Learning to pay more for gasoline

The new gasoline prices are displayed at a gas pump recently in the UAE. (Photo courtesy of The National)

The new gasoline prices are displayed at a gas pump recently in the UAE. (Photo courtesy of The National)

This column appeared in Arab News on Aug. 02, 2015:

By Rasheed Abou-Alsamh

The move by the United Arab Emirates to raise the price of gasoline at the pump by 24 percent from Aug. 1 was a brave one and is a sign of the times. Once again the UAE is being a trailblazer among the Gulf countries, realizing that despite our vast reserves of oil and our low production costs, compared to the US and other countries, our oil will not last forever and we can get much more for it by exporting it rather than selling it at heavily subsidized prices at home.
The initial reaction of Gulf citizens at this news most probably is one of shock and outrage. After all, most of us have grown up with dirt cheap gasoline as our birthright, costing only a few halalas a liter. Having to pay 1.72 dirhams per liter, let alone the new price of 2.14 dirhams per liter, is outrageous to your average Gulf citizen.
But with the drop in the world price of oil from over $100 a barrel over a year ago to the current average of $52 a barrel of today, our rulers have begun to realize that despite our large foreign currency reserves that we accumulated during the years of high oil prices, which are now helping cushion our budget shortcomings, we must stop wasting so much energy domestically both in our cars and in our homes.
Most citizens think that cheap gasoline and electricity have no cost to the government or to society, but they are wrong.
Today, Saudi Arabia has to use one-third of its oil production just to meet electricity demand at home, oil which could have been exported and sold to earn much more income for our government.
And our electricity consumption just keeps on growing. The main reason of course is because of our high temperatures, especially in the summer, where everything has to be air-conditioned 24-hours a day, just to make life bearable. But then our cheap, subsidized power rates encourage people to waste electricity by leaving lights on in their homes all day long, even when they are not at home, and to leave lights on in rooms, when they are at home, in rooms that they are not using.
Some families even leave their air-conditioners running constantly when they go on vacation, even though no one is left at home during that period.
Our cheap gasoline price in the Kingdom, currently 57 halalas a liter (16 US cents) leaves us with the third cheapest gasoline in the world. Only Libya and Venezuela have cheaper gasoline than ours. But is that really something to be proud of? I don’t think so as it just encourages waste. Have you seen how many of our young men drive aimlessly around the streets of our cities on the weekends and during holidays?
If gasoline were SR1.50 a liter, I doubt we would see so many of them roaming the streets as before, which would be a big relief to the young women who get harassed by them.Saving our natural resources and using them wisely should be seen as a patriotic duty and the right thing to do for our nation’s future. Our beloved Prophet Muhammad (peace be upon him) encouraged us not to be wasteful and to help the less fortunate. Let us follow his advice and stop wasting our oil and electricity so that we can help ourselves and our future generations.


Do we really want to share so much information?


This column appeared in Arab News on Dec. 29, 2013:

By Rasheed Abou-Alsamh

The revelations this year by former CIA employee Edward Snowden that the US National Security Agency has been spying on the phone calls and e-mails of Americans, foreigners and their leaders were astounding and disturbing.

The official justification from American officials for such unprecedented large-scale snooping was not reassuring: That this was necessary to disrupt terrorist plots against the United States. Further justification that most of this data was processed in bulk format through automated computer programs looking for key words such as “Al-Qaeda” or “jihad” was not very comforting. Nor was the reassurance that the NSA over-collected so much information that it was humanly impossible to sift through all of it individually. That was supposed to make us feel better about having our privacy violated? I hardly think so.
Yet in all of the hullabaloo over whether Snowden is a patriot or a traitor for stealing thousands of top secret documents from the US government, a crucial debate has been avoided entirely: What about the rivers of personal data that private businesses collect on us every day of our lives in shops and online?

Internet expert Evgeny Morozov recently asked this question in an article he wrote for the Financial Times. “What eludes Snowden — along with most of his detractors and supporters — is that we might be living through a transformation in how capitalism works, with personal data emerging as an alternative payment regime. The benefits to consumers are already obvious; the potential costs to citizens are not,” wrote Morozov.

A few months ago I was startled to find out that my local pharmacy here in Brasilia had been keeping track of every single purchase I made there by insisting that I enroll in their discount program. Years ago I had given them my CPF number, which is a taxpayer’s number that every adult resident in Brazil must have. Without a CPF you cannot buy a SIM card for your mobile phone, or make any purchase of appliances, automobiles or plane tickets. Without giving them my CPF number I would not have gotten the significant discounts on prescription medicines that I had been getting so far. I found out when I bought two boxes of a prescription medicine for my neck. The pharmacy had only one box, but said they would order another one for me, and that I could come back the next day to get the other one. It was when the clerk turned her computer screen around to confirm my details with me that I was horrified to see a long list of medicines and the dates of when I had bought them. Did I really want them to be able to call up this list and see that I had bought antibiotics last January for a sinus infection? Or that I had bought baby formula for my maid’s baby in March? Not really.

