0:00

In the past few decades it's been like watching

0:03

the world shrink right in

0:05

front of us .

0:06

Once considered key to increasing trade , post-shrink

0:08

peace and raising the standard of living , globalization

0:11

is now seeing a pushback .

0:13

Globalization has turned our planet into this super

0:15

connected place where everything's

0:17

buzzing Borders

0:19

. They've become kind of blurry Businesses

0:23

. Oh man , they're popping up all over

0:25

the globe . In tech , well

0:28

, it's like the ultimate game changer

0:30

, making even the most remote spots

0:32

possible market hotspots

0:35

. But the winds of change are

0:37

blowing once again .

0:38

The issue was raised at Davos , with new data showing

0:40

world exports and imports are now in retreat

0:43

for the first time since the Second World War

0:45

. Partially driving this retreat nationalistic

0:47

policies and protectionism .

0:50

Enter globalization . While

0:52

it might sound like we're hitting the brakes

0:54

, it's a bit more complicated than

0:56

that . Countries

0:58

are revisiting the whole global trade angle

1:01

thanks to the volatile past few years we've

1:03

witnessed From rising trade

1:05

tensions , evolving geopolitics

1:07

and supply chain crises driven by COVID

1:09

. Yeah , the showdown

1:12

with Russia . You also have supply

1:15

chain issues , post-pandemic tensions

1:17

with China . Everyone's wondering what

1:19

globalization will look like in the 21st

1:22

century . We're moving from that

1:24

whole worldwide party

1:26

mode to a chill regional

1:28

hangout scene

1:32

.

1:32

This episode of Things of Change Podcast , we

1:34

dive into Brazil's remarkable

1:36

economic transformation . Our

1:39

focus will be on its impressive

1:41

GDP growth and the rapidly

1:43

expanding digital revolution , all

1:46

while acknowledging Brazil's already

1:48

established global leadership in

1:51

agriculture and natural resources

1:53

. So Brazil

1:55

is crafting a new narrative of

1:57

prosperity in a world that's

1:59

undergoing significant change . Get

2:03

ready for a Samba of Success

2:05

.

2:12

If you had known how important the technology

2:14

economy was 20 years ago , would

2:17

you have done things differently ? The

2:19

internet , cell phones , the cloud

2:22

and data Things

2:25

have changed . We're here to talk about it

2:27

, hi .

2:29

I'm Jed . Hi , I'm Shikhar

2:31

, welcome to Things of Change

2:33

, your new Economics and

2:35

Technology Podcast . So

2:43

, growing up in India , I start many

2:45

podcasts like this . But the context

2:48

of how different

2:50

it is growing up outside

2:54

of the US , where I

2:56

feel the sentiment inside the US has always

2:59

been we are the best , no one's

3:01

better than us , that

3:04

kind of USA mentality . And

3:06

outside of the US , growing up in India

3:08

at least 20 years back , when it

3:10

wasn't the India of today , it was always

3:13

about , hey , we could be the next

3:15

big thing and

3:17

nothing has been more like the

3:19

next big thing , like the

3:21

BRICS . So that is the

3:24

BRICS coalition

3:26

, brics partnership , which

3:28

is Brazil , russia

3:31

, india , china

3:33

and who else ?

3:35

South Africa .

3:36

South Africa . Yes , yes , yes .

3:39

It's really the .

3:39

BRICSA , but anyway the

3:41

BRICSA yeah . And

3:45

so each country in

3:47

this coalition has

3:50

gone different parts

3:52

, different ways . China

3:55

is its different beast . China is basically number

3:57

two in the world , but the

3:59

other countries Russia has its

4:01

own thing going . South Africa

4:03

maybe we'll discuss this later , but

4:05

specifically with

4:07

regards to India and Brazil

4:09

, there's a common

4:11

theme a country that's

4:14

got a lot of people . So you have

4:16

this massive population and

4:19

you have these huge tailwinds

4:21

of great natural resources

4:24

, self-sustaining to a point , previously

4:26

agricultural countries and

4:28

now embracing the digital

4:31

revolution across the world . That's

4:33

our focus today Brazil , the biggest country

4:35

in Latin America , and

4:37

all the incredible things that are

4:40

happening in that

4:42

country , which could probably set

4:44

it on course to be a

4:46

top five economy in like

4:48

five , 10 years .

