What are the top five business opportunities

Brazil

Sérgio Veloso

Born 1982 in Juiz de Fora in the state of Minas Gerais, studied history at the Juiz de Fora Federal University and cultural studies at the Jagiellonian University in Krakow. Since 2011 Veloso has been a member of the research group of the think tank BRICS Policy Center, in which research is carried out on the topics of urban development and sustainability in the BRICS countries. Veloso lives in Rio de Janeiro.

Brazil and the BRICS countries

In 2001, the BRICS countries - and thus also Brazil - were prophesied of the best economic prospects in the future, and that the countries would change the world economy. What has become of it? And how has Brazil developed since then?

BRICS summit on March 31, 2013 in Durban: the then Indian Prime Minister Manmohan Singh, China's President Xi Jinping, the President of South Africa Jacob Zuma, Brazil's President Dilma Rousseff and Russia's President Vladimir Putin (from left to right) (& copy picture alliance / Kyodo)

In 2001, Jim O'Neill, chief economist at Goldman-Sachs, prophesied high growth rates in four countries, Brazil, Russia, India and China, and summarized them for the first time under the acronym BRICS in a report entitled "Building Better Global Economics BRICS" . The text of the analyst of one of the largest investment banks was the initial spark for the BRICS group: Since then, these four countries have endeavored to deepen their relationships in order to expand their influence on the international stage. But what unites these culturally and politically so different countries?

One answer to this question can be found in the report itself: Essentially, the four countries are characterized by successful economic development and high growth, which makes them attractive as sales markets but also for investments. The name BRICS countries was created to draw the attention of investors worldwide to the business opportunities in these previously peripheral regions. The emergence of new investment areas creates a scenario in which traditional economic powers like the G7 group come into competition with emerging powers like Brazil, Russia, India and China as well as South Africa.

The BRICS are thus emerging as a kind of self-fulfilling prophecy - based on the finding that the considerable economic growth of these five countries (South Africa joined the group in 2011) represents the dawn of an expansion phase in the global economy, in which new players are among the largest and most important economies of the Mix planets. BRICS is also becoming a symbol for a new world economic order in which the dominance of the classic industrialized countries is declining.

Just like the other BRICS countries, Brazil corresponds to the predictions of Jim O'Neill, because it can point to a whole series of successful developments in its recent past. In the past decade, its gross domestic product (GDP) rose by around 42 percent. This breathtaking growth in the Brazilian economy is based on a twofold development strategy: On the one hand, the Brazilian governments have been trying since the mid-1990s to make the country attractive for new capital; on the other hand, they promote the social mobility of the population.

In order to attract new capital, the public sector has initiated processes of legal and infrastructural reorganization: These are intended to create favorable conditions for investments and business. In the cities, for example, this is implemented through a policy of city marketing and the promotion of major events: city marketing is intended to transform cities into sales areas with numerous business options. At the same time, hosting major events such as the 2016 Olympic Games in Rio de Janeiro or the 2014 FIFA World Cup requires investment levels that exceed Brazilian economic capacities and, in turn, promise profits to foreign donors. Large events alone can therefore attract a lot of capital.

Income inequality in the BRICS countries and in Germany in comparison (as of 2013) License: cc by-nc-nd / 3.0 / de / (bpb)
In Rio de Janeiro, several city governments have tried to invest in recent decades - currently mainly with the help of a gigantic redesign of the urban space. Entire populations are being relocated from their traditional homes to the outskirts to free up large areas for new investment. One example of this is the port district, one of the central areas for the 2016 Olympic Games. One of the largest public-private partnerships in the history of Brazil with a volume of 8 billion reals (around 2.58 billion euros) is being completely restructured .

Distribution of the Brazilian population by income class (as of 2011) License: cc by-nc-nd / 3.0 / de / (bpb)
At the same time, the Brazilian government wants to increase the citizens' opportunities for advancement. This process manifests itself in the expansion of a new middle class, the so-called "C-Class". According to the definition of the Getúlio-Vargas Foundation, the "C-Class" includes families with a monthly income of between 1,115 and 4,807 real (around 362 to 1,560 euros). (The B and A-Class include families with a monthly income of over 4,807 Real (1,560 euros), the D and E-Class families with a monthly income of under 1,115 Real (around 362 euros) or under 804 Real (around 261 euros) ).