But if we stop and think about it, companies constantly indulge in such bargaining for our information. The most used method is that of the age-old discount. Who doesn’t like saving money on a purchase? In exchange we are usually asked to give up personal information such as our birthdate, gender, home address, e-mail address, and phone number. My pharmacy is collecting purchasing information on all of its clients and in exchange gives us a discount on medicines. But how is this information stored and protected? Who has access to it? From the look of it, any employee of my pharmacy, which is part of a local chain, could punch in my CPF number and then print out a long list of all of my purchases since 2009!

This illustrates a very interesting shift in capitalism in which more than just money is needed to get full benefits out of the trading system. Businesses are not just asking us to give up personal information to get discounts, but they sometimes try to influence our behavior. Recently a Brazilian friend asked me if I wouldn’t like to attend a free concert near the National Museum here in Brasilia. I said sure, not knowing that in order to get the supposedly “free” ticket I had to register online, giving them my CPF number and home address, and then I had to take one broken electronic item that I happened to have laying around at home to specially designated collection centers in order to get my ticket. In other words, they were trying to get the concertgoers to be “green” and recycle their electronic trash instead of just throwing it out. They may have had a noble intention but for me it was too complicated, and I wasn’t desperate enough for a free ticket to jump through so many hoops!

I don’t think my pharmacy, or any business for that matter, should be allowed to demand that customers hand over their personal information in order to get a discount. That is anti-democratic and unfair. A legal loophole should exist for those of us, who like me, refuse to allow businesses collect our buying information in order for us to be able to get discounts. We want our discounts but without giving up our privacy.

— The writer is a Saudi journalist based in Brazil.


240,000 Brazilians protest across country for reforms

São Paulo, Rio de Janeiro and 5 Brazilian cities have already announced bus fare cuts

Brazilian protesters on the roof of the National Congress building in Brasilia on June 17, 2013.

Brazilian protesters on the roof of the National Congress building in Brasilia on June 17, 2013.

By Rasheed Abou-Alsamh

Updated on Wednesday, June 19, 2013 at 21:10:

BRASILIA, Brazil – In a movement devoid of any overt political demands, and run mostly by young Brazilians fed up with being ignored for so long, Brazilians across the country spilled out into the streets on Monday night (June 17) to protest rising bus fares, huge federal government expenditures on football stadiums for the 2014 World Cup, and a lack of investment in healthcare and education.

An estimated 240,000 people took to the streets in Brasilia, São Paulo, Rio de Janeiro, Belo Horizonte, Salvador, Maceió, Vitoria, Porto Alegre, Fortaleza, Curitiba and Belém. The biggest turnouts were in Rio de Janeiro, where an estimated 100,000 people took to the streets, and in São Paulo where an estimated 60,000 people protested. These were the biggest street protests since ones in 1992 which called for the impeachment of the then president Fernando Collor de Mello.

Already these protests are showing results, with five Brazilian cities on Tuesday, June 18, announcing that they were reducing their bus fares by 10 centavos, or 5 US cents. With an eye on the 2014 elections, the governor of Pernambuco, Eduardo Campos, who is planning to run for the presidency next year, denied that he had decided to reduce bus fares in Recife to appease the protesters.

Brazil is currently hosting the Confederations Cup football tournament, with games being held at many of the gleaming new stadiums that were built with public money to the tune of hundreds of millions of dollars. On Sunday, Brazilian President Dilma Rousseff was booed by the spectators at the National Stadium in Brasilia when she was opening the tournament. That stadium cost a whooping US$600 million to build, delivered over budget and behind schedule just in time to host the opening game of the tournament.

The day before the tournament kicked off, homeless people protesting the high cost of hosting the World Cup next year, burned a line of tires on the main road next to the stadium, blocking traffic for several hours. On Monday, Globo TV revealed that one of the leaders of that protest was an assistant in the presidential office of strategic affairs in Brasilia.

The protest in Rio turned ugly on Monday night when a small group of protesters broke off from the larger group and marched to the local Legislative Assembly building and began throwing stones and Molotov cocktails at the police that were guarding the building. At one point in the night, around 70 policemen and 45 legislative workers were pinned inside the building for several hours, with 20 of them injured and not being medically treated as the emergency workers could not get inside the building. The head of the assembly estimated that the building suffered around R$2 million (US$1 million) in damage. Vandals also turned their rage against shops and banks in the downtown area of Rio, ransacking them and setting two cars on fire. The trapped policemen were finally rescued later in the night after Special Forces arrived to get them out safely.

