Let’s Get the Shopkeepers!

I am inspired today to completely de-mystify the Brazilian Corporate tax system, whose potential 90 different taxes seem to puzzle some people.

Well, yes, there are apparently 90 taxes you are potentially exposed to in Brazil, but for the purposes of the small business, this comes down to a mere 16 or so, and we simplify this even more by talking normally in terms of tax regimes, which are the various schemes one signs up to in order to give money to the various corrupt and incompetent authorities responsible for collecting and/or applying the taxes from said systems.

Tax System_800

Now, like everything in Brazil, the names for these regimes are designed to be made into acronyms so that the poor people have no excuse for not remembering which scheme is bleeding them dry. The three best-known regimes are the IRRUUT (Insane, Regressive, Ridiculous and Utterly Unsustainable Tax), the URTOR (Utterly Regressive Tax On the Rest) and the holy grail of tax systems, THEHG, which outside Brazil is called “normal”, but which here is only open to businesses who can afford to pay a multitude of office staff and accountants and of course the statutory federal, state and municipal bribes.

Before we continue, we should remember that this critical analysis is undertaken on the basis that outside of planet Brazil, nearly every business in the known universe, in the long term, one way or the other, will achieve an average true rate of net profits of somewhere between 5% and 15%. So for the sake of argument, we will use the figure 10%.

So let us start with the most common tax regime, the IRRUU. Under this system, the government guesses what your net profit is and charges you a percentage on what it says you should earn, by taxing your turnover.

Bloggs

The clever bit of the IRRUU is that the government, knowing that most businesses try (however inexplicably) to get away from paying this tax, and knowing how incredibly inefficient all Brazilian businesses are because they are protected from competition by tariff barriers and a tax system no-one in their right minds would accept, have turned the percentages up enough to compensate for the those who successfully evade the tax, by killing those who did not or cannot (although as always, there is a tax relief system which can be used to defray any taxes incurred. Anyone can apply for this by filing in the form and handing it to the tax inspector with a large sum of money in a brown paper bag).

Next we have an even cleverer regime. The URTOR is designed to catch those poor business who do not even make enough money to be caught by the IRRUU. If your business is unable to support you and your family, never fear – it could eligible for this. It is still based on your turnover, but now the rate plunges to only 8% – 10%. The relief this provides the struggling business can be clearly seen:

Fulanos

Finally, we will look at THEHG and we see why it is, all things considered, the Holy Grail.

Fulanas

So Fulana’s at least should be happy, except that all its salary oncosts will be double anyone else’s (this is something the government has decreed for those who opt for THEHG). But in fact this is no problem, because Fulana’s will be big enough to be eligible for the special scheme under which it may bribe all the people necessary for minimising inconvenient expenses, may be awarded big government contracts and allowed to pay fake suppliers (for only a very large fee), and may borrow vast sums of money destined for small businesses from state banks at low interest rates and divert this to the directors’ and owners’ own bank accounts. In this regime, everyone involved is happy – so no-one really cares what the book result is anyway.

So there we are – it’s all quite simple, isn’t? I was inspired to provide this overview by the news this morning that the government has decided that in order to address the issue illustrated in the diagram, the answer is to try to get the consumer to rat on shopkeepers who do not always issue a tax invoice. It is so deliciously insane, I was surprised it was not announced by Kenneth Williams. Forgive me. 🙂

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Manaus, this is your alarm call

Manaus – drugs capital of the North?

My experience here makes me ill-inclined to spend much time looking for the positives in Brazil and especially Manaus. This does not mean that what I may observe is not true, however. I address this thought to those who, like many Brazilians, think that the only reason people say bad things about the place is because they are simply malcontents. Now allow me to continue.

Under-resourced Police

A lot has been talked about in the local, national and international press this week with respect to the wave of killings that “hit” Manaus last weekend. The conspiracy theorists would have us believe that it was the result of a coordinated Police attack in revenge for the killing of an officer last week, while others have suggested that it may be the result of criminal gang warfare. Few have suggested it is a mere coincidence, although of course it is a possibility.