In 2003, "C-class" families made up 37.6 percent of the population, but by 2008 they made up 49.2 percent of the population, making a total of 91 million people. This means that within five years 29.5 million Brazilians have found their way into this new middle class and increased their purchasing power. The "C-Class", the new middle class, plays an essential role in sustaining the development of the economy. People with low purchasing power in Brazil can now obtain loans more easily and flexibly than in the past, which enables them to acquire new goods and merchandise and thus keep the flame of the internal consumer market alive.

With the two strategies, attracting new capital and promoting social mobility, we are dealing with two sides of the same coin. On the one hand, the terrain is being rearranged to make it attractive for domestic and foreign investments. On the other hand, public and private banks provide loans that enable a new population group to significantly increase their purchasing power. But the two processes make Brazil even more a living metaphor for social mobility and the influence of consumption on the transformation of a society.

State development policy has so far seen Brazilians primarily as consumers. Against this background, Brazil is promoting the development of social mobility via the market or via the existence of a heated consumer market that offers the population the opportunity to move up in society. As a result, advancement and social mobility in BRICS Brazil do not necessarily mean that the rights of hitherto marginalized, poorer population groups are comprehensively strengthened. They mean strengthening their rights as consumers. So in Brazil, advancement and social mobility are ultimately synonyms for new business opportunities.

The bankruptcy of consumption

Driving development and mobility through the attraction of capital played an important role in the success of Luiz Inácio Lula da Silva's two terms as President of Brazil from 2003 to 2011. But in June 2013, now Lula's successor Dilma Rousseff, changes This: The reasons for the great success of the governments of the Workers' Party (PT), the growing consumption and the attraction of many investments to Brazil, became the engine for one of the largest demonstrations that Brazil has ever seen. Millions of people took to the streets, not only in the Brazilian megacities, but also in small and medium-sized cities. The reason was fare increases in local public transport. It became clear that the policy of increasing consumption had drained the Brazilian cities: the streets in the metropolises are constantly congested and local public transport is not only miserable but also unaffordable for the majority of the population. The citizen protests in June 2013 are a clear sign of the bankruptcy of spatial mobility within a social mobility process.

The cities in whose area the new Brazilian middle class is developing simply do not offer the conditions for such a high increase in consumption. The lack of urban mobility was the bottleneck that slumped the notion of presumed social mobility, which was met with enthusiasm around the world. The demonstrations in 2013 made it clear that there can be no social mobility without physical mobility on the streets of cities.

The steady increase in the resources available for consumption led to the formation of a new middle class in the lower income groups. There is a belief that social mobility through consumption is an essential element to redress social inequalities. However, I would argue that the relationship between increasing consumption and leveling social inequality is a fallacy. If one wants to compensate for social inequalities, the conditions must be created so that everyone can really be equal.

Social mobility achieved through consumption necessarily requires a strong and stable market climate. In a market climate, however, universal social equality is not envisaged, because it is precisely this inequality that characterizes and supports the market. Access to consumption is not a given fact or right. A person's participation and involvement depends primarily on how much money they have in their wallet. With steadily growing consumption, a new middle class is emerging, the C-class, but at the same time the difference to the other middle and upper classes is increasing. The country is dividing itself more and more into market niches, inequality and isolation within its population are deepening and the quality of its still unconsolidated democracy is being put to the test.

The demonstrations that began in 2013 were characterized by an almost schizophrenic variety of issues and demands, but they very clearly show the democratic deficit the country is struggling with. The hosting of major events such as the 2014 FIFA World Cup and the 2013 FIFA Confederations Cup, which people used as an opportunity to take their protest to the streets, is indicative of the development of a defective democracy in Brazil.

In addition to the late completion of infrastructure projects to accommodate thousands of tourists coming to Brazil in June 2014, the organization of the 2014 FIFA World Cup was characterized by a lack of transparency in the use of public funds, by FIFA's interference in national affairs and by the displacement of population groups. The goal of attracting capital impairs the safeguarding of basic rights such as the right of residence and causes great unrest among the population. The BRICS Brazil is thus becoming a major player in maintaining the dynamism of the world economy, but in doing so it turns its population into consumers and forgets the historical prerequisite for all nation states: securing the rights of its citizens.

Translated from the Portuguese by Niki Graça