Order & Progress

So here I am in Sao Paulo, and here I have been for 3.5 months, helping to raise my beautiful half-Brazilian baby boy and setting up the Brazil office for a new international digital agency, Queensberry Rules Media (stay tuned).

First impressions of this first-time visitor ? Well, I'm reminded of the old joke in which a Western visitor to Soviet Russia asks a tight-lipped Communist to sum up, in a word, life in the USSR. After a pregnant pause the Russian replies: "Good". The Westerner then asks for a slightly more expansive description, in more than a word. After an even longer pause, his interlocutor elaborates: "Not good."

Obviously present-day Brazil is not pre-Glasnost USSR ! But to my foreign eye there are some disturbing parallels when it comes to groupthink within insular societies. More of which later.

Yes, the people are famously friendly, laid-back and warm (especially those now connected to me by blood !) The scenery in parts of the country is stunning. But this much-hyped "booming economy" strikes me as having some serious flaws.

Let's start with the prices. They are often as high or higher than in London, and I'm talking about boring everyday consumables and services, often of inferior quality. Taxi prices in gridlocked Sao Paulo were already shockingly high before they jumped 20% recently.

Why the high prices ? Everyone agrees that the local currency is over-valued (thanks to rampant foreign investment and speculation), which has also undermined Brazil's non-commodity exports. But the other excuse / explanation for high prices is tax. Recently departed President Lula gained favour by giving handouts to the poorest Brazilians so they could buy a house, a car, mobile phone, TV etc. The debate about whether this is money wisely spent is drowned out by the much louder and more constant refrain: our tax money is wasted on corrupt policies and politicians ! Every person I have spoken to has said this. Every single one.

After multiple failed attempts to get elected, Lula finally achieved his goal, partly by making deals with some of the wealthiest and most powerful interest groups in Brazil. That is why it is not so ironic that while he was giving questionable hand-outs to the poorest, Brazil became a global banker's wet-dream, generating some of the biggest, fattest banking profits of any country, ever. Tell me, how is a spirit of entrepreneurialism and free enterprise supposed to grow and flourish in such infertile soil ? I recently spoke to one of Brazil's richest men. He told me that his company had only succeeded because it was able to bypass the banks completely and rely on its own self-generated cash. Not a very practical solution for most companies, is it ?

(By the way, I've never understood how all these Catholic countries in South America, which in theory should shun usury more than most, ended up with such obscenely usurious interest rates ? Can someone enlighten me ?)

I'm sure the tax regime here needs a complete, free-market-friendly overhaul, but I suspect an equally important factor in the inflated prices is an abundance of monopolies, oligopolies and price fixing. All of which, I suppose, relates back, one way or another, to corruption. Of course, these things are a constant danger in any economy, which is why industry watchdogs and other forms of firm but fair regulation are needed. How much of this is there in Brazil ?

I also note the toxic mix of rampant consumer credit and widespread financial illiteracy. Prices advertised in shop windows are invariably just a fraction of the real price because of the dependency on paying by instalments. Apparently this is not a new phenomenon. But coming from the UK, where the consumer credit bubble exploded catastrophically, I don't see how overstretched Brazilians will fare any better. If people are living beyond their means thanks to overzealous credit facilities (in conjunction with uncomfortably high interest rates and uneducated consumers) this should be a concern for companies too. Is there a "subprime" time bomb ticking away within Brazil's "booming" consumer sector ?

On a related note, all the excited chatter about Brazil's swelling middle class must be taken with a big pinch of salt. There's no way that the average salary allows for the kind of disposable income which economists and sociologists generally assume when they talk about the middle classes in developed countries. In fact a good chunk of the Brazilian middle class has been hit hardest by Lula's Robin Hood politics, seeing their wages stagnate while the cost of living rockets. The very poor and the rich elites appear to have done best.

The physical infrastructure (roads, sidewalks, electricity and telephone cables etc.) is often in very poor condition or even dangerous: power cuts are too frequent for comfort and trying to push a baby buggy on our neighbourhood streets is a nightmare. A shopping centre is going up next door to my house but the ragbag of building materials being used, including tree branches as support pillars, makes me wonder about its eventual solidity and durability. Our local refuse collection point is ... the sidewalk.

Meanwhile, the social infrastructure (dreadful bureaucracy and inefficiency) leaves Brazil trailing badly in the second decade of the twenty-first century.

The Brazilian flag boasts the proud motto: "Ordem e Progresso", order and progress. It's easy to laugh at the apparent irony but this is a throwback to less chaotic eras, such as the 1920s and 30s when Sao Paulo was an Art Deco alternative to New York and seemed to be growing in an exciting but controlled manner. Then it all went pear-shaped as corrupt and myopic governments threw the rule-book out of the window.

