Adventures of a Gringa

A Brief History of Brazilian Capitals

Quintino at Diário do Rio posted this video from a government agency-produced educational series about different Brazilian cities. I also found the rest of the series about other state capitals, including São Paulo, Recife, Salvador, Brasília, and Porto Alegre. The series is a few years old, but what's interesting to see is just how much has changed in a short period of time, particularly when it comes to the outlook of locals and overall optimism. The Rio episode is particularly interesting, since it came before Rio's resurgence: before the city won the World Cup and Olympic Games, before the peak of the economic boom, before the major oil discovery, before the UPPs, and before the growth of international businesses. Available only in Portuguese.

A Brief History of Rio de Janeiro

 

A Brief History of São Paulo

 

A Brief History of Recife

 

A Brief History of Salvador

 

A Brief History of Brasília

  

A Brief History of Porto Alegre

 

CFR's Brazil Task Force

This month, the Council on Foreign Relations released "Global Brazil and U.S.-Brazil Relations," an extensive report developed by a new Brazil-focused task force. Comprised of academics, business and non-profit leaders, and Brazil experts, the group's purpose is to enumerate specific suggestions based on the belief “that it is in the interest of the United States to understand Brazil as a complex international actor whose influence on the defining global issues of the day is only likely to increase.” It's really a great opportunity to showcase Brazil's accomplishments, as well as food for thought for American policymakers.

While some of the recommendations were somewhat general or even vague, there were quite a few very valid points worth mentioning.

One of the first major recommendations is this, since it has been up in the air for some time:

"Recognizing Brazil’s global role, the report recommends that the Obama administration now fully endorse the country’s bid for a seat as a permanent member of the United Nations Security Council (UNSC). It argues that a formal endorsement from the United States for Brazil would go far to overcome lingering suspicion within the Brazilian government that the U.S. commitment to a mature relationship between equals is largely rhetorical.”

Next, the report urges more funding for educational, cultural, and work exchanges between the U.S. and Brazil, allowing for more people to work and teach in both countries and an "increased flexibility and timeliness in granting visas" in each country. Also, the task force suggested that the State Department and Defense Department invest more in Portuguese language training programs.

The report stresses the lack of Brazil policy infrastructure in the U.S. While the experts applauded Obama and Dilma for signing ten bilateral agreements earlier this year, they expressed concern that "no mechanism exists in the U.S. government to coordinate these initiatives and drive policy in Brazil." While the U.S. government has undertaken a variety of Brazil initiatives, they are divided amongst different agencies and departments with little to no coordination and a lack of an overall strategy. As such, the task force recommends the creation of an Office for Brazilian Affairs, one that is separate from the Southern Cone office and dedicated soley to Brazil. Not only do I strongly support this notion, but I think it should apply to businesses and non-profit organizations as well, allowing them to better segment and focus on the Brazil market or programs.

The task force also discussed trade barriers. They pointed out that there is no bilateral tax treaty with Brazil, which would help American companies expanding to Brazil. However, according to report, business officials often understand each other better than government officials in the two countries, and one of the results of that is to ease travel between Brazil and the U.S. The U.S.-Brazil CEO Forum helped lobby the respective governments to extend tourist visa validity from five to ten years, and to increase passenger flights between the two countries by 50 percent in the past two and a half years. Still, visas between the two countries are a hassle, and the task force urged the U.S. government to officially begin the review process for the Visa Waiver Program, which would allow Brazilians to travel to the U.S. without tourist visas.

The task force emphasized that miscommunication and lack of discourse between the U.S. and Brazil have been recent roadblocks to a better relationship. One example is the Iran nuclear debacle in 2010, which the report blames partially on a "mistaken" understanding by Lula and his foreign minister. Nevertheless, the report points out that there has been some progress. In April 2010, the US Secretary of Defense and the Brazil Minister of Defense signed the first defense cooperation agreement of its kind since the 1970s. Plus, Obama's historic visit "heralded a new phase of the U.S.-Brazil relationship," with important symbolic undertones.

