The Biggest News Story of 2009 (and Predictions for 2010)
THE BIGGEST STORY OF 2009
My family has a tradition in which, sometime before midnight on New Years Eve, each person chooses the biggest news story of the ending year and makes one prediction for the coming year.
Regarding the biggest Brazil-related news story of 2009, there were several to choose from, including the still-unsolved tragedy of the Air France flight from Rio, the award of the 2016 Olympics, the rise of Sino-Brazilian relationships (China passed the US as Brazil’s largest trading partner) and the unfortunate Goldman-Bianchi custody battle.
In my opinion, however, the biggest Brazil-related biggest news story was not a single definable event but rather 2009 as the year in which Brazil took its place as an economic powerhouse on the world stage. In 2009, the world realized that Brazil’s legendary potential had become real.
2009 was also the year that Brazilians themselves accepted this new reality: some of the biggest skeptics of Brazil’s rise have been Brazilians themselves, who have been jaded by the country’s previous false starts but there are few skeptics left.
In the beginning of 2009, when I told people that I do business in Brazil, I often got blank stares or some form of the question, “Why?” By the end of the 2009, I got eager looks and some form of the question, “Can you tell me more?”
PREDICTION FOR 2010
Regarding predictions for 2010, I have nothing too creative. My primary call for 2010 is that the Brazilian IPO market will come back strongly, which will lead to large gains for private equity firms and drive further investment in Brazil-related private equity funds. This momentum will eventually drive investment in select venture funds, as well.
On the negative side, I feel concerned about further measures Brazil may take to prevent the appreciation of its currency. The goal is to help Brazilian exporters, which is understandable (stronger currency = more expensive products = less exports). The recent 2% tax on foreign investment, however, came as a surprise and a reminder of the risk of sudden changes in the rules.
The US will sputter along, with tepid growth derived almost solely from profligate government spending. Underlying economic fundamentals in the US are and will remain very poor. High levels of public spending, necessary to prevent financial collapse in late 2008 and early 2009, has recently devolved into the creation of massive new entitlement programs (e.g., healthcare) that we cannot afford at this time.
The world has begun to realize that the America’s balance sheet is not healthy – even China, the largest purchaser of US government bonds, has begun to get indigestion. Soon we will have to pay significantly highest interest rates to entice buyers to purchase our debt.
US citizens can look forward to a crushing debt burden and damaging inflation but those are probably 2011-2012 issues.
All the more reason to focus on Brazil for the next few years.
Personally, I feel grateful to be connected to two wonderful countries that, despite some near-term challenges for the US, have a wonderful long-term future.
Happy New Year – Feliz Ano Novo!!
