Mean its very famous people the idea of coming to rio and on the beach and all this stuff is very in peoples minds and they would dream of coming here but in fact the Tourism Industry is not really work could be due to a certain lack of infrastructure etc so that could be an area of big growth they could also be all the headlines in the news about the violence throughout rio it is one of the deadliest i believe the deadliest states of brazil and theres like 22 states here and i think it was Something Like 6000 or 6000 murders in 21000. 00 so you know mary baker from chicago can come down here during the winter and the murder rate would be roughly equivalent yes a lot sunnier but also there has been an ongoing Corruption Case member the carwash case that poll then. Lula and other major figures here so when we landed there was this headline this could be really interesting Rio De Janeiros ex governor currently facing about as illian years in jail for corruption has reportedly signed a plea bargain deal just imagine the size. The fishes who must be involved in this whistleblowing for that have been offered hes been sentenced so Something Like 266 years in prison for you know corruption and hes giving back hundreds of millions of ryall that he stole and he looks like hes going to finger some judges that were involved in this mass Corruption Case so this has been a problem of course stifling growth in this economy because of course with Foreign Direct Investment and other sort of investors they do get concerned that you know the payoff and this guy was paid off millions of dollars and cut kickbacks for you know allocating various contracts for example Building Infrastructure in rio right so is there an attempt to really crack down on the corruption and if so it could be like a court of Scotch Whisky moments remember during russias transition to a more free market. Country they got rid of the oligarchs are trying to get rid of the only guards in course coffee was a high profile example that this could be similar there are dozens and dozens and dozens and dozens of people its not just this guy was a politician so theyre cracking down on politicians and the politicians receiving that kickbacks from major multinationals and various powerful corporations that control various sectors of the economy here it is a 2 trillion dollar economy a car according to the world bank 2017 data that gives it a g. D. P. Per capita of 9800. 00 so its a pretty big economy and a huge economy with p. P. P. You know when they adjust for purchasing power its a really massive economy its got a lot of resources its got a lot of potential be a slick so much of south america the colonial past as as created a lot of the legacy problems and also during the seventys and eightys a lot of the the the interference from abroad particularly from the u. S. Has caused a lot of problems so this is the mountain that needs to be climbed yes our guest in the 2nd half Robert Wilson can go over some of the kuoni open. Because there is a specific structure formed in this economy because that dates back hundreds of years from the portuguese empire so it is unusual wiki pedia says that the economy of brazil is a developing free market economy it is the 9th largest in the world by a nominal g. D. P. And the 8th largest by purchasing power parity the country has an estimated 21. 00 trillion dollars worth of Natural Resources which include vast amounts of gold iron and timber of course timber well talk about in the next episode thats the amazon its a resource rich country and but they are saddled with a lot of debt and because they have to play ball with the debt sellers the bond sellers the the i. M. F. And these other multi Global Global institutions that love to straddle people with debt and so this is going to be another impediment to get to a place of sustained growth more than debt their debt is quite manageable here certainly compared to argentina where we are but argentina has much better infrastructure than here brazil does not have much infrastructure Robert Wilson who we talked to in the 2nd half you know hes done a lot of research on this hes been a banker here for a year as in years and years and part of it is the government has an investment nor have private investors and thats because Interest Rates have generally been about 14 and a half percent over the past few decades so they make more Money Lending risk honestly rather than resting in huge Infrastructure Projects but now Interest Rates are 4. 00 and a half percent here. And inflation is 3 percent so you would expect a boom but that hasnt happened they did have a lot of a local Rio De Janeiro investment with the olympics they said they extended for example that the metro system out to the beach much to the disdain of a lot of wealthy People Living in places like ive been ema and level on but heres a story from reuters about the ongoing Economic Situation here because theyve only been growing at one percent for the past few years. This in a situation of the global g. D. P. Booming and markets booming and theyre only grown by one percent here brazil economic stars align turning 2020 into make or break year unprecedented monetary stimulus huge strides in the governments reform agenda to bring public finances under control and open up the economy and a record low Exchange Rate should help fuel the boom sustained growth is long overdue the economy a struggle to grow much above one percent a year in each of the 3 years since the 2152016. 