Francis for Brazil

The Malta Independent



This has nothing to do with Francesco de Assis Querioz who was scandalously despatched back to Brazil saving 12 years jail and fifty thousand liri fine on flimsy medical grounds to the delight of those who were exposed to his divulging all he knew.

It has to do with St Francis of Assisi whose feast falls today the fourth October.` In my numerous family of fourteen off springs St Francis was always an inspiration. My sister, ten years older, joined the Franciscan Sisters and she is currently their Mother Superior. She reinforced the culture of devotion towards St Francis which made it a double celebration on the day which happens to be my birth-day.` I was not called Francis only because in devotion to the saint my parents had so named my elder brother. `Globalisation is showing its displeasure with Lula and is punishing Brazil for exercising its democratic right, by devaluing the Brazilian currency, the real, and by pricing Brazilian bonds at a high default risk discount.`

As the world tethers on the brink of war and recession may be we need to listen to St Francis`s message in managing globalisation for the good of mankind. `For unless globalisation is managed in a way that promotes economic growth in harmony with environment protection and eradication of poverty, two values so strongly promoted by St Francis of Assisi during his lifetime, then globalisation is destined to failure sourcing discontent, protests, terrorism and wars.

Next Sunday there is the first round of the presidential elections in Brazil. The Leader of the Workers Party Luiz Inacio Lula da Silva (Lula) seems heading for a victory at the fourth time he is asking. The government preferred candidate Jose Serra, is a distant second and Lula could win outright in the first run or face a run-off with Serra in the second turn.

Globalisation is showing its displeasure with Lula and is punishing Brazil for exercising its democratic right, by devaluing the Brazilian currency, the real, and by pricing Brazilian bonds at a high default risk discount.

Which brings into question whether globalisation in its current largely uncontrolled form is consistent with the spread of democracy to under-developed countries. `In many instances default fear could become a self-fulfilling prophecy`

Brazil is a country rich in resources but has always been exploited by foreign interests. Leaders who tried to defend Brazilian interest were quickly eliminated whereas ones who served well the interest of foreign investors and exploiters survived. Like many South American countries Brazil has a legacy of high inflation and fragile financial systems. When it needed to borrow to finance its development Brazil could not do so in local currency as there were no savings to source it.` Locals never trusted their own financial system and exported their capital.

Consequently Brazil`s debt is largely in foreign currency or linked to it. As the real devalues, the burden of Brazil`s debt increases proportionately. Apart from this the maturity profile of the debt is rather concentrated on the short term.` Each year Brazil has to negotiate renewal of a large chunk with foreign banks and bondholders.

Banks and bondholders price a default risk and force Brazil today high interest rates ` in normal times 7% above what investment grade countries pay and in turbulent times like the present the margin could increase to 20% or more. These are rates that could hurt even the American economy let alone Brazil`s.

In many instances default fear could become a self-fulfilling prophecy. Bondholders who in their private life give charitable donations for the missions of Brazil feel at peace with their conscience investing in Brazilian bonds at extortionist rates. Default could almost be rough justice with such investors but could bring more confusion and poverty to Brazil who, unlike Argentina, was following rigid IMF reform programmes.

Brazil deserves much better than being destroyed by the globalisation it is seeking to join. Brazil and many other poor countries can only conduct successful reform programmes and benefit from globalisation if G7 countries include a dimension of debt cancellation to benefit countries seriously trying to get their act together. The world needs the spirit of St Francis of Assisi.

Alfred Mifsud