In Brasilia, the federal capital, around 10,000 protesters marched to the National Congress building at around 6 pm, and around 3,000 of them ran up the ramp of the building at around 7:45 pm, occupying the rooftop of the iconic building with its cup and saucer coverings over the Senate and the House of Representatives, designed by Oscar Niemeyer. Around 600 policemen guarded the Congress, showing amazing restraint, only using pepper spray a few times when some the protesters jumped into the reflecting pools in front of the building, and again when some of them tried to get inside the building itself.

This was in sharp contrast with the violent police reaction in São Paulo to protests there last week. Last Thursday, the police used copious amounts of tear gas and rubber bullets to push back protesters from the main Avenida Paulista. They also targeted journalists covering the protest, shooting rubber bullets directly at several of them, and hitting two of them in the eyes. Sergio Lima, a photographer for Futura Press, was the worst affected, with doctors saying he had less than a 5% chance of regaining vision in his eye that was hit. Giuliana Vallone, a reporter for the Folha de São Paulo, was also hit in her eye, but doctors said she would regain vision in the affected eye. In all 105 protesters were injured in protests over several days, with 12 policemen wounded.

Many blamed the governor of São Paulo, Geraldo Alckmin, for the escalation of police violence after he publicly called for a tougher crackdown on the protesters after their first protest caused huge rush hour traffic jams when they blocked main streets in the central area of the city. After the many injuries suffered during the second protest, police in São Paulo were ordered to stop using rubber bullets, and instead resort to pepper spray.

Born from the Passe Livre (Free Pass) movement, which calls for free public transportation in all Brazilian cities, the protests on Monday were remarkable for lacking any political inclination. Indeed, several protesters who showed up wearing t-shirts of various political parties in protests in Rio and Brasilia were forcibly ejected from the marches. In a survey of protesters in Sao Paulo by Datafolha, 84% of those polled said they had no favorite political party.

Social media sites, especially Facebook, have been instrumental in mobilizing the protesters, who are mostly students in their 20s. A rise in São Paulo bus fares from R$3 (US$1.50) to R$3.20 (US$1.60) is what sparked the first demonstration. The mayor of São Paulo Paulo Haddad and Alckmin were dismissive of the demand to dial back the bus fare to R$3, openly scoffing at the idea of having free buses, the ultimate goal of the Passe Livre movement.

President Rousseff said on Tuesday that she supported peaceful demonstrations as a legitimate and democratic right of the people. But government officials have openly shown their frustration at not knowing whom to talk with in the Passe Livre movement in order to try and stop the marches which are disrupting the country and embarrassing Brazil’s government on the world stage. This has been the advantage of the protesters as the police do not have any clear leaders that they can arrest to try and disrupt the marches.

“This revolt did not happen because of a 20 centavo rise in bus fares,” wrote the Brazilian activist Raphael Tsvakko Garcia on his blog The Angry Brazilian. “It happened because of the rise in fares across the whole country. While the Workers Party is preaching that everything is honky dory here, the people on the streets have shown that this is not true. We are not happy with the World Cup, or with the state of our education and healthcare.”

These protests have gone completely against the narrative of the Brazilian government over the last couple of years that Brazil is whizzing towards its rightful place as a developed nation in the near future. Weaker economic growth this year, and a slight rise in inflation have brought to the surface the anxiety that many Brazilians feel that all is not well in the enchanted kingdom of the Workers Party television ads. The minimum salary is R$678 (US$312) a month, but that is barely enough for one person to survive on, let alone a family of four.

Protesters are fed up with public transportation that is expensive and of bad quality. According to a Folha de São Paulo survey which looked at how many minutes a person has to work to pay a bus fare, the average Brazilian worker has to work 13.89 minutes to pay his bus fare, while a worker in Argentina only has to work 1.44 minutes, and a New Yorker needs to work 6.33 minutes to pay his fare.

On Wednesday, June 19, São Paulo state governor  Alckmin and São Paulo city mayor Haddad announced at a joint press conference that all bus, metro and train fares were being reduced to R$3 from R$3.20, a key demand of the Passe Livre movement. One of the leaders of the movement, Caio Martins, immediately announced after the fare reduction announcement that the protest planned for Thursday, June 20, on the Avenida Paulista was going ahead as planned. “It’s going to be a big party to celebrate our victory, but will also be an act of solidarity for those who live in cities that still haven’t reduced their tariffs,” he told O Globo. “The fare reduction is an important decision because it shows that fares are political choices. If they can raise fares to R$3.20 and then reduce them again to R$3, why can’t they reduce fares to R$2 or even to zero?” he added.

Analysts predict that street protests may continue until the World Cup in June of next year and through to the Brazilian presidential elections due to be held in October 2013.



