I had a chance to catch up with Kenneth Rapoza recently, who told me about his time in Brazil and his thoughts on the Brazilian economy. Ken was a staff reporter based in São Paulo for Dow Jones, where he wrote daily for the newswire. He wrote for the Wall Street Journal and Barron's from 2005 to 2010. He currently manages and writes for Forbes' BRIC Breaker blog, covering Brazil, Russia, India and China.
Ken lived in Brazil for 10 years between 2001 and 2010. He lived in São Paulo, in the Higienópolis neighborhood. "For me, a gringo, it was totally exotic and the kind of glamour I could have never afforded in the U.S.," he recalls. He misses catching a glipse of parrots on his way to work. He has fond memories of the city, though he doesn't miss the traffic. He also remembers the excitement of living historic events, like Lula's election victory.
He had the opportunity to travel all over the country, and his favorite places were Rio de Janeiro and the Panatal. "The Pantanal was great for its natural beauty. I woke up at around 4:30 in the morning to large hyacinth macaws. I really felt like I was in a jungle there," he said. However, when asked about misperceptions foreigners have of Brazil, he explained: "Manaus has more people than the city of Boston and it is smack dab in the middle of the biggest rainforest on earth. Also, Brazil is home to Embraer and can actually make amazing jet aircraft, not just FIFA stars. I don't think people realize that when they are flying from New York to Boston they are probably flying something Made in Brazil."
I asked how Brazil stacks up to the other BRICS in terms of the economy and growth. He said: "All four are so different from each other it is hard to compare. I think Brazil is way more diverse than Russia, and in this regard it is probably closer to India. China is more export-driven, but trying to turn inward. Brazil already has a decent domestic market and that is growing. Brazil has a lot of know-how; they're very innovative. It's just so hard to compare all four of them together." He also sees them differently in terms of culture. "Who has better clothing designers? Brazil. Who has better musicians? Brazil. But who has better filmed entertainment? India and China. Brazil still relies on Hollywood and Globo novelas."
He weighed the differences between the countries. "Is Russia more innovative than Brazil? Well, Brazilian aircraft are certainly better than Russian aircraft, and the market will tell you that. But Brazil doesn't have an international cyber security brand like Russia has in Kaspersky Lab, for example. Or an IT leader like Infosys or Wipro in India. What does China have that Brazil doesn't have? Well, it's created their own Twitter/Facebook hybrid called a Weibo, by SINA Corporation. Brazil doesn't have that. They adopt U.S. consumer technology, but they invent other kind of technology. Brazil does elections on line, and its banking IT infrastructure is incredible. So everyone is different."
He also believes Brazil benefits from having more ties and similarities to North America. "I think the advantage of Brazil over a place like Russia, China and India is that Brazil is way more diverse than all three. And it is more hospitable than Russia. Russia really is another world. There are zero American references there, which is fine. But Brazil is more gringo friendly." On Brazil's other development advantages, he pointed to low-cost electricity and hydroelectric power. But, he said, "the disadvantage is you have to build hydroelectric dams and there is really only one place to build them--in the Amazon."
He went on to share his thoughts on Brazil's oil sector. "Brazil also has this pre-salt deep ocean drilling capabilities and know how that could turn Rio into Oslo if they play their cards right. By that I mean that Rio can be a third center of oil services in the world, outside of Norway and Houston, Texas," he explained. He believes Brazil's oil wealth is an important advantage. "Brazil is raking in a lot of foreign capital because of the Santos and Campos basin discoveries by Petrobras. "There's a lot of know-how that is going to come from that on all fronts. It is going to be a very costly venture and everyone knows that. The disadvantage is that it is oil and oil can spill, and when it does off the coast of Rio, it could be a super mega disaster. Chevron is feeling this now and their November 2011 oil spill was miniscule (2,400 barrels with no oil on shore, no wildlife or human casualties) compared to BP's oil spill in the Gulf of Mexico. That is a disadvantage. Because God forbid something more severe happens. You will have a lot of money tied up to drill deep through the bedrock of the Atlantic and the political risk is that the government says, 'Okay, everyone just go home.' Petrobras can develop it itself, but not on the scale they could with partners."