Brazil: a tough nut we need to crack

Carter Jonas partner and joint head of its commercial agency and professional services in the eastern region, is not the only Britain who’s nuts about the Latin American country’s economic ascendancy.

Brazil puts the ‘B’ in the mnemonic BRIC as one of the darlings of the developing economies alongside Russia, India and China.

It’s a country top of mind of this country’s elite. Not only did the third in line to the British royal throne visit Brazil with a delegation in March but it also got a mention at the dispatch box in the House of Commons when the Chancellor of the Exchequer delivered his Budget statement.

It’s no wonder. March saw this Latin American nation overtake us in becoming the sixth-biggest economy in the world - growing by 2.7 per cent last year whereas UK growth was 0.8 per cent.

In such a vast country of topographical contrast, Brazil’s economic boom is down to high food and oil prices. It’s now the world’s ninth largest oil producer and its government aims for a top five ranking.

The UK is Brazil’s fourth largest foreign investor and the George Osborne was clear in his Budget speech in saying we’re looking to create a climate for export finance which will support our smaller firms in such new markets as Brazil. He also - in contrast to previous default positions of western states of old - was pointed about not wanting ‘protectionist rhetoric’ which, in the past, would have seen a regime of tariffs and heavy protection of currencies in challenging economic times.

Much has been said of the growing gap between rich and poor in our country, with predictions that austerity measures will see this gap increase. With a growing economy, Brazil has seen a decline in absolute and relative poverty in the past ten years, during which time the poorest half of a total population of circa 190 million saw incomes grow by up to 60 per cent.

The source of that statistic tells its own story. It’s Brazil’s Getulio Vargas Foundation which some in the foreign policy field regard as one of the world’s top five policymaking think-tanks. It has links with partner educational institutions such as Harvard Law School, St Petersburg State University, London Business School and, closer to home in our region, Cranfield University.

HRH Prince Harry was in Brazil for the Rio de Janeiro launch of the GREAT campaign which is part of the Government’s drive to capitalise on the international spotlight we’re in this year in not only hosting the Olympic and Paralympic Games but it’s a year which sees the Queen’s Diamond Jubilee.

The GREAT initiative’s Rio launch was anchored around a £25 million campaign to encourage Brazilians to visit the UK. GREAT will see campaign launches in Mumbai and Shanghai too.

British brands on display at the launch included Bentley, Aston Martin, Burberry and Stella McCartney, who is both a brand and the fashion designer responsible for the Olympic wardrobes of Team GB.

Indeed, we pass on the Olympic baton from London in 2012 to Rio de Janeiro in 2016 and, in between, Brazil hosts the 2014 FIFA World Cup.

Even though Horse Guards Parade on Whitehall is the scene for the beach volleyball Olympic event, it’s a world away from Ipanema or Copacabana. But wouldn’t it be inspiring to think that, alongside some of the 2,000 plus tons of sand scattered across the London landmark for the event, some of that Brazilian economic fairydust might be mixed in so we can maximise the chance to shine that this summer will bring Team UK plc? .

Will Mooney MRICS
Partner
Commercial, Cambridge

Keep Focused on What You’re Good at and That Should Keep you and Your Business Interests Smiling

In the musical Annie, the wee orphan girl sang ‘You’re never full dressed without a smile”. I can’t recall whether this was before being taken under the wing of Daddy Warbucks but, with or without finding my own millionaire patron, I’m determined to be more positive this year.

It doesn’t come easy to those of us on the genetically dour side of the Celtic tracks. But, one month in and my disposition is still sunny. Apparently, being - or at least appearing outwardly happy - is in-vogue now too.

While the Duchess of Cambridge has a lot to be genuinely happy about, she positively beamed forth with teeth-showing and dimpled cheeks on the front cover of January’s Tatler magazine. I’m also advised that models in adverts for luxury brands Mulberry and Chanel have dropped the moody pouts in spring campaigns, whereas Bally’s models are giddy with giggling and goats in the shoe brand’s latest shoot.

While it’s not exactly mirth, my sustained positive outlook is kind-of puzzling given the relentless churn of bad economic news that just keeps on coming.

I still went to bed in a good frame of mind at the end of a day last month which saw £5 billion wiped off the share value of a company which has been the 6th largest property seller since 2007 and which is also a significant tenant and contributor of rent to some of the country’s biggest commercial property companies.

I’m talking Tesco.

It wasn’t that I was positive just because I had sealed a deal with Sainsbury’s on a unit in Cambridge at the end of last year – I’m not naïve. The ‘model’ supermarket not performing indicates it’s not rosy for the others who’ll surely follow in Tesco’s wake come the reporting season.

Yet one person’s bad news gives somebody else a lift.

On that very same January day, when the Royal Bank of Scotland announced the shedding of 3,500 jobs, it saw its stock rise by 5.5 per cent. Mixed blessings for those employees facing redundancy yet who are also UK taxpayers and thus RBS shareholders of 82 per cent’s worth of rising shares.

Boil down the analyses and commentary on the bad fortunes of Tesco and RBS and it seems that, at the core, each company had moved away from the essence of good business and that is knowing and doing what you’re good at.

Tesco CEO Philip Clarke admitted that the supermarket’s focus on expansion beyond UK shores had been a distraction. This and a seasonal price drop in-store which it had adopted as an alternative to its usual, more targeted ‘couponing’ of its loyal customers had contributed significantly to its falling fortunes.