More bad news from Brazilian press as stagnating sales force cuts

Both the Folha de Sao Paulo and Valor Economico dailies have slashed editorial staff. (photo by Rasheed Abou-Alsamh)

Both the Folha de Sao Paulo and Valor Economico dailies
have slashed editorial staff. (photo by Rasheed Abou-Alsamh)

By Rasheed Abou-Alsamh

BRASILIA, June 11, 2013 – The cuts in editorial staffs of Brazilian publications this year continues unabated, with the huge Abril group getting ready to close or sell up to 11 of its magazine titles, including the Brazilian edition of Playboy magazine, which it started printing in 1975 during the military dictatorship. According to sources at Abril, the choice was down to closing down its popular newsweekly magazine Veja or Playboy. Veja won that round. And it’s probably not surprising, because in this age of free porn on the internet, sales of Playboy have slumped in Brazil. Sales of the magazine in the last few months slid 38.52% from 221,700 copies a month to 136,300 copies. Plus its habit of paying famous Brazilian women up to R$1 million each (US$464,371) to pose for its covers, surely did not make business sense over the last few years.

Abril is also shutting down its MTV Brasil channel by December. All of this comes on the heels of the death of Abril’s editorial director Roberto Civita on May 26, 2013, following a long illness. He launched both Veja and Playboy.

Despite making R$2.8 billion (US$1.3 billion) in profits last year through the publication of its 52 titles, the Abril group has R$100 million (US$46.43 million at $1=R$2.15) in debt that it wants to pay off, and it must think that shutting down these publications will help their bottom line. Plus, as most other publications in Brazil are doing, it is pushing its expansion further into digital publishing.

The Equilibrio section has been reduced to just two pages in the Cotidiano section of the Folha de Sao Paulo. (photo by Rasheed Abou-Alsamh)

The Equilibrio section has been reduced to just two pages in the Cotidiano section of the Folha de Sao Paulo. (photo by Rasheed Abou-Alsamh)

Brazilian newspapers have also not been slackers in firing editorial staff this year, with the Folha de São Paulo continuously shrinking its printed newspaper by cutting sections, and cutting staff, since last year. Its latest victim was its Equilíbrio section, which was a separate tabloid pull-out. From this week it’s been absorbed into the daily Cotidiano section, and got a miserly two broad sheet pages. (See photo above).  The separate FolhaTeen tabloid section was discontinued earlier this year, being absorbed into one of its daily sections. Already this year it has axed 24 journalists.

The Brazilian investigative site A Publica published a long article (in Portuguese) on June 10, 2013, detailing the many cuts in editorial staff at various publications across the country that were taking place. From its interviews it seems that older journalists, who had been at newspapers for 10 years or more, were targeted for the cutbacks, probably because of their higher salaries and benefits that was costing the publications more.

The Estado de São Paulo has also been shrinking its physical paper by closing down sections. This year alone it has fired 31 editorial staff.

One of the biggest shocks came from the business daily Valor Econômico, that announced on May 23, 2013, that it was slashing 50 positions, 30 of these editorial ones, and the rest administrative ones. Owned jointly by the Folha de São Paulo and O Globo newspapers, Valor launched in January its own real-time business news service called Valor Pro, using its own terminals, at an estimated cost of R$100 million (US$46.43 million). This was used to justify the firings, despite the company admitting that it saw ad revenue grow 20% in 2012. Again, Valor alleged that it could not afford to keep paying the high salaries of the fired journalists.

O Globo has let go of some of its staff, but nothing on the scale of the publications based in São Paulo. A source told me though, that in May all spending had been frozen at current levels at O Globo until the situation improves.

Other smaller Brazilian newspapers and magazines have also cut staff this year, with the Diario Catarinense cutting 20 jobs in March; A Crítica of Manaus cutting 15 journalists in April, and A Tribuna in Santos, SP.

The leftist magazine Caros Amigos caused a stir in March when it fired its entire editorial staff who had been on strike after their publisher had slashed their salaries by 50% because of a slump in circulation and sales. The publication’s director general told the Folha that newsstand revenue had fallen 32% in the last three years, and ad revenue had fallen 12-15% in the same period. Although the magazine only has 9,500 subscribers, its publisher maintains a monthly print run of 30,000 copies in order to keep the magazine’s visibility on newsstands. “Although we are a leftist publication, we are also a publishing company that survives on its income and that has accumulated many debts,” said Wagner Nabuco, the magazine’s director general, to the Folha.  “Many people on the left think this is the discourse of a liberal businessman. But the reality is that we are a company that exists here in this capitalist world, and not in some other place.”

Despite celebratory stories in early 2012, such as this one, which celebrated a rise in the circulation of Brazilian newspapers —2.3% in the first semester of 2012 — the situation in 2013 is much more sober and worrying. According to the Instituto Verificado de Circulação (IVC), the growth in newspaper and magazine circulation in all of 2012 was a meager 1.8%, with all of that growth coming from the digital publications of these newspapers and magazines, which grew a stunning 128% from 2011 to 2012. The digital side of publications already account for 3.2% of all circulation.

