My Opinion...

Marcus' thoughts on business, education, society, culture, and ethics around the world.

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Marcus Goncalves
Nichols College Professor and International Business Program Chair, international management consultant and le...
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Brazil, An Economy of Extremes

Posted on Thursday, 31 January 2013 in BRIC Countries

I recently returned from Brazil, and while observing the hustle and bustle of Rio’s international airport, busier than ever, it dawned on me that Brazil has much to be proud of. I am Brazilian, and therefore, admit to being a tad biased, but the fact remains that a decade of accelerated growth and progressive social policies has brought the country prosperity that is ever more widely shared. The unemployment rate for December was 4.9 percent, a little higher than the lowest on record, 4.7 percent from January of last year. Credit is flourishing, particularly to the swelling numbers who have moved out of poverty status and into the ranks of the middle class. Income inequality, though still high, has fallen sharply.

For most Brazilians life has never been as hopefualtl, and to some extent we see plenty of paradigm shifts. Women’s salaries are growing twice as fast as those of men, even though they only occupy a mere 21.4 percent of executive positions, despite the fact they hold most of the doctoral degrees in the country (51.5 percent) and dominate the area of research (58.6 percent). They also own more companies in the Latin American region (11 percent) than any other emerging country. The new shifts in the Brazilian economy also benefit the black communities, which have seen their salaries increase four times faster than their white counterparts, bringing the population of the middle class blacks from 39.3 percent to 50.9 percent. According to research conducted by the Federal University of Rio de Janeiro, of 20.6 million people who entered the workplace, only 7.7 million where white. Overall, the country is enjoying the boom brought by commodities, in particular oil and gas, despite the global economic slowdown. Are American entrepreneurs taking advantage of this?

If not, they should, but with a caveat. I believe what worked for the Brazilian economy ten even twenty years ago, such as a focus on commodities, low labor costs, excessive focus on exports and so on, won’t work moving forward. Today, Brazil is a new country, with new habits and customs, and believe it or not, a population that possesses an extremely elevated self-esteem. Meaning, the fledgling and rapidly growing Brazilian middle class, 52 percent of the population since 2008, is in love with itself and ready to spend. According to Goldman Sachs, more than two billion people around the world will belong to the middle-class by 2030, but the majority of Brazilians are already there.

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Marcus Goncalves
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Franken-Climate?

Posted on Friday, 02 November 2012 in Climate Change

The media coverage of Superstorm Sandy was 24/7. However, there was little mention of climate change. Why is this? And why didn't Obama or Romney mention climate change at all in the three TV debates despite a summer of record temperatures, historic drought and wildfires in the US? Why are so many people in the US in denial of this dire situation? And is the thermometer going up or down?alt

Nichols College Professor Dr. Pelto explains http://www.youtube.com/watch?v=Fqfwt2r1CQY

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Marcus Goncalves
Nichols College Professor and International Business Program Chair, international management consultant and le...
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Dealing with Corruption in Brazil

Posted on Thursday, 01 November 2012 in FCPA

 

Brazil, with its booming economy, is the largest recipient of foreign direct investment (FDI) in Latin America, even more so due to the World Cup scheduled for 2014 and the Olympic games for 2016. The country, however, continues to suffer from the corruption plague.  Brazil ranks 73 out of 182 on the Corruption Perception Index (CPI).  According to the International Finance Corporation of the World Bank, 70% of companies responding identified corruption as a major hurdle to doing business in Brazil.alt

International companies have reported demands for payment of bribes (extortion) from Brazil government officials.  The U.S. Justice Department and the SEC have an ongoing investigation of Embraer, the third airplane manufacturer in the world, after Boeing and Airbus, for its activities in Brazil.

