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VANCOUVER, British Columbia, March 31, 2023 (GLOBE NEWSWIRE) -- Pan American Silver Corp. (NASDAQ: PAAS) (TSX: PAAS) (" Pan American " or the " Company ") and Yamana Gold Inc. (TSX: YRI; NYSE: AUY; LSE: AUY) (" Yamana ") are pleased to announce that Pan American has completed its previously announced acquisition of all of the issued and outstanding common shares of Yamana (" Yamana Shares "), following the sale by Yamana of its Canadian assets, including certain subsidiaries and partnerships which hold Yamana’s interests in the Canadian Malartic mine, to Agnico Eagle Mines Limited (" Agnico Eagle "), by way of a plan of arrangement (the " Arrangement ") under the Canada Business Corporations Act
"This acquisition is transformative for Pan American, significantly increasing the scale of our operations in Latin America where we have been operating for nearly three decades," said Michael Steinmann, President and Chief Executive Officer of Pan American. "We expect a material increase in our production of silver and gold, while we continue to provide a preferred way to invest in silver through large silver mineral reserves and growth opportunities, further enhanced by the increase in our market capitalization and trading liquidity. The acquisition is firmly aligned with our strategy of creating value by pursuing attractive growth opportunities, improving operating margins and extending mine life."
The Arrangement adds four producing mines to Pan American's portfolio: the Jacobina mining complex in Brazil, the El Peñón and Minera Florida mines in Chile, and the Cerro Moro mine in Argentina. It also adds the MARA development project in Argentina.
Pan American plans to provide a 2023 operating outlook inclusive of the Latin American assets acquired through the Arrangement, as well as a consolidated forecast for annual general and administrative, exploration and project development costs, in the mid-second quarter of 2023.
Transaction consideration
Pursuant to the Arrangement, Yamana shareholders received, in respect of each Yamana Share held, US$1.0406 in cash paid by Agnico Eagle, 0.0376 of a common share of Agnico Eagle (each whole share, an " Agnico Eagle Share ") and 0.1598 of a common share of Pan American (each whole share, a " Pan American Share "). In aggregate, Yamana shareholders received US$1,001,302,560 in cash, 36,177,931 Agnico Eagle Shares and 153,758,280 Pan American Shares pursuant to the Arrangement. Upon closing of the Arrangement, existing Pan American shareholders own approximately 58% of the Pan American Shares and former Yamana Shareholders own approximately 42% of the Pan American Shares.
Full details of the Arrangement and certain other matters are set out in the management information circular of Pan American dated December 20, 2022, which can be found under Pan American’s profile on SEDAR at www.sedar.com and EDGAR at www.sec.gov.
Delisting of Yamana Shares
The Yamana Shares are expected to be delisted from the Toronto Stock Exchange as of the closing of the market on April 3, 2023, and from the New York Stock Exchange as of the opening of the market on April 3, 2023. The depositary interests of Yamana were suspended from trading on the London Stock Exchange as of the opening of the market on March 27, 2023, and are expected to be formally delisted from the London Stock Exchange and cancelled from the UK Financial Conduct Authority’s Official List as of the opening of the market on April 3, 2023. Pan American is in the process of applying for Yamana to cease to be a reporting issuer under applicable Canadian securities laws and to otherwise terminate Yamana’s public reporting requirements.
Pan American's revolving credit facility and establishment of term credit facility
Pan American has further amended and restated its existing US$500 million sustainability-linked credit agreement (the " Existing Credit Facility "), which has been increased to US$750 million. In addition, a delayed-draw term loan facility in the amount of US$500 million has been established, which will be permanently cancelled and reduced to zero if it is not drawn within 60 days of today’s date. Pan American’s new amended and restated sustainability-linked credit facility (the " Amended Revolving Credit Facility ") is led by BMO Capital Markets, The Bank of Nova Scotia and Canadian Imperial Bank of Commerce as Joint Lead Arrangers and Joint Bookrunners, and Bank of Montreal, as administrative agent.
As at March, 31 2023, Pan American had drawn US$325 million under the Amended Revolving Credit Facility, which was used to repay the US$103 million drawn on the Existing Credit Facility, fund closing costs associated with the Arrangement and to repay, in full, and cancel Yamana's revolving credit facility, under which US$205 million had been drawn.