The Folha, Globo, Valor and Estado newspapers have seen that the future is digital and have invested heavily in redesigning their websites and advertising their digital subscription packages.

One glimmer of light was the hiring of 20 local journalists in Brasilia by Abril recently to launch a weekly city guide that is being sold with its Veja weekly.

One hopes that the cuts in editorial staff will diminish and that experienced hands be offered creative solutions – such as accepting moderate cuts in salaries for those earning highly – so that a fountain of experience and wisdom doesn’t get thrown out in the process of cutting costs.


The Dangers Of Relying On Hydroelectric Power: Brazil’s Lesson

Itaipu dam, on the border between Brazil and Paraguay, is one of Brazil's largest hydroelectric dams.

Itaipu dam, on the border between Brazil and Paraguay, is one of Brazil’s largest hydroelectric dams.

My article in the the International Business Times:


BRASILIA, Brazil — In early January, Brazilian President Dilma Rousseff cut short her end-of-the-year beach vacation and rushed back to Brasilia to lead an emergency meeting.

The reason wasn’t a natural disaster or a terrorist attack. But it was still a national emergency.

She headed back to give directions to a government body charged with ensuring adequate supplies of electricity for the world’s sixth-largest economy, which needs all the power it can get.

Summer rains, which usually start in December, had been late and light, and the amount of water in reservoirs at the nation’s major hydroelectric dams had reached critically low levels.

Newspapers had already been screaming in headlines that Brazil would have to ration electricity as it had threatened to do in 2001, the last time water at dams had reached such critical levels. Back then, the government told consumers that they would be fined and could have their power cut off if they consumed too much electricity. Panicked Brazilians rushed to buy compact fluorescent light bulbs to replace their inefficient incandescent bulbs.

Brazil gets up to 80 percent of its electricity from hydroelectric dams, which produce no emissions. That makes it one of the greenest countries in the world in terms of environmentally friendly energy generation, but it also leaves it vulnerable to the vagaries of nature. Since 2001, the country has built new thermoelectric power plants, which are supposed to be turned on to take up any slack in the system when hydropower fails. But those plants use expensive fossil fuels and emit huge amounts of greenhouse gases, defeating one of the main reasons to build dams in the first place.

Immediately upon Rousseff’s return, the Brazilian government went into damage control, deploying Edson Lobão, the veteran energy minister, to downplay alarmist headlines and assure the nation that there was absolutely no risk of rationing or blackouts. Indeed, thermoelectric plants had been turned on since October, and Petrobras (NYSE:PBR), the state-controlled oil company, reported that it was spending US $10 million a day to import liquefied natural gas to fuel many of the power plants.

The Folha de São Paulo newspaper reported that Petrobras was actually losing money because it had to sell the LNG to power generators at a cost lower than what it was paying on the international market due to contracts it had signed that locked in the price of the gas it sold locally.

Since then, water levels at dams have risen and the immediate threat of power shortages has passed, though many experts warn that Brazil’s energy woes are far from over. In 2012, four blackouts plunged vast regions of the country into darkness at one time or another. That, experts say, indicates how bad a job the federal and state governments have done planning for emergencies and failing to invest in the regular maintenance of critical infrastructure.

A Surprise From The President

To top it all off, Rousseff has promised to slash electricity prices, something that would be hard to do in any situation, let alone when that electricity is becoming more scarce.

Yet, in her Independence Day speech to the nation in September, the president vowed to cut electricity prices by 16 percent this year. In part she was responding to an unprecedented ad campaign by Paulo Skaf, the president of the powerful São Paulo Federation of Industries, calling for cheaper electricity.

Brazil has some of the most expensive electricity prices in the world, mainly due to heavy taxes imposed by the federal and local governments. Private dam owners also play a part, claiming that they have to recoup the massive investments needed to build hydropower systems.

Yet Rousseff surprised everyone by addressing the nation again in January and saying that the cut in electricity prices for residential consumers would be even bigger than previously announced, at 18 percent. For industrial users, cuts could reach up to a whopping 32 percent. She called her critics “pessimists.”

“It is surprising that since last month some people, who got ahead of themselves, or through disinformation, or for some other reason, made unfounded predictions when the water levels at reservoirs went down and the thermoelectric plants were switched on. These predictions failed,” Rousseff said.

Her leftist administration is no friend of the power producers, private companies that operate through public concessions given by the federal government. Brasilia has pointed out that many of the dams they operate are already 20 to 30 years old, and the cost of building them has been recouped long ago. Most of the concessions are up for renewal between 2015 and 2017, and the federal government has been trying to strong-arm the power producers into accepting lower rates for their electricity.

To make them swallow the pill, the government has thrown in some fiscal incentives, such as forgiving some debts, but that failed to sway regional power producers in the states of São Paulo, Minas Gerais, Paraná and Santa Catarina, controlled by opposition state governments, which have refused the offer.