My concern is not really with the motive on this occasion, but with the trend and with a quick reading of the tea leaves, especially since it is not generally  part of the Brazilian culture to try to analyse things for the purposes of prediction or planning. On this basis I would like to put my head above the parapet and say that Manaus is most likely in for a very hard time in the near future unless some champion of proactive law and order steps up to the mark to avert disaster.

Youth Crime – An increasing problem

First of all, we have the local and national economic collapse. Although most of the rich in (and outside) the country are so out of touch with what is happening that they appear to be in denial and do not yet believe that things are going to get a whole lot worse before there is the remotest possibility of them getting any better, the reality on the streets is that we have a burgeoning population who have just had a long spell of the good times and who swallowed the whole Brazilian economic growth miracle hook, line and sinker…and who are shortly going to find that the promised land of milk, honey, iPods, jet skis and never-ending parties has just put up the shutters to them. The result is that for the first time – ever – Manaus is going to have to deal with a large, seriously disaffected youth population. No-one here yet realises how nasty this can make people and what the potential for disaster is.

To make the potential somewhat clearer, let us add to the mix a huge raft of corrupt, very rich, stupendously ignorant and stupid politicians and other so-called ‘community leaders’ and ‘representatives’ who are in fact nothing more than opportunists with a few street smarts. How long will the general public continue to tolerate them?

Next, we can add all the dysfunctional systems that pertain in Brazil, amongst which are the health system, the education system, the legal system, the political system, the banking system and the tax system. In the deepening recession, these will only get worse: an application of heat to the bubbling cauldron.

Not much to do in the suburbs

Now let us consider the lack of infrastructure in the city.There is, basically, nothing much that works and there is little to do (unless one has some money, of course).  Even those who have had the money in the last few years are likely to find they no longer have enough – and for them, it will be a case of one door closing, and another slamming in their faces.

Illegal airstrips galore

Finally, it is worth considering Manaus’ strategic significance in terms of criminality. If one were tasked with identifying the best spots on earth for the future development of one’s nascent criminal or terrorist or extremist organisation, one would be hard pressed to find anywhere better than Manaus. With access to all the best porous illegal goods, drugs and arms borders, a wealth of wonderfully confused and exploitable communications networks and distribution channels, and a million square kilometres to get lost in, Manaus is a veritable paradise for the non-conformist with a revolver, a few kilos of coke, a box of Kalashnikovs, a few thousands smokes, or even the odd bit of farm machinery, box of jewellery or branded sports goods. I have little doubt that thousands of tons of this stuff is coming in to Manaus by river, by road and by air, and being spirited away onwards to local, national and international markets.

Now, if you take a lot of disadvantaged, unrepresented, poor, unfulfilled youth with nothing to do, place them in close proximity to an increasing population of national and international criminal gangs, and dangle in front of them the wealth the government promised them but then took away, it does not take a genius to realise you have a problem on your hands. And if you talk to the Police, as I have been doing over the past year or so (often for the wrong reasons), they will confirm most if not all of these points. They will tell you that the situation is spiralling out of control. That they do not have the resources to deal with it. They will talk openly about the dramatic rise in crime, the flood of drugs and arms coming into the area, and the changing attitudes among the youth population.

This is why I feel it is justifiable – even essential – to propose that the prognosis for Manaus is not great – at least not without some decent leadership, which is a possibility I see as so remote I am tempted to dismiss it out of hand (but since I don’t want you thinking I am a mere pessimist, I shall not). I do not know what exactly happened last weekend, but I do know that it is a wake-up call – and that if it is not heeded, there will be tears before (the next) bedtime.

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Explaining the Inexplicable

BureaucracyI have often said that without fundamental reforms of the legal system (and other basic systems) Brazil will always be a hopeless mess, period. The financial markets may consider the problem irrelevant in the context of short term gains; the politicians may choose to ignore it while buying votes and sending large sums of stolen money to Switzerland; and the vast majority of the great unwashed don’t have much of a clue about it anyway – but it remains (one of) Brazil’s most intractable problems and in reality is far more important that what political party happens to be running the asylum at any given moment.

