After the Deluge | Dilma and the Demonstration Effect

Source: CartaCapital

Headline: The Post-Demonstration Polls

CC has partnered with Coimbra’s Vox Populi to provide a third alternative to the usual pollmongers — the evil IBOPE and the no less fishy Datafolha. Marcos has a good track record in outguessing his colleagues. Here, he provides a sophisticated take on the political ramifications of the Brazilian Summer of Fighting in the Streets.

All things considered, Dilma remains the favorite. She haslost ground, but her likely adversaries did not gain any.

By  Marcos Coimbra

The erosion of support for Dilma Rousseff was intensified and accelerated by the June protestts.

In the recent levy of polls, one question stands out: What do they say about the presidential succession? The rest is secondary. Or better, it is only relevant insofar as it effects the fundamental isssue.

If we were not having an election a little over a year from now and the current president was not a candidate, questions about how the government and its policies are evaluated would be less relevant.

Everyone agrees that Dilma Rousseff was taken down a notch starting in early June.  In those polls, she received the unprompted support of 25%. In recent polls, this has fallen to 15%.

In the so-called “prompted vote” she scored between 50% and 58%, depending on her adversary. In the most recent polls, she receives 35% in the simulation of the first round and reaches, at best, 42% of votes in the second round.

We must remember that the predisposition to vote for the president fell between March and June. In the unprompted vote, she fell from 35% to 25%. The prompted vote fell from 60% to 50% in the simulation. That is to say, her chances of victory have declined, even though they remain fairly good.

In the most current polls, the decline was much more marked. The erosion of support intensified and was accelerated by the June protests.

It seems as though Dilma suffered a considerable loss in the intentions to vote because citizens  took to the streets, and not because of any dissatisfaction with Dilma or her government.

In other words, the protests were a cause, not an effect of the scale and the nature of discontent that current polls indicate (and are  reflected in her “nose dive” — a term the  mainstream media are fond of.)

Demonstration Effect

On one hand, the emergence of this dissatisfaction, which received extremely extensive (and favorable) coverage in the mainstream media has had what in sociology is known as  a “demonstration effect”.

It occurs when a a subject who reports an “acceptable” level off dissatisfaction starts to perceive this level of discontent as reason for indignation, even though he does not yet know exactly what he is indignant about

Wikipedia:

Some heterodox economists such as James Duesenberry and Robert H. Frank, following the original insights of Thorstein Veblen (1899), have argued that awareness of the consumption habits of others tends to inspire emulation in of these practices. Duesenberry (1949) gave the name “demonstration effect” (p. 27) to this phenomenon, arguing that it promoted unhappiness with current levels of consumption, which impacted savings rates and consequently opportunities for macroeconomic growth.

Similarly, Ragnar Nurkse (1953) argued that the exposure of a society to new goods or ways of living creates unhappiness with what had previously been acceptable consumption practices; he dubbed it the “international demonstration effect.”.

The logic of the effect resembles that of “moral panic!” — aconservative moralism amplified by digital echo chambers that seek to draw mass media and digital technology consumers into causes of various kinds,, often under the umbrella of youth movements.

Digital technology was made for and fooms large in  the role of manufacturing of the demonstration effect of diffuse, objectless indignation– and Steve Jobs is His messenger.

The primordial reason that the  demonstrations fulfilled this role was the impact and elevated sense of insecurity  they caused in common Brazilians. What provoked this effect were the images of brutal violence in a major Brazilian city.

No government can resist the daily repetition of death, blood, gunshots, rioting, looting, and arson fires. For three weeks, exactly during the period of the June and July surveys, Brazilian society saw all of this: on TV, on the Internet, on the radio, in the newspapers and magazines.

In other words, what actually undermined the evaluation of the government  (with its consequent impact on the intention to vote for Dilma) was not the “good side” of the demonstrations, which the media praised to the skies as they sang the national anthem wrapped in the flag, but their “bad side” — the street thugs and looters. Like a pair of conjoined twins, each depends upon the other.

Also–Rans

moreover, if it is true that Dilma has declined in the ratings, it is also true that none of her adversaries gained any ground. OnlyMarina Silva displayed positive results.

Comparing the performance of Aécio Neves and  Eduardo Campos in the June and July surveys, we see that in the unprompted vote, neither has made progress: The Toucan has 4% and the  man from Pernambuco gas 1%. In the prompted survey, Aécio had 14% and there remained. Eduardo had 3% and rose to  4%.

Marina (who enjoys the favoritism of the rich) and the option to not vote picked up support. The aggregate of voters who say they will submit blank ballots or nullify their ballot on the voting machine, or  who say they will vote in no one or that they do not know, is stable at 5%.

