Building Brazil Back Into The Global Space

President Lula’s declaration that “Brazil is back” in the international sphere, emerging after years of catastrophic demagogy inevitably reminds us of the similar declaration by Biden after Trump’s “make America great again”. It’s another scale, but considering how right-wing populism spread in the world, the political shift in Brazil is hugely important. The impact goes far beyond Brazil, because of the stimulating impact it can have in the Latin-American sub-continent.

After bringing down the Capitol-like attempted coup in Brasilia (January 8, 2023), and adjusting the army authority chain, Lula prioritized a meeting in Buenos Ayres, a key potential ally, and the meeting of the Community of Latin American and Caribbean States (CELAC). “It is urgent and necessary for Mercosur [the Southern Common Market] to make an agreement with the European Union” – Lula said at that meeting on January 24, 2023.

Environmental Catastrophe

Besides hunger, this generated an environmental catastrophe. The Amazon Forest destruction had reached 28,000 square kilometers in 2002, under the Cardoso presidency, was reduced to 4,500 in 2012, an impressive result of the Lula/Dilma administrations, but climbed back to 11,000 in 2022. All the agro-toxic chemicals forbidden in Europe and other countries were authorized in Brazil, generating contamination of soil, rivers, and aquifers.

For European, American, and other toxic chemicals producing countries, this meant profits, particularly for Bayer/Monsanto. Do we have a common ground of interests with Europe here? Building regulation capacity to reduce the disaster needs a bilateral effort. Norway and Sweden already announced they were restarting the funding of the Amazon protection programs, suspended during the Bolsonaro administration.

Energy is another important field of common interests. Brazil has important oil reserves, managed by the dominantly state-owned Petrobrás, which used to manage the whole production cycle: deep-water extraction, platforms, refineries, distribution, petrochemical industry and even research on clean energy. This allowed the country to stimulate all the energy-intensive activities in the country with low costs, while investing in new sources.

With the governments emerging from the coup 1964, Petrobrás was partly privatized. In the case of reelection Bolsonaro promised to fully privatize it. Privatization means shareholder control, and loss of national control. We do not imagine China, for example, giving away control over as strategic a sector as energy.

With dividends for shareholders gaining priority over productive investment, energy prices were raised from cost plus investment levels to international price levels, roughly doubling the costs for households and businesses. A country with no oil resources must pay international prices, but not Brazil. And international prices do not depend on “markets”, on supply and demand variations, but on political decisions. Volumes of production, extraction costs and demand are relatively stable over the last decades, yet price volatility is impressive.

We have an energy-price explosion in Europe and in Brazil, and this has been attributed to the Russian War in Ukraine, and other fluctuations to other wars. But this is not a market driven inflation, but profit extraction: Britain’s Shell and France’s Total Energies reported profits for the first nine months of 2022 of $59bn (£51bn). US rivals Chevron and ExxonMobil are expected to report year-to-date earnings approaching $70bn, while 2022 profits at Britain’s BP could break the $20bn mark.

Norway and Sweden announced they were restarting the funding of the Amazon protection programs, suspended during the Bolsonaro administration.

The cumulative takings for the seven biggest private sector oil drillers during the first nine months of 2022 could hit $173bn (£150bn), according to analyst forecasts. Exxon profits tripled in 12 months. Some commentators called this price-gouging, driven by an oligopoly, not “free-market”.

The profits are paid by families and businesses. The corporations that stall our economies by windfall profit extraction belong to our common scourge. And the climate change challenges must be built into the system: for the while, we have lobbying and ESG talk, a set of standards measuring a business's impact on society, the environment, and how transparent and accountable it is.

Brutal Spending Cuts

Many are also planning brutal spending cuts. Oxfam has calculated that over the next five years, three-quarters of governments are planning to cut spending, with the cuts totaling $7.8 trillion dollars. An age of crisis, creating huge fortunes for a tiny few. Meanwhile, the scale of wealth being accumulated by those at the top, already at record levels, has accelerated. The global polycrisis has brought huge new wealth to a tiny elite.

Over the last 10 years, the richest 1% of humanity has captured more than half of all new global wealth. Since 2020, according to Oxfam analysis of Credit Suisse Data, this wealth grab by the super-rich has accelerated, and the richest 1% have captured almost two-thirds of all new wealth. This is six times more than the bottom 90% of humanity. Since 2020, for every dollar of new global wealth gained by someone in the bottom 90%, one of the world’s billionaires has gained $1.7m.”

