Sugar probably is not Brazil President Dilma Rousseff’s favorite fare. Two sugar induced headaches have come her way and one of them promises to bring about a political shake-up.
This week the impact of a record drought upon income and employment has mobilized the governors and sugarcane industry representatives from the states of Alagoas, Goias, Mato Grosso do Sol, Parana, Minas Gerais and Sao Paulo to pressure the Federal Government into lowering the industry’s tax rate. This petition comes at a moment when fiscal receipts are on the low side due to economic slowdown and failure to reduce tax evasion. The federal government is cornered between a rock and a hard place.
Failure to act will deepen the ongoing crisis in sugarcane production and that of ethanol production.
Brazil is the world’s largest producer of sugarcane with an average annual production of 38 million tons, 67% of which is exported. Brazil is also one of the world’s largest sugar cane based ethanol producers. But this year the sugar cane production outlets have discharged 300,000 workers while 70 ethanol plants have filed for bankruptcy.
But giving in to the sugar cane producers plight could spell an enlarged deficit for the federal budget. And deficits spell inflation and inflation fuels discontent.
As she faces an increasingly complex second mandate with support for the government party crumbling and middle class citizens enraged by the Petrobras scandal, the sugar industry protest could spell havoc for the government in terms of support and economic reinvigoration.
And while sugar daddies continue to lobby, federal prosecutors have found that many sweet deals inside Petrobras point in the government party’s direction. Accordingly, the PT treasurer Joao Vaccari Neto was invited to testify in connection with alleged money transfers originating in kickbacks amply paid by Brazilian companies that were awarded Petrobras contracts.
Investigators say Paulo Roberto Costa, a former refining and supply director in cahoots with Alberto Youssef, an infamous Brazilian career criminal and money launderer, built a a complex web of corruption within Petrobras that after traveling through many financial networks ended in many private coffers -- including that of PT. Investigators allege that companies paid inflated prices for Petrobras contracts and that money was funneled to the Workers' Party and its allies.
To make matters worse, Petrobras Chief Executive Maria das Graça Foster was invited to resign as the company reported losses of about $33 billion in 2014. The scandal is bound to affect President’s Rousseff’s ability to lead as she, too, served as Chairman of Petrobras’ board from 2003 through 2010.
Revelations about these sweet deals have already produced some casualties. The Camargo Correa leadership has been issued arrest warrants and gossip has it that there are 10 more major Brazilian economic flagships in the subpeona pipeline. Definitely sugar is not welcomed in the Planalto Palace.
And President Nicolas Maduro of Venezuela took once again the world and the media by surprise by asking UNASUR's President, former President of Colombia Ernesto Samper, to act as facilitator in a dialogue with the US with a view to “stop the ongoing aggression against Venezuela." Had he bouija-in his predecessor, he would probably have told him that while a protected witness is singing in Washington, it is better to lower the profile. And while Samper flew to Caracas almost immediately, President Obama was unimpressed. He continued to set his eyes on other horizons concentrating on the National Security Report. President Obama unveiled a national security strategy on Friday, February 6th, that called for "strategic patience" and warned against American "overreach." In short, his statements on National Security essentially indicated that the US can wait for its policies to render fruits as it is on the right geopolitical track. As the US policies unfold, President Obama will only focus in advancing his agenda that includes putting his home in order to fully benefit from the incipient economic take off. He also depicted ISIS as an organization inspired by a “bankrupt ideology."
Meanwhile, President Maduro is desperately trying to convince his people that the “wicked witch of the North” is responsible for Venezuela’s economic quagmire, but Obama’s very public remarks must have left no doubt about where in the world are US concerns. Should President Maduro desire to escape irrelevance, he needs to stop talking to everyone else in the world and start talking to his people who certainly have a lot to tell him about their worries.
Also by Beatrice Rangel in her Latin America from 35,000 Feet series
Beatrice Rangel is President & CEO of the AMLA Consulting Group, which provides growth and partnership opportunities in US and Hispanic markets. AMLA identifies the best potential partner for businesses which are eager to exploit the growing buying power of the US Hispanic market and for US Corporations seeking to find investment partners in Latin America. Previously, she was Chief of Staff for Venezuela President Carlos Andres Perez as well as Chief Strategist for the Cisneros Group of Companies.
For her work throughout Latin America, Rangel has been honored with the Order of Merit of May from Argentina, the Condor of the Andes Order from Bolivia, the Bernardo O'Higgins Order by Chile, the Order of Boyaca from Colombia, and the National Order of Jose Matías Delgado from El Salvador.
You can follow her on twitter @BEPA2009 or contact her directly at BRangel@amlaconsulting.com.