Board of Director Changes
In connection with the Arrangement, Pan American has identified three members of the former board of directors of Yamana who will be nominated for election to the board of directors of Pan American (the " Pan American Board ") at the upcoming annual general and special meeting of Pan American (the " Meeting "), being John Begeman, Alexander Davidson, and Kimberly Keating. In addition, Michael Carroll will not be standing for re-election at the Meeting, and Chantal Gosselin will be nominated for election at the Meeting. The Meeting is expected to occur on May 10, 2023.
About Pan American
Pan American is a leading producer of precious metals in the Americas, operating silver and gold mines in Canada, Mexico, Peru, Bolivia, Argentina, Chile and Brazil. We also own the Escobal mine in Guatemala that is currently not operating. We have been operating in the Americas for nearly three decades, earning an industry-leading reputation for sustainability performance, operational excellence and prudent financial management. We are headquartered in Vancouver, B.C. and our shares trade on NASDAQ and the Toronto Stock Exchange under the symbol "PAAS". Learn more at panamericansilver.com.
For more information about Pan American contact:
Siren Fisekci
VP, Investor Relations & Corporate Communications
Ph: 604-806-3191
Email: [[email protected]](mailto:[email protected])
Cautionary Note Regarding Forward-Looking Statements and Information
Certain of the statements and information in this news release constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian provincial securities laws. All statements, other than statements of historical fact, are forward-looking statements or information. Forward-looking statements or information in this news release relate to, among other things, that we expect a material increase in our production of gold and silver; that there will be an increase in our market capitalization and trading liquidity; that the Yamana Shares are expected to be delisted from the Toronto Stock Exchange on April 3, 2023, the New York Stock Exchange on April 3, 2023 and the London Stock Exchange on April 3, 2023; that the Yamana Shares are expected to be cancelled from the Financial Conduct Authority’s Official List on April 3, 2023; statements regarding the timing of operating outlook and forecast updates; statements regarding interest rates that may apply under the Amended Revolving Credit Facility; statements relating to cancelling the delayed-draw term loan facility; statements regarding an investment grade credit rating; that the Meeting is expected to occur on May 10, 2023; and that John Begeman, Alexander Davidson, Kimberly Keating and Chantal Gosselin will be nominated for election at the Meeting.
These forward-looking statements and information reflect Pan American’s current views with respect to future events and are necessarily based upon a number of assumptions that, while considered reasonable by Pan American, are inherently subject to significant operational, business, economic and regulatory uncertainties and contingencies. Pan American cautions the reader that forward-looking statements and information involve known and unknown risks, uncertainties and other factors that may cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements or information contained in this news release and Pan American has made assumptions and estimates based on or related to many of these factors. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking information are the following: the duration and effect of local and world-wide inflationary pressures and the potential for economic recessions; the duration and effects of COVID-19, and any other pandemics on our operations and workforce, and the effects on global economies and society; fluctuations in silver, gold and base metal prices; fluctuations in prices for energy inputs, labour, materials, supplies and services (including transportation); fluctuations in currency markets (such as the PEN, MXN, ARS, BOB, GTQ and CAD versus the USD); operational risks and hazards inherent with the business of mining (including environmental accidents and hazards, industrial accidents, equipment breakdown, unusual or unexpected geological or structural formations, cave-ins, flooding and severe weather); risks relating to the credit worthiness or financial condition of suppliers, refiners and other parties with whom Pan American does business; inadequate insurance, or inability to obtain insurance, to cover these risks and hazards; employee relations; relationships with, and claims by, local communities and indigenous populations; our ability to obtain all necessary permits, licenses and regulatory approvals in a timely manner; changes in laws, regulations and government practices in the jurisdictions where we operate, including environmental, export and import laws and regulations; changes in national and local government, legislation, taxation, controls or regulations and political, legal or economic developments in Canada, the United States, Mexico, Peru, Argentina, Bolivia, Guatemala, Brazil, Chile or other countries where Pan American may carry on business, including risks relating to expropriation and risks relating to the constitutional court-mandated ILO 169 consultation process in Guatemala; diminishing quantities or grades of mineral reserves as properties are mined; increased competition in the mining industry for equipment and qualified personnel; the ability of Pan American and Yamana to successfully integrate operations and employees and realize synergies and cost savings, and to the extent anticipated; and those factors identified under the heading "Risk Factors" in Pan American’s management information circular dated December 20, 2022 and under the heading “Risks Related to Pan American's Business” in Pan American’s most recent form 40-F and annual information form dated February 22, 2023, filed with the United States Securities and Exchange Commission and Canadian provincial securities regulatory authorities, respectively.