4:50

It's an interesting story . You mentioned BRICS , and

4:52

Brazil is one of those leading

4:54

economies in this coalition , right

4:57

in terms of growth . We

4:59

were taught about BRICS in college , bro . That's

5:01

so crazy Studying economics

5:03

in college , and one of the terms that you needed

5:05

to know was BRICS and why they

5:07

were being called out as separate coalition . You

5:10

know Brazil I don't know

5:12

if you've ever been to a Brazilian steakhouse man

5:14

, but the meat , the meat , great

5:17

. I just took my brother there , who's

5:19

from Europe , and he was really impressed

5:21

with with the meat that we had at Brazilian steakhouse

5:24

. But I've known it to be

5:26

a place of great

5:28

agriculture from an economics perspective

5:31

.

5:31

Sure Economics perspective Brazilian

5:33

steakhouse .

5:36

We know they got good meat . It came

5:38

into my mind again , into my consciousness

5:41

Brazil , because quite recently

5:44

a lot of things from the import-export

5:47

space and global trade

5:49

changed with these crazy events

5:51

this year , dude , because

5:53

a lot of what happened

5:56

with the Russia-Ukraine

5:58

war and the

6:00

recent opening of China has

6:03

just shed so much light on

6:05

how much of a powerhouse Brazil

6:08

can be in global exports

6:10

of agriculture I mean

6:12

food , right . Like we had this

6:14

massive shortage all of a sudden

6:16

when the Russia-Ukraine

6:19

war started and there

6:21

was this vacuum of

6:23

space left for the global trade

6:26

for food and a lot of countries

6:28

stepped up to try to provide that and

6:30

Brazil was one of those countries

6:33

who was vital for , like , exporting

6:35

I think it was soybeans and corn

6:37

, right . So it was interesting

6:39

. But these events I mean

6:42

these events honestly had pushed Brazil

6:44

to the top of

6:46

the trade surplus line , right

6:48

.

6:48

Yeah , pre-covid . I

6:50

have to mention pre-COVID , like you

6:53

know , people would be like okay , they're talking

6:55

about Brazil . Let me go to the Brazilian

6:57

stock index and see how they have performed . During

7:00

COVID it was , you know , they saw

7:03

some deep pains . They were in a recession

7:05

, and why is

7:07

? Because they are so reliant on those

7:09

exports . If China shuts

7:11

down , china is like 20% of

7:14

their exports go to China .

7:15

Their biggest trading partner .

7:17

Yeah , if China shuts down , they

7:19

don't have the money coming

7:21

in . Rightly so . The

7:25

GDP estimates were so low

7:27

during COVID

7:30

. Why we

7:32

wanted to actually focus on Brazil is

7:34

a stat that really hit

7:36

me like a train was the

7:39

GDP estimate for 2023

7:41

for the country of

7:43

Brazil was 0.7%

7:46

, so 0.7%

7:48

growth for the entire year

7:50

. In the first three months of

7:53

2023 , their GDP

7:55

growth was 4% . They

7:58

grew 4% in the first three months

8:00

, which shows how

8:02

important the reopening trade

8:04

was for Brazil . When

8:07

the world started reopening , they started

8:09

producing and exporting those

8:11

soybeans and beef and all

8:14

of that good stuff helps tremendously

8:16

. They're also one of the largest exporters

8:18

of iron . So all the

8:20

construction , everything construction

8:23

and manufacturing requires iron

8:25

right . So again , huge

8:27

cog in the

8:29

global trade wheel .

