Rio Gringa

Rio's Renaissance: Will Public Works Last?

During my recent trip to Rio, someone told me that Rio is experiencing its "golden age" because of the upcoming mega-events and the growing investments the city is attracting. So given this fact, what would be the best legacies to result from this presumed renaissance? A functional public transportation system? Improved public schools? State-of-the-art hospitals? A modern sewage system? Maybe. But one thing that will definitely come out of this period are grandiose public works, ones that certainly contribute to the city but ones that also need to be maintained after the Olympics or risk becoming white elephants. That's really one of the big questions: if everything being built and accomplished in this window of time can survive until 2017.

I'd like to give two examples of these public works, which I had the chance to visit this month, and a third example of a cautionary tale.

The Rio Museum of Art (MAR) is an amazing new institution, which opened to the public in March. It's made up of two connected buildings: an uber-modern one with a sleek design, and another that resembles the early 20th century architecture that you find in downtown Rio.

The museum not only has a great collection of modern art, but it has entire sections that showcase Rio. It's like a trophy case for the city, and a wonderful way for people to celebrate Rio, its history, and its culture in a meaningful way. It's not that Rio doesn't already have good museums, but often they are places seen as places for, and sometimes with works catered to the elite. It was heartening to see not only that the museum was packed, but that there were Cariocas from across the socioeconomic spectrum. 

And at MAR, it's not what you usually find at Rio's museums, like paintings from the 18th century. There are lots of works focusing on favelas, as well as Rio social movements. For example, there's an amazing installation of a favela made out of cinder blocks, wire, beer cans, and other recycled materials (see below). But even those classic paintings are wonderful, showing the city in its colonial days.

Another plus: tou can go all the way to the roof and see a view of the bay. MAR is part of Rio's massive port revitalization project, and there are several screens that have an interactive view of what the area will look like when all the construction is done, with videos showing the simulated buildings and infrastructure. (The Museum of Tomorrow, for example, will be built on the spit of land you can see in the photo below). Looking at the simulations, you can't help but hope that not only will they actually come to fruition, but that they'll also last.

Next is another public work on the other side of town. Parque Madureira, a huge, beautiful park surrounded by favelas and blue-collar neighborhoods, is a perfect example of creating public space where it's needed. (It's also a smart political move, but anyway.) The park opened last June, and now not only attracts Cariocas but also performances from singers like Daniela Mercury and a visit by skater Tony Hawk.

There's a stage with a large plaza for concerts and shows, numerous areas for different sports ranging from volleyball to ping pong, a bike path, koi ponds, a playground, a fountain for kids to play in, gym equipment, several cafés, and a skate park that Hawk called one of the best in the world. It's also very green, both literally and figuratively, with different elements made from recycled materials, some solar panels, and plants sprouting from building facades. There's also a visible police presence, including both municipal guards (who can't carry guns) and military police.

One of the coolest parts of the park is the "nave de conhecimento," or knowledge ship. It's one of several located throughout the city that give locals free internet access. There are iPads for kids, an upstairs with laptops for events and classes, and evidently, a Wifi signal that people use by sitting outside. There are also several large touch screens that allow people to search maps, look up information, and make suggestions to local government about their communities.

The government wants to expand the park even more. But walking through and seeing everything looking new, it made me concerned about what will happen once Paes is out of office, let alone 2017.

And then we come to Engenhão.

This photo was taken in 2007 during the Pan-American Games, when the stadium was brand-new. Now, with less than 2 months to go before the Confederations Cup and about a year away from the World Cup, Engenhão is closed indefinitely. That's because the six-year-old stadium is essentially falling apart. The city found that the stadium--which cost $190 million to build--had structural problems, particularly with the roof. That mega-event, Brazil-based journalist Andrew Downie points out, was over budget with promised infrastructure projects that never happened, and venues that aren't being used or now have to undergo costly renovations. "It is nothing short of scandalous that the organizers are being given a second chance," he wrote.