The good news, Brazil is trying to focus on fighting corruption and staying clear from the U.S. Foreign Corrupt Practices Act (FCPA), as too much business, and reputation is at stake. The Supreme Court in Brazil is prosecuting a few dozens of the country’s best-known politicians and lobbyists for corruption in a vote-buying scheme.  The trial is high profile and is focusing attention on corruption in Brazilian society.  It has been dubbed as the “trial of the century.”

Last year, a massive scandal was uncovered in the Brazilian ministry overseeing Brazil’s new $66 billion infrastructure plan.  Brazilian officials allegedly demanded 5 percent kickbacks on highway construction projects and then pushed carts down the hallways to hand out the cash.  The transport minister and most of his staff resigned or were fired in July of last year, and a new, supposedly more scrupulous group is now in charge.

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Marcus Goncalves
Nichols College Professor and International Business Program Chair, international management consultant and le...
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Spain: Where to go from here?

Posted on Wednesday, 31 October 2012 in Eurozone

Today’s news about Spain is unequivocally bad: unemployment hits new peak, where one in four Spaniard workers is now without a job. With a record unemployment rate of 25% in the third quarter, with the jobless total growing to nearly 5.8 million people, Spain's economic situation is very dismal. Coupled with the fact that 50% of the youth is also unemployed, in my view, this is a full-fledged depression by any standard.

But what troubles me the most is the unstated theme that unemployment and subsequent suffering imposed on the people are simply part of life, as a result of some cyclical economic path. Even more so is the underlying idea that the only viable alternative for this problem is austerity measures. Sure, fear is an essential element, and the government is portrayed as heroes with its social programs to alleviate the pain. But in exchange, people must accept higher taxes, social service cuts, and generalized enforcement of regulations.

Of the 25% unemployed, almost 50,000 were workers formally employed in the public sector, representing a fall of 7% year-over-year. Worse, about 1.7 million Spaniard households have no adult of working age employed, a rise of more than 300,000 over the past year. That means about 10% of all Spaniard families are now without a breadwinner.

Even more striking is the fact that Spain, as the Eurozone’s fourth biggest economy, had fewer than 2 million people out of work at the end of 2007, last than five years ago, when it was riding a boom before the financial crisis hit, and now 25% of its population is unemployed.

The kind of economic collapse that Spain is suffering is unbearable. It will lead either to secession of certain regions such as Catalonia and the Basque country, or state fascism, or both. It is hard to see these results as supporting globalism but these are the results that current, to borrow John Perkins term, corporatocracy strategies must almost inevitably generate.

 

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Marcus Goncalves
Nichols College Professor and International Business Program Chair, international management consultant and le...
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Time to Pay even More Attention to China

Posted on Friday, 26 October 2012 in BRIC Countries

It is not news that investing on emerging markets is a good idea, especially with advanced economies struggling to gain some foothold. But watch for China's twelfth-straight month of manufacturing contraction, according to HSBC's survey of purchasing managers in China’s manufacturing sector.

While the index rose slightly to 49.1 from 47.9 reported in September, it still came in below the vital demarcation of 50.0 that signals expansion in the sector. This is in line with my forecast back in April, in an article to benzinga.com titled "China: the White Elephant Versus the Dragon."

However, China's Unstoppable Relevance, title of another article on mine in early September for the Worcester Business Journal, remains true. New orders are being reported at a six-month high of 49.7, and exports showed an upward trend to a five-month high. This is after the country reported a rise of 9.2% in industrial production for the month of September, up from 8.9% in August.

Beyond some planned infrastructure spending this summer and a hastened approval process for new projects, the government has been fairly quiet on monetary or fiscal stimulus since its last cut to the reserve requirement in May. The move followed several cuts to banks’ required reserves ratio and two interest rate cuts.

While I do acknowledge my bias for the region, those interested on investing in China can make a reasonable bet on strength over the next few months, as production and investment data are showing positive momentum, and the manufacturing surveys are hovering just below 50. If a new government stimulus programs is announced, which likely will, the economy may jump-start and promote an even greater FDI (foreign direct investment) inflows into the country's economy.

