be vaccinated.

• At least 26 killed in floods in India: Torrential rain has triggered floods and landslides in India's southern coastal state of Kerala, killing at least 26 people.

• Facebook to hire 10,000 in EU to develop "metaverse": The U.S. social media giant plans to hire 10,000 workers in the European Union over the next five years to build a "metaverse," a virtual reality version of the internet that the company touts as the future.

Punishing parents for children's bad behavior: After limiting gaming hours for minors, China is now considering legislation to reprimand parents if their children exhibit "very bad behavior" or commit crimes.

🗞️  FRONT PAGE

Colombian daily El Espectador dedicates its front page to Alex Saab, "owner of the secrets" of Venezuelan President Nicolas Maduro. The Colombian businessman, wanted by U.S. authorities for allegedly laundering money on behalf of Venezuela's government, has been extradited from Cape Verde to the U.S. where he is scheduled to appear in court today.

#️⃣  BY THE NUMBERS

4.9%

China's economy registered its slowest pace in a year as the country faces a looming energy crisis with power shortages and increasing pressure on its property sector. Gross Domestic Product (GDP) for the period between July-September rose 4.9%, the weakest numbers since the third quarter of 2020 and significantly lower than forecasts. The world's second-largest economy faces a debt crisis linked to the China Evergrande Group debt crisis, while energy shortfalls have dropped factory output to its weakest since early 2020, when heavy COVID-19 curbs were in place.

📰  STORY OF THE DAY

7 ways the pandemic may change the airline industry for good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

⛽ Cleaner aviation fuel: With air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel. In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials

.🛃 Smoother check-in: The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

✈️ The billion-dollar question: Will we fly less? At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel, in particular, is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.


➡️ Read more on Worldcrunch.com

📣 VERBATIM

"The crimes committed that night are unforgivable for the Republic."

— Emmanuel Macron became the first French president to commemorate the killing of as many as 200 Algerian independence protesters by Parisian police in 1961. For 40 years, French officials ignored the massacre, which took place a year before Algeria gained its independence from France after an eight-year war. In 2012, French President François Hollande acknowledged the killings for the first time on a visit to Algeria, and Macron took it further by attending Sunday's commemoration at the site where the events happened in the French capital. Still, many had hoped the French President would go further and take responsibility for a "state massacre," for a crime many historians consider the most violent repression of a peaceful demonstration in post-War Europe.

📈💥  IN OTHER NEWS

​Low trust, high risk: The global rise of violence targeting politicians

The deadly stabbing of British Parliament Member David Amess confirms an ongoing study on trust and governance in democracies around the world: It's bad. In The Conversation, James Weinberg — the study's author and a lecturer in Political Behavior at the University of Sheffield — writes:

⏪ The assassination of Amess, who was stabbed to death in his constituency on Friday, is a tragic moment for democracy. What makes it even more devastating is that such a catastrophic failure is not without precedent or predictability. Labour MP Jo Cox was shot at her constituency surgery in 2016. Before her, another Labour MP, Stephen Timms, survived a stabbing in 2010. And Andrew Pennington, a Gloucestershire county councilor, died in a frenzied attack in 2001 while trying to protect local Liberal Democrat MP Nigel Jones.

☝️ Beyond these critical junctures in the public debate about politicians' safety, elected representatives must live with an increasingly insidious level of popular cynicism that threatens violence on an almost daily basis.

🇬🇧🇳🇿🇿🇦 Not only are these experiences of abuse or threats of physical violence felt across both sides of the political aisle in the UK — they also appear to be growing more common in other democratic contexts where the climate of politics has been presumed to be both calmer and more volatile, from New Zealand to South Africa.


Read the full piece from The Conversation, now on Worldcrunch.com

✍️ Newsletter by Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

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