Anyway, while I was en route yesterday to waste my valuable time in the pursuit of yet another ludicrous, unnecessary chore perpetrated on us by these dysfunctional systems, it occurred to me that while people in other third world countries generally nod and recognize the problem, those who live in the developed world generally don’t quite ´get´ what it’s all about. So here is a (very minor) example to illustrate the point.george-carlin-never-underestimate

The task facing us in this case was to give someone a note to confirm they could represent us at a meeting. Nothing complicated – just that. If we were in a functional society, we would probably just bang off an email – Dear so-and-so, we propose X. Yours etc., or perhaps just ring up and advise the person organising the meeting. But this is not enough in Brazil, because here, everyone is trying to steal from everyone else before everyone else steals from them. So of course no-one trusts anyone else, and a labyrinthine bureaucracy has sprung up to waste everyone’s time on the point. What we must do is prepare a formal document with a lot of silly terminology in it (we have now already grown a simple and clear one-liner into an obscure shaggy dog story). This stupidly long text now needs to be properly signed and dated….and then we have to go to a place called a cartório to have our signature witnessed and registered on “the system”. And once this is done, we have to get the cartório to confirm that the signature on the proposal is really our signature. They then have to stamp the document as “Recognised”, and sign it (it’s a wonder you don’t have to go to another cartório get them to “recognize” the signature of the first cartório).

How long does this take? Well, to get your document “Recognised”, you have to take it to the right cartório, take a number and wait in line. Then you give your document to a numpty who checks it to see if they can be bothered doing their job, and then gives you another number. You leave the numpty with the document and go to another queue to queue up and pay for their invaluable service. You (eventually) get a receipt for your payment, and…then you have to go to another queue to wait for your document to emerge from “the system” with the relevant stamp and signature on it.

But why, I hear you ask, can’t the original numpty just do the whole thing? Ah, well, remember that in Brazil everyone is trying to steal from everyone else, right?  You must have a clear division of labour in your business (or government department or hospital or whatever) and you don´t want any employee to be able to do the work AND receive the money, otherwise they would just steal it (and, in my experience, they usually do – or at least a percentage of it).

In our particular case, the person who had prepared the document (you see you can’t just prepare it yourself, can you, because it has all those silly words in it) had dated the document 10th May instead of 10th April, and this very nearly put the kibosh on the whole deal. Well, we can’t possibly “recognize” a signature on a document that has a future date on it, can we?  Goodness me, no. You see even if, as in this case, the date is completely irrelevant to the “recognition”, it is clear evidence of a plot to steal some money from someone, somewhere down the line. Fortunately in this case, the author’s amazing charm allowed us to side-step the issue by tippexing carta_800out the wrong date and writing the correct date over the top (this is okay because they saw me do it – clearly the idea that someone could do it later, after the document was stamped etc, did not occur to anyone). It was a close run thing, though – but for the goodwill of the numpty, it would have been necessary (and it happens regularly to all those who have to confront this moronic system) to go back to square one, get the document prepared again and return to have the new document “recognized”.

So you can see, just from this minor example, why Brazil is in the mess it is in. Something that would take, what, 10 minutes in the USA?, can easily take up to two days in Brazil. You multiply that by the number of people wanting to do a simple transaction like this every day (a business transaction, a request to the bank, cancellation of service, a renewal of an agreement etc etc etc….) and perhaps you can imagine the thousands and thousands and thousands of unproductive hours squandered by Brazil every single day of every single week of every single month of every single year.

Any comments, please get them reconhecidos before you submit them (or just bribe me to look the other way) 😉

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The Untenable Judging the Indefensible

Eike-Batista-porsche-cayenne-in-police-custody-600x400I see the judge in the Eike Batista trial (Brazilian millionaire now bankrupt and being investigated for insider trading) was found driving one of the defendant’s seized Porsches. Later, he was also found to have taken home a Range Rover and a Grand Piano which he had also ordered to be confiscated from Batista. The man, Flavio Roberto Souza, said he was keeping the seized assets “safe from the sun and other possible damage”, although quite how this applies to the Porsche he was driving is unclear.bad_thief

 What I would like to know is, firstly, on what planet Mr Souza might have even considered his actions were not hoplessly, completely and stupidly inappropriate. Then having satisfied myself as to his sanity, and I think we may assume he is not clinically insane, I would like to ask what sort of judicial system, legal education and professional training can produce this type of result. Finally, I will be interested to see how quickly this man returns to normal duties (because as sure as God made little apples, he’ll soon be back there judging other indefensibles as if nothing ever happened).