Will 2017 be different? We have to hope so.

Rio's Airport ATM Scam

At the end of a long hall on the second floor of Rio's international airport, there is a group of ATMs designed to rob bank account numbers. Despite reports of these robberies allegedly dating back to 2008 and police reports from victims, no one has done anything.

The horrific rape of an American woman in Rio earlier this month, as well as the rapes of Brazilian women that only came to light as a result, put the city on high alert. In an ideal world, these crimes should serve as a wake-up call about impunity and rule of law--that police should actually attempt to investigate all crimes, not just those with rich or influential victims. In addition, this week's attack in Boston brings into sharp relief the need for even more security during mega-events. Foreign Minister Antonio Patriota said that Brazil will take "all necessary measures" to do so. The city government is already taking steps to try to reduce crime, with programs like the pacification units (whether that is really working is another question, but it is at least taking steps).

So with that in mind, I realize that an ATM scam pales in comparison to any of the aforementioned unspeakable crimes, or many of the crimes taking place in Rio, for that matter. But it's emblematic of a continuing problem in Rio with the police failing to act and of impunity in general. Police sometimes are unhelpful; the last time my husband tried to report a card getting cloned in Rio a few years ago, the police actually wouldn't even file the report. When people do report crimes--in this particular case, both foreigners and Brazilians--nothing is done. All in all, this is the kind of thing that makes Brazilians purse their lips and shake their heads, and say something about how that's a shame but that's Rio. But it doesn't have to be this way, not for smaller crimes nor for the more serious ones. It shouldn't have to be.

***

I became the unwitting victim of the scam last week while traveling in Rio. I was alone and didn't want to wander around the streets with cash, so I thought I'd take out money as soon as I got the airport. The airport, after all, should theoretically be one of the safest places in the city. Theoretically.

I remembered that there were some banks on the top floors, but I just needed an ATM. I asked around and was sent to the second floor. I remember thinking that it was nonsensical that there weren't any ATMs on the arrivals floor. But I went upstairs anyway. I headed down the long hall, recognizing a drugstore where I usually buy stuff before departing flights. The drugstore was open, but the place where the ATM guard would sit was empty. A man in front of me seemed to have trouble taking out money, and gave up. I should have known better, but I was exhausted and impatient. I picked the HSBC ATM, quickly took out money, and left.

A few days later, my bank emailed me saying my account had been blocked. When I called, they told me that someone had tried multiple times to take out large sums of cash from my account. But going through each transaction with the representative, I told her that the first withdrawal was in fact mine. "Oh, I just wanted to check that," she said. "That type of ATM is associated with fraud." I cut up my ATM card.

Later, numerous people told me they'd also been victims of the same scam at the same ATMs in Galeão, and sent me links to forums--such as this one and this one--with people reporting the same crime starting in 2011 and even allegedly dating back to 2008. Not every single person who uses the ATMs is getting robbed, evidently, but a consistent pattern is clear. These types of scams take place all over the world. But the fact that one of only two sets of freestanding ATMs in an international airport have been used for several years to rob people is something that could theoretically be resolved easily.

***

Before my flight home, I briefly stopped at the drugstore across from the ATMs. I asked one of the cashiers if he ever noticed anything unusual at the ATMs. "Well, you always see all sorts of weird people," he said. I told him about the scams. He didn't seem surprised. "Yeah, I mean, this hall is totally empty," he pointed out. The guard, I noticed, was in his post this time. "The guard isn't always there," the man added. When I left, the guard was talking on his phone.

To be honest, I'm a little tired of these pre-mega-event stories, of these will-Rio-be-ready stories and is-Rio-tourist-friendly stories, and all of that. I'm much more interested in if the UPPs are working, if new transportation projects are going to happen and if they're going to help commuters, if some of the incredible new public works being built will survive in their current form after 2016. (More on that next week.) So consider this one a freebie to all of the journalists looking for a World Cup/Olympics story. Given how and which crimes seem to get the attention of police in Rio, the media might be the easiest way to tackle this one. It shouldn't be that hard to investigate, and both the tourist and civil police should theoretically have records of some of these complaints. Theoretically.

