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As a proactive global risk management exercise, we have recently focused our Hedgeyes on Brazil’s domestic newspapers (reading them in Portuguese).

Here are a few interesting takeaways that we have translated for you from this week’s domestic news. Ultimately, the US media focuses very little on the macro issues in Brazil, and we think there is an opportunity to be your risk manager calling out macro risks as they develop.

 

Political Corruption

11 – 12 February 2010 – O Globo (Brazil)

Jose Roberto Arruda, Governor of Brasilia, the nation’s capital city, has surrendered to Police in a corruption probe. 

Arruda is charged with accepting bribes in connection with awarding government contracts.  He was videotaped last year accepting bags of money and the video was YouTubed around the country.  His explanation at the time was that he was accepting donations to help him launch a program to distribute free panettone cakes for the city’s poor.  I kid you not.

One of the key witnesses in the government’s case claims he was offered a half million dollar bribe to reverse his testimony.

Five alleged co-conspirators have also been named.  Arruda was part of an opposition that had hoped to campaign against Dilma Rousseff, Lula’s hand-picked successor, partly by dredging up corruption charges that had been raised during Lula’s earlier presidential campaign.  It didn’t work against Lula then, and it doesn’t look like they will be able to use it now.  NB: Lula is leaving after two terms with something like an 81% approval rating.  This is amazing for a head of state who is not a dictator.

Lula expressed his concern about the implications of the arrest for the integrity of the political system – this is the first time in Brazil’s history as a democracy – post military dictatorship – that a high level official has been charged with corruption.

 

Social Unrest

O Globo 11 February – One of the directors of the social activist group Nos do Morro was found murdered in Rio de Janeiro.  Jose Frederico Pinhiero was found with his throat cut after being reported missing by his family.

Nos do Morro is a major Rio de Janeiro not-for-profit cultural and social welfare group founded in 1986.   It combines cultural activities with social programs in the Morro de Vidigal neighborhood of Rio.  It has programs designed to keep kids in school and promotes local culture.  Group members have been featured in national and international venues, including appearing in such internationally known movies “City of God.”

A related cultural group, AfroReggae, was also victimized.  Its leader was attacked and robbed.  The assailants were caught on street cam video but have been released on their own recognizance, pending court proceedings. 

[COMMENT: It is not clear to me whether there is police, or other government support for attacks against successful grass roots social programs, but clearly there is no immunity for the Good Guys caught between those warring for control in the inner city.  If these high-visibility champions of the inner-city poor are also their victims, one has to wonder how successful the government will be in cleaning up crime and violence in advance of the World Cup and Olympic Games.  This could get extremely ugly.]

Moshe Silver and Keith McCullough