Brazil: Reforms to spur competitiveness would strengthen COVID-19 recovery
Brazil was pulling out of a long recession when the COVID-19 outbreak hit, bringing the economy back into another, even deeper recession. However, swift government support has helped millions of vulnerable households, including those without formal employment and social protection. A strong and inclusive recovery from the crisis that benefits all Brazilians will require additional ambitious reforms to boost jobs, productivity and trade, as well as to strengthen public finances and improve social protection, according to a new OECD report.
The latest OECD Economic Survey of Brazil says that while the decisive response spared Brazil from a more severe economic impact, the pandemic will still significantly affect well-being and prosperity, taking a toll on people and businesses in the informal economy. The Survey estimates the COVID-19 crisis will cause GDP to shrink by 5% this year, followed by a return to growth of 2.6% in 2021 and 2.2% in 2022. Reforms to help firms to grow and compete internationally would enable Brazil to reap the benefits of integrating into global trade and to address rising poverty and inequality.
“Brazil was making good progress on structural reforms prior to the pandemic, including its successful 2019 pension reform. The shock to the economy and society from COVID-19 makes it paramount to keep momentum going and tackle outstanding barriers to competition, productivity growth and foreign trade, as well as address pressing environmental challenges,” said OECD Secretary-General Angel Gurría, presenting the Survey. “The OECD is committed to work with Brazil to ensure a strong, inclusive and sustainable recovery and to build a better future for all Brazilians.” (Read the speech in full)
The Survey estimates that an ambitious package of reforms to improve domestic regulation and competition, reduce barriers to foreign trade and improve institutions and economic governance would boost per-capita GDP growth by 0.9 percentage points per year over 15 years. Lowering trade barriers could also bring down the prices of many goods, with a tangible impact on the lives of ordinary Brazilians.
The COVID-19 crisis has accentuated the need to further lighten the cumbersome regulations, including complex procedures for taxation, which hamper entrepreneurship and competition. An average medium-sized company in Brazil spends around 1,500 hours a year on procedures to pay taxes compared to 317 hours in Latin American countries or 159 hours in OECD countries. Investment in education, vocational training and adult skills would in turn help to build a more productive workforce ready for a more globally integrated economy. Evidence suggests that adult training programmes can make a real difference for workers seeking to move into better-paying jobs, provided that course content is well-aligned with local labour market needs.
Inequality and poverty have edged up in Brazil over the last few years, reversing progress since 2000 due to strong growth, social transfers and improved education outcomes. The richest 10% of the population earn over four times that of the bottom 40%. Almost half of social benefits go to the wealthiest 20% of households. The Survey recommends better targeting transfers to those most in need, accelerating benefit concession for people who lose their jobs and withdrawing them more gradually. This would help to support the 40% of workers employed in the informal economy and not covered by unemployment schemes, and ensure an inclusive recovery from the crisis.
The efficiency of public spending should be improved, as the pandemic is adding to Brazil’s already high public debt. There is scope to make significant savings with no impact on well-being. The Survey recommends reviewing tax exemptions and subsidies that account for almost 5% of GDP and trimming civil service costs.
Brazil should also use the recovery as an opportunity to strengthen protection of the Amazon rainforest including through stronger enforcement of its forest law to stop illegal deforestation, focusing instead on the sustainable use of the Amazon’s economic potential.
U.S. bank trouble heralds The End of dollar Reserve system
The US banking system is broken, stresses ‘The Asia Times’. That doesn’t portend more high-profile failures like Credit Suisse. The central banks will keep moribund institutions on life support.
But the era of dollar-based reserves and floating exchange rates that began on August 15, 1971, when the US severed the link between the dollar and gold, is coming to an end. The pain will be transferred from the banks to the real economy, which will starve for credit.
And the geopolitical consequences will be enormous. The seize-up of dollar credit will accelerate the shift to a multipolar reserve system, with advantage to China’s yuan as a competitor to the dollar.
Gold, the “barbarous relic” abhorred by John Maynard Keynes, will play a bigger role because the dollar banking system is dysfunctional, and no other currency — surely not the tightly-controlled yuan — can replace it. Now at an all-time record price of US$2,000 an ounce, gold is likely to rise further.