00 crash making it the worst recovery from recession on record that the central bank just cut Interest Rates to 4 and a half percent which is very very low here so it has one of the most negative rates in the world essentially because of inflation running so low and yet Interest Rates as well so for a while capital flight is also a big problem so you have a lot of capital leaving the country because of the threat of taxation increased taxation on property and things like this certainly in argentina that was a huge case with since weve been here we saw argentina imposing huge amounts of 30 percent tax on Foreign Exchange and things like that here we have a new free market. Also has is cutting taxes hes removed the Public Sector from huge parts of the economy and his government has sat back expecting for Foreign Direct Investment expecting private investors to step in where the government has stepped out but not none of that has emerged according to this reuters article about here in brazil so theyre basically just stuck you know theyre stuck they cant define a spark what might the kind of thesis is it is amazing here right and the population is entrepreneurial you see it all over the streets you see it Walking Around but the headlines of all the danger the same thing happens with much the latin america and mexico you know weve been afraid in the past to go to mexico because all these headlines about danger danger danger cartels are going to get killed here you have the same thing right over the resource. Country about resources autonomy a low margin business yes so for a high margin business Like Services entertainment Financial Products you need to have a story an appealing story you need to have dancing and singing and make it sound appealing right he can be kind of like a truck driver in the back alley you know calling out somebody like dont dumpster dollars told you that right is like who i dont want to go there for vacation right youve got to have a. Go to liven it up a little bit he would think that would not be a problem in rio but now the reputation is that theyre kind of you know like a Teamster Convention theres got to be more disney speak in disney of course they make their funds and much of america is iran today economy are on the global stage because not only do they have the u. S. Dollar but they have intellectual property so thinking of the fact that these huge amazon which is amazing resource totally unexplored still to this day so the fact that theyre willing to just chop it down and deforestation is rapidly increasing chop it down and sell it for timber and the fact is you know rain forest soil is very bad is like its not nutrient rich at all so once the rains come it just washes away and its hard to ever read grow the forests like we did in america like america chopped down their entire forest covering the country as well and then we grew it but you cant read grow the amazon so however with intellectual property there are so many plants and all sorts of wildlife that you can possibly package into pharmaceuticals for example the Indigenous People there use these ingredients for their own products in the u. S. Sort of and pharmaceutical giants and france and switzerland come here and they they look for these ingredients but you know why not thats a higher value revenue stream that you can as a country collects for generations yet much higher margins on ip intellectual property and the rain forest possesses potentially a lot of pharmaceutical brakes. So you can then sell as. Such an intellectual property you can scale that into billions and billions of dollars where is what you chop down the rain forest is gone its like i come back and its a one time thing and so you know it doesnt make any sense selling off your gold supply is like Gordon Browns or no move as the equivalent of the dumb member gordon brown who is the chancellor the exchequer the eye kingdom sold off half their goal that a global all time low for gold prices yet the same thing is like actually Commodity Prices there are all time lows as well so why sell off this Precious Resource of the amazon which will never be able to get back again but it is a sort of resource that you could extract. Income for generations to come the current kind of mentality though of the ruling class seems not going down that they need i guess in the leadership circles here in brazil some body to come along and say hey you know you have a greater opportunity here in this rain forest and just chopping the trees down you can actually get involved in a much higher margin business and you can become a Global Leader and develop some Global Brands i mean theres not a lot of aside from the flip flops there are lots of flip flops there and i have like 5 care now that im given the sale of brazilian brand im not ive got to be honest yes theres only a nuts but Ratings Agency s. And p. By the way did recently upgrade brazils sovereign credit to positive from neutral but the important thing to note here about this economy much like say france and Spain Unemployment remains high 11. 