Don't Discount Brazil Just Yet

I love it when financial types make fools of themselves by passing judgment based only on quantitative information rather than digging into the on-the-ground issues. It reaffirms that even though I'm making far less than if I had chosen an investment banking path earlier in my career, at least I'm in the operational trenches, digging into issues that matter at a level which enlightens rather than confuses or misleads. Consider, for example, how, according to Supply Management, Mark Berrisford-smith, of HSBC, recently told a crowd that, Brazil's "growth rates are not spectacular ... It is not a superdynamic economy. It is not a manufacturing superpower. It is not the supplier we believe it to be."

Hmmm. Let's see, an LSE (or would that be Harvard or INSEAD) finance type writing off a huge manufacturing economy based on his look at the numbers -- probably after a tipple or two. But the "numbers don't lie, you say -- he must be right". Well, I could connect anyone who reads this blog with a number of phenomenal sources of supply in Brazil who are competitive on the world stage (and don't even try to compare the shipping and lead times of Brazil with China and India). Sure, one interpretation of the macro-numbers might say one thing today (and the current exchange rates are not the best). But we all know that numbers can be spun to reflect the desires of the presenter (I won't quote Disraeli's famous quip about statistics here as I recently referred to it in another post).

In my view, whenever an economist type has the urge to make a blanket judgment call that a country is not "the supplier we believe it to be" they should go on factory tours, interview key export customers -- and above all, look beyond just one perspective on the numbers from their plush office. And rather than simply reporting what Smith had to say, the trade publications have an obligation to offer critical analysis -- or at least an alternative perspective through another interviewee -- of why HSBC might be wrong, otherwise they could easily mislead their readers.

Personally, I think that banks would get more international finance and trading business if they halved the six and seven figure bonuses of their economic analysis and sell-side staff and lowered their fees for letters of credit with the savings. Now that's an econometric forecast I'd like to see.

Jason Busch

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