«Is There a Housing Bubble in Brazil?»

• IPEA points to risk of bubble in Brazilian  housing market

Source: Folhapress, via Brasilianas.Org. I translate …

Is there a housing bubble in Brazil? Five indicators for and against

Pro

1. Housing prices have risen far beyond inflation and the purchasing power of families
2. The volume of available housing credit jumped from 1.5% of GDP in 2007 to 5.5% in 2012
3. Interest rates have fallen substantially and homes are financed at favorable interest rates
4. Purchase prices have risen faster than rents
5. Government programs, incentives and public works have overheated the market

Con

1. The rise of a new middle class and a rosy outlook for the future make the rise in prices sustainable
2. The volume of housing credit is trivial alongside the 65% of GDP in the United States
3. Brazilian interest rates remain relatively high, inhibiting the expansion of the real estate sector
4. Rents may rise, compensating real estate prices
5. The housing deficit in Brazil remains high: 5 million units

The analysis is by the IPEA, the federal government’s Institute of Applied Economic Research. The IPEA

point to the real possibility of a bubble in the Brazilina real estate market which could explode in the event of future interest hikes.

In other words, the rapid rise in housing prices in recent years is resulting in unrealistic valuations, incompatible with real supply and demand and therefore unsustainable.

The study, by economists Mário Jorge Mendonça and Adolfo Sachsida, brings new arguments to bear on the controversy involving researchers, sellers and buyer.

The economists calculate that prices have risen by 165% in Rio de Janeiro and 132% in São Paulo between January 2008 and February 2012, compared with a 25% inflation rate in the same period.

A rise in prices well beyond the rise in inflation was also observeed in Recife, Belo Horiznote, Brasilian and Fortaleza, though the period studied was smaller because historical data was unavailable.

Price bubbles are generally inflated by rapid growth in the supply of credit.

This type of growth is visible in the Brazilian housing sector — impelled, the study makes it a point to say, by federal government programs, incentives and public works.

“The government’s insistence on heating up what is already an overheated real estate market only contributes to a worse overall result,” the study concludes.

Among the examples cited, along with the availability of favorable interest rates, were the Minha Casa, Minha Vida — My House, My Life — housing program and public works relating to the World Cup 2014 and the 2016 Olympics.

An advisory council of the federal presidency, IPEA does not endorse these conclusions. In its bulletin, the institute argues that the volume of available credit is a long, long way from the 65% of GDP observed in the United States.

We can only speak for our own modest microcosm, here on the modest little street in the Vila Madalena-Sumarezinho where we live: There is a temptation to sell into peak prices which have increased literally six-fold (in theory) in the past decade.

Abril Fools | «Veja Vexed for Collor Collar»

From the nostalgic 90s: President Collor as media-made … and media-unmade … man

Via Comunique-se.

Select outlets of the Brazilian press celebrate a World Bank database on corruption cases that names two notorious figures — ex-São Paulo mayor and governor Paulo Maluf — Maluf! — and the media and telecoms venture capitalist Daniel Dantas.

Meanwhile, the congressional commission examining the scandal of Mr. Waterfall drones on as efforts continue to quash the wiretaps on which the case is founded. This essential legal detail gets very little coverage, however.

The senior federal judge in charge of analyzing the motion has already voted in favor of throwing out the evidence on the grounds of insufficent cause for the warrant. Two other judges on the panel — roughly equivalent to a federal appeals court — have yet to weigh in.

And a former Supreme Court justice, Gilmar Mendes — scrutinized over travels on a private jet allegedly paid for by the Waterfall organization — has already demonstrated, in spades and ex parte, a similar distaste for a supposed «police state» based on court-ordered wiretaps.

In fact, Mendes famously claimed that he had been the victim of some infinitely sneaky wireless war driver in his chambers, who allegedly captured a conversation with Senator Demosthenes Torres of the DEM — a central figure in the current scandal .

At the time, Veja amplified the allegation, but when the federal police found absolutely no evidence of such activity it issued no mea culpa.

