Randomly Noted

We met with Sergio Cabral, governor of the state of Rio de Janeiro today. The 47-year-old is a smooth pol who never goes off message. His message today was: A bill to redistribute oil royalties is unconstitutional, and unfair to Rio, which produces the lion’s share of Brazil’s oil. We’ll let Brazilian lawmakers duke it out in Brasilia – and in the press – as they have been doing in recent days. When Rio won the 2016 Olympics last year, I wrote that the related costs would saddle the city with massive debts and *white elephant* facilities. I still view this as a risk, with a caveat: If Cabral and his coterie deploy Rio’s wealth wisely, the city will turn a corner and become a livable and visit-able world-class city — offsetting any negatives associated with the Olympic games. Cabral himself is a bit of a cipher, but I felt reassured by the smart, worldly Joaquim Vieira F. Levy, a former national Treasury minister now serving as Rio state’s Secretary of Finance. I met Cabral and Levy at an “Invest in Rio” conference sponsored by The Wall Street Journal. Also interesting were some of the industrialists and public pension fund managers with stakes in Rio’s future – such as Fabio de Oliveira Moser, chief investment officer of PREVI, Banco do Brasil’s employee pension fund. He has money to deploy in Rio, and is scrutinizing commercial and residential redevelopment opportunities. One came away from the conference believing that Rio’s huge, decrepit port area will emerge as an attractive, thriving destination for tourists, not to mention locals; and that an ongoing effort to more effectively police the favelas is having the sort of impact that will genuinely improve the lives of the poor. It’s so hard to gauge the future of Rio from afar. But one has the sense that 1) Brazil’s robust 5% annual GDP rate — likely to continue for a decade, according to superstar businessman Eike Batista; 2) the burgeoning oil sector centered in the state of Rio; 3) this autumn’s national elections which will underscore democratic Brazil’s political stability; and 4) the World Cup and Olympic games in coming years – all of these factors add up to a real turning point for Rio de Janeiro. “Rio is becoming a garden of opportunities, said Moser. The dynamic, youthful Elvio Gaspar, director of BNDES, the Brazilian Development Bank, said Rio’s fortunes depend on a “regularity of growth” beyond a surge in Olympics-related economic development. This, Gaspar argued, can and likely will happen as long as the political class stays clean: “Any shadow of corruption will destroy our dreams.”