Although Pan American has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated, described or intended. Investors are cautioned against undue reliance on forward-looking statements or information. Forward-looking statements and information are designed to help readers understand management's current views of our near and longer term prospects and may not be appropriate for other purposes. Pan American does not intend, nor does it assume any obligation to update or revise forward-looking statements or information, whether as a result of new information, changes in assumptions, future events or otherwise, except to the extent required by applicable law.
​
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Introduction
Here's another effortpost on Brazil! This time I'll be talking about why the Brazilian economy stagnated, and what we can expect from Lula in terms of economic policy (I've talked about this in the past but now I'll go into more detail).
Between 1920 and 1980, Brazil was a clear economic success story. For 60 years, our GDP grew at an average of 4% a year. This 'golden age' ended in a hyperinflation crisis, which made the 1980s become known as a 'lost decade', and since its resolution in 1994 with the Plano Real, our economy has experienced minimal growth: from 1980 to 2020, the average GDP growth rate was only 0.7%.
Evolution of the Brazilian per capita product, at 2010 prices, from 1900 to 2021. The scale of the graph is logarithmic in base 2.
In this post, I'll try to explain the reasons for Brazil's low growth in the last four decades and what Lula's plans are to address them.
The debate
Before delving into the actual causes of the "semi-stagnation", I would like to explain the economic debate in Brazil. This debate revolves around two major groups of economists: the "developmentalists" and the "liberals." The term "developmentalism" may be unfamiliar to many people here, but it is very present in Latin America. A decent explanation for it could be "dirigisme with Latam characteristics."
In short, liberalism in this context is associated with economic orthodoxy and a pro-market orientation in economic policy, while developmentalism leans towards economic heterodoxy and advocates for direct state interference in the economy. This debate is, in theory, separate from the traditional right versus left political divide, as we have had governments from both ends of the political spectrum adopting policies aligned with either school of thought. For instance, Lula I (2003-2007) represented a left-wing liberal government, while Geisel (1974-1979) presided over a right-wing developmentalist government. However, in practice, liberalism is associated with the right-wing while developmentalism is associated with the left-wing.
One area of major divergence between those two groups is full employment. Liberals argue that the Brazilian economy generally operates at full employment, which means that there are well-defined supply-side limits and restrictions in the economy, whereas developmentalists believe it tends to operate below that level. This implies that the economy's natural state is one of perpetual aggregate demand deficiency, and thus the government could just increase spending to mobilize idle production factors and stimulate economic growth.
Furthermore, liberals typically view direct state intervention in the economy with distrust, opposing increased public investments in infrastructure and most forms of industrial policy. Their preference generally leans towards reducing government spending and relying on a 'crowding in' effect, together with supply-side reforms. Conversely, developmentalists perceive state intervention as a necessity to stimulate the economy, favoring a robust industrial policy and increased public investments.
Those are significant oversimplifications, and many economists do not align themselves with either group. In any case, I would say this categorization reasonably represents the current debate.
It's a tradition in Brazil to divide ministries between liberals and developmentalists to ensure a balance between the two. The current Finance Minister, Fernando Haddad, believes in a middle ground approach, with some of his secretaries (e.g., Guilherme Mello) leaning more towards developmentalism, while others (e.g., Bernard Appy) lean more towards liberalism. Planning Minister Simone Tebet and Industry and Commerce Minister Geraldo Alckmin are firmly in the liberal camp. However, due to the nature of his ministry, Geraldo Alckmin will probably concede more to developmentalist policies (as he's already doing). Aloizio Mercadante, the President of the National Bank for Economic and Social Development (BNDES), is considered the leader of the developmentalist branch of the government, along with Workers' Party President Gleisi Hoffmann (some people jokingly refer to her as the main opposition to Fernando Haddad and the 'Twitter Shadow Finance Minister' due to some of her tweets).