Considering only the degree of indecision, the July results were equal to June’s, at 20% …

All things considered, Dilma remains the favorite, even considering the fact that these surveys did not catch her at her worst moment. She remains the front-runner, and is favored by such factors as time, the inertia of reelection and, as recent qualitative surveys show, continues to enjoy the support if those who feel it is still too early to judge her.

The only candidacy that progressed was that of someone the majority of the electorate views with sympathy, but who lacks the ability to occupy the presidency. Many admire Marina, but few are comfortable with entrusting her with the job.

As to the attempt to fabricate an opposition candidate at the last minute, the chances are slim, though they cannot be discarded. In 1989,for example, one month from the election, the right wing invented the candidacy of Silvio Santos.

Does it have another such candidate in its back pocket?

São Paulo | Mass Transit Probed

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CPI of Mass Transit Takes First Deposition

Source: Agencia Brasil

By: Marli Moreira

São Paulo — In its third meeting, the Parliamentary Commission of Inquiry into Mass Transit (CPI) of the São Paulo city legislature took the  first deposition in its attempt to clarify the composition of public transport pricing in São Paulo.

During the session, which began in the early afternoon, the director of finance of SPTrans, Adauto Farias, explained to councilmembers that the value paid by the city government as subsidies has grown thanks to social benefits.

Sabesp | The Ad as Political Launching Pad

Source: Rede Brasil Atual

Despite recent street protests demanding improvements in public services, subsidies for public transport, an end to high tolls and fines, and strong measures against corruption, governor Geraldo Alckmin (PSDB-SP) seems to enjoy living dangerously, to the point that he feels he can defy popular dissatisfaction.

Sabesp, owned by the state government, recently completed a public auction for  a R$ 87 million publicity campaign -– market rumors say that the ad spending of the company will run to  R$ 120 million this year.

The problem is that the company has a captive clientele and maintains a monopoly over the area of its concession. That is to say, it does not need to promote itself as if it were a soft drink.

Advertising Sabesp is useless in the selling of its product: water and treated sewage. For that reason, there is no item on the state budget more worthy of protest than this. It would be much more useful and necessary to use this sum to reduce the monthly water bill or invest more in its own water supply and sewage treatment.

As I recall — and I do not recall very clearly, sorry — Sabesp is interested in a strategy of expansion — selling its proprietary tech to other operators around Brazil, and even abroad — that might explain this approach to advertising. On the other hand, if you have driven on the Tietê or Pinheiros beltways recently, the persistent stench still makes you wonder whatever happened to that Big Dig clean-up you used to read about ….

At any rate,,Sabesp sometimes behaves as though it wants to become something like the Odebrecht of sewage.

The current campaign is reminiscent of what PSDB governor José Serra did. In 2009, a pre-election year like the present one, Serra launched a massive TV ad campaign with such contempt for the taxpayer that it did not even limit the ad to state-owned broadcasters.

Serra went much further than this: he expanded the advertising project to every state in the Union. The television audience of Amapá, which gets its water from Caesa (The Water and Sewer Company of Amapá) and which lives scandalously far from the concession area of Sabesp was regaled with advertising for the company.

A plan for market consolidation may have something to do with this approach, as I believe I read somewhere a while back. Sabesp lists shares on the Bovespa [BVMF:SBSP3]. It may be planning a launch of ADRs or a restructuring prior to  expansion or internationalization. You can imagine more scenarios than I can, I am sure.

The company positions itself in its ads as an innovator and, if I remember correctly, has demonstrated interest in M&A. It merged with Caed in 2012, for example.

In 2009, the case awakened the interest of the regional electoral tribunal of Rio  (TRE-RJ) as a potential case of campaign propaganda outside the established time period for the Serra 2010 campaign.  Because Serra was not yet officially a candidate at the time, the  TRE-RJ could not charge him with an electoral misdemeanor. An investigation by the São  Paulo prosecutor into administrative misconduct might have been in order.

The logic behind  rules applied by the election tribunals is difficult to understand, I find.

Now Alckmin is about to repeat the tactic. This time, he is unlikely to spend money for ads run on the national networks, since what looms on his own  horizon is his reelection as governor.

Sabesp’s ad account is divided among three agencies;  curiously, one of them is Duda Propaganda, the agency headed by Duda Mendonça, a highly esteemed publicist, to be sure, and especially good at election campaigns.

Mendonça was involved in the election of Lula in 2002 and as a suspect in the “monthly payola” scandal that beleaguered the PT.

As if this were not enough, a columnist from the old media, Lauro Jardim [of Veja], announced the winners of the bidding before the results were known, making it seem as though the bidding process was not entirely kosher.