Ncea_700…And this is why I keep banging on about the fundamentals in Brazil. There really is little mileage in exchanging the lunatics in charge of the asylum for more lunatics, unless at some point there is a major reform of the fundamentals. And who is going to make that happen? The lunatics? People who have the same high-quality education and thorough professional training as Mr Souza? The same critical thought processes and strict moral values? I see…

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Roll me over.

brazil_alarmI often hear Brazilians complain that “aqui, ninguem tá responsável para nada” (no-one is responsible for anything), and this concept is clearly deeply rooted in the culture. I also suspect that if Brazil really wants to suck its feet out of the big pile it finds itself in, it needs to reflect on this a bit more deeply.

One of the big issues at present is whether the current President should be impeached. In law, the fact is that she cannot be impeached unless she is found guilty of some crime; and the problem for her detractors (which would be more than 50% of the voting public) is that some judge or other has declared that there is insufficient evidence to investigate her further, let alone charge her. Frankly, I would be concerned about any ruling that adesivo-fora-dilma_iZ1XvZxXpZ1XfZ159089885-568435718-1.jpgXsZ159089885xIMforbids looking for evidence, but what is really interesting in this context is the comparison with other – perhaps more responsive – democracies, where there is generally only so much smut the public will take before those responsible for fumbling the ball bow to the pressure and head for an early shower (regardless of any actual  or potential legal or investigative processes).

In Dilma’s case, what would long ago have brought her down in any country where the moral compass and public awareness has progressed a few notches up the evolutionary scale, is the fact that she was President or Chairwoman of Petrobras, the company which has been found to have been handing out the candy to all and sundry, at precisely the time it was doling it all out. It happened, conclusively and demonstrably, on her watch, and she even has her signature on a document which expressly and specifically authorises a transaction which later proved to be a massive fraud.

The fact that this seems to bother absolutely no-one, is a little cultural factor that is clearly at the very root of the Brazilian problem – because in a very real sense, there is simply no responsibility or not-me-blaming-signaccountability for anyone here, from the President to the brick layer to the schoolboy. Quite simply, at no stage in the life of the average Brazilian is there ever any question of responsibility or accountability, personal or collective. Even where there is a system in place to define such responsibility and specify mechanisms which make it meaningful, it is blithely ignored by one and all. There may well be a contractual document which makes Dilma responsible for her decisions and her signature (it would certainly be unusual if there were not) – but no-one (as far as I am aware) has even hinted at the fact that she may be legally responsible for her actions at Petrobras.

So now we have this bizarre situation where people are actually suggesting that the army should wade in, remove the current President and “let someone else have a go”, when they seem unwilling or unable to even consider simply holding their politicians accountable for their actions. The message this sends out – and it is the same message that so deeply permeates every aspect of Brazilian life – is that far from there being any sort of moral compass to which you might or should refer for guidance,  on the contrary there is no requirement for you to consider your fellow man or men even where society expressly stipulates that you must.

This is surely (one of) the most fundamental issues for Brazil and the Brazilians to resolve. On the one hand everyone wants the perceived joys, freedoms and delights of a fully functioning democracy; on the other, no-one is prepared to accept the onerous responsibilities that devolve to the whole of society for making it happen and making it work. That is why they continue to line up quietly to bribe the teacher to give them a pass mark, the police to investigate a crime, the builder to finish his work, the civil servant to issue a chit, the bank manager to give them a loan, the businessman to give them a contract, or the politician to give them a monopoly.

I’m not sure to what degree accountability and responsibility are defining qualities of a great country (there is surely plenty of both in North Korea, for example), but for a great democracy, I’m certain they must be fairly high up the “wants” list. I’m equally sure their absence is one of the main reasons Brazil has finally run full tilt into a great big wall, and why it was clearly predictable (and predictably ignored) for a decade or more.