Without further ado, let's get to the causes of Brazil's stagnation.
Guido Mantega (Finance Minister between 2006 and 2014) and Antônio Palocci (Finance Minister between 2003 and 2006). Mantega is associated to developmentalism and Palocci to liberalism.
Education
First of all, the significant growth of the 20th century left a terrible educational legacy. Brazil only began to have a somewhat consistent educational policy in the 1990s and 2000s, when basic education was universalized. To put it into perspective, in 1990, the average number of years of schooling in Brazil was 3.8 years. Even Sub-Saharan African countries like Congo, Zimbabwe, and Zambia had higher average schooling levels than ours. Approximately a quarter of the population were illiterate.
The key change came with the 1988 Constitution, which decided that Brazil would try to become an European-style social democracy. Since then, considerable progress has been made, but clearly not enough. The main educational bottleneck lies in Elementary School II, which typically spans the ages of 12 to 15. It is during this stage in Brazil that the discrepancy between age and the appropriate grade level drastically increases, leading to higher rates of grade repetition and students falling behind in their education.
This problem is probably related to the transition from a single teacher trained in pedagogy in Elementary I to several specialists teaching only one subject. This transition also occurs at the onset of adolescence, which is naturally a turbulent phase already, with the introduction of drugs, alcohol and various forms of prejudice being normal. The result ends up being a distancing of the student from school.
Two Brazilian states, which have been governed by center-left parties for many years, serve as examples in Brazilian educational policy: Pernambuco and Ceará.
A highlight in Ceará is the Programa de Afabetização na Idade Certa (Program of Alphabetization in the Right Age), which aims to ensure that all students in the state's public school systems achieve literacy by the age of 7. The plan was based on the following pillars: (1) the elaboration of a specialized literacy curriculum that was adopted in all the municipalities, with structured materials for teachers and students containing a daily routine of classroom activities and homework assignments; (2) pedagogical practices to encourage reading in the classroom; (3) financial incentives for the municipalities that achieve better results in education; and (4) evaluation and monitoring of the program, with a census and diagnostic test that is applied at the beginning of every semester.
Pernambuco has implemented a Full-Time High School system that stands out. The system is based on the following pillars: (1) the introduction of a subject called "life project," which encourages students to create plans with goals and objectives for their lives; (2) guided study, providing a space for autonomy in learning and fostering self-directed learning skills; (3) hands-on, practical classes that combine theory and practice; (4) youth clubs, where collective interests of young people are pursued; (5) tutoring, where teachers (tutors) interact with students to support their development; and (6) full-time education, of course.
Both plans have been tremendous successes and could be implemented nationwide. The Member of Parliament Tabata Amaral has proposed the program "basic education like Ceará's, high school like Pernambuco's." We might see that put in practice. Izolda Cela, the mind behind Ceará's basic education plan, is the Executive-Secretary of the Ministry of Education, and the current Minister of Education is Camilo Santana, the governor of Ceará between 2014 and 2022.
Izolda Cela (Executive-Secretary of the Ministry of Education) and Camilo Santana (Minister of Education).
Public Investments
Furthermore, there is a general consensus that the significant decrease in public investment since 1980 explains part of the problem. During the Golden Age of Brazilian growth, public investment mounted to about 6% of GDP, whereas it currently stands at approximately 4% since the lost decade. Liberal economists tend to attribute this to the expansion of the welfare state, that came with a substantial increase in the tax burden (from 25% of GDP in the 1970s to 35% in 2000). On the other hand, developmentalist economists point to the decline in public savings due to the privatization of state-owned enterprises in the 1990s.
In his second government, Lula created the Programa de Aceleração do Crescimento (PAC) (Growth Acceleration Program), whose objective was precisely to expand public investments. Unfortunately, the plan ended up with highly controversial results, primarily due to the low administrative capacity of the Brazilian State and corruption (some like to call the plan the Corruption Acceleration Program!).
But now the Workers' Party has gained new experience. Many of its state governments became famous for extensive investment programs in partnership with the private sector, delivering positive results. Chief of Staff Rui Costa, in particular, had a successful experience with public-private investments during his tenure as the governor of Bahia. He is now expected to lead the "New PAC", which will probably be announced at some point between today and July. (The project still has no name and is provisionally being called "New PAC").