So, then: Will the youth that took to the streets of  São Paulo to protest corruption now express their anger against the Governor and Sabesp?

You could make a similar case for AES Eletropaulo, which recently blew up my computer with a nasty power surge.

The U.S. used to have laws that barred governments from engaging in propaganda for themselves in messages addressed to citizens.

This is apparently changing. Following the use of retired military as spokespersons selling the Second Gulf War to a nationwide audience, the rules were loosened even more:

•  National Defense Authorization Act for Fiscal Year 2013

The National Defense Authorization Act for Fiscal Year 2013 (NDAA) allows for materials produced by the State Department and the Broadcasting Board of Governors (BBG) to be released within U.S. borders and strikes down a long-time ban on the dissemination of such material in the country.

Ad Council

The Ad Council, an American non-profit organization that distributes public service announcements on behalf of various private and federal government agency sponsors, has been labeled as “little more than a domestic propaganda arm of the federal government” given the Ad Council’s historically close collaboration with the President of the United States and the federal government.

Latifúndio | Counting the Beans

Senator Kátia Abréu: “Miss Deforestation”

Source:  Brasil de Fato

At least six of the major foreign and domestic groups in the agribusiness, mining and firearms industries invested  R$ 1.395 million in the 2010 election campaigns of nine of the 17 federal deputies who signed  PLP 227.

The bill weakens protections of indigenous rights to ownership of their traditional territories.

Data from the federal elections tribunal (TSE):  See the complete list of campaign donors to the 17 authors of PLP 227.

Dozens of other companies and multinationals involved in grain, pesticides, meatpacking, mining and construction are well represented among the principal donors of the lawmakers who signed PLP 227. As the Parliamentary Agriculture Front denounces the supposedly corrupt interests of native peoples and environmentalists, without ever naming names, the TSE donation figures indicate who should really be questioned about conflicts of interest.

“Creditors Partner With Mr. X”

Dilma, Eike and the petroleum concession process. “Sold at the price of a banana.” Cartoon by Latuff.

Fearing bankruptcy, creditors become partners of Eike

Source: R7 Economia

Assets of the businessman reduced to US$ 200 million, according to Bloomberg

By: Willian Volcov

The situation of businessman Eike Batista gets more and more complicated. Bloombergrecently reported that the man considered to the 8th richest in the world just last year has seen his personal fortune fall to US$ 200 million.

In addition, he is said to have accumulated US$ 2 billion in personal debt and currently owes R$ 1.5 billion to the Arab investment fundMubadala, of Abu Dhabi.

Because the books do not balance, with many fewer assets than debts, experts interviewed by R7 say the owner of the EBX group is trying to restructure his finances and transform his creditors into partners.

According to finance professor Gilberto Braga of Ibmec-RJ — the Brazilian Capital Markets Institute — part of the debt to the Arab fund is being transformed into assets. That is, it is being converted into shares in some of the Group X companies.

— Instead of a creditor, the bank becomes a business partner to Eike.

This strategy might be used by the financial institution to forestall a potential bankruptcy.
— This conversion of debt is so that you can ensure enough profits and dividends to repay the loans. If you have not obtained a guarantee of receipt, it is better to enter into a partnership.

The process is being intermediated by Banco BTG Pactual, which, through its press office, said it had no comment on the matter. BTG Pactual has been acting as a financial consultant to the EBX Group since March.

Although the companies of the Batista group are trying to adjust their fnances, the concern of major and minor creditors remains. A minority shareholder of the oil and gas division OGX, Márcio de Melo Lobo, has asked a court to freeze Eike’s assets.

An attorney forBatista, Sérgio Bermudes, called the petition “frivolous” and “uttterly without foundation”. Bermudes said that the objective of the suit was to seek a settlement beneficial to the shareholder, who reportedly holds R$ 40 million in OGX shares.

On July 15, foreign creditors of Eike Batista met in New York to discuss with Braziilian and foreign lawyers what is happening to the companies.

Despite the gloomy perspective and the loss of US$ 34.3 billion of Eike’s personal fortune, Elad Revi of Spinelli brokerage house does not see a bankruptcy on the horizon. In March of last year, Eike had a personal forture worth US$ 34.5 billion.

— This is a little hasty; there are other options. He could raise capital based on his personal wealth combined with foreign and international capital.

In this way, according to Ravi, he can achieve a certain balance and buy time for  payment of  debts.

Failure

EBX found itself in a difficult position when the company announced its operational failure  in four oil fields. From that point on, its shares  fell and credibility was lost. Batista has publicly said that he regrets having entered the market by means of an IPO.

Batista said it would have been better to created a private equity fund with corporate partners, which would permit to start from zero and develop each company over the period of a decade until it was ripe for an IPO.