The common challenge we are facing, is that we are destroying our planet for the profit of the few, and this represents a global catastrophe. We do not lack resources to face them. World GDP reached around 100tn dollars in 2022, which is equivalent to 4,200 dollars per month per four-member family. We can use Net National Income or other variations, but the basic fact is that with a very moderate reduction of inequality, we can ensure everyone has access to the material dimensions of a dignified life.

Latin America, the most unequal region in the world, is preparing a major event on this issue for July 2023. But then again, with global asset-management corporations dominating the financial system, virtual money and tax havens, regional solutions are limited: Tax abuse by multinationals and the richest in our societies has developed in the context of globalization and requires global solutions. But it also needs a Latin American perspective that defends the interests and characteristics of the region.

Basic fact is that with a very moderate reduction of inequality, we can ensure everyone has access to the material dimensions of a dignified life.

With the first Latin American and Caribbean tax summit in Colombia, which has the title, “Towards an inclusive, sustainable and equitable global taxation”, the Andes State can now make history to ensure that the countries of Latin America and the Caribbean go further together and define more effective mechanisms in the fight against tax avoidance, both by large corporations and large wealth holders. This can also ensure that the region joins forces to shape the international agenda.

We are looking here at key challenges, access to food and energy, environmental impacts, inequality, and the structural deformation of the financial system, through which our money, instead of funding the necessary measures to ensure sustainable development, generated a global rentier extractive economy.

The dimensions of this challenge can be seen for example in the fact that BlackRock, a private asset-management corporation, manages 10tn dollars, while Biden manages a federal US budget of 6tn. In Brazil, the right-wing government managed to transfer the Central Bank control to private banks, generalizing usury, and reducing 79% of families to unsustainable indebtedness and paralyzing the economy.

Facing global finance with national initiatives simply does not work.

European banks operating in Brazil gladly accepted usury: Santander sent millions of messages to would be clients presenting an “opportunity”: “Excellent news for moment of hard times! Interest rate on your account limit fell to 5.9% per month, until 31/01/2023”. I received this message on my cell phone, and obviously few people understand that a monthly rate of 5.9% is equivalent to practically 100% a year. I am presenting this personal note because few people believe that a modern European bank can resort to this level of usury in other countries.

We are looking here at key challenges, access to food and energy, environmental impacts, inequality, and the structural deformation of the financial system.

Controlling finance, making it useful for the economy again, is a global challenge, as the Base erosion and profit shifting (BEPS) negotiations show, and a key area of international collaboration. BEPS refers to tax planning strategies used by multinational enterprises that exploit gaps and mismatches in tax rules to avoid paying tax. Working together within OECD/G20 over 135 countries and jurisdictions are collaborating on the implementation of 15 measures to tackle tax avoidance, improve the coherence of international tax rules and ensure a more transparent tax environment.

Fields of Cooperation

We can certainly find narrower immediate collaboration fields, as in the regulation of trade in commodities destructive for the environment, or the sales in Brazil of Europe-based toxic chemicals, or patents concerning essential pharmaceutical products, and this should be exploited. But the key issue is that we have a global economy, particularly concerning finance, commodities, communication, information, and privacy invasion platforms, while the political decision process is fragmented in national or regional authorities. This results in a free-for-all global chaos which we call “markets”, but for which we are still trying to build the necessary governance capacity. Collaboration is more necessary than ever.

Facing global finance with national initiatives simply does not work.

But there is another level, involving communities, unions, NGOs, local authorities. In case you haven’t noticed, the world is not run by producers anymore, but by middlemen, or “middle-corporations”, with huge profits and little contribution. A look at family farming in Brazil, France or Germany shows that the dramas lay in middle-servicing. Do we need them? Connectivity through the internet presently would allow a drastic reduction of intermediaries’ oligopolies and the corresponding profits.

In France farmers are suiciding, and they are in the hands of big trade. Do we need Uber and its costs? In Araraquara, a medium-size town in the state of São Paulo, they made their “Uberzinho” (“Ubersomething”), a local collaborative platform created by the municipality. What is the sense sending 20 or more percent of what we pay to a taxi driver in Brazil to the US? As the cost of running collaborative local platforms is ridiculous, the drivers in Araraquara receive 95% of what the customer pays, and it all stays in the country.

Can’t Germany support Brazil with the Sparkassen system, to help us by-pass the big-bank usury? It would be a “Sparkassenzinho“ system. This not beyond the point at all: modern technologies allow for innumerous forms of disintermediation of the economy in general, and these cross-fertilization experiences between Latin America and Europe can scale-up by multiplying effects, not by corporate gigantism. Because solutions are not only at the top. What we are going through is not just “industry 4.0”, it is the digital revolution that opens new opportunities for decentralized collaborative networks. Universities are already taking note.