Here's what Rui Costa has said about the project: "We will have, in an unprecedented way, investments with Public Private Partnerships (PPIs) at the federal level. Many states, including Bahia, have made PPI projects. [...] We are negotiating with the Ministry of Finance the conditions for guarantees so that we can leverage these projects."
Lula wants to meet with the 27 state governors to determine which state projects the Union should prioritize for its investments. In recent weeks, Costa has held individual meetings with the state governments to define which projects will be included in the new PAC. In all, eight governors have already been heard.
In a speech on the May 1st holiday, Lula said the following about the project: "We are inviting foreign businessmen to invest in Brazil and we are showing them the great projects that we are going to present in the third PAC. It will be the largest infrastructure project in this country."
Former Governor of Bahia (2014 - 2022) and current Chief of Staff Rui Costa.
Deindustrialization
Another problem is the early deindustrialization that is taking place in Brazil: we are losing our industry before becoming rich. In the beginning of the lost decade, the industry accounted for one-quarter of the Brazilian GDP, whereas today it represents around one-tenth. The reason for this process is complex, and once again, economists disagree. Liberals point to the new form of production organization that emerged with globalization, where the manufacturing of goods was fragmented into different stages, each executed in different countries. According to this line of thinking, Brazil failed to adapt to the new industrial configuration and remained stuck in an unrealistic autarkic dream. On the other hand, developmentalist economists usually argue that after the end of hyperinflation, Brazil fell into a trap of having an overvalued currency and high interest rates, demolishing the industry's competitiveness. (I am more inclined towards the first thesis, although it is a fact that the Brazilian exchange rate was detrimental to the industry after the Real Plan).
Now I want to talk a little bit about the Brazilian industrial bourgeoisie and its problems. In the 1960s, the then sociologist and future president Fernando Henrique Cardoso published his thesis on the Brazilian industrial entrepreneurs. Based on his research, he concluded that Brazilian industrialists did not have any national project, and (1) "only cared about their personal interests when speaking on behalf of the class" and (2) "[their] political action consists of personal participation in the patrimonialist game." Brazil has a serious problem related to what we call 'patrimonialism,' which refers to the capture of resources from the Brazilian state to benefit private interests.
Unfortunately, industrial policy in Brazil often results in tax exemptions, subsidies, tariff protections, etc., for an inefficient, patrimonialist, and somewhat broken industry that was developed in the 20th century. The Workers' Party itself fell into this outdated corporatism while in power, especially during the first Rousseff administration (2011-2015). It is a shame that advocating for greater state involvement in the economy ends up becoming a defense of those interest groups.
In this sense, I find myself opposed to both liberals and developmentalists. While the latter end up promoting an agenda that only benefits private interests, albeit with good intentions, the former dismiss any state planning, believing in an 'economic abiogenesis.' Since 2016, we have been reducing the role of the state and waiting for a crowding in effect, but with no success. We need strong a industrial policy, but it has to be transparent and not perpetuate the old game of patrimonialism.
In the words of the brilliant economist Laura Carvalho: "We want a State that identifies ways to stimulate technological innovation and product development in partnership with the private sector. But this policy cannot become hostage to the existing private sector. We have remnants of our industry of the 20th century, for example the automobile industry, and when we do industrial policy, we end up just giving incentives to them. This is a state that does not choose winners, but rather is chosen by losers. Those who are struggling in the industry try to eat the resources of the state to survive."
Unfortunately, the signals from the new Lula government are quite negative. Industry and Commerce Minister Geraldo Alckmin recently announced a plan of incentives for the automobile industry, which is essentially the same program that has failed several times in the past. There are positive things coming from his ministry, but few of them have much to do directly with a well-made industrial policy. It's a shame.
His plans beyond industrial policy appear positive, as shown in the following excerpt, at least: "Brazil had an early deindustrialization. Europe also deindustrialized, but ours was precarious and severe. More than reindustrializing, we need a neo-reindustrialization. A central issue is the competitiveness agenda. There is a principle in medicine that says: suppress the cause and the effect ceases. We have to act on the causes of low growth. Our tax model generates an absurd cost for companies. It is not fair. We have an absurd judicialization that leads to legal insecurity and hinders exports. The whole world has a VAT (value added tax. I defend it. I think Haddad is doing well and I am a great enthusiast of the tax reform."