8:31

Yeah , I know Absolutely , and I think , putting

8:34

that into perspective , it hasn't always

8:36

been super rosy in Brazil . You

8:39

know , things haven't been great , as if

8:41

you've been listening to our show , you'd be very familiar

8:43

of the trend of inflation that we've been mentioning

8:45

all over the world In different types of industries

8:47

. Brazil was not exempt from

8:49

this . Obviously , they also

8:51

had a very difficult time with

8:54

inflation , and so , you

8:57

know , central banks all over the world came into focus

8:59

during this time , and what's really

9:01

cool about Brazil's economy

9:04

is that monetary policy

9:06

. They are super strict with

9:08

that shit . You can see when stuff

9:10

goes wrong when , like , a central bank

9:12

ceases to do its job of trying to

9:14

control inflation , and we've seen

9:16

that go really bad , especially on the show . But

9:19

Brazil , actually , I'm pretty impressed

9:21

with how they've worked with inflation

9:24

and used monetary policy and very

9:26

, very strict monetary very aggressive

9:28

dude . I didn't know it worked 12%

9:31

crazy .

9:33

I mean , can you imagine ?

9:35

Can you imagine 12% , dude ? I mean , we would

9:37

probably trail that at like an eight , nine

9:39

percent mortgage rate or something Like

9:41

. That's ridiculous , you

9:43

know so .

9:45

What are rates in the us Right now ? 5.5

9:47

above five . Now , yeah , we're hitting

9:49

5.5 . To double that and add

9:51

more , that's where the

9:54

cost of borrowing basically became

9:56

. So , as you can see , over covet

9:59

the businesses that you

10:02

know you need a certain amount of Money

10:04

flowing in the system for businesses to

10:07

be able to grow and consumers to be able

10:09

to spend and stuff . If inflation

10:11

is hitting you like um again

10:14

, like a train , and

10:16

then the rates are hitting you like I don't

10:18

know meteor , like it has an

10:20

impact on an economy and Inflation

10:23

has started to take down , the reason

10:25

why we are recording this right now is because

10:27

you know At least some things have changed

10:29

. We are looking forward , right . Yes

10:31

, brazil had has had a

10:33

tough couple of years , but looking

10:35

forward , it looks promising because , hey

10:38

, uh , china's reopening , so

10:40

your exports are increasing . You're

10:42

making a bit more money as a result . Inflation

10:45

is coming down .

10:46

As a result , rates are coming down , so now

10:48

businesses potentially have a bit

10:50

more like breathing room rates are now

10:52

going down , as you mentioned , and inflation

10:55

is also going down , so the pressure on the businesses

10:57

are becoming less . What

10:59

do you think's happening in the tech

11:01

space because of this ? You know our

11:03

listeners are tech enthusiasts from

11:06

all around the globe and we've actually interviewed

11:08

some founders who are also from brazil

11:10

Sinai technologies

11:13

, maria fujihara we had on the show , who

11:15

talked a lot about the things that we didn't really

11:18

notice from the tech's perspective

11:20

of happening in brazil , for example , like

11:22

there are a lot of sustainability

11:24

programs there you know , very Large

11:27

presence in the sustainability world . She

11:29

mentioned that a lot of her

11:31

work in brazil were being Copied

11:34

kind of across the globe when it comes to sustainability

11:36

, you know . So it's also a leader in that space

11:38

. But dude talk about , like what's happening

11:40

in the tech space right now In

11:43

brazil .

11:44

I came across this mckinsey study the internet

11:46

in developed countries . In advanced

11:49

economies , the internet has accounted

11:51

for 10% Of

11:54

the GDP growth over the last 15

11:56

years . 10% of 23

11:58

trillion . So if you accumulate

12:00

that , that itself is tech has

12:02

brought about trillions of wealth

12:04

creation over the last 15 years .

12:07

You realize that both of us work for

12:09

trillion dollar Companies . Yeah

12:11

, that's insane , by the way

12:13

, knowing that it's only 23 trillion , not

12:15

only , but 23 trillion dollars is the

12:18

uscd .

