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 hopeful, 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.

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.

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.

Tuesday, May 22, 2012, 3:03 PM