RollingSo it will be interesting to see what happens on 15th March, when millions will take to the streets to demonstrate their frustration with the dysfunctional government they placed there. What will be more interesting still, however, is how much effort they are prepared to put in subsequently to solving their problems democratically and holding to account the whole shower of useless politicians they were so happy to re-elect only a few short months ago.

Is Brazil finally waking up, or is it just twitching a bit before it rolls over again? Let’s see, shall we?  15th March 2015.

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Quo Vadis Brazil?

nao vamos

“We won’t give up on you Brazil”

At last, I see some realism in the financial press about the short to medium term prospects for the Brazilian economy. I read a recent FT analysis with some incredulity, as the paper – like many other normally reliable sources – seemed to have taken leave of its senses.

 There is very little good to dig out from the steaming economic pile the country finds itself in after a decade of total fiscal mismanagement. Not only has there been a lack of investment in desperately needed infrastructure. Not only has there been a failure to tackle corruption in any meaningful way. But everyone continues to ignore the harsh fact that the basic systems in Brazil remain hopelessly dysfunctional. Raising the interest rates is not the end of the matter, as the FT seems to believe. Far from it – it is merely scratching the surface to expose the rot underneath.

boatConsider that the State of Sao Paulo, with – now get this – 20 million souls (or the same as the whole of Australia), has no water. This is – or should be – a simply staggering fact on its own, never mind when combined with the fact that most of the country’s woefully inefficient industries rely on electricity generated from  – you guessed it – water. And how much has been invested in energy conservation over the last ten or twenty years?  Zilch. Energy has been so cheap, and the potential for more – water powered – energy so great, that there has never been any interest in conserving anything. Well, uh, now what, people..?

Something else the financial press seems to overlook are the fundamentals. I do not mean the usual financial fundamentals, but the real fundamentals – the people, the culture – that table1drive a country in one direction or another. Most countries have their stereotypical population characteristics (Japanese innovation, British determination, German efficiency etc), and if we look closely at Brazil we may find a lot of nice, pleasant things, but nothing that suggests even remotely that there is some sort of spirit that will keep the country on the rails.

Okay, so perhaps we cannot expect the Wall Street Journal to know about this sort of stuff, but we should, I think, expect them to realise that what we have here is an inexorable slow motion train crash, with inevitable results. After all, none of these issues is exactly hidden, except from a largely uneducated, uninterested, stupidly rich, idle and corrupt Brazilian political class:

  • A weak infrastructurepetrobras
  • A breakdown in the supply of basic utilities
  • A protectionist state where there is no industry; no value added
  • A collapse in demand for commodities
  • Dysfunctional legal, financial, health and education systems
  • A hopeless bureaucracy and bloated civil service
  • Corruption on a simply massive individual and collective scale

Now, given these issues, can anyone believe that hiking the interest rates up a few basis points can have any sort of realistic impact? Really? Or is there, in the immortal words of Leo Bloom, “no way out”? Well I believe the financial markets are in the process of making up their own minds thank-you-very-much, and money is fairly bleeding out of the country as we speak. Modigliani and Miller would be proud .leccy

It is tempting to be trite about it all. It is tempting – especially when you live here in the middle of the pile – to point and say “I told you so” (and in fact it is at least superficially satisfying to say it – okay, so I never said I was perfect).  But really, it is difficult to find something constructive to say about the situation. What is to be done? What would you do, other than run away?

A few moments thought might generate the sort of list below for building something out of the wreckage that is heading our way. It is all stuff that Brazil really needs to look at seriously and urgently, but which recent governments have failed spectacularly to address:

  • Raise consumer interest rates, but provide grants to industry
  • Reform the civil service, freeze pay rises and pensions, and make civil servants accountable to the public
  • Dismantle most of the trades and employers unions
  • Remove trade barriers
  • Reform the tax and legal systems
  • Publish every public financial transaction
  • Stop building dams and use the money for energy conservation and policing the rainforest and watersheds . Invest in and provide incentives for serious energy conservation.
  • Leverage hundreds of years of experience and ask for outside assistance, taking gringo advice when it’s good
  • Reform the police pay systems, retrain the police, give them the tools needed, and make them accountable to the public for reducing crime
  • Provide permanent visas for any skilled workers wanting to enter Brazil
  • Abandon systems based on mutual mistrust and replace with trust-based systems.
  • Allow anyone to worship any god or church they like, and then keep them the hell away from the people running the country