12:19

In developing countries like india and brazil

12:21

, the internet , according to this

12:23

study , accounted for

12:25

11 growth in the last

12:27

five years five

12:30

years . So , from 2018

12:32

, 11% of their GDP growth

12:35

is just from the internet . And

12:37

that's what I'm saying . Like you know , I we

12:39

have this conversation all the time and we'll

12:41

we'll do an india episode after this . I

12:44

was in india two or three months back . Every

12:46

time I'm in india , it feels like a different

12:49

, like it's leveling up . It

12:52

feels closer to like certain cities

12:54

, feel closer to like new

12:56

york city . Then it does to my

12:59

my memory of that city

13:01

when I lived there , you know . So it's

13:03

one of those things where you're just seeing

13:05

this like camberian explosion

13:07

of businesses and activity Thanks

13:10

to people coming online . Online

13:12

commerce and banking is like unlocking

13:15

latin america . In

13:17

2023 , 80 percent

13:19

of brazil's consumers access

13:22

finance through their cell

13:25

phones . Right , and what

13:27

is the cell phone ? Again , it's tech , it's

13:29

your broadband , it's the wi-fi

13:31

, it's the connectivity and all of that great stuff

13:33

. So you're starting to see some

13:36

big moves , even in the e-commerce

13:38

space , because , you know , spending through

13:40

the internet is e-commerce right

13:42

. In 2018

13:45

, e-commerce was like 5% of

13:47

brazil . In 2023

13:50

, post-covid , it is 11%

13:52

, doubling every five years .

13:54

No , it's big stuff , dude . It's big stuff , and

13:56

the fact is , like

13:59

Countries typically focus

14:01

on certain areas of

14:03

expertise right , and being

14:05

dependent on that one area is

14:07

very it's kind of really risky

14:10

. So I like seeing this change

14:12

that they're growing in

14:14

tech now and they're making deals

14:18

all over the place with

14:20

certain voting blocks as well

14:22

. Other regions and trade

14:24

is making a lot of this stuff better . A

14:27

developing country that is starting

14:29

to build its infrastructure

14:31

, its institutions are getting more formalized

14:34

, they're having better relationships with

14:36

some globalized countries

14:39

and they're gonna have commerce coming in seeping in

14:41

. Typically , there's one

14:43

industry that does really

14:45

, really well and

14:47

therefore leadership throws

14:49

everything they have into building that piece

14:52

of the economy , and that's kind

14:54

of what happened with Brazil in its earlier days . People

14:57

started realizing that you can trust

14:59

really good agriculture

15:01

products from Brazil

15:03

and all over Latin America and

15:06

typically they focused on those

15:09

. And if you imagine , what does

15:11

Brazil have , bro , crazy

15:13

. They're blessed with natural

15:15

yeah , brazil and state as

15:18

well but they have to fricking Amazon . They

15:20

have the biggest block of the Amazon

15:22

and that is a natural

15:24

resource heaven , although

15:27

a lot of folks have looked down

15:29

on the fact that deforestation

15:31

has been going up in that economy

15:34

for a little bit during Bolsonaro's

15:36

leadership and subsequent presidents

15:38

. That's why , like the recent

15:41

election of Lula , had

15:43

kind of changed the view of a lot of folks

15:45

when looking at Brazil but as

15:47

a developing economy they were blessed with

15:50

the natural resources . This

15:53

trend of kind

15:55

of all over the place

15:57

people are moving more

15:59

towards a really

16:01

diverse set of industries

16:04

is because of this . They're starting to realize

16:06

that when trade slows down for another

16:08

country , especially in the way that COVID did imagine

16:11

being the biggest trading partners , china

16:13

, when China slowed down , what the heck

16:15

happened , you know , when they closed ports , what would

16:17

Brazil do ? What would they do with their exports

16:19

? So I

16:21

think they realized that and leadership was

16:23

like oh shit , we got to find other

16:26

ways to grow certain

16:28

industries , and

16:30

tech is one of those that have been

16:32

growing dude Like . One thing I didn't look

16:34

into until you did the research and

16:37

you had mentioned it to me was Mercado

16:39

Libre , huge company . Dude

16:41

Like who would have thought

16:43

that was the alternative for Amazon

16:46

in the region .