While the report has some excellent recommendations, there are some missing pieces. Boz of Bloggings by Boz pointed out that there was almost no mention of the Brazilian military, a significant omission considering its increasing size and budget, as well as its nuclear ambitions. While there are mentions about human rights, crime, and public safety, as well as an addendum about the Belo Monte dam, there is a lot more opportunity to discuss them in greater detail, as well as room for ideas on bilateral cooperation to tackle these issues.

But I think the overall message of the report is best summed up in this passage from the conclusion:

"Treating each other as equals is fundamentally a matter of diplomacy and respect: it does not imply that the United States and Brazil operate within the same global context."

The more the U.S. government can engage Brazil as a partner and make officials feel like partners rather than subordinates, the easier it will be to create more meaningful policies and a better relationship. The world order has changed, and if the U.S. and Brazil can recognize their new international roles and better understand one another, it will be easier to see eye to eye.

Download the full report here.

Brazil Summerfest

This Sunday, a special Summerstage show kicked off the first annual Brazil Summerfest, a celebration of Brazilian music in New York. Marcelo D2, Pitty, and DJ Nuts started off a week of performances by Brazilian artists, including Forró in the Dark, Brothers of Brazil, Davi Vieira, and Percussivo Mundo Novo, amongst others. The festival also happened to come right after Tom Zé's first New York performance in 12 years. The Central Park show had a huge turnout on one of the hottest weekends of the year.

Despite the scorching temperatures and a brief rainstorm, there was an impressive turnout on Sunday. Though the crowd appeared to be largely Brazilian, there were plenty of gringos there interested in Brazil. Quite appropriately, Marcelo D2 sang "A Maldição do Samba," or the Samba Curse, which includes the refrain:

A maldição do samba
O gringo subiu no morro e bebeu cachaça, fumou maconha e obteve
a graça. Depois do samba sua vida nunca mais foi a mesma

The samba curse
The gringo went up to the favela and drank cachaça, smoked weed and had a good time
After the samba, his life was never the same.

It was a great way to start a new summer tradition in New York, showing off the fusion of different Brazilian styles. Pitty, an acclaimed rock star, could have easily been confused for a tourist going to brunch; she was dressed in a cute pink dress with a pink headband and ballet flats, a very different look from her usual black and denim rocker style.

She gave an impressive show, keeping the crowd excited despite the oppressive heat. At the end of her set, she sang a song in English, "You Know I'm No Good," in honor of Amy Winehouse.

Marcelo D2, who was profiled in The New York Times on Thursday, showed off his fusion of musical styles: hip hop, rap, samba, reggae, and African-influenced percussion, and as he sang in "Gueto," "um pouco de europeu, um pouco de africano" (a little European, a little African). He even had the security guards dancing.

Later in the afternoon, he surprised the crowd by singing with Bebel Gilberto, a sneak peak for their show on August 3rd at City Winery. At the end, despite confessing he was about to faint from the heat, he invited around 20 women on stage to samba with him in his closing song.

There's a tremendous opportunity for Brazilian cultural events in the US, with an increased interest in everything Brazil. Plus, there's also plenty of opportunity to attract and engage the Brazilian community in major metropolitan areas for events other than Brazil Day. Though Summerfest only features music events, it has already been able to accomplish both by appealing to Brazilian and American audiences. Aside from film festivals, there's a lot of focus on Brazil Day in New York, but there's obviously room for more comprehensive events with a focus on Brazil. Clearly, the Brazil Summerfest organizers are on to something, and there's even more room to grow.

For more concert photos, click here. For a full line up of this week's events, click here.

Photos by Eliseu

Rio de Janeiro: Tourist Mecca?

Recently, the Rio de Janeiro government announced its desire to make the city a gay tourist mecca and to compete with other gay-friendly destinations like Buenos Aires and Mexico City for travelers. The city's mayor, Eduardo Paes, declared that Rio is "a city without prejudice," and a newly appointed "diversity secretary hopes Rio's allure and gay events will attract more travelers. While the initiative is a worthy one, it's just part of the city's plan to attract more tourists leading up to the World Cup and Olympics. In 2010, the city received 1.61 million foreign tourists, pouring US$2 billion into the city. It was an increase from 1.49 million in 2009, and marked the largest amount of foreign tourists visiting the city in the past five years.