An excerpt from today’s news flow, and I translate … 

Anxieties of Influence | Some Key Brazilian Bloggers

As a wannabe beat reporter trying to get oriented in a strange land, my raison du blog is to identify influential media strategists and strategies and reverse engineer their techniques and implementations.

In some cases, the structure of hyperlinks in a galaxy of related content provides evidence of a Collaborative Networked Organization (CNO) in action, just as much of the 21st century management literature predicts.

But which cases?

In the past, I have done quite a bit of this with political campaigns, owing both to personal curiosity and to the fact that political campaigns tend to use state of the art techniques for achieving well-defined goals — get at least one more vote than the competition at all costs.

This makes such campaigns ideal for reverse engineering and hypothesis testing. O brave new world, that hath such Twitter robots in it!

I have also had some pretty good success using the technique of focused crawling to identify key players in various economic sectors, such as banking & finance, agriculture, utilities, IT, infrastructure and culture & entertainment — stuff my work is about.

Forget the free-living joyful image of Pelé and Carvanal –Brasil is the world capital of soul-crushing alphabet-soup bureaucracy. Web crawling helps generate lists of bureaucratic agents and agencies and assess their relative importance. 

Virada Cultural Paulista | The Second Life Effect

Why we avoided the Sambodian Virada Cultural Paulista | 2012, or, traduttores traditores.

Neuza and I have not been consuming our fair share of Sambodian culture lately, owing both to ennui and to the odd work schedule of a traduttore traditore.

We are also somewhat puzzled over the latest pet project supported by federal and state Brazilian Reais — a Portuguese-language translation of Priscilla, Queen of the Desert. Our cable channels are blitzing subscribers while we scratch our heads over why you would present this example of transnational metrosexuality when there are perfectly good home grown works to musicalize — Eu Tu e Ele, maybe?

Anyhow, thus it was that we decided to skip this weekend’s Virada Cultural Paulista in the traditional city center, currently undergoing — controversial — economic and social reconstructive surgery.

A likely opposition candidate for the mayoral race later this year, for example, has announced he would review and possibly withdraw from the troubled Nova Luz urban design project aimed at recovering what has grown into Cracolândia — Crack CIty, Sambôdia, in recent years.

The current mayor is an engineer and real estate broker with strong ties to the local industry — he hired his brothers, with similar backgrounds, to key posts at the subway and bus authorities as soon as he assumed office.

Second Life Syndrome

The project suffers from Second Life syndrome — having produced nothing but a virtual reality experience so far, after several fresh starts producing nothing but the standard jokes about the New New Nova Luz 2.0.

The city planners have produced a portfolio of fantastic VR scenery without a single human figure to set the scale — a trait in common with the architectural and landscape studies of A. Hitler. The site is highly uninformative.

We have seen this tactic used before.

Several years ago, in our beloved Brooklyn, we took part in the Tour de Brooklyn, a cyclothon running from Prospect Park to the projects of Coney Island and back.

A heavy police presence ensured our safety, but it was embarrassing to see projects dwellers — fellow Brooklynites — cracked down on for our presumed safety. Start the tour at Coney Island and run it up to Atlantic Yards for a Brooklyn Nets game, Mayor Bloomberg!

More generally, the Virada — modeled on the White Nights of Madrid — is something of dress rehearsal for major international events later in the decade — the Cup, the Olympiad — and so does its best to evangelize the event.

No news is good news, as the saying goes.

[Further down, I will try to present an X-ray of the online mobilization behind this effort.]

Or barring that, get someone like Larry Rohter of the New York Times to write a puff piece on São Paulo state and its SESC sociocultural programs — programs we use with pleasure without abandoning our critical faculties.

The larger context for understanding sociocultural programming are recent political developments that create an environment of extreme mistrust around issues of governance.

First of all, a major contractor on public works for the Olympics and Cup — and for major federal economic growth (PAC) projects as well — finds itself at the heart of another wild and unpredictable political scandal along the lines of the “big monthly allowance” of 2005, which also began as a contracting scandal in the postal service.

Secondly, as to the big monthly — a case still without a verdict seven years later —  you do well to remember that a stream of under-the-table election finance was laundered at one point through one of the most notable international events in Brazil, Rock in Rio.