So how would Rousseff pull off a reduction in prices? By subsidizing them, according to several analysts. The Brazilian Treasury would take the hit, to the tune of R$8.46 billion a year (US$4.23 billion), according to an estimate by the industry regulator, the National Electric Power Agency.

“Dilma has undertaken such a public commitment to cut power rates that even if she can’t find a way to do so, ultimately the government is going to have to subsidize this,” said Roberto Piscitelli, an economics professor at the University of Brasilia. He also pointed out that the money would be recouped from Brazilian consumers in other ways, such as an increase in gasoline prices, which are controlled by the federal government.

Petrobras has already asked for a 7 percent increase in the price of gasoline at the pump this year becaise it has to import oil at higher prices, which is something the government is trying to avoid for fear it will stoke inflation.

Complicating the scenario is Brazil’s extremely disappointing gross domestic product growth of only 1 percent in 2012, which hurt public finances and made it one of the worst-performing economies in Latin America last year.

‘A Big Fiasco In Economic Terms’

Then there’s the cost of running the thermoelectric power plants, which has reached R$1.6 billion (US$800 million) since October, according to Greenpeace Brazil. That also generated 16 million tons of carbon dioxide, O Globo newspaper reported, citing environmental consultancy WayCarbon’s estimate. According to a Brazilian environment ministry official, the carbon emissions from power plants in 2013 would for the first time exceed emissions caused by the deforestation of Brazil’s huge Amazon rainforests.

In a surprising shift of policy, the business daily Valor Econômico reported last week that the Brazilian government was going to keep thermoelectric power plants running virtually year-round, shutting them down only for periodic maintenance. This is in sharp contrast to the past practice of only switching them on a few months each year, usually during the dry season when dam reservoir levels dip.

The reason why is reportedly because the government wants to ensure an adequate electricity supply, despite the increased cost and environmental impact. (Greenpeace says the cost of electricity produced by Brazil’s thermoelectric plants is almost double the cost per megawatt/hour of solar energy, and five times that of wind power.)

Valor Econômico said the government wants to decrease the amount of electricity generated by dams to 50 percent of total national production, with 30 percent coming from renewable energy sources such as wind and biomass, and the remaining 20 percent coming from thermoelectric plants.

This shift in policy has displeased some experts in the energy field. “The government has lost control by not being able to organize the supply of electricity,” said Ildo Sauer, a professor at the Institute of Electricity and Energy at the University of São Paulo, and a former government energy official. “The use of thermoelectric plants is proof of the failure of this planning. It’s a big fiasco in economic terms.”

Sauer, who is a member of the ruling Workers’ Party, believes that if Rousseff insists on pushing through the cut in electricity rates, the Brazilian government will in effect be subsidizing power rates for all Brazilians, rich and poor. “What she’s doing is a crime against the Brazilian people,” he said.

He also believes that the threat of rationing is not over. “We won’t know until the end of April, or early May, if enough rain fell to fill the dam reservoirs, and whether it will be enough to last until the end of the year,” he said. “The threat of rationing is very low, but it is not negligible.”

Prices going down in Brazil? You must be kidding!

Dilma baixar

Brazilian President Dilma Rousseff addressing the nation on television last September to announce cuts in power rates.

THERE has been on ongoing campaign by the federal Brazilian government to cut electricity rates in the country, some of the highest in the world. One has to wonder why electricity is so expensive in a country that produces the majority of it from dams, without the high costs of buying fuel to burn to generate power. Water in the many rivers of Brazil is after all free. The problem is that the regional power generators, who build the huge dams that produce the power, claim that building the dams is very capital intensive and thus have asked and been paid very high rates for their power to help defray their initial investments. But that was 30 years ago, and they still want to be paid those absurd rates for the power they generate. The federal government thinks otherwise.

And so too does Paulo Skaff, the president of the Sāo Paulo Federation of Industries, who has led a long campaign for lower power rates both in Congress and directly to the public through a website called ‘Energia a Preço Justo’ (Power at a Just Price) and appearing in primetime TV ads warning that certain power producers are plotting to stop a cut in power rates. Brazilian President Dilma Rousseff finally signed a provisionary measure in September ordering power rates to be cut in March 2013 by 19% to 38% for industry and 16% for residential consumers. She said the federal government would stop charging two types of taxes on electricity in order to pass on the savings to the public, from an array of taxes that are piled onto the price of electricity.

The federal government also tried to strong-arm regional power producers to sign new supply contracts at sharply reduced rates, in some cases 70% lower than the old ones. Most producers protested that they were still writing down their investments in building new dams, even though most of them are more than 20 years old. To lessen the alleged blow to their bottom line, the federal government is coughing up R$30 billion (around US$15 billion) in compensation to be paid to the regional power producers. Some have accepted, while others in the states of São Paulo, Minas Gerais, Santa Catarina and Paraná have outright refused to sign the new supply contracts. The federal government is now running TV ads with a famous Brazilian soap opera star, claiming that the power rate cuts are coming as announced in 2013.