But considering that Rio is such a stunning city with so much to offer, the numbers are much lower than they could be. Compare last year's 1.6 million foreign tourists to 2.6 million in Buenos Aires, 3.3 million in Sydney, 6 million in Miami, and 7 million in Barcelona, to name a few. There are now more flights than before from North America, Europe, and Latin America, and a range of accomodations for different budgets, so why aren't there more visitors?

One cause could be prices. With the real at an all-time high, as well as inflation, Rio has become extremely expensive. Between the exchange rate and bigger price tags, especially for hotels, it's possible visitors are turning to cheaper destinations. Attractions are more expensive, too: a report this week showed that entry to the Christ the Redeemer and the Sugarloaf are more expensive than a ticket to the Eiffel Tower or the Statue of Liberty. The other cause could be the economic crisis; with fewer traditional travelers taking vacations, there's fewer visitors to be had.

Another likely cause is fear. Sadly, many potential visitors have erroneous assumptions about the city, thinking that city is a war zone, and that the worst of the city's violence takes place everywhere, even the wealthy areas. There are real risks, though, mainly being the victim of theft or a mugging. There are even stranger risks, like falling off a streetcar, or getting hit by an exploding manhole.

But most people are concerned about violence, so when prospective visitors see stories like this one from earlier in the week, they panic.

"Armed robbers have invaded a luxury Rio de Janeiro hotel, robbing guests of money and phones, Brazilian police say. Four men scaled the wall to enter the Santa Teresa Hotel in central Rio early in the morning, officers said...The Santa Teresa hotel, located in the neighbourhood of the same name, offers "peace of mind and safety" to guests, according to its website." (Read the full article from the BBC)

Santa Teresa is not exactly known for safety, but the most common crime there is getting mugged while walking on empty streets or at night. But this wasn't just any robbery. It was planned by an ex-employee, who also participated in the crime, and the hotel was just 100 meters from a police station. Plus, the nearby favelas are occupied by a pacification force.

Though the UPPs have been lauded by the local press and international media, some have questioned their efficacy, noting that in some cases, traffickers have simply been driven to other favelas. There's other issues too: this week, the director of the Special Police was robbed in his own office when R$5,000 in cash were taken from his desk (what he was doing with all that cash, though, is an entirely different question). Also, the construction company responsible for building UPP buildings as well as government-run health clinics is under investigation for being a shell company, failing to begin construction they were already paid for, and tax evasion.

With more attention on Rio and with public security policy in the spotlight, it's hard to find a strategy to convince potential visitors that the city is a secure destination. One of the newest major international reports is a Vanguard documentary from Current TV called City of God, Guns and Gangs, that premiered tonight. It was really well done, but the overall message wasn't entirely encouraging. The whole episode should go online sometime soon, but for now, here are some excerpts:

 

 

In light of these issues to contend with, tourism officials can only hope that visitors will overlook crime and exercise caution, and that the city can limit bad press leading up to 2014. Meanwhile, Cariocas can only hope that the governor's security strategy will actually pay off for those who call the city home.

Interview With Observing Brazil's Greg Michener

When I first came across Greg Michener's blog, it was a bit like discovering a diamond in the rough. True, with less than a year of beginning the blog, he was already being featured on the Christian Science Monitor's LatAm Monitor (by the way, I'm also being featured there, as is Boz of Bloggings by Boz). But I couldn't believe I hadn't seen the blog sooner, considering that much of Greg's recent work is very unique in the English-language blogosphere.

Michener is a proud Canadian, raised in Toronto by activist parents, who taught him the importance of democracy and policymaking. A polygot with an interest in Latin America, he received his Masters in Latin American Studies and his Ph.D. in Political Science, both from the University of Texas. For his doctorate, he studied freedom of information laws in ten Latin American countries, and he will publish a book next year on his findings. His focus is on transparency law, anti-corruption policy and governance, and his blog largely focuses on transparency, legislation, and corruption in Brazil.