Probably more than any other politician of expression today, Haddad positions himself as a republican and talks about reducing the patrimonialist distortions of the Brazilian public budget. He talks about "closing the drains of what is called Brazilian patrimonialism" and "ending a series of abuses that have been committed against the fiscal base" of the country. He says that many sectors have been "overly" benefited "with rules established over the decades and that have not been reviewed by any outcome control. Many have expired from the point of view of efficiency, and need to be revoked."
Former Governor of São Paulo (2001 - 2006; 2010 - 2017) and current Vice-President of Brazil and Minister of Industry and Commerce Geraldo Alckmin.
Business Environment
Brazilian productivity has been stagnant for decades. What is causing this? The main suspect is the Brazilian tax system. There is an enormous complexity in the various indirect taxes (ISS, ICMS, PIS/Cofins, and IPI), which forces every company to have an excessively large department dedicated to tax payment. Additionally, numerous divergences of interpretation arise between the Federal Revenue, state authorities, and businesses. On every corner of our cities, there is a specialized tax law office to assist companies in dealing with the extremely high level of litigation in our taxation system. To make matters worse, our indirect taxes discourage investment in locations with higher social returns, as the tax complexity and special tax regimes artificially alter the profitability of investments and production. A general simplification of these taxes, with the adoption of a Value Added Tax, could have an impact on the economy's efficiency equivalent to the Plano Real, which ended hyperinflation.
Even beyond the tax issue, the Brazilian business environment is terrible. According to the World Bank's Doing Business 2020 report, which measures the ease of doing business in 190 countries, Brazil ranks 124th. This problem is related to excessive bureaucracy, unexpected judicial decisions, loopholes in regulatory frameworks, and disrespect for contracts.
The Tax Reform is going to be the government's main priority after the approval of the New Fiscal Anchor. Planning Minister Simone Tebet summed up the reform as follows: "The Tax reform is the only silver bullet that we have to save Brazil."
And here's what Finance Minister Fernando Haddad has said about it: "There is no way to grow Brazil's productivity with this tax system [...] We are developing a tax reform that is even more modern, because it introduces in the national tax system a Value Added Tax that solves a good part of the flaws of the current system that, in my opinion, is the great villain for the low growth rates of our productivity." The idea is to approve the Tax Reform still this year (Haddad talks about doing it in the first semester!).
Special Secretary for Tax Reform Bernard Appy.
Economic Isolation
Brazil has a very closed economy. Among the 160 countries analyzed by the World Bank, the Brazilian economy is only less open than that of Sudan. The average protection applied by Brazil to capital goods is 14 times higher than in Chile and 25 times higher than in Mexico. This is probably the most expressive cause of the low productivity and deindustrialization in Brazil, together with the tax system. Here, I quote the brilliant economist Edmar Bacha: "[The closure of the Brazilian economy during the Geisel government (1974 - 1979)] caused a tremendous drop in the economy's productivity and an increase in the cost of capital goods. And this, I believe, is what lies at the root of our stagnation after the so-called economic miracle (1968-1974). Our industry became unable to compete internationally. And we were forced, because the industry has this extraordinary lobbying capacity, to prevent the redesign of the Brazilian industry to participate in global value chains."
Bacha's argument makes sense: the collapse of GDP growth coincides with the collapse of capital accumulation (the growth rate of the capital stock) after Geisel's government. Why did capital accumulation collapse? Bacha explains that using a decomposition of the investment = savings relationship: K' = s(1/p)v - δ, where K' = capital accumulation, s = savings rate, p = relative price of investment, v = output-capital ratio, and δ = depreciation rate.
Between 1950-1980, the "golden age" of Brazil, K' grew at nearly 9% per year. Between 1981-2014, this number was 3%. Why? Looking at the historical series, the difference is not in savings or depreciation. What happened was that the output-capital ratio fell by about one-third, and the relative price of investment increased by one-third. In other words, the capital requirement per unit of output increased significantly, and at the same time, the price of investment goods rose significantly. According to Bacha, this process occurred between 1973 and 1983, a period in which the Military Government pursued an autarkic economic policy.