Or more specifically, through the ad agency in charge of publicity for this and other public-private partnerships.

As Fall Waterfalls, So Falls …

It is too early to tell exactly what will pan out of an investigation into the Charley Waterfall case –aptly named for the massive leaking of new angles to newspapers and TV, who introduce new characters to the 9 o’clock soap opera every day now.

It is interesting to see quite a few regional and sub-megalopolitan papers focusing on the regional angle — a fragmentation of coverage to contrast with the Ctl-C Ctl-V sameness of coverage in past cases of this kind.

Speaking of Rio,at any rate, and as the FSP reports,

Delta’s new CEO, Carlos Alberto Verdini, accuses former Rio mayor Cesar Maia (DEM) of refusing to pay what is owed on the Engenhão football stadium, inaugurated in 2007 for the Pan-American Games.

The project raised concerns by coming in at BRL 350 million out of an initial budget of BRL 60 million.

One remembers all too well the photos of Mayor “The Naked” Maia — a self-styled Lusophone acolyte at the Church of Dick Morris — in a grip and grin  with bicheiro — numbers racketeer — Captain Guimarães at the Sambadrome some years back.

The Captain is an accused former military torturer from the days of the dictatorship. This career trajectory is not without precedent – the infamous General Kruel, for example, who used the coup as a pretext for taking over the underground lottery and using it to finance black ops pre- and post-coup.

Tourism and the Post-Modern PPP

I find it interesting to study the organizational structuring and restructuring of the tourist industry at the national and regional level. It makes for an intriguing contrast between models of governance at the state and federal levels, even if Larry Rohter forgets to mention it.

São Paulo and Rio tend to govern themselves more in line with neoliberal models than does the federal government, and lately have found themselves on the lower end of a 60-40 split — prevailing with 60% at home and losing with 40% on the road, in newly important states such as Bahia — which is still at work consolidating its victory over Carlismo.

Lest we forget, the political machine of Antônio Carlos Magalhães, a dictatorship-era caudilho, was treating to a syrupy obit by Rother in which the reporter downloads the emotional tenor of Oriana Fallaci on Onassis.

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Campus Party

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The Fearless Independence of the Editora Abril and Other Tall Tales of Its Kind

Blog da Cidadania‘s Edu Guimarães is a leading figure in the self-styled «progessive blogsphere» here in Brazil.  He writes,

Some days ago, a friend of mine employed by the Editora Abril phoned me to describe his worries over the scandal involving the newsweekly Veja — that is to say, involving the possibility that group publisher Roberto Civita will be subpoenaed to appear before the parliamentary inquiry into the Charlie Waterfall case.

Wiretaps of the numbers racketeer captured the racketeers boasting of their success in planting scandalous cover stories with the magazine to undermine their political enemies and competition.

This friend’s concern was that condemnation of the company will produce blowback affecting the thousands of Abril employees. My response was that my friend should not worry himself, given the likelihood that Civita will succeed in hushing up the case, but also given that the damage will be confined to Veja and not affect the division where my friend works.

We also have friends at Abril and can testify that the vast majority of its knowledge workers are talented and conscientious.

My friend, still worried, said he takes no comfort from this scenario because what is keeping Abril in business nowadays is Veja and its contracts with the state government of S. Paulo, which burns massive amounts of cash from its education budget to buy tens of thousands of copies of Veja and textbooks published by Abril, along with others purchased from the Folha, Estado and Globo groups.

Somewhere here I have informal financials of the Abril group from 2007, at which time it was in the market for private equity partnership. Other than that, however, the company profile is that of a hereditary media robber baronage.

I remembered this conversation when I read the accusations that Veja columnist and blogger Reinaldo Azevedo and other mainstream media figures publish every day against members of a blogosphere opposed to the synergies pursued by the major media and the PSDB, DEM and PPS political parties.

TV PSDB? | The Padre Anchieta PPP

They might be better off I think.
The way it seems to me
Making up their own shows,
Which might be better than TV …
–Talking Heads

Recent developments at São Paulo’s PBS quasi-equivalent, TV Cultura, continues to draw flack from the Ford Foundation-funded Observatório da Imprensa and other local observers.

