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.”

Today’s historically huge earthquake in Chile and, now, reports of tsunami waves measured in centimeters – in Hawaii, Australia and elsewhere in the Pacific – are fascinating scientific phenomena. What’s also remarkable, from a humanitarian and macroeconomic standpoint, is that Chile’s death toll has been so limited – it now stands at around 214. It’s a reminder of how robust Chile’s economy and infrastructure are. It’s easy to forget about the likes of Chile (smaller, thriving emerging economies) when all the EM-investing chit-chat is about Brazil, China, India and (decreasingly, for Putin-esque reasons) Russia.

Argentina’s embattled central bank chief, Martin Redrado, has resigned after weeks of battling the president over her desire to deploy some of the central bank’s $48 billion reserves to pay down government debt. The global economic crisis has spurred politicians in a number of countries to meddle with the instruments of monetary policy, which are best left independent in good times and bad. Argentina’s crisis has been marked by a particularly blatant brand of monetary meddling by President Cristina Fernandez – and has provided a window into the country’s fascinatingly flawed governance. I can’t say how large Argentina’s reserves should be and whether there’s slack that can be used for debt repayments. What I do know is when a politician tries to make such decisions in defiance of the central bank’s governor, the risk is that her own – and her party’s interests – may clash with the country’s long-term interest. All this said, it’s odd that Redrado quit rather than continuing to fight the politicization of his institution. Perhaps we’ll find out why as this story unfolds.

The latest from Buenos Aires: The government of Cristina Fernandez is at an ugly impasse with the Central Bank’s president,  Martin Redrado. Long story short: the president demanded Redrado resign because he declined to allow central bank reserves to be used to pay off government debt coming due this year. Even as Redrado dug in his heels, Fernandez’s Economy Minister reportedly offered his job to a former Central Bank boss, Mario Blejer. Of course, Blejer  turned it down upon learning Redrado was refusing to bow to political pressure. Markets reacted blithely to a report in the Cronista newspaper that  Blejer had been offered the Central Bank job, mainly because he’s a respected and known quantity on the international stage whose appointment might usher in some much-needed stability. But anyone with a stake in Argentina should actually feel rattled, not reassured, by this turn of events. It’s a sign of governmental, and governance, rot.

It’s a fact of bourgeous American life circa 2009 that boys about my son’s age – he’s 11 1/2 – are besotted by Lego. The venerable Danish company has managed a remarkable revival by generating Lego-ish toys that are both innovative and fairly addictive – even if they long ago abandoned their purist educational mission. Some small businesses have grown up around Lego Madness. One such is Brick Arms LLC. Owner Will Chapman, based on Redmond, Washington, describes himself as an Adult Fan of Lego and says on his website that BrickArms is a family affair involving wife and their three sons. What BrickArms produces are a multitude of Lego-compatible accessories. They’re not for old-fashioned fuddy-duddies (like me) who remember Legos as basic bricks. BrickArms’ staples are plastic guns, missiles, bombs and ammunition – teeny-tiny weapons that clip onto the hands of Lego mini-figures. (BrickArms also produces modified Lego “mini-figs,” one or two of which have stirred a bit of controversy in the past year or so.) The firm is apparently so busy this year that it’s no longer taking pre-Christmas orders. Lucky for my son, these minuscule weapons of destruction can be purchased on other sites.

We have just spent a thousand bucks on a new B-flat clarinet for our almost-14-year-old daughter, a dedicated clarinetist who has outgrown her beginner’s instrument. We’re not buying a traditional wooden clarinet, however. We’re betting on an entrepreneur named Tom Ridenour. Based in Texas, Ridenour produces the increasingly renowned Ridenour Lyrique  Clarinets made of a hard rubber substance. My husband read through all manner of  ”serious musician” websites and found consistently good reviews of the Ridenour line. In particular, the rubber seems to render instruments impervious to the extreme temperatures that wreak havoc on a wooden clarinet’s tone, quality and structure. Our daughter’s clarinet teacher supported our decision to go with Ridenour. The instrument is on its way from the Lone Star to the Garden State. We’re optimistic about this American innovation. I’ll update you soon.

Brazil’s leftist president is admirable in many ways but his recent comments about Iran and Honduras are an embarrassment. Today, for example, Lula condemned the Honduras elections which brought a conservative politician to power on Sunday. But when pressed on the point, he refused to criticize the Iranian elections whose legitimacy remains in question and which spurred unprecedented popular protests that were brutally suppressed by the “elected” leaders. Lula, it seems, is happy to embrace Iran’s establishment despite its despotic tendencies. Yet when Honduran voters speak with their ballots, well, it’s illegitimate! “Those are two totally different things,” Lula told reporters during a summit meeting in Portugal. “The president of Iran ran for election and got 72% of the vote. You can have questions regarding the opposition speeches, but it was an election within rules that didn’t break the country’s constitution. You can’t compare that to Honduras where someone organized a coup that was rejected by all countries of the world.” It’s astonishing t0 think that the president of Brazil would give Iran’s religious and political bosses credit for adhering to some constitutional ideal while conveniently forgetting that Honduras’s incumbent president was poised to implement unconstitutional plans in defiance of that country’s court system – before the coup leaders stepped in. Lula’s pro-Iran positioning was on stark display last week when he embraced Iranian President Mahmoud Ahmadinejad, who was touring Latin America. Lula’s Chavez-esque posturing is beneath him – and Brazil.

Venezuela’s economy shrank 4.5% in the third quarter, so the country’s boss is going to change how gross domestic product is measured: “We simply can’t permit that they continue calculating GDP with the old capitalist method,” he said in a televised speech to members of his socialist party. “Capitalist calculations,” the president said, don’t take into account socialist-style economic activity – such as visits to subsidized medical centers in which money doesn’t change hands.  Nor, he says, does capitalist methodology adjust for a government’s decision to cut oil production to support prices, as the Chavez regime has done. Those awful capitalists were likewise responsible for the 2.4% contraction in Venezuela’s economy in the second quarter. One would almost feel sorry for the President if his socialist calculations weren’t so utterly flawed and his government so unfriendly to investors and entrepreneurs.

Argentina’s stock and bond markets are up following the weekend’s midterm elections which dealt a humiliating blow to the ruling leftist Front for Victory coalition. In Honduras, many people are celebrating as its Chavez-embracing president is ousted – amid some odd tut-tutting by the Obama administration. WSJ columnist Mary Anastasia O’Grady raises this interesting issue: Why is Secretary of State Hillary Clinton, on behalf of President Obama, condemning what might be considered a legal ouster of a constitution-defying political leader? At the very least, one would think the U.S. President would avoid taking sides in this particular fight. Here’s the column:http://online.wsj.com/article/SB124623220955866301.html