Married to a mineira, Michener originally moved to Belo Horizonte about two years ago. He works as a translator, editor, and consultant, but after moving to Rio de Janeiro last year, he hopes to begin teaching political science and international relations. Like my blog, and others, he began by writing about what it was like to live in Rio, and his observations about the city, and later moved into detailed political analyses.

Why is transparency so important? According to Michener, a freedom of information law is the basis of any country's transparency infrastructure, permiting citizens to request and receive public information and obliging government to publish preestablished details about its operation, including budgets, employees, plans, contacts, contracts, etc. Transparency encourages public employees to be more accountable and professional in their work, recognizing that anything they do might be subject to a freedom of information request. It also directly affects freedom of the press and press politics, since transparency laws allow journalists to get information from the government. This may seem simplistic, but in countries without transparency laws, finding out basic facts about how tax revenue is spent and how much government employees are paid can be quite difficult.

So where does Brazil stand in terms of transparency in the region? "It's a mixed bag," Michener said. "On the one hand, there's decent budgetary transparency." Indeed, the federal government is known for this type of transparency on the international level. On the other hand, as Michener has written about extensively, the Brazilian congress has failed to pass a Freedom of Information bill, one that would provide a much more robust legal framework for transparency policy. It's supposed to pass before September, but has been delayed several times already.

Brazil will be one of the last countries to pass a transparency law of this kind in the region, and it also will be one of the least "open" of the laws in the hemisphere. In the bill, the maximum reserve period for information release is set at between 25 and 50 years, compared to, for example, 12 years in Mexico, and the international standard of a maximum of 20 years. This type of secrecy is "very retrograde," according to Michener, and the bill could actually be weakened further before passage. Plus, some legislators are still pushing for eternal secrecy, to ensure certain information is actually never made public. Compared to neighbors like Chile and Argentina, who set up truth commissions to investigate dictatorship era abuses, Brazil still hasn't attempted anything of the sort. Despite promises from Dilma to finally establish these types of investigatations, it's been stalled in Congress, due in part to the power of the military. According to Michener, "vestiges of authoritarianism still have a lot of sway in Brazil."

There's plenty of need for more transparency. "History seems to repeat itself in Brazil," Michener laments. With rife corruption in Congress, an elite-driven system, and the largest tax to GDP ratio in the hemisphere, citizens deserve to know precisely what is going on. Michener cites a quote, reportedly from Eike Batista's father: "Brazil has the services of Angola and the taxes of Switzerland." There are a multitude of systemic problems; Michener points to education as one, since the average Brazilian has an average of seven years of formal education, meaning that some politicians and policymakers also lack a high school education. In addition, there's the infamous amounts of bureaucracy, which can sometimes be wasteful and lead to overspending. With more information readily available, the government could potentially become more regimented - and allow citizens to see what's really going on.

Corruption, though, is really one of the main issues. In his blog, Michener says there's evidence that billions of dollars worth of public monies are stolen each year; by one estimate, it's around US$35 billion annually. In 2003, the comptroller general estimated that 30 percent of federal funds were lost to corruption at the municipal level, amounting to R$60 billion annually -- the value of the GDP of Uruguay. In 2009, the comptroller general found that 90 percent of municipalities still had irregularities, despite a law passed that year setting standards for transparent budgets at the municipal level. "Barely a quarter of municipalities have complied," says Michener.

What exactly will the law do? There's already a transparency portal set up by the federal government, which allows anyone to access certain government expenditures. But it's not quite all encompassing. Michener has looked through the records, and he found that one army colonel has been making withdrawals of R$1,000 a day, every day - but there's no explanation as to what the money is for, or why it's happening.

Given the current information available, the transparency law will have two components – information that is visible, and information that leads one to draw accurate conclusions. "It will create an opening," says Michener, "to show people where things need to happen, and to make the government more conscientious." The government would be forced to become more organized, both to organize information properly and to operate with greater effeciency. The obligation for active transparency -- to put information online and make it visible -- will in fact lead to interesting revelations, like "ghost companies, more employees than are on the payroll, and lots of discrepancies."

