Brazil's European Dream

Why Brasilia sees the euro crisis as a once-in-a-generation opportunity.

The news that Brazil has overtaken Britain to become the world's sixth largest economic power is being touted as a sign that that the longtime "country of the future" has finally arrived. While the celebrations have been somewhat muted by concerns over slowing GDP growth and the country's still-heavy dependence on high energy and food prices, Brazil is heading into the coming global showcases of both the 2014 World Cup and the 2016 Summer Olympics with more than its usual swagger.

But this emerging economic prominence is raising the question of just what kind of actor Brazil will be on the world stage. In the past 20 years, Brazil has become well known for turning crisis situations into geopolitical opportunities, becoming a leading voice in international forums devoted to AIDS, poverty, and even the environment. And now, it is doing it again with a challenge that Brazilians understand all too well: a debt crisis.

Only this time, it's Europe in need of a helping hand, not the former Portuguese colony in Latin America. At an EU-Brazil summit held in Brussels last October, President Dilma Rousseff told European leaders, who had asked for assistance: "You can rely and count on us." As an initial strategy, Rousseff and her finance minister, Guido Mantega, considered using their foreign exchange reserves -- estimated at $352 billion -- to purchase debt through treasury bonds. However, after consulting with her BRIC colleagues at a meeting in Washington last November, Brazil decided that buying EU bonds would be too financially risky, and proposed instead to indirectly assist Europe by donating an estimated $10 billion to the International Monetary Fund.

There is a grander strategy at work here beyond seeking to help Europe in its hour of need. The IMF contributions stem from Rousseff's intention to maintain a tradition that began under her predecessor, President Luiz Inácio Lula da Silva, of using foreign assistance as a means to strengthen Brazil's international reputation and influence. Yet another example is Brazil's annual contributions to the World Bank, which have averaged $253 million from 2004 to 2009. Brazil was the first nation to contribute -- $ 55 million -- to the World Bank's Haitian Reconstruction Fund. From 2003-2007, Brazil also gave approximately $340 million to fund the U.N.'s operations. Lula also increased Brazil's contribution to the U.N.'s World Food Program from $ 1 million in 2009 to $ 27 million in 2011.

There's also the satisfaction of seeing the tables turn. Because of Brazil's recent economic success and reputation, the IMF has approached Brasília for help for the first time. Back in 1998, it was the Brazilian government, under President Fernando H. Cardoso, that was running to the IMF for assistance. Brazil was trying to recover from a capital flight of roughly $30 billion dollars, triggered by a lack of foreign investor confidence due to exorbitant debt and recession. To help quell investor speculation that Brazil would default (like Russia did months earlier), the IMF provided a bailout package of $41 billion on the condition that Cardoso prune government expenditures by 20 percent and reform the pension system.

Then in 2001, after a steep decline in foreign investment, currency depreciation, and a debt crisis in neighboring Argentina, Brazil essentially begged the IMF to help avoid a default on its external debt. This time the government received $15 billion in exchange for reducing federal expenditures and maintaining a primary budget surplus of approximately 3.75 percent through 2005.

Today, Brazil seems to be relishing the opportunity to impose conditions on the IMF: Last October, Brasília made it crystal clear that it will not help the IMF should it decide to continue imposing austerity measures on European states. Much to Brazil's chagrin, however, last month the IMF and the EU provided a bailout package of 130 billion euros to Greece with stiff austerity measures attached, grudgingly passed by Greece's parliament -- a slight that may explain Brazil's delayed assistance to the IMF. What's more, Finance Minister Mantega has told the EU that Brazil will only provide IMF support as long as the EU strengthens its Central Bank and if other European nations contribute to the European Financial Stability Facility, the special relief fund set up provide a firewall for heavily indebted economies.

Rousseff also wants an expanded role for Brazil within the IMF, along with the other BRICS, mainly through increased quota shares and voting rights. She has joined her colleagues from China, India, Russia, and South Africa in emphasizing that the IMF needs to recognize the importance of the world's largest emerging economies and allow for opinions and recommendations from nations that have overcome their economic hurdles and that more accurately represent the developing world.

Despite the IMF Governing Board's agreement in 2008 to increase the BRICS' quota and vote shares, and despite the Board deciding to shift more than 6 percent of the quota shares to them and other nations last December, these recommendations have yet to be officially adopted and ratified into the Articles of Agreement. What's more, analysts and the BRICS believe that these changes are insufficient, especially in light of the US and Europe's substantially higher quota shares, voting rights, and the BRICS' growing importance to the global economy. Mantegna and Rousseff hope that the Euro crisis will be an opportunity to address this imbalance.  

Europe's crisis has also accelerated the shifting power dynamics between Brazil and its former colonial power, heavily indebted Portugal. Rousseff has not only proposed to buy Portuguese treasury bonds, but she has also considered the possibility of early buybacks of Brazilian bonds held by the Portuguese government, which would help reduce Portugal's debt by retiring bonds at a discount while stabilizing the bond market. While Mantega has expressed his reservations, given Portugal's potential inability to repay and the legal limitations on using Brazil's foreign reserves for buying debt, Rousseff still seems firmly committed to these options, stating that she will do "everything to help" and pledging to lend a hand.  Rousseff views Portugal's recession as an opportunity to strengthen bilateral political and economic ties, helping overturn years of jealousy and envy over Brazil's success. And she has often invoked simple gratitude as a motive, referring to Portugal's past assistance in Brazil's time of economic crisis.