The greatest danger to dollar hegemony and the strategic power that it imparts to Washington is not China’s ambition to expand the international role of the yuan.
This crisis is utterly unlike 2008, when banks levered up trillions of dollars of dodgy assets based on “liar’s loans” to homeowners. Fifteen years ago, the credit quality of the banking system was rotten and leverage was out of control. Bank credit quality today is the best in a generation. The crisis stems from the now-impossible task of financing America’s ever-expanding foreign debt.
America’s chronic current account deficits of the past 30 years amount to an exchange of goods for paper: America buys more goods than it sells, and sells assets (stocks, bonds, real estate, and so on) to foreigners to make up the difference.
America now owes a net $18 trillion to foreigners, roughly equal to the cumulative sum of these deficits over 30 years. The trouble is that the foreigners who own US assets receive cash flows in dollars, but need to spend money in their own currencies.
Before 1971, when central banks maintained exchange rates at a fixed level and the United States covered its relatively small current account deficit by transferring gold to foreign central banks at a fixed price of $35 an ounce, none of this was necessary.
The end of the gold link to the dollar and the new regime of floating exchange rates allowed the United States to run massive current account deficits by selling its assets to the world.
In effect, the market worries that buying inflation protection from the US government is like passengers on the Titanic buying shipwreck insurance from the captain. The gold market is too big and diverse to manipulate.
The dollar reserve system will go out not with a bang, but a whimper. The central banks will step in to prevent any dramatic failures. But bank balance sheets will shrink, credit to the real economy will diminish and international lending in particular will evaporate.
Southeast Asia will rely more on its own currencies and the yuan. The dollar frog will boil by slow increments.
It’s fortuitous that Western sanctions on Russia during the past year prompted China, Russia, India and the Persian Gulf states to find alternative financing arrangements. These are not a monetary phenomenon, but an expensive, inefficient and cumbersome way to work around the US dollar banking system.
As dollar credit diminishes, though, these alternative arrangements will turn into permanent features of the monetary landscape, and other currencies will continue to gain ground against the dollar, concludes ‘The Asia Times’.
Mastering Writing Skills: Write Effectively for Academic and Professional Success
Most people underestimate the importance of knowing how to write. In school, students are assigned paper after paper. The results help teachers grade their knowledge. But, that’s not the main reason why these are assigned. Essays and other papers give students practice, and a chance to learn effective writing. It’s a lifelong skill that not only serves to land them a passing grade but can also help them boost their professional success later on.
How to Master Your Writing Skills
If you want to make sure that you learn how to write better, both for academic and professional success, here are some tips and tricks for you.
1.Ask Someone to Write for You
The best way to learn how to write is to read what you need to write. If you aim for academic success but don’t know how to craft a paper that gets you an A, get some writing help from a reliable service. Today you can simply go online and request to write my essay and you’ll receive a top-notch assignment. This isn’t just to help you meet a deadline or land a high grade. You can also use it for college learning – to read what a good paper should look like.
When you have a finished piece of writing, this can be your guide. Students often order papers online to meet deadlines or make sure they get a high grade. Even if this is the case, use the opportunity to learn, too – next time you need to craft a similar paper, refer to the one written by an expert to boost your writing skills.
2.Read What You Like
Reading is an amazing way to boost your writing skills. How is this possible, you wonder?
For starters, reading books, articles, other papers, or anything else – can boost your vocabulary. When you read, you also come across different writing styles, giving you ideas for when you need to write.
Even though it might not seem this way when you actually read, reading gives you a lot of useful information that is stored in your subconscious.
If you want to master writing, truly master it, you need practice. Those essay assignments are not enough. You should do some free writing, too. Start your blog or journal, write letters to your peers, join a writing workshop, etc. Just write for the sake of it – practice is very important!
4.Don’t Skimp on the Editing Part
Editing is as important as writing itself – maybe even more important. While some mistakes might be acceptable in school, these are never welcome in professional circles. A single, unintentional mistake can have a devastating effect and ruin the quality or the message in your writing.
Research and writing are tiring, but this is no reason to skip the editing part and submit the work in a rush. If you want to learn to write better, you need to start by editing your work. When you proofread and edit it, you can find the most common mistakes you make and learn how to avoid them.