But this kind of wake up call is a good thing. "It needs to create citizen demand," Michener told me, "since Brazilians are famously depoliticized." According to Michener, with little contact with the federal government and a general lack of active participation to keep government accountable, Brazilians could become more active in demanding responsible governance. The law could help create a culture change, though it could take decades, and it could take a long time to make a visible difference. Still, there are tangible benefits to this type of transparency: discovering and revealing corruption and irregularities doesn't just save tax dollars, it can actually save lives, Michener claims.

Initially, though, the law will start out as a "symbolic gesture of opening," one that won't initially solve problems or even necessarily work at first. But by putting a system into place that opens the government up to scrutiny, there will still be more information available to the public than there is now, and will provide a very useful tool for citizens, the media, and politicians themselves. Michener also hopes the law will make the press more critical, allowing journalists access to more information. Plus, he says, "it will provide hope for democratic progress."

Yet the law still hasn't passed, which has actually proved an embarrassment not only to Brazil, but also to the United States. That's because Brazil and the US are co-chairing the Open Government Partnership, an Obama initiative "aimed at securing concrete commitments from governments to promote transparency, increase civic participation, fight corruption, and harness new technologies to make government more open, effective, and accountable," according to the State Department. Since Brazil is still not considered very open, "it's difficult to credibly chair this iniative," says Michener. In his post about the partnership, Michener wrote:

"The question that should be on everyone’s minds is whether Brazil is fit to co-chair the OGP, much less whether it should qualify for the OGP in the first place. If the OGD adopts these sorts of permissive benchmarks before its formal inauguration, much less makes a co-chair of a country not leading on transparency, can we expect the OGP to be anything more than feel-good window-dressing."

President Dilma had hoped the freedom of information law would pass in April, on World Press Freedom Day, but later backpedaled, and the bill is still stalled in Congress. The Open Government Partnership was just launched last week, and it's true that Secretary of State Hillary Clinton's gushings about Brazil didn't ring 100 percent true:

"I go around the world bragging on Brazil, so I’ll do it again here. But what Brazil has done over the last 25 years is remarkable, because it expanded its tax base, increased its revenues as a percentage of GDP, and then did not enrich a small elite, but spread those resources broadly among the Brazilian people in an effort that has lifted so many out of poverty while at the same time enhancing the even stronger establishment of democratic institutions and positive results."

(Watch the video of the speech here)

Still, Michener thinks the initiative is worthwhile, as he wrote in his post:

"Regardless of what the skeptics say, if there was ever a time in history to launch an international open government partnership, this is it. Historically, it’s a highly atypical diplomatic initiative: unideological, nonexclusive, engaged with all levels of government and society, and diffuse—it’s a heck of a promising initiative, if it turns out to be for real."

He also agrees with Clinton that Brazil has come a long way in terms of democracy, and says it's made good progress that needs to be recognized. At the same time, criticism is important, he told me, since it puts pressure on the government and opens people’s eyes. "My kids will be Brazilian," Michener explained, "so I want a better government for them."

For the latest on transparency issues, corruption, and politics in Brazil, read Greg's blog Observing Brazil.

Q&A With Boz of Bloggings by Boz

James, known as Boz, is one of the foremost Latin American foreign policy bloggers on the Web. He's an American based in Nicaragua, but he covers the entire region, from daily news stories to more complex policy issues. He's especially interested in transnational crime and security, but he does an excellent job writing about a large variety of topics. He writes Bloggings by Boz, and also has a popular Twitter account for those interested in Latin American news. Boz was kind enough to answer some questions I had, and I'm really excited to feature him here.

You're quite a prolific writer - you've been blogging since 2004 with hundreds of posts a year, and you also freelance. Where else have you been published?

Most of my public writing is on my blog and Twitter feed. I started my blog as an experiment in 2004 and it became a hobby that I really enjoy. With over 3,500 blog posts in seven years and over 7,000 tweets, I'm not sure where it all comes from. I just sit down to write every morning.

In terms of public writing, I contribute to some of the analysis published by Southern Pulse. In the past year I wrote a paper on organized crime in Honduras for the Woodrow Wilson Center and a speech on Arms Trafficking in Central America for the Parliamentary Forum on SALW. I was also excited my paper on botnets and cybersecurity, which I wrote in late 2009, was released publicly by the Conficker Working Group.