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Marcus Goncalves
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China’s Communist Capitalism

Posted on Sunday, 21 October 2012 in BRIC Countries

 

Recently, I returned from China, and during my return flight, I came to the realization that although I teach on the subject of China in my international business program at Nichols College, I had missed the point when it came to that country’s profile. I kept thinking about how Taipei, a democracy in Taiwan, with all of its tall gray buildings seemed more like a communist country than China. In contrast, Hong Kong’s Time Square, the World Trade “Centre,” Causeway Bay, and its SOHO seemed more like Manhattan on steroids. Despite the plethora of books and articles I’ve read on the subject, I came to realize that Chinese communism today isn’t anything like my antiquated vision of it which was shaped by the Soviet Union, and living in the United States (US).
 
The communism I witnessed in Hong Kong and Macau, although we must note these two countries are China’s Special Administration Regions (SARs), are true examples of capitalism at its core. In contrast to the West and most advanced economies today, unemployment rates in Hong Kong and Macau are only four and two percent respectively. Hong Kong hosts the most skyscrapers in the world, with New York City a distant second, with only half the amount. Hong Kong is also the city which holds the most Rolls Royce’s in the world. Macau’s per capita income is $68 thousand dollars, in contrast to $48 thousand in the U.S.
 
What impacted me the most during my twenty-one days there was its people’s optimism, in contrast to the cynicism I hear constantly in the West, whereby people seem to have lost their excitement about the future. There, young and old, people yearn and strive for more than what they have. I agree with Goldman Sachs’ Jim O’Neill, who coined the “BRIC countries” back in 2000, in his assertion that “China is the greatest story of our generation.” China’s general macroeconomics is very promising. It scores well for its stable inflation, external financial position, government debt, investment levels, and openness to foreign trade. At the micro level it falls just below average on corruption and use of technology. But the latter is changing rapidly.
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Marcus Goncalves
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Immigrants: Restless Dreamers, Economic Pillars

Posted on Thursday, 16 August 2012 in Immigration

The American dream is alive and well, at least to immigrants who are magnetized by it.

It is they who challenge the rest of us to foster a culture of inclusion, access, opportunity, and empowerment. Moreover, they are the ones with the starkest sense of how America differs from every other country in the world. Their very belief in that difference virtually guarantees the American dream come true.

As James Jasper noted in his book Restless Nation, immigrants “picked this country because of its promise. They dreamed the dream.” This has always been one of the underlying premises of this dream, which has simultaneously been a catalyst for renewal and transformation of our society over the centuries.

When it comes to the topic of immigration, however, the public debate seems to undermine the positive contributions of immigration to our economy. True, border control and illegal immigration need to be dealt with, not only to protect the American people, but for the immigrants themselves.

Although it is cliche to note, the United States has always been a nation of immigrants. The fact is, according to Herman and Smith in their acclaimed book Immigrant, Inc., no other country in the history of mankind has accepted over 70 million immigrants. About 50 percent of Americans have close immigrant lineage or share immigrant ancestry.

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Marcus Goncalves
Nichols College Professor and International Business Program Chair, international management consultant and le...
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Graduate Students Visit Brazil

Posted on Thursday, 16 August 2012 in International Education

Tuesday, May 22, 2012, 3:03 PM

By Andrew Conklin ‘13

During the past week and a half, Professor Marcus Goncalves expanded the school’s horizons by venturing to Brazil with his graduate International Operation Management class. Students and instructor departed Massachusetts on May 12th and returned on the 22nd after spending 10 days in the city of Victoria on Brazil’s coast.

The students viewed the scenery, businesses, and infrastructure around Victoria, but they also had to attend class as if they went to school in Brazil. The class met every morning in their hotel, the Praia Do Sol.

The class was led by a paid instructor from Brazil’s Salesian College. It provided insights into the many areas of Brazilian international business operations, as well as into change and innovation management.

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