As Wikipedia notes, and I translate

The adminstrative council of the Padre Anchieta Foundation comprises 47 members. The appointment of life-time and elected members are, in large part, influenced by the São Paulo state government.  The state’s role in the foundation’s decision-making process — said to violate its founding principles – has led to criticism by media analysts.

This is true: elected and appointed city and state officials share the dais with tenured professors at state-run universities, which do themselves no favors by playing along. I cannot bear to watch it, although I used to enjoy Roda Viva.

The naked truth is that the ruling PSDB has followed in the footsteps of its ideological twin in Mexico, the PAN: founded as a moralizing antidote to the machine politics of the PMDB and PFL — the PRI, in PAN’s case — it has slipped the very leash it sought to place on public immorality.

Heading this partial llist, Goldman and Matarazzo are one of the PSDB’s federal senators and the power behind the throne of São Paulo’s municipal government, respectively. Is he one of those Matarazzos? Yes, he is: a scion of the coffee barons, a sort of tropical Lorenzo de Medici.

Added to the mix most recently is commercially produced programming by the Folha de S. Paulo and the Editora Abril, both of them credibly — they are incredibly guilty, really — denounced as part of the political machine.

I find that a preliminary «link ecology» of TV Cultura’s Web presence neatly confirms this diagnosis. I have pruned the network of most redundant «social code» — Twitter, Facebook and other echo chambers …

Currency Wars | Welcome to the Desert of the Real

• O Brasil acorda para a guerra cambial | Brasilianas.Org.

The daily column of Luis Nassif, the notable Brazilian business and economics «spreadsheet head».

Last Friday, March 9, 2012, will be regarded by posterity as the day Brazil officially awakened to the currency wars, which for so long have eaten away at the fabric of Brazilian industry.

The federal treasury is taking stronger measures against the entry of speculative dollars, while last week, the Banco Central accelerated the lowering of interest rates, cutting the basic rate by 0.75%. And most importantly, President Rousseff has cut out the middlemen, stating an official position of her own regarding the impending tsunami.

Personally, I pray for a return to the golden years of USD=BRL 2.50. I could afford to stay in three- or four-star hotels and wander the country at will. Now, the cost of living is getting close to parity with the cost of living in New York. The Enigmatic Mermaid has taken to referring to the local bakery O Novo Ladrão — the New Lion — as O Novo Ladrão, for jacking up its prices, as the local gas station also did during a fuel delivery strike last week.

Vulture Culture | An Impromptu Link Sociology

Item: SEC Launches Inquiry Aimed at Private Equity.

Federal regulators have launched a wide-ranging inquiry into the private-equity industry that examines how firms value their investments, among other matters.

The Securities and Exchange Commission’s enforcement division sent letters to private-equity firms of various sizes in early December as part of an “informal inquiry,” according to the letter and people familiar with the matter.

In response, as PR Watch reports, private equity firms from all over the world have mounted a PR campaign using viral strategies to polish the tarnished public image of the sector as a flock of “vulture investors.”

My bookshelf contains the second edition of The Vulture Investors: The Winners and Losers of the Great American Bankruptcy Feeding Frenzy — published in 2000. There is also a really badly written financial thriller with a similar title.

At any rate, this mobilization of a PR rapid response team  presents a unique opportunity to track the development of a viral campaign from brainstorm to viral firestorm, in case of success.

Endowment Fever | Crimson Tide on the Rio Pinheiros

The Folha de S. Paulo reports: The University of São Paulo plans to imitate Harvard, establishing a private endowment to be filled up by alumni and, one suspects, principally, corporate sponsors, and then magically quintupled by ronin financial rocket scientists from Connecticut.

What is odd in this puff piece, however, is that while Harvard has been a purely private university since its founding as a Puritan sermonizer’s academy in sixteen something something, USP has always been a public university, free of cost to qualified students and subsidized directly by state funds. If I am not mistaken, this state of affairs is black-letter Constitution.

Given that state of affairs of utter category confusion, then, it seems hard to maintain the “just like Harvard” analogy. Nevertheless, the Folha works it.