16:47

And they are a payment company as well , because

16:50

you're doing your finance through Mercado

16:52

Libre right and incredible

16:55

numbers . Now Consumers

16:57

are spending a bit more .

17:00

A bit yeah .

17:01

Yeah , that is evident . The

17:03

numbers are wild . Their revenue

17:05

has jumped 50% year

17:08

over year . Year over year their

17:10

net income has five

17:12

X's . So you can

17:14

see , okay , this company

17:16

yes , it got

17:18

hit by COVID , but they

17:21

are showing that they're not only reporting

17:23

these strong metrics , strong numbers

17:26

, right , but it's a machine . Now

17:28

they are hiring aggressively to boost

17:30

its workforce . They've put like these

17:32

big hiring numbers in

17:36

different countries , actually in Latin

17:39

America , because they want to be the Amazon

17:41

of South America .

17:43

Regionally . It's a huge

17:45

advantage for them to

17:47

be growing this kind of company

17:49

. Amazon is quite

17:52

a huge company and a huge presence in

17:54

the US . We employ 2.3

17:57

million people in the country

17:59

and that also means for

18:01

a company such as Mercado

18:03

Libre , they could do the same for

18:05

that region of Latin America . So

18:08

very exciting to see these developments

18:10

. Something that

18:12

comes to my mind when I think about

18:14

these regional partnerships is when we were

18:16

looking into this , we learned a little bit about Mercasur

18:20

, which is also itself a

18:23

voting block of folks that are

18:25

also in Latin America that

18:27

have regional partnerships . I think

18:29

, tying into our Mexico episodes right

18:31

before this , a lot of

18:33

manufacturing is coming to Mexico because Mexico

18:36

is a regional partner of the US . There's easy

18:38

trade going on between the two because of NAFTA

18:40

. Mercasur is one of

18:43

these agreements where you

18:45

have trade flowing through these regions and

18:48

it's a lot easier for them to help

18:50

each other grow as a region . I

18:52

think that blocking itself in Mercasur , it has

18:54

Argentina , brazil , paraguay

18:56

, uruguay and Bolivia Quite

18:59

big countries and if

19:01

you think about it , you

19:03

can find a lot of raw materials

19:05

in these countries that make

19:08

sense to trade in between themselves . We

19:11

talked about a lot of battery production

19:14

on this show , and Bolivia has

19:16

one of the largest salt mines

19:18

. It's

19:21

very interesting to see that this

19:23

regional partnership is happening and they're helping

19:25

each other out to do trade deals . The

19:27

biggest one , I think this year that you guys will have

19:29

heard of if you're in the IMEA region is

19:31

the deal with the EU the

19:34

entire EU to have one

19:36

of the largest trade deals

19:38

signed from the EU . It's

19:42

a lot like we talked about before

19:44

. Brazil's economy is very agricultural . They

19:47

would be exporting a lot of their agricultural

19:49

products . Europe

19:51

would be exporting a lot of Finnish

19:54

goods into Brazil , and

19:56

so that partnership is very , very vital for

19:58

them because , as we're talking about , economies

20:01

are starting to diversify their industries

20:03

and this is one way they

20:05

could do . It is . Having these partnerships

20:07

and trade deals across

20:10

the region Also makes them more

20:12

stable for stuff like Black

20:14

Swan events , like COVID . When COVID

20:16

happened , you couldn't get stuff from China . Well

20:18

, what if I could get that same natural

20:20

resource from Paraguay ? Maybe they could make it there

20:22

. Maybe they could make it in . Uruguay . So

20:26

that is something that I think is a

20:29

trend that's happening across these countries

20:31

that we've been talking about , mexico and

20:33

Brazil alike , and

20:36

it's kind of showing us that there

20:38

will be kind of a different pace

20:41

to things when it comes to globalization . Now there

20:43

are still global deals happening , as we can

20:46

see with Merkocer and the

20:48

EU , but now

20:50

there's a lot more focus on regional

20:52

partners . So , whatever you have a trade deal