Image: Galeão, by Zel Nunes.

Q&A with the Drunkeynesian: Brazil's Food Inflation

Earlier this month, I reported on Brazil's tomato crisis, with prices of tomatoes and other vegetables rising. Soon after, the international press also began covering this issue (see Beyond Brics, FT, Bloomberg, AP, NPR, and Quartz). There were even reports in the Brazilian press of tomato smuggling across the Argentine border. One of Brazil's most popular TV personalities, Ana Maria Braga, wore a "tomato necklace" on TV and joked she was wearing gold. This weekend, two of Brazil's largest weekly magazines put tomatoes on the front cover. Much of the coverage, both domestic and international, focuses on the threat of inflation, and what rising inflation could mean for next year's presidential election. There's also the issue of consumption. Valor reported last week that due to rising food prices, supermarket sales fell 2.1 percent in February, though families spent 9.3 percent more than in February 2012. In the last week or so, tomato prices have started to go down, though prices of other vegetables--namely onions and potatoes--increased by 15 and 25 percent, respectively. Onions, too, are being smuggled across the Argentine and Paraguayan borders.

To determine what is really going on with food inflation, I talked to São Paulo-based economist Luciano Sobral, also known as the Drunkeynesian, to get his views on whether this a long-term trend, a short-term problem, or a symptom of other economic forces at play.

Tomatoes, onions, and other vegetables and food products have risen over the last year. There are climatic reasons (drought, rains) and agricultural reasons (less area planted), but what are the bigger economic forces at play?

I don’t think there are other bigger economic forces acting here, since demand for those items is pretty much stable. As you mentioned, there was a supply shock caused mainly by climatic reasons (heavy rains in the Southeast, a severe drought in the Northeast), and since arbitrage is not possible for several products (there’s no international market, at least not a liquid one where players can hedge or speculate), prices skyrocketed. Curiously, the prices of exchange listed agricultural commodities have been falling consistently since last September, so if there’s any external factor in foodstuff items it should lead to lower domestic prices.

How is food inflation going to affect inflation overall? The economy overall?

Of course the first effect is a spike in headline inflation. The infamous tomato story caused a frenzy on local media (two of the largest weekly magazines in Brazil are currently running cover stories about inflation and food prices), and called attention to a deeper, more structural problem: headline inflation is so sensitive to food prices because ex-food inflation has been quite high. Service prices are rising more than 10 percent per year. There’s a huge adjustment in relative prices going on, and it’s not favourable to capital or investments. Thus the conundrum: the current situation is very desirable politically (low unemployment and real wages rising), but it doesn’t seem sustainable, since overall profit margins look already quite weak and don’t attract new private investments. Dilma has the political incentives to postpone an adjustment until after next year’s elections, but, as a long term growth strategy, Brazil cannot rely only on state-lead, profit-insensitive capital investment.

Do you think food-driven inflation will continue into next year? Or is this a short-term issue?

I don’t see a major global uptrend in food prices, so I’d bet this is a short-term issue. Shocks related to climate are pretty much random, impossible to forecast. What’s been more or less established is that they tend to dissipate quite quickly, as soon as the climate turns favorable or higher prices attract new producers or importers to the market. An example: tomato prices hit R$12/kg a couple of weeks ago; this weekend I bought beautiful tomatoes at a supermarket for less than R$4/kg.

What does the price spike of certain foods reveal about the Brazilian economy?