But cultural affinity and altruism can only explain so much. Several Brazilian companies have invested in Portugal in recent years, with a total investment of $ 65 million in 2008, increasing to $ 310 million in 2009. Rumor has it that Petrobras, Brazil's state-owned oil company, is planning to purchase 33 percent of Galp, Portugal's leading petroleum company. Portuguese businesses have also invested heavily in Brazil. And in January 2011, Portugal's Telecom acquired 25 percent of Brazil's biggest land-line phone company, Oi, for $5 billion. Last year overall, Portugal's investments ranged from the energy sector, to tourism and construction, tallying approximately 25 billion euros.

Of course, engaging with Europe carries risks at a time when Brazil's own economic future -- generally attributed to high tax rates, inflation, an overvalued currency, and high public sector deficits -- isn't exactly guaranteed. The government projects the country's economic growth will not exceed 3.4 percent this year -- it was 2.7 percent last year, down from 7.5 percent in 2010 -- so Brasilia may not have very much cash to spare come 2013.

Despite these economic risks, Rousseff's European strategy is a smart move. By providing financial support in time of need, Brazil can strengthen its partnership and economic relationship with several European countries, as well as with the IMF. And by lending a hand, Rousseff may be able to garner more European support as she strives to boost Brazil's influence within the U.N. system and the IMF. Through these calculated endeavors, Rousseff can signal that Brazil isn't just arriving on the international scene, it's here to stay.



A Tragedy in Toulouse

Could a series of seemingly race-inspired killings in France upend the presidential election?

PARIS – Just as the week was beginning in southwestern France, on March 19, a man appeared at the entrance of a small Jewish school in Toulouse wielding a pair of powerful guns, including a semi-automatic pistol. As parents dropped off their children on the sidewalk, or left to take younger kids to other nearby schools, the first shots rang out -- every parent's worst nightmare. He continued into the Ozar Hatorah middle and high school, where he shot at adults and children, witnesses said in French radio and television interviews, sometimes at nearly point-blank range.

Unlike many American-style school attacks, in which assailants just go deeper and deeper into the carnage until they are killed by responding authorities or they shoot themselves, the Jewish school killer finished his loathsome business, went outside to his white motor scooter, and rode off.

The public prosecutor of Toulouse, Michel Valet, brought the horror of the cold-blooded killer home. "He shot at everything there was in front of him, children and adults," Valet said before reporters in Toulouse, "and some children were followed inside the school."

The death toll included a 30-year-old Franco-Israeli professor of Judaism who had recently moved back to France from Jerusalem, his two sons, and another girl. The oldest of the murdered children was reportedly seven years old. The youngest was just four. (A 17-year-old is also seriously wounded.)

In isolation, the attack might appear to be the act of a lunatic, probably an anti-Semitic one, but an array of factors make this attack into something even more troubling, particularly that it is the third murderous attack in eight days -- and that all seem to be linked to race and/or religion.

The first attack came on March 11, when a man responded to an online advertisement by a French soldier selling a motorcycle. But, authorities believe that instead of buying the bike, the man shot the soldier in cold blood. Four days later, a man wearing a motorcycle helmet attacked three off-duty military paratroopers as they withdrew cash from a bank machine in the town of Montauban, near their base, some 35 miles from Toulouse. That attack killed two soldiers and left a third struggling for his life. The three dead soldiers are all of North African descent, while the gravely injured survivor is from a French territory in the Caribbean. They are all dark-skinned.

Barely a dozen hours after the Jewish school attack, authorities concluded that the seven killings were the work of the same man using at least one of the same guns and who rode the same motor scooter, although repainted white for the March 19 attack.

Before Monday's attack at the Jewish school, some 50 investigators were already working to track the killer. By nightfall, there were well over 150, backed by cyber investigators pursuing the first victim's digital interactions with the prospective "buyer."

As France struggled to understand who might execute defenseless off-duty army men from minority backgrounds and small children, two main theories have arisen.

The first is that the culprit is a current or former soldier with a murderous racist streak. (The powerful .45 caliber automatic pistol he carried is fairly rare in France outside of shooting clubs.) Urban video footage and an eyewitness' account of the bank-machine killings suggest that the murderer kept his cool while executing people in public in broad daylight. Following that attack, police using an array of security cameras in the area figured out routes that he did and did not take, and at which speeds, leading them to surmise that he had a detailed knowledge of the area. They also concluded that he wielded his weaponry with expertise. (Analysis suggests that the paratroopers didn't have a chance to defend themselves or escape.) Police found no signs of DNA or fingerprints on a discarded gun cartridge, and witnesses describe a fit, agile, and supremely self-confident attacker.