The ideal scenario for Brazil would be to open its economy and have an export-oriented industry. The industry we have developed is heavily reliant on our domestic market, without external competition. In the words of economist Nelson Barbosa: "Brazil cannot produce ships, but it can produce airplanes. Brazil does not have car manufacturers, but it has bus manufacturers. Brazil cannot have a domestic production of microelectronics, but it has a good domestic production of electric motors. So we need to study what worked in these sectors to see if it can be replicated in other sectors. All these successful sectors, Embraer, Weg, Marco Polo, are sectors that are competitive in Brazil and in the world. Here is the first clue: correct industrial policies create domestic production that competes domestically and internationally. They are integrated products that import and export extensively. Value chains."
However, an open trade policy without a plan may not be positive either. In Nelson's words: "Development always means increased productivity. Opening the economy can stimulate productivity, but it can also lead to a negative specialization. You can open your economy and become a country that only exports commodities, with an inflated services sector that only sells domestically, with a significant portion of your population relying on informal jobs. Which is what happens in Brazil. So I think trade openness is inevitable, more developed countries are more open, but thinking that just opening up will automatically lead to development is naïve and something we shouldn't do in the 21st century. I believe that strategic trade integration is crucial and necessary for development. Unilateral openness, without any plan, will only reinforce the specialization we already have today."
In any case, it is certain that the current excessive protectionism cannot be maintained. Opening up would allow broader access for companies to (1) cheaper and higher-quality inputs and (2) foreign-produced capital goods and technology, (3) create significant competition effects to invigorate the economy, and (4) create a 'selection effect' that would eliminate losers and favor winners.
But this is the agenda that I am least hopeful about. Trade openness is a topic that faces strong opposition from the Brazilian left and would likely only occur under a moderate center-right government. I hope, at least, that some trade agreements can be reached to open up the economy. The European Union-Mercosur trade agreement would have a significant impact and would be very important but I'm not very hopeful that it'll be approved.
Haddad is still optimistic, though! He said that a more emphatic diplomatic effort will be made starting in the second semester, in a movement that will take advantage of Brazil's leadership in Mercosur and Spain's leadership in the European bloc.
Simone Tebet (Planning Minister) and Fernando Haddad (Finance Minister).
Interest Rates
Interest rates in Brazil are much, much higher than the global average. Our credit is scarce and dysfunctional. Lula likes to repeat that Brazil is a capitalist country without capitalism because there is no credit.
Brazil has the second-highest bank spread in the world, second only to Madagascar. This means that banks in Brazil charge very high interest rates for lending money. To give you an idea, Brazil's bank spread is higher than the average observed in countries at war. There are several reasons for this, but some stand out: (1) savings in Brazil have historically been very low (around 20% of GDP), (2) the government consumes a significant portion of savings to finance itself, and (3) the Brazilian banking sector is extremely concentrated, with a few banks dominating the entire sector.
The other issue in this discussion is the current policy interest rate set by the Central Bank. Brazil currently has the highest real interest rate in the world, at around 9%. The debate about whether this interest level is correct or not is quite active in Brazil, with its proponents arguing that the current Brazilian inflation is demand-driven and pointing to inflation in the services sector and core inflation, while its critics argue that inflation is not demand-driven, pointing to the fact that Brazil has had a negative output gap since 2015 and that supply shocks can explain the inflation in services.
This debate is complex, and it is hard to determine definitively which side is right. Nevertheless, the Central Bank is strongly adhering to the first thesis.
The current Chairman of the Central Bank, Roberto Campos Neto (RCN), is the grandson of an economist of the Military Dictatorship and was appointed by Bolsonaro. He will remain in his position until 2024 due to the new autonomy granted to the Central Bank in 2021. In this scenario, Lula engaged in a public war against RCN, urging him to lower interest rates. The situation became tense, but Lula never showed any willingness to take effective action to remove him, remaining only in rhetoric. Throughout the conflict, Haddad positioned himself as a moderate, playing a certain "good cop, bad cop" game with Lula and gaining trust in the financial market. Apparently, Lula intends to nominate former executive-secretary of the Finance Ministry Gabriel Galípolo to replace RCN in 2024. He was recently appointed as director of monetary policy at the Central Bank, and is widely identified as a heterodox economist.