"Order and Progress" in today's Brazil ? Sorry, I don't see it. Nor do I sense much cause for optimism that things are about to change with this more-of-the-same government. What is needed, as the rest of the world races into the new millenium, is for Brazil to look outwards for inspiration and for ordinary Brazilians to demand the kind of change that they deserve and need.

My most pressing day-to-day problem is the lack of a half-decent broadband connection to the internet. Insufficient competition means prices are higher than in the UK and speeds are slower. I am stuck on a theoretical 2Mb download speed from Telefonica, which in reality is waaaay slower than that. Have tried to upgrade to a faster speed but am told that all the 4Mb and 8Mb slots in my area are taken. However we "should keep trying every now and then to see if someone has moved out of the area and freed up a faster slot" ! As usual, I don't know whether to laugh or cry. So I remain unable to watch most videos without huge and frustrating waits while they buffer .. if they buffer.

And don't forget this is in Sao Paulo, the Big City. What must it be like in the provinces ?! (Actually I can partly answer that: when I travelled to the North-East last year, in and around Natal, there generally was no internet connection at all, or else an extremely flakey one.)

This doesn't sound like a recipe for living la vida online but strangely Brazil seems to score highly in research showing internet use on a country by country basis. From my anecdotal research it seems Brazilians are mainly using Orkut, Google's social network, with many now shifting to Facebook, and others hooked on Windows Instant Messenger. That's all very well but it's not exactly the same as someone who spends hours browsing a more varied mix of websites, is it? I don't get the impression there's much online shopping, for example.

I am here to learn as much as to preach or teach so I don't want to sound like I'm rushing to condemn Brazil's internet efforts. But I will call it as I see it and I notice that the Brazilians I have spoken to so far tend to agree with me - indeed, many have been much more critical. Perhaps it's easier to say these things to an outsider since there is a sort of conspiracy of consensus here, a taboo on rocking the boat in this intriguingly non-confrontational culture. After all, Brazil is supposed to be a blessed land and "God is a Brazilian!"

I'd love to be writing this blog post on a new Apple MacBook Air but since you can't get too many Apple products in Brazil because of .. exorbitant cost ? .. taxes ?.. corruption ? .. I will, like most wealthier Brazilians, have to wait until I next leave the country for the UK, US or other relatively normal markets. And yet zillions of Brazilians are clamouring to buy Apple products ! Ten months ago Steve Jobs revealed why an official Apple presence in Brazil isn't likely to happen anytime soon.

In a break from the relentless soap operas and Big Brother Brazil broadcast here, I recently saw coverage of Dilma's new cabinet appointments, a procession of grey and aged characters that reminded me of a Soviet Union Politburo line-up. I noted with a grimace that the Minister for Science and Technology looked like he'd never even heard of the internet and I imagined the political horse trading between different factions of Brazil's Labour Party that may have resulted in random appointments such as this one. (Note: I imagined but of course do not know for certain. Perhaps he is the perfect man for the job). Perhaps he will do what I would do were I in his shoes: begin a massive, top-priority project to bring high-speed, reliable, affordable (or better still, free) broadband to at least the most populous parts of this country.

In addition, and admittedly going somewhat beyond his ministerial remit, were I in his shoes I would announce an equally ubiquitous and expeditious campaign to get people, but especially young kids, learning English. Like it or not, English is the language of the Web, the language of science and technology and the language of international business. Most Brazilians have absolutely no knowledge of English, reflecting a longstanding insularity.

"Booming BRIC Brazil" is a red herring, as far as I can see. Relying on raw materials and commodities is no way to secure the country's future. Just ask Africa. The only way is to invest in human capital, and that means an unprecedented investment in education. What better way to do that at high speed than by harnessing the power of the internet ?

I look forward to hearing your comments and sharing more thoughts with you.

PS: It's "Brasil" with an "s" in the blog title but everywhere else it will be Brazil with a "z", since it's an English language blog. So why not "z" in the title too ? The marketing answer: because I wanted a touch of authenticity reflecting the fact that I am in Brasil rather than writing about it from a distance. The non-marketing answer: because someone had already taken that blogspot domain !

PPS: How many Nobel Prizes has Brazil won ? Remarkably, none. Neighbouring Argentina, whose history and economy has been at least as troubled, has meanwhile managed to pick up five. The question is, do Brazilians care about such things ? I hope so.

UPDATE: This blog was originally called "Digital Marketing Brasil" and still has the original URL address. But since the blog's interests quickly became more than just digital marketing, soon enough I felt the need to change the name.