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Renewed greetings from São Paulo. Once again, this needs to be a very brief postcard, as I am running around the city and then running to the airport. 

For another postcard from Brazil that is well worth reading, try this one from Brian Winter of the Americas Quarterly. He comes to a similar conclusion to mine, but with a wealth of greater knowledge and detail. Again, the opportunity is great, if Brazil manages to implement the reforms the president wants. But the critical question — remains — can an unpopular government in the middle of a corruption scandal really pass such a huge reform agenda only 18 months from an election? 

It is hard to walk more than a block in São Paulo without passing graffiti saying “Fora Temer” (“Temer Out”), which does not augur well. And the “car wash” investigation looking into the depths of political influence-peddling seems to spread ever wider, poisoning confidence in everyone. At least it gives me an excuse to offer up a video:

But is there an opportunity? The greatest hopes are, first, that the government has nothing to lose, and can therefore do everything it can to get some sensible structural reforms passed, and second that the market reaction so far could create a virtuous circle, and make it easier for consumers and companies alike to raise capital. 

And Henrique Meirelles, Brazil’s finance minister, gave a strong argument that this government, for all its weakness, can get things done. It already has made some remarkable breakthroughs:

Governance rules for state-owned companies were approved. There were rules for offshore drilling that were also approved, increasing the contributions for Petrobras. All the basic proposals are being approved because this government was at the end of the day chosen by Congress because Congress took the decision. As a result of that, this government is very strong at the level of the Congress and is being successful in approving the basic reforms and our expectation is that in due time when the economy begins to grow the popular approval will come back. Absolutely this is the time to do it. What has already been approved wasn’t thinkable two years ago.

I hope he’s right. It is very hard not to wish the best for Brazil.


As I am in Brazil, I may as well take a look at the Amazon. Back in the US, Amazon now dominates the rest of the retail sector (which does not include Walmart, part of the staples index), to an extraordinary degree. This chart from Bespoke tells the story clearly enough:

Amazon now accounts for 36 per cent of the entire retailing sector’s market cap. And its market value is now almost exactly double that of Walmart’s $218bn. The market expects Amazon to swallow up most of US retailing, and presumably use far less real estate in the process. It grows ever more important to monitor the pain for the retailers and particularly retail real estate.

Pensions: a universal problem

One more point before I embark on what I am warned could be a very long trip in a car to São Paulo airport: Brazil is in no way alone in having a serious problem with its pensions. This is what has happened to the pension deficits of US S&P 1500 companies. A much greater rise in bond yields would help. As it is, mixed stock markets and a slight rise in discounts during March brought pension deficits down to their lowest in a year. They are still terrifyingly high. Without a significant rise in bond yields (which would not be welcome elsewhere in the economy), meeting pension promises is going to be very painful indeed for the US corporate sector. 

And now, very sadly, I have to leave Brazil …

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