Haddad's current plan is to stabilize Brazil's deficit to allow for a monetary loosening. Here's what he said: "We are not at a point where fiscal expansion is going to help the economy. If there is room for any stimulus, it will be monetary. If we know how to make the transition, there is room for a lower interest rate, you just have to give security to the monetary authority." He does not seem to be concerned about banking concentration, though.
Chairman of the Central Bank Roberto Campos Neto.
TL;DR
The Brazilian economy has seen very little growth since the the lost decade in the 1980s. One of the primary factors contributing to this stagnation is the economy's low productivity. There are several reasons behind this low productivity, including:

1. Inadequate infrastructure and insufficient investments in its development.
2. A significant delay in comparison to other countries in terms of investing in education.
3. Unreasonable economic protectionism.
4. Private groups exerting undue influence and capturing the Brazilian state (patrimonialism).
5. Failure to adapt our industry to a globalized world.
6. Excessively high bank spreads.
7. A terrible business environment, particularly due to the tax system.

There are other reasons for sure, but I'd say most people would agree those are the most important ones. Also, here's my effortpost on the Workers' Party, in case you haven't read it.

Half of Americans can't afford an unexpected expense, so what happens when they need a car repair or their job sends them home early for a week? For millions, the answer is often a high-cost payday loan that usually carries an exorbitant interest rate. [LOANSANGEL - up to $5,000]
But better options are now available after years of advocacy from consumer groups and new federal rules. Some large banks now offer small-dollar loans at rates far cheaper than payday loans. Since 2018, six banks — Bank of America, Huntington Bank, Regions Bank, Truist, U.S. Bank and Wells Fargo — let checking-account holders take out short-term loans of $10 to $5,000, making it more affordable to handle a financial emergency or make a purchase.
"They require no travel to a branch and no waiting for an online lender to review an application and transmit the funds," the Pew Charitable Trusts wrote in a recent report. "Instead, customers complete short applications via the bank's website or mobile app [LOANSANGEL], and the bank deposits the funds, usually within minutes, into the customer's existing checking account."
The typical interest rate on such products, sometimes called installment loans, can rise as high as 18%. But that's less than the nearly 21% average annual percentage rate on credit cards today, and they're far more affordable than the short-term financing peddled to people with poor credit, such as payday, car title or pawn shop loans. Compared with such options, a small bank loan is about 5 times cheaper, Alex Horowitz, who leads Pew's consumer finance research and authored the lending report, told CBS MoneyWatch.
Payday loan math: $1,000 loan over a 12-month term would have a total cost, including interest, a total payback amount of $1,134.72. APR 29.82%. Rates between 5.99% APR and 35.99% APR for qualified customers. Loan term lengths from 3 to 36 months for qualified consumers.
Some states have moved to regulate these loans, with 18 states capping APRs at 36% or less, according to the Center for Responsible Lending.
It doesn't take a financial disaster to push people into borrowing. In a 2022 survey, the vast majority of borrowers said they used a payday loan for everyday expenses, such as food, rent or utility bills. Just 16% said they had an emergency expense, and 8% said they used the loan for "something special."
\"A lot of Americans don't have much margin for error and need a little help when they get fewer hours at work in a week or have an unexpected expense,\" Horowitz said.
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Payday loans have one major benefit: They're a fast way to get money if you're desperate.
Until recently, banks generally shied away from offering small-dollar loans. It wasn't clear that it was legal for banks to lend without pulling a credit report, the cost of which outweighed the potential profitability of lending a small amount of money to a financially strapped customer.
But after guidance from financial regulators in 2020, some banks started offering these products, which rely heavily on automation and a customer's checking account history. Examining how often a customer makes deposits and withdrawals is often a better indicator of whether they can repay a few hundred dollars than a traditional credit report, Horowitz said.
Because the process is so automated, there's no way to ask for one, Horowitz noted — a person logs into their bank account, and if they're eligible to ask for a loan they'll see the option. "Banks want to show these loans to people who qualify for them, not people who don't," he said.
Some credit unions offer a similar product called a Payday Alternative Loan. Still, Horowitz said that tens of millions of Americans lack options for affordable borrowing in a pinch, and Pew is pushing for more banks to offer this option.
LoansAngel makes possible to request such financial services as personal, installment and payday loans with a single application form. Such solution will help to find more options for your clients. Loan amounts may vary from $100 to $5,000.