Harvard, considered the best university in the world, has a budget of nearly R$ 6 billion. But only 20% of that sum comes from the American government.

Considered by whom? And wasn’t that endowment up to USD 36 billion just a few years ago?

Furthermore, that that much taxpayer money goes to subsidize a private institution with such plentiful means of its own actually seems sort of shocking — especially given the amount of defense-related contracts this sum represents, and the free-booting anarcocapitalism that has supplanted Veritas as the school’s official ideological compass.

The rest of the money is the sum of a set of annuities, donations and income from so-called “endowments”, which are investment funds belonging to the institution.

This is the model imported by the Escola Politécnica at USP, which now has its own investment fund — a first among public Brazilian universities.

Again: Harvard private. USP public. Harvard Business sells the naming rights to chairs of its business school faculty the same way baseball stadiums sell their naming rights to cell phone operators nowadays. Tell us again how self-sufficient its research is and appears to be?

Just like at Harvard, the fund will be managed by a third-party firm, Endowments do Brasil, which will invest what is received from private donors and alumni.

“The principal is untouchable. The dividends will be plowed back into research funding”, explains José Roberto Cardoso, director of Poli-USP.

In this way, the school gains some autonomy from research incubators run by the State — 85% of the R$ 2,89 billion given to USP is consumed by university payroll.

And now it will be able to produce research without having to pay anyone a salary to produce it?

In the case of Poli the idea came from the students themselves. It was the «Grêmio da Poli» that created the “endowment” and made the first donation: R$ 100,000. What the institution hopes for now is money from outside [the school, the state, Brazil].

The peculiarly Brazilian twist given to the concept of “managing innovation” continues to fascinate me, though I do not have as much time to follow up on it.

All I can say as an alumnus of a private liberal arts college run on the Oxford model and a gigantic state university run into the ground on the principals of social entrepreneurship is that the autonomous university system in Latin American countries is a model not to be cast aside lightly.

The pitch from Endowments do Brasil — surely there is a Portuguese word that can be pressed into service for “endownment”, such as the plain old FIP? — seems pretty greasy to me.

Harvard, Yale, Cambridge, Ford Foundation and the Bill and Melinda Gates Foundations consolidated their financial independence using endowments organized by each of them, and each of these entities withdraw each month a great deal of the financial resources they need to operate.

Correct me if I am wrong, but Ford and Gates consolidated their financial independence with predatory business practices — oiled with the blood of the workers, if you will — and then endowed Ivy League universities to stamp out junior managers preprogrammed with that same predatory frame of mind.

I personally am not ready to consider any university top-notch that still maintains a legacy admission policy — like Yale and Harvard, both of which admitted George W. Bush because of who his father was.

Copersucar Ready to IPO

Copersucar’s booze-fueled Formula 1 model.

I told them so, but they only wanted to pay me $0.05 a word for the wisdom so I blew them off.

One of the largest ethanol and sugar exporters in the world, Brazil’s Copersucar has filed with the Brazilian SEC-equiivalent to go public and sell shares on the Bovespa stock market of São Paulo.

The company’s prospectus indicates it will offer both new shares (a “primary offering”") as well as shares currently in the hands of company shareholders  (the “secondary issue”) but does not specify the amounts it intends to raise with this action.

There is still not information on the timetable for the IPO, known in Brazil as an OPA.

In the preliminary prospectus, the company reports exporting 4.6 million tonnes from the 2010/2011 harvest, “or 10% of all the product in the world”, as well as  640 million liters of ethanol.

Goldman Sachs, Itaú-BBA, Bank of America and Credit Suisse will coordinate the offer, which is to be open to domestic and foreign investors alike.

Copersucar markets the output of 48 production units. In the first quarter, it presented net profits of  R$ 355.5 million, compared with a loss of  R$ 2.5 million in the same quarter of the previous year.

Gross revenue was R$ 8.3 billion, up from R$ 3.8 year on year. EBITDA was R$ 407 million, up from R$ 40 million on the same accounting basis.

via Jornal Documento | www.odocumento.com.br.

Behind the scenes there is a restruxturing going on so that partner cooperatives will not see their equity shares diluted by the IPO. I remember reading.