In the midst of a particularly grim political campaign and barely a month before the French begin to vote for their next president, the French political class suddenly downshifted in respectful acknowledgment of a particularly grim national tragedy. François Hollande's spokesman announced that he was temporarily suspending his campaign -- just before Hollande himself traveled to the school, where parents sobbed out front, along with Israeli ambassador Yossi Gal, and the mayor of Toulouse. They arrived after President Nicolas Sarkozy, who made it to Toulouse barely three hours after the attack. It was a "national tragedy," Sarkozy said in a live broadcast from the site, and he promised a minute of silence in French schools the following day. "Barbarity, cruelty and hatred cannot win," the president said. France, he added, is "stronger than that."

By the end of the day, Sarkozy had also suspended his campaign, at least until Wednesday -- and both he and Hollande were among the thousands who showed up at Paris's third-largest synagogue for a religious ceremony just a half day after the attack.

Prior to the Jewish school attack, anti-racism groups had been pointing to what they saw as the troubling xenophobic, anti-Muslim, and perhaps even anti-Semitic subtext of the presidential campaigns by the far-right National Front party as well as Sarkozy's "respectable right" ruling party. Both have criticized Muslims -- and, to a lesser extent, Jews -- during the controversy over halal and kosher meat. And both have called for stark reductions in legal immigration to France. (The far right wants a 90 percent drop, while Sarkozy's UMP has said that 50 percent is the most that is possible.) Prominent figures in both parties have amalgamated immigration and crime, despite the absence of any legitimate statistics on the matter.

The other dominant theory about the killer is that he could be a radical Islamist -- whether a lone wolf inspired from afar or someone affiliated with an international power structure -- who took aim at the soldiers as a message to France about its military policy abroad, and at the Jewish school to get back at Israel. There is no shortage of aspects of French foreign policy that might create enemies these days, from the ongoing French military presence in Afghanistan to the successful efforts to help overthrow Muammar al-Qaddafi in Libya to intensifying political sanctions in Iran to the Élysée's desire for regime change in Syria.

French anti-terrorism investigators are investigating all three attacks. The main international wing of al Qaeda, of course, has not hesitated to target against Muslims (like the French paratroopers of North African extraction) when it believes them to be spiritual traitors. And terrorists affiliated with al Qaeda have a track record of engaging in attacks during sensitive electoral moments.

In 2004, terrorists loosely affiliated with al Qaeda bombed morning commuter trains in Spain, killing 191 passengers and wounded more than 1,500 -- just three days before national elections. The conservative ruling party's deceptive handling of that investigation in the days before the vote -- they continued to suggest, for politically expedient reasons, that the attack was the work of Basque separatists even after they had extensive information pointing toward Islamic radicals -- led them to lose an election that they had seemed set to win. The incoming Socialist government quickly pulled Spanish troops out of Iraq, as it had promised and as the vast majority of Spaniards wanted. But it was also what those who inspired the Madrid bombers had hoped for.

Since the 9/11 attacks in the United States, France has, with its top-notch anti-terror squad and intelligence, managed to avoid the sort of brutal attacks that al Qaeda affiliates orchestrated in Spain and then in Britain the following year.

But France has extensive experience with radical Islamic and anti-Semitic terrorism in recent decades. In 1980, a bomb detonated outside of a synagogue in Paris killing four people and injuring many others. Later that decade, a group of men charged into the packed Jo Goldenberg's restaurant in the Jewish quarter and detonated a grenade that killed six and wounded 22. (That attack was blamed on Fatah.) There were many other attacks in the 1980s and 1990s, including on the Parisian metro, but perhaps the most ambitious came in 1994, when four men from the Armed Islamic Group seized control of an Air France jet full of passengers on the tarmac in Algiers. They killed two passengers, placed dynamite inside the aircraft, and discussed how they might get the plane over the French capital so that they could blow it up and maximize the carnage. After executing a third passenger, and promising to kill another one every 30 minutes unless they were cleared to fly to France, they made it to the southern French city of Marseille for refueling. Once there, just 400 miles from Paris, they demanded an absurd amount of fuel (likely to make for a bigger explosion). But as the plane was being refueled, deft French commandos closed in and killed all four men.

All history aside, the March 2012 attacks come barely a month before the first round of France's presidential election. While the reasons behind the recent attacks remain obscure, they have already upended the presidential election.

President Sarkozy has, over the last 10 days or so, finally found some campaign footing, trimming Hollande's lead over him in a likely run-off from as much as 20 percent down to 8 percent (largely by luring some of the disgruntled Gaullist and hard-right members of his natural base back into the fold). If the recent attacks turn out to be the work of radical Islamists, it would have the potential to shake up the electoral battlefield in his favor. But if these attacks are the work of a Neo Nazi-inspired Timothy McVeigh-esque figure, Sarkozy's recent appeals to hard- and far-right voters on immigration, citizenship, and religious meets just don't set him up for a Bill Clinton-like renaissance driven by an Oklahoma City Moment. The consensual François Hollande, who has never been accused of scapegoating foreigners or their children for electoral gain, would be the natural beneficiary at the ballot.

But right now, as France seeks to process its shock at the unimaginable horror of a killer who chased children just to shoot them, the presidential campaign feels far less immediate than catching the crazed killer on the loose.

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