Over-confidence, you say? Or just propaganda? A bit of both in my opinion.  After The Economist recently told President Rousseff she should fire Finance Minister Guido Mantega after GNP growth figures showed Brazil will barely grow much over 1%in 2012, it seems that the spin masters in Brasilia have been working overtime to assert how healthy the Brazilian economy is. Yet the warning signs that everything is not quite so great are all around for everyone to see. Petrobras, the state-controlled oil giant, has been complaining for months about the money it is losing at the pump because of the government-controlled prices. Brazil has been forced to import large quantities of gasoline this year after the high price of ethanol forced drivers across the country to switch to gasoline. Finally, after months of rumors that gasoline prices would be hiked, the government announced that a hike will take place for sure in early 2013. At R$2.85 a liter, gasoline in Brazil is already some of the most expensive in the world, and that’s mostly due to federal and local taxes on gasoline that reach up to 40% of the final price. I hear no one talking about slashing these taxes in order to make gasoline more affordable, certainly because governments have become addicted to the many taxes they levy across the nation.

To top all of this, O Globo newspaper reported in December that Rio de Janeiro consumers of electricity will actually face HIGHER power bills next year, up to 15% more expensive, because of the current lack of rainfall in some states that has led to low water levels in reservoirs at dams. In turn, this has forced power generators to fire up oil and gas powered power plants, which cost much more to run than dams.

The truth is that Brazilian governments, both state and federal, are addicted to all of the income they generate from the excessive taxes they charge on everything, in part because they need to pay the salaries of all of the government bureaucrats. It is estimated that the federal government uses 50% of its annual budget just to pay the salaries of the nearly 500,000 people who work for it, and the ridiculously generous pensions they get when they retire (100% of their last salary).

Brazilians are mostly rather apathetic about all of this, running up huge debts just to stay afloat in an economy that is overpriced and inefficient. The Brazilian real, which has finally breached the R$2 to a dollar level, is still overvalued and could easily reach R$2.70 to a dollar if the Central Bank would just allow it to do so. I don’t see why leaders in Brasilia cannot see the fact that many Brazilians who can afford it fly to Miami regularly to go on shopping binges ‑‑ snapping up clothes, sneakers, electronics and computers, that are 30 to 40% cheaper than in Brazil – would most likely buy locally if prices were reasonable.  If only they realized that by cutting local taxes and making Brazilian manufacturers more competitive, the country would export more and produce, for example, clothes which were affordable. Then instead of running off to America to shop, Brazilians would start to spend more of their money right here at home. Is that too hard to grasp?


Brazilian Soaps Profit from New Story Line: The Lives of the Booming Middle Class

Nina and Max in a scene from Avenida Brasil. (Photo courtesy Rede Globo)

This story appeared at International Business Times on Sept. 8, 2012


By Rasheed Abou-Alsamh

BRASILIA, Brazil – In South America, soap operas are an immensely popular genre. And in Brazil, the biggest country and economy in the region, they are the mirror of the nation’s newfound economic success.

The new Brazilian middle class, commonly referred to here as the “C-class,” is becoming the focus of marketers and soap opera writers, both eager to cash in on the culture and tastes of this huge swath of the Brazilian population.

The phenomenon is evident in one of the most popular programs in the nation, the 9 pm soap opera Avenida Brasil on Globo TV (which is itself, in a reflection of Brazil’s growing clout, the second-biggest TV network in the world by revenue behind ABC.) The prime-time soap has gone to extreme lengths to accurately display this new middle class, with the whole drama focusing on characters living in the suburbs of Rio de Janeiro, something that had not been tried before in Brazilian TV.

Soap operas have usually focused on the swanky neighborhoods of Rio and São Paulo, where the A and B classes live, or the top of Brazilian society, according to a now-popular A-to-E classification. In this analysis, people in the C-class are the backbone of Brazil’s new consumer economy, and soap operas are increasingly featuring the way they live.

The main story line of Avenida Brasil is the obsessive quest for revenge by Nina/Rita, who as a child was abandoned in a garbage dump in Rio by her evil stepmother Carminha and her lover Max, after they both rob and push Nina’s father to his death. Years later, Nina returns and gets herself employed as a cook in the suburban mansion of Tufão, a rich (and cuckolded) former football star who is now married to Carminha.

The soap, or novela, as they are called in Portuguese, has been so successful that it has garnered a market share average of 38 points in the greater São Paulo area alone, according to the Brazilian Institute of Public Opinion and Statistics. That means 65 percent of all televisions in Brazil are at some point tuned in to Avenida Brasil.