Despite all the progress of recent years, Brazil remains a (somewhat) poor and (very) unequal country. The substantial weight of food prices in the average consumption basket (and, consequently, in price indexes) is an evidence of that: everytime certain food prices rise, there’s a national concern. This is similar to what happens with tortilla prices in Mexico or rice prices in some poor Asian nations. Another interesting aspect is the dependence of Brazilian food markets on local producers, since importing is not a viable emergency solution (think of taxes, red tape, complicated logistics). This tends to make supply shocks more frequent and persistent. Finally, it shows the old obsession of the country with inflation, as if it were part of our collective conscience, and how there’s little space in current inflation to accommodate shocks within the established inflation target range (2.5 percent to 6.5 percent, with a center of 4.5 percent). Brazil indeed has an inflation problem, although I don’t think it’s as dramatic as the media and some economists are painting it; only it serves as an important alert to more complicated structural issues.

Image: Courtesy of Drunkeynesian

Brazil's Tomato War

Brazil has a tomato problem. In recent weeks, the price of tomatoes has skyrocketed, making it as expensive as meat and chicken in some cases.

In supermarkets in parts of São Paulo state, Brazil's second-largest tomato producer, the price of tomatoes rose by 346 percent, from R$1.90 to R$8.49 per kilo. Wholesale prices there have also risen above 330 percent. In states like Mato Grosso do Sul and Pernambuco, prices spiked above 200 percent. In Goiás, the country's largest tomato producer, tomato prices hit an all-time high of 150 percent in April.

Nationwide, tomato prices increased 17 percent in the last week alone. Prices went up 70 percent from January to March, and rose a total of 150 percent in the last 12 months.

For an international comparison: At my local grocery store in New York, vine tomatoes are on sale for $1.97 per pound, or about R$8.61 per kilo. In São Paulo, vine tomatoes at Pão de Açucar are selling for R$14.39 per kilo--67 percent more than in New York. Even in Alaska, tomatoes cost less than in some Brazilian cities.

A number of factors are at play. Areas of tomato cultivation were reduced nationwide, in part due to heavy rains in the South and a record drought in the Northeast. There was also overproduction of tomatoes last year, which led to fewer areas of cultivation this year. In total, the area covered by tomato fields fell 16 percent in Brazil; in Goiás, by nearly 42 percent. The result of falling supply? Higher prices.

On the agricultural side, there were other factors. Some crops were hit by diseases. Agricultural labor doesn't come cheap. Small-scale farmers are often unable to invest in high-tech equipment, opting to pay for workers instead. Another theory is that the lack of policies to guarantee a minimum price based on production costs has also had an influence. Then there are the overall economic causes. High production costs, as well as high price of diesel, contribute. There's also the "Brazil cost," which includes expensive transportation costs and high taxes. 

The price spike has led to jokes in the media and on the internet, spawning political cartoons such as a robber demanding tomatoes instead of a wallet, and a woman complaining that tomatoes are too expensive to throw at politicians. It's inspired Facebook memes, showing TV host Silvio Santos giving away tomatoes as a prize, an engagement ring made with tomatoes, and an image of a robber saying: "ATMs are over with. The game's in boxes of tomatoes now."

Some people are simply cutting back on tomato purchases. But others, like an Italian restaurant in São Paulo is fighting back and "declaring war" on tomatoes. Nello's Cantina and Pizzaria announced on Facebook earlier this week that it would stop buying tomatoes and serving dishes using tomatoes until the price goes down--a fairly extreme decision for an Italian restaurant. Today, though, the restaurant posted a video showing owners negotiating 25 boxes of tomatoes at a wholesale market. (Incidentally, this is the same restaurant that, like several other upscale restaurants in São Paulo in recent memory, saw armed thieves invade the premises and rob 60 customers about a year ago.)

Some say prices will come down soon, though it's not likely to come down to previous lows. Other vegetables, like onions and carrots, have also become more expensive, hitting the highest prices in 14 years. Is this just a price flux? Or is this a sign of more inflation to come--which could have a bigger impact ahead of next year's election? We'll have to see. For now, Brazilians may just have to cut back on salad.

**Updated 4/6 with additional info on Alaska prices, corrected tomato cost per real in NYC.