table2I could go on, but perhaps it would be better to wait until we see what happens on March 15th, when there is supposed to be a national demonstration against the government – indeed a demonstration demanding the President’s impeachment. Two million people came out onto the streets the last time (2013), and I wonder how many will turn out on the Sunday before St. Patrick’s Day. I suspect it will be a lot more. I also suspect that unless the government does some serious grovelling and takes some decent, honest action, we could be looking at an event that will define Brazil for the decades to come.  Although there are few in the press who dare to mention it, a glance at any of the social media will show that there are a lot of people out there happy to bandy around the concept of a military coup.

And that really is playing with fire…

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VADS

colour_carBack to being positive. I saw another blue car yesterday! I wanted to share this amazing news with the world in general.

It used to be that the “in” colour to buy was black (I think Henry Ford started it originally – it just took Manaus a while to catch on). Notwithstanding the fact that in a tropical country black is the stupidest colour you could wish for in a car, everyone dutifully bought black. Then there was a rebellion back in 2012 and every new car was suddenly white (a colour reserved for taxis for years and years). For the budget conscious or the rebel, you could go wild and get silver (let’s call a spade a spade and say ‘grey’, shall we?).

So there we are – in the last 7 years or so, what we’ve had is a market flooded with black, white and grey cars. We’ve got VADS (Vehicular Affliction Disorder Syndrome). We badly need some bright traffic. And that is why my heart is lifted when I see a nice blue (or green, or red, or yellow) car appear in the distance like a mirage in the desert. It’s finally happening – some of the sheep are breaking through the fences. Hooray! Come on people of Manaus – rise up and buy a colourful car!

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And they’re off! Right off!

CORRUPCAO ELEITORALIf I were a betting man, I would put a tenner on Dilma to win this year’s election. This has nothing to do with merit, and everything to do with the fact that the majority in Brazil remain largely uneducated and uninspired. They know the score – like Rab C. Nesbitt, they fully understand that they are ‘the scum’, to be rightly treated like cattle by their economic superiors (i.e. anyone with a half-decent income).

They may not tell you so openly, but the vast majority secretly believe that at the top of the pile (the real scum, buoyed on their bags of stolen money) are those who deserve to be there, because they are smart enough to lie and steal and cheat better. There is no hope for the average voter, and the scum know it. So of course if they see anyone tossing scraps in their direction, they’ll run like lambs to the slaughter to grovel in the mud before them. The PT (the Worker’s Party) understood this, and set up its long reign of power by doling out a bit of cash to the poorest of the poor. It may have mismanaged the economy to a standstill, but it can still crow about the pearls it once cast before the swine.

So, while there may be no reason to vote the current lot back into power, the memories of those extra pennies are still fresh in the minds of the poor (the party propaganda machine has made sure of that). Some of the more enlightened in the population may hope, but the reality is that no amount of skill, ability, integrity, honesty, intelligence or any other virtue possessed by any of the parties or politicians will influence the vote by one iota.

Some say the people get the government they deserve, but on the other hand someone once observed that ‘if voting really made a difference they’d make it illegal’. The true problem is perhaps that Brazil is, in a very real sense, a villainocracy. And what on earth do you do about that?

Answers on a postcard please, to Shep at Blue Peter…

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Cheers!

(Don’t open it now – there’s a cop behind you)

Election day in Brazil tomorrow, so – apart from watching a largely marginalised, uneducated public trying to agree on some spurious criteria to latch onto to help them decide which lunatic will take over the asylum – we will all be enthusiastically applying the “Lei Seca” (literally “Dry Law”) from 10:00 o’clock tonight.

As you might imagine, this law prohibits the sale or consumption of alcohol on election day, thus supposedly guaranteeing a nice quiet public. I can see the conversations now:

Wife to husband: Put that bottle of beer back in the fridge right now. You might get unruly.
Husband: Aye. Right enough, love. Pass me some milk then, would you? Hot work over that barbecue.