This has not escaped the attention of marketers, who are always eager to reach this new mass of Brazilian consumers. Evidence of this are the endless commercials for new flat-screen TVs, mobile phones and refrigerators that appear when this novela and others air.

“Brazilian novelas have always had suburban characters ever since the 1970s and 1980s. What is different now is that mainstream TV networks are focusing much more on what the marketers call the ‘new middle class’ or the C-class,” said Heloisa Buarque de Almeida, a professor of anthropology at the University of São Paulo. “This is a section of the population that has ascended economically since the years of the Lula government, and they are consuming much more now.”

Middle Class On $875 A Month

Granted, the C-class isn’t making a lot, in absolute terms, when compared to similar earners in Europe or the U.S. But in a developing country, where the average family income for the upper levels of the C-class is around R$1,750 a month or $875, they make enough to have money left for disposable income.

And that’s also enough money to attract advertisers that have already flocked to Brazil’s fast-growing economy, Almeida said. “In the 1980s and 1990s, advertisers were much more focused on the A and B upper classes. It is only fairly recently that they have realized the significant volume of consumption of the more popular classes. So that is why ‘Avenida Brasil’ is so focused on characters that came from the poorer classes but who have succeeded in moving up into the middle classes.”

José Afonso Mazzon, a professor of marketing at the University of São Paulo, has studied this social mobility phenomenon, and he is going to publish his findings, along with Professor Wagner A. Kamakura of Duke University, in the International Journal of Research in Marketing, in the first semester of 2013. Titled “Social Class and Consumption in an Emerging Economy,” their study looks at the consumption patterns of all social classes in Brazil. Mazzon said that there had been a noticeable increase in disposable income starting in 2003, which is the same year that the government of then-President Luis Inácio ‘Lula’ da Silva greatly expanded the Bolsa Familia wealth transfer program through monthly government payments to the poorest of families.

“We saw a huge shift in spending patterns of the C-class population starting from 2003, when the Bolsa Familia program freed some of their income to be spent on other things than just basic necessities,” explained Mazzon. “The yearly growth in the minimum salary, always above the inflation level, also helped propel consumers in the lower classes to eat out more, go on trips, buy more meat, chicken, and fish, and spend more of their income on personal beauty goods such as shampoos, soaps, perfumes and manicures.”

Mazzon now believes that 14 million families are part of the C-class, which if multiplied by four, means that 56 million Brazilians have landed in this new middle class, or roughly one-third of the population. In contrast, he estimates that only 25 percent of the population is in the A and B classes, giving advertisers good reason to focus on the C segment.

Language, Music, Fashion

But Avenida Brasil is not only a reflection of this new middle class. It also influences popular culture, from its catchy soundtrack to the jewelry that the main characters wear and that people now want to buy.

Not that jewelry and social mobility can buy class. The producers know this, and Avenida Brasil’s characters are, despite their newfound money, still a little unrefined. One of the directors recently told the Folha de São Paulo that she studied how people spoke in the suburbs and then instructed the actors playing Tufão’s family to speak in a similar manner.

“I told all of them to speak at the same time, one on top of the other, sort of shouting, while they are being filmed having meals around the dining table,” said Amora Mautner, who as one of the many directors on the soap is tasked with filming Tufão’s family. “I think of Tufão as a nice version of Tony Soprano.”

The novela’s opening song “Dança com Tudo,” penned by the relatively unknown songwriter Robson Moura, has been a big hit. Many users of social media use the song’s opening line of “Oi, oi, oi,” in their many snarky Twitter messages about the show.

“This song has been a big hit because it’s so catchy,” said Jads Antunes, 26, who works in public relations and often uses “Oi, oi, oi” in his Tweets about the soap opera.

Even in the realm of costume jewelry, Avenida Brasil is having an effect, with the earrings used by the character Suelen and the many bracelets and necklaces worn by Carminha a big hit among women in markets across the country.

“Suelen’s long earring has been very popular among my customers,” said Ana, 27, who has been selling women’s costume jewelry at Brasilia’s Feira dos Importados market for five years. “I’ve sold out of Carminha’s saint medallion necklace,” she said, adding that it was a little more expensive, at R$65 or $32.50, than her other items. At the stall of another seller named Milena, Carminha’s gold-toned bracelets were fast sellers at R$35 ($17.50) for a shiny set of three.

Yet, for all its consumerist implications, Avenida Brasil is as much the image of the new Brazil as it is steeped in a traditional Latin American trope: the hyper-dramatic novela full of intrigue and passion, where the inevitable character of the cruel stepmother is the focus of everybody’s hatred. This, too, has an economic consequence. Milena, the bracelet vendor, summed it up when explaining why Carminha’s jewelry wasn’t selling as fast as the other characters’: “It’s because she’s evil, so there’s not that much demand for all of her stuff.”

Click here to read the story on the IBT website.

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