6 percent and is only likely to come down gradually more than 12000000 brazilians are out of work the number of underemployed is around double that and the number of private sector informal jobs is now at a record high of 11900000 so many of these new jobs are again just like in america i would say very low paid gig economy sort of work so thats a difficult even despite the low Interest Rates. Its if negative real rates people arent spending because they have coral jobs right i mean thats not china at all that cheap labor and they were that workshop of the world and they went up the value chain to great brands brazil as the commodities they need to go up value chain brands like everything a break i mean. Im one who will ever argue that there are worth the worth of victims its also important to also distinguish the fact that whenever we have a crime. Genocide and other cases of genocide. Thats that were talking about issues confronting it acknowledging it and injustice and reparations for it are important it is important to confront the crimes wherever they happen but it shouldnt be. You know. In this particular case of. Taxes are not going to do it you have to go right to the root of things its. The Balance SheetBalance Sheets is what they should talk about and thats where we can be clear because taxation is the dumb one of trying to get the will fact from the wealthy. And. Imprisoned by the. Tension and. Year olds 16 birthday parties. So i think the police tell a lot of pressure. Close the case. I mean. Its like somebody. You know testified it wasnt a shorter one with issues because i was standing right next to. Me is the son you guys. Wanted you know you. Just couldnt believe that i was under. The tree and i pulled through the. Truth. Welcome back to the kaiser report imax guys are time now to turn to robert well said hes a former banker turned private Equity Investor who has lived in Rio De Janeiro for 20 years robert welcome i think you really great to meet you we want to dig into some of these issues you lived in rio for on 2 separate occasions over the past 2030 or 40 years the last time now here for 23 years describe the evolution youve seen in the city said you 1st came here during the military dictatorship. A huge evolution. When i 1st got here in the late seventys just to give you an idea there are as you probably noticed on most of the buildings there are guard rails and barriers to entry to the buildings didnt exist in the during the military dictatorship so rio is going through a massive change in the past 40 years i mean obviously the lead up to the end of the dictatorship in 8485 was kind of a precursor to the changes that we all experienced but part of those changes were. I guess youd have to put part of it on brazil owens doorstep was a former governor but the drug trade and a bunch of other things transformed the city dramatically the Financial Sector which was largely focused here and until the 1980 s. Moved migrated to some pollo pretty much on mass real still has a good presence in private equity Asset Management looking at the economy you know 30000 feet down whats working well for brazil and where is it not working well the sector thats working i would say the best is agriculture thats the sector that you could say is a home grown 1st world sector. At least in terms of the technology and production in terms of infrastructure in terms of getting product to market its not what youd call the best logistically brazils tools still has about i guess well over 80 or 85 percent of its transport of goods by road not by rail not by air not by water so the infrastructure is a bottleneck in brazil but the acceptor is a serious sector. And i think that you know obviously automobiles d is a major sector because its technologically advanced. The aviation said a lot of Car Companies may factor here versus out absolute there is no brazilian brand car there is no brazilian very good they have a brazilian brand of car i dont think that would make sense you know i mean the competitively just that make any sense of the technology that the with the factories here have is actually state of the art so for brazil to carry over and try to transport that into a you know a brazilian automotive sector thats a tourist industry its underdeveloped correct dramatically undeveloped because everyone knows Rio De Janeiro they know brazil but a same time it would be attracting more tourists its not tracking more tourist i think the reason i mentioned like a person car company it seems like theres a lack of fabulousness in paris. If you well thats a great way to put it yeah you know theres a lack of sizzle and time in a brand i mean to have a car a dollar a year a carry thats thats been around for a while but is there hipster same there is a hipster scene. Lamentably to his book hipster scene here which is obviously culturally driven you know the arts cinema its. Thats considered today left wing. And frowned upon so you know that it cuts in a lot of Different Directions i mean theres no question tourism could be huge in brazil it sure is not here is the global leftwing resurgence they make politically maybe not getting great traction but these millennialism jhansi are definitely identifying more i dont left side of the spectrum and theyve got a lot of discretionary dollars theyre having to write i think youre right about that and if brazil put its mind you know to really opening up the country to tourism and creating the infrastructure for tourism and infrastructure is really the bottleneck for everything but if they get if they could do that this country would be absolutely fabulous for infrastructure and its a cultural legacy kind of overhanging the ability to break out of a legacy mentality if you will is there a legacy a mentality that stops some dynamic rother dynamism i think there is i think that the colonial history of the country is more a mindset. That manifests itself in the lack of things in the country i mean theres a you know the tendency here is to always think about the idea of doing this but the practical measures to make it happen are you know lost in the bureaucracy lets talk about some nuts and bolts of the economy here so Interest Rates are brazil been cut down to 4 happier sat down from an average of over 14 percent over the past few decades and place of just 3 percent wheres the investment bo