Drug user: got any meths, man?
Drug pusher1: sorry mate, no alcohol today.
Drug user: Oh. Okay. Any opiates, at all, then…?
Drug pusher1 (calling across the street): I say George, are we okay to supply opiates?
Drug pusher2: Reckon so, Charles.
Drug pusher1: Jolly good. Here you go, mate.

Anarchist1: Well everyone, are we ready to go? Take over the planet an’ that?
Anarchist mass (all together): Best leave it ‘til Monday!
Anacharist1: Huh?
Anarchist mass: No beer today!
Anarchist1: Ah. Okay then. Well, um, I’m off to watch the telly then. Anyone for a glass of juice?

Bride: Put that bottle of champagne away!

Bar owner at 21:59: Well, that’s that then – kick them out and close up. The family had enough to eat last week anyway.

We are told the Police will be running around rigorously enforcing this law. “Okay lads – I want you to get out there and really punish the normally law-abiding bar, supermarket and corner shop owners.” That’ll teach ‘em, eh? Eh?” And when you come off duty we’ll all get together around a nice bottle of sparkling mineral water.” We must assume that with this highly effective stranglehold on their supplies of alcohol, all the anarchists, criminals, drug dealers etc will behave themselves while the Police are otherwise occupied.

I wonder if there is any correlation between 3rd world countries and the unquestioning enforcement of ludicrous laws.

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It wasn’t me, guv’…

BRThe English-speaking press does not yet seem to be running with the story of the President of Petrobras somewhat suspiciously divesting herself of part of her fortune before a forthcoming judgement on her part of the Pasadena oil scandal (essentially where Petrobras paid US$1.2bn for a refinery worth less than US$50m, a deal also signed off by the Chairwoman of Petrobras at the time, none other than the current President of Brazil).

Potential investors in Brazil should be paying attention, because this quagmire of excrement clearly illustrates the problem facing anyone who wants to do business here. And let’s be quite clear – the case is not an exception, but the rule. So let me point out the three main lessons for potential investors.

Lesson one is that provided they have enough money or friends, no-one in Brazil is responsible for anything they do. Period. The ex-Chairwoman of Petrobras is able to deny that she was in any way responsible for a deal which defrauded Brazil of US$1.15bn. Note that she cannot deny she signed it off as a “responsible officer of the company” – just that she was, as a responsible officer of the company, in fact not responsible for it at all. Instead, she blames her then-colleague Nestor Cervero (also under investigation, corrupçãobut incredibly still a Financial Director of Petrobras, even after throwing away US$1.15bn of its money in an (allegedly) fraudulent deal). So you need to ask yourself the question – if the board of directors of a company are not responsible for the actions of the company, who is? And even if you can identify them, do you really want to deal with them?

Lesson two is that even in the unlikely event that you can pin responsibility on someone, you will never bring them to any sort of justice. Most Brazilians will just walk away and laugh at you. Take a look at just about any busted business here and you will quickly see that those responsible – even where they are prosecuted – are generally going about their normal lives without a care in the world, while those they defrauded may well have lost everything. Why? Because the legal system is not only slower than a small continent, but so full of holes it is designed to encourage bribery and pervert justice – and anyway, if there seems to be any danger of an unfavourable pronouncement, friendly politicians can interfere in the process with impunity.

Lesson three (as if one and two were not enough). Brazil is so corrupt, and the systems so dysfunctional, that the only way to make a profit at all is to lie, steal and cheat like everyone else. Anyone who tells you they have a successful honest business in Brazil is seriously myopic or a fabulist. Even international businesses dinheiro-da-saude-educacao-nao-sao-fiscalizadoshave to play the game to establish themselves here (covered by employing a third party agent to pay the local public servants the right bribes to get the paperwork – and critically, the tax incentives – through), even if they manage to subsequently avoid any skulduggery.

And lest you may think that gringo-run global businesses are whiter than white once they are established here, look more closely. If you compare similar products from the same company across countries you will usually find that products in BRICS countries are comparatively poorer quality, older, higher priced and sell at a higher margin. Try asking the companies why, and – guess what – they will tell you it is not their responsibility. Ethics? Schmethics…

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