My freelance writing and consulting business leads me to do a lot of private memos and analytical reports for clients around the globe. A lot of what I write as part of work is never published publicly, so I'm glad to have an outlet in my blog to post stuff I want to say.

Why Latin America? How did you first become interested in the region, and what do you find fascinating about it?

I'm asked "Why Latin America?" fairly often and I've never been quite sure. I'm part hispanic and have a lot of relatives in Argentina, but I don't think that completely explains why I'm drawn to the region. I took every university course I could on Latin American politics and history and spent a semester abroad in Santiago, Chile. About a year after college, I stumbled into a job as a Latin America analyst with a strategic communications firm. Even though I've also done work related to Asia, the Middle East and Africa as well as US politics, I never enjoy working on those regions as much as I do Latin America.

How is that you came to live in Nicaragua? As someone who covers Latin America and foreign policy, why was it important for you to live there?

I'm actually in Nicaragua because of my wife's job. The flexibility of being a freelancer means I can write from almost anywhere with an internet connection. That said, I'm glad to be living and working in Latin America and appreciate the opportunity to get to know Nicaragua and Central America better. It's been a good experience.

On your blog, you do a daily round up of interesting news stories from the English, Spanish and Portuguese language press. How do you determine what's worth sharing?

I share whatever news articles interest me. My blog is still my hobby, even though I have far more readers today than when I started. Of course, as my interests change over time, so do the articles I share. I've become much more interested in technology, energy and innovation issues in the past year, and I think it shows in what I share. I also have an interest in transnational crime, which I think is the big threat to the region.

You cover the region as a whole but you give Brazil plenty of attention. What do you think is one of the trends most worth watching in Brazil, be it political, economic, social, etc?

I give Brazil attention because Brazil deserves attention. It's a political and economic powerhouse in the region and increasingly in the world. Anyone who does regional analysis and ignores Brazil is missing a big piece of the puzzle.

In terms of trends, I think Brazil's interest in South America as a regional community is incredibly important. They have the opportunity to build up their neighbors and work to everyone's strengths through integration. However, that integration with a South American community also creates some risks for Brazil. In the coming years, Brazil will want stability in their neighborhood, leading to them influence other governments. We see this already with Brazil helping Bolivia and Paraguay do border patrols with UAVs or with their construction contracts in Venezuela and Peru. As Brazil works to maintain stability, help out neighbors, and promote Brazilian multinational businesses, it's going to lead to both good and bad consequences for the image of their country.

How do you think Dilma's administration is going? How do you predict things will play out given the corruption scandals and her beleaguered relationship with Congress?

I think the Rousseff administration is hitting some rocky times as happens any time a party moves to its third term in office, whether with the same person or with a new leader. Her administration has one clear advantage: Brazil has a set of goals it must achieve in the eyes of the world with the upcoming big events. They need to build infrastructure for the World Cup and Olympics. I'm 90% sure that Brazilian politics will pull together, move past their differences, and make it happen on time. Dilma will get the credit when it does.

Brazil's Credit Bubble

As I've written about recently, the international press has been murmuring about the possibility of a credit bubble in Brazil. While some local economists have brushed off the idea, citing high real interest rates and a consumer lending as a low share of total GDP, amongst other reasons, other observers continue to worry.

The Financial Times has written extensively about the possibility of a credit bubble, and today continued the warning:

"...While the stock of outstanding debt is reasonably low, the cost of servicing that debt is very high – the average interest rate on consumer loans is just over 45%. Hence, various estimates that the consumer debt service burden has risen to an eye-watering 28% of disposable income (compared to a peak of just under 19% in the US prior to the global crisis)."

Brazilian credit: big threat to growth, Beyond Brics

More Financial Times credit bubble stories here (related reading)

In another news report, there were worrying numbers showing rises in consumer prices and the 2011 inflation forecast.

"Consumer prices rose 6.71 percent in June from a year ago, led by increases in food and fuel costs. Consumer prices rose 0.15 percent in June from May, while service prices rose 0.67 percent. Commodities prices rose 31.65 percent in June from a year ago, according to an index published by the central bank. The government targets inflation of 4.5 percent, plus or minus two percentage points."