20:54

for Brazil , you're going to have one for Paraguay

20:57

, you're going to have one for Uruguay , and

20:59

therefore that gives it access to

21:01

freely trade in between , with less

21:03

taxes , and

21:07

those are the things that stimulate certain

21:09

economies . And we're going to see a lot

21:11

of big tech companies come out of Brazil dude , but also

21:14

the block of Merkocer . We're

21:16

going to see a lot of tech companies being supported across

21:18

the regions because we have certain partnerships . That's

21:21

the reason why people want to get in on Mexico

21:23

as well , because , as part of NAFTA , there's

21:26

going to be a lot easier flow of

21:28

trade in between the countries .

21:29

You said big companies coming out of Brazil

21:32

. Mercado Libre is 70 billion

21:34

dude Right , so

21:36

that's a big company . Now , and now hopefully

21:38

we start seeing more of these .

21:40

That's what I'm saying yeah , 100% , and

21:42

excited for where things are going today

21:44

with what we're

21:47

quoting as globalization , and

21:50

it's been really interesting seeing

21:52

these regional partnerships show up

21:55

as bigger voting blocks in the world , because

21:57

we're going to have so much more complex supply chains dude

22:00

, it's going to come out of nowhere , like

22:02

processing raw materials . I

22:04

am excited to see that grow bigger in Brazil

22:07

. Because now that they have , these partnerships with

22:09

the EU , I have a feeling

22:11

that they're going to start moving

22:13

from raw materials to

22:15

actually the processors

22:17

of these raw materials . Therefore , they can export

22:20

a lot more things , rather than just raw

22:22

materials , to the rest of the world . I mean , we learned so

22:24

much , I think , in this episode about Brazil

22:26

. I didn't know 90%

22:29

of the things we talked about today until we did the

22:31

research , and it's super interesting . I

22:34

only thought of Brazil as that one country

22:36

that I supported in the World Cup

22:38

right , because they're always killing

22:40

, yeah , and the great celebrations

22:43

. You know the amazing football that

22:45

comes out of Brazil . Now I can kind

22:47

of appreciate it for something else , which is

22:49

this growing economy

22:51

and a real mix

22:53

of different industries that are

22:55

about to burst right Now

22:58

, although things aren't perfect

23:00

in Brazil , of course . Everything else

23:02

you'll read on the news and

23:05

a lot of the issues that are coming out

23:07

as inequality , as many growing nations

23:09

have . Things

23:11

are definitely improving for a lot of people and

23:15

the growth of these industries and the

23:17

growth of the region puts Latin America

23:19

kind of in a spotlight right , and

23:22

hopefully this trend continues

23:25

. I love what it's doing for tech and

23:28

I love that leadership has

23:31

gone into a more sustainable direction

23:33

. In all

23:35

of the things we look at in Latin America , we're seeing that

23:37

there's an insane focus on sustainability

23:39

, so it's nice to see . It's

23:42

nice to see all these great developments . Brazil

23:46

is definitely part of this globalization

23:48

trend of which we named this series

23:51

after right . We'll see a

23:53

lot of things coming out of Brazil in the next

23:55

few years and the way they've persevered

23:58

through the challenging times of COVID

24:00

and things that are happening around the world

24:03

. It serves also as a good

24:05

economic use case for us to look

24:07

at for how to deal with monetary policy . Thanks

24:09

for hanging out with us . It was such a cool

24:12

episode and , as always

24:14

, stay curious . The

24:20

information and opinions expressed in

24:22

this episode are for informational

24:24

purposes only and are not

24:26

intended as financial investment

24:28

or professional advice . Always

24:31

consult with a qualified professional before

24:33

making any decisions based on the content

24:35

provided . Neither the podcast

24:38

nor its creators are responsible

24:40

for any actions taken as a result

24:42

of listening to this episode .