5.Focus on the Structure
The first draft is often a result of free writing. It’s good to write with the flow without focusing on the details, the mistakes, or the structure. This allows your thought to run without interruptions.
But, you can’t submit the first draft of any writing – not if you want it to be good.
In addition to editing the mistakes out of your writing, focus on the structure, too. Structure makes sure that your ideas get across to those who read the content.
Outlines are very useful for this. Many students see them as a waste of time since they aren’t formally required. However, a good outline can actually cut down the time you spend on editing and formatting your task. It will also make sure that the information in your essay flow and are clear to the reader.
6.Ask for Feedback – and Use It!
Unless you’ve mastered the skill of writing, you’ll make mistakes. This is how you learn, and there’s no shame in it. It’s also the time when feedback can really help you. Ask your mentors, your peers, your parents, and friends to take a look at your writing. Ask them to be blunt and tell you what flaws they find in your writing.
You might not accept all of their notes and feedback, but learning how others view and understand your writing is very useful.
Writing requires some talent but most importantly, it requires practice. It is something you learn in time, which is why it’s assigned at every academic level. So, practice, practice, and practice some more. This is how you’ll master the skill!
FORBES: Where is the Russian banking crisis?
“Sanctions were supposed to kill the Russian financial sector. It did, and it didn’t. Where is the Russian banking crisis?” – FORBES is perplexed.
Yes, sanctions have hurt Russia’s financial institutions. But a Russian banking crisis, one that looks like we have seen in the U.S. recently with Silicon Valley Bank and in Switzerland with Credit Suisse, has not occurred.
There were never any runs on Russian banks. The ruble strengthened. And while most banks are protected by the state – led by Sberbank and VTB – the Russian Central Bank has spent much of the last decade working to clean up the financial system.
For this reason, Russian banks have survived the West’s sanctions regime and stock market delistings better than anyone would have imagined. For a cynical Russian, watching Silicon Valley Bank and Credit Suisse burn down while their bankers are gainfully employed is like smirking before the camera lens in front of a burning building.
Had the sanctions come at the time when the Russian Central Bank was cleaning up its “zombie banks” – all hell would have broken loose. But seeing how much of that mess was swept away prior to the 2022 sanctions regimes taking hold, Russia’s banks remain safe and sound, even if Russian investors in those banks have lost their shirt.
The sanctions policy, the hardest ever taken out on Russia, is 13 months old. New ones pop up regularly. It is unclear what can possibly be next, as Russia’s financial institutions have already been largely cut off from the Western system.
Russia’s financial sector, and its banks at home, aren’t making headlines like banks in the U.S. and Europe are. They have withstood the onslaught of sanctions.
They’ve lost their European and U.S. assets, which will not be recovered for years to come, if ever. Sberbank CEO Herman Gref said in press reports that Sberbank is “the most attacked entity” in the country, which experiences “unprecedented challenges in terms of complexity and power.” He said Sberbank lost nearly all of its assets abroad, leading to massive write-downs.
Yet, Russian president Vladimir Putin smirks at the burning buildings of Credit Suisse and the lost $200 billion in Silicon Valley Bank deposits, needing unprecedented FDIC support to protect account holders. The bank is now insolvent. His biggest banks remain only because most of Russia’s banks over the years have been folded and rendered insolvent. And a danger to the Russian financial system was liquidated.
“Thanks to the professional actions of our banking community, government agencies, and the efforts of the central bank, I want to emphasize that we managed to overcome all these (sanctions) difficulties in general,” Putin reportedly said in Moscow earlier this month after meeting with Sberbank’s CEO. He said that Sberbank’s current stable position was “a good signal for the whole economy.”
With sanctions expected to remain for a long time to come, will Russia’s heavily sanctioned banks fold one day, too?
“Who knows what will happen in Russia, because we all only know what we read in the press and what we read in the press is that Russia did a smart job handling their banks pre-sanctions and so after sanctions they have managed okay,” says famous commodities investor Jim Rogers from his home in Singapore, who has been a director of Russian fertilizer company PhosAgro. “We saw the ruble go down when sanctions were first imposed, then it went up. So in that case alone, the market tells me that somebody in Russia did something right,” he says.
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