Brazil Economists Boost 2011 Inflation Forecast for First Time in 10 Weeks, Bloomberg

In the TIME story I mentioned earlier this week, there was lots of talk about skyrocketing prices:

"Hotel rooms in Rio de Janeiro cost more than in the south of France. Restaurants in São Paulo are pricier than in Paris. Bellinis are cheaper in Venice. Apartments in the chic Leblon area of Rio sell for more than Fifth Avenue co-ops with views of Central Park. But often there is something amiss when a middle-income country has such a rich currency. The real's gross overvaluation is a symptom of a seriously imbalanced economy."

Brazil: The Un-China, TIME

Speaking of skyrocketing prices, the big story today was about the new Mercer cost of living ratings for 2011. Because of the astronomical rise in prices, São Paulo is now the 10th most expensive city in the world, followed by Rio de Janeiro as the world's 12th most expensive city. The two cities leapt to the top of the list, since São Paulo was in 21st place last year, and Rio in 29th. After moving up 11 and 17 places, respectively, they're currently the two most expensive cities in the hemisphere. It's not just the usual suspects in terms of inflated prices, like technology or gas - the ratings encompass "housing, transport, food, clothing, household goods and entertainment."

Between inflation and the strong real, these types of stories are a daily occurence. Just yesterday, there was this FT article about São Paulo's warehouse boom, describing that the city's warehouse space "cost an average of R$23.50 per square metre a month to rent in the first quarter of this year, the fourth most expensive in the world after Tokyo, Zurich and Hong Kong." It also mentioned that real estate prices in Brazil's largest cities are absurdly high -- since 2008, residential real estate prices in Rio rose 99 percent, and rose 81 percent in São Paulo.

But the high prices haven't stopped consumers from spending. Retail sales were higher than expected in May, a 6 percent rise from the same period last year. But a lot of that spending is on credit, as this Reuters article explains:

"Credit-related segments presented the biggest increases in May from the prior month, indicating that Brazilians are ignoring higher interest rates and taking on loans for their purchases."

But as consumers spend more on credit, more consumers go into debt:

"Outstanding loans have doubled to about half of Brazil's gross domestic product since 2003, according to central bank data."

Credit card debt is in fact on the rise in Brazil, detailed in this AP article that came out this week.The numbers are striking. As I've written about previously, credit card interest rates in Brazil are obscenely high; according to the article, credit card interest rates in São Paulo are an average of 238 percent (compare this to what are being described as "soaring" credit card interest rates in the US, at just 15 percent). And then there's debt:

"By the end of the year, the Central Bank expects 28 percent of Brazilians' disposable income will go toward servicing debt, compared with 16 percent in the United States and less than 10 percent in other developing nations."

This week, Serasa Experian released a report showing that in the first two quarters of 2011, defaults increased 22 percent from the same period the year before, hitting a nine-year high. Economists pointed to inflation-control monetary policies, high interest rates, taxes, and more expensive credit as the culprits. They also said there was a need to change the way lenders evaluate risk.

Finally, in a report that went under the radar, a study found that the average Brazilian's purchasing power barely changed from 1995 to 2009. For Brazilians who earn and buy in reais, the average monthly salaries adjusted for inflation stayed at around R$1,110 over the 14 year period. Plus, the study found that the price of goods and services during the beginning of the Real Plan period, when the real was pegged to the dollar, were cheaper than they are now. The cost of a cesta básica in June 1994 was US$67, compared to US$167 in May 2011.

I'm not an economist, so it's difficult to make a prediction about a credit bubble. But given the culture of savings is not particularly strong in the new middle class, and the rampant spending that these new consumers are doing, it seems likely that there will be a slowdown at least in terms of consumption sometime in the foreseeable future. There are plenty of preventative measures, like ensuring legislation to protect against predatory lending, or public service campaigns to teach first-time credit card holders about credit. But who wants to spoil the party? Ultimately, bubble or no bubble, the consumers are going to be on the losing end. And when those consumers are your family, friends, colleagues, or you, it's worth paying attention.