Equally, the expert view of RBS is that its desire to divest itself of its high stakes investment banking activities will bring nothing but good. Its pre-bail out activities had diverted RBS from what it was really good at - being a very fine high street retail bank whom its Scots customers always use to refer to with affection as ‘The Royal’ as opposed to its auld enemy on the high street, the plain old ‘Bank of Scotland’.

So what’s the lesson? Keep focused on what you’re good at and that should keep you and your business interests smiling.

Will Mooney MRICS
Partner
Commercial, Cambridge

Not playing the blame game

Imagine a media interview in which a politician, in under eight minutes, managed to not only answer two interviewers’ questions but appeared to be without the yolk of partisanship in clearly setting out how a country could, step-by-step, find its way out of recession through central government policy.

The politician being interviewed came from a Euro-currency country but he bore no bitterness towards his more powerful northern European neighbours, nor grudges toward his southern Euro-counterparts. He was very much not in the blame game.

How refreshing but it’s probably no surprise to anyone who has done business in the politician’s country. It was Mark Rutte, the Minister-President of the Netherlands– equivalent to the UK’s Prime Minister.

He spoke clearly and openly about his country’s growth strategy which seemed remarkably similar to what many people in this region and other UK hotspots targeted for growth have been urging as the way forward.

Rutte’s strategy for the Netherlands is to focus on the innovation, creative and technology industries, aligning the universities with business and vice versa at the earliest possible opportunity.

The Dutch Minister-President was being interviewed in Manchester - another great university city with a science focus through UMIST, its university’s institute of science and technology – where his delegation had been visiting a number of SMEs in the creative and innovation industries, as well as sharing thoughts on transport.

Not by coincidence as these things play out, the previous week, forty business leaders from the Netherlands had been on a fact-finding mission to Cambridge and had met several of our academic, business and civic luminaries including Prof Alan Barrell, Dr Hermann Hauser and the Mayor of Cambridge.

You would think that at such a time of crisis for his country’s currency, that as a political leader, Meneer Rutte would be grandstanding about the need for financial institutional reform, taking a view about the role of the European Central Bank and, as a politician, he surely wasn’t going to resist having a pop at some of his counterparts?

Not a bit of it. In fact he admitted he wasn’t a fan of huge institutional debates.

Instead he coolly and calmly outlined his roadmap for growth which he summarised as getting public finances in order, taking away hurdles for new business, making government smaller and getting the universities involved as quickly as possible in business life to get development from innovation.

The Dutch leader felt that it was important for him to get in to the thick of what was going on and he couldn’t do that from The Hague. He appeared really pleased to be in the thick of it over here and complimented us by saying the UK’s innovative and creative capability were needed - with 50 per cent of our exports going directly in to the Eurozone, he’s got a point.

According to Meneer Rutte, we have much in common with other non-Euro currency countries such as Sweden, Poland and the Baltic states who are all growth oriented as much as his own country – which, after all, is this region’s closest continental neighbour across the North Sea.

This 44-year old politician is just over a year in to a role which has no limit to its term in office and based on the interview, he sounds like a person with whom we’d all like to do business.


Will Mooney MRICS
Partner
Commercial, Cambridge

Learning to live with whatever ‘the new normal’ is

I’ve been told recently that ‘being on the brink is the new normal’ and this is how it is going to be for the foreseeable future. There is the temptation to head for the hills but that’s a little difficult for us in the flatlands of eastern England.

Yet in the past month, I’ve read comments by property grandees and gurus which suggest parallel ways in which we can survive and actively thrive in this new normality.

At a strategic, long term investment level, it’s difficult not to agree with those – like Jeremy Newsum of the Grosvenor Estate - who favour a quiet acknowledgement of the fact that while there is a good reason to panic and thereby to join the throng and sell wholesale, it’s probably best not to. We will only add to our own troubles.

The most sage should just sit it out day-to-day and resist the temptation to follow too closely the lead of the markets at such times.

Property, after all, is but a tiny part of something bigger which is happening.

While there’s the feeling that we neither know what that something bigger is, nor do we know how it will play out, it’s better to control what we can than add the to mayhem.

Yes, there are select deals to be done because even a modest return on property is better and safer than other many asset classes.

While the cool advice is to choose to do nothing on one level, there is a level where a more thrusting approach is required. This advice is encouraging us to adopt tactics now to embrace this ‘new normal’ and come to terms, quickly, with the opportunities emerging and on offer to us by this new world order.

This advice talks with confidence about now being a time for new skills, new sectors and, even, new sub-sectors. So while the world is ‘getting more global every day’, it seems the way forward for property advisors is to become more specialised and niche to get in tune with our more fragmented markets.

It is cheering that while property is a dry investment, it’s still considered an investment with a return, nonetheless.

Anyone advising clients with retail and leisure interests will get what is meant by the need for specialist advice in fragmenting sub-sectors.

What we can all agree on is that we’re in a time of price correction when it comes to assets. The hurt we’re taking in property is probably only what we’re due anyway post-2008, if we really stopped to think about it.

As we look around to other business sectors, let us be thankful that if price correction is the worst punishment we’ve got to take and with the addition of working a harder in new ways for our clients in order to advise them better on all things niche, then we’ve got off quite lightly.

If a state of affairs goes on for long enough then it’s normalised - so we’d best get used to it.

While it’s a good time for neophiles, it’s a bad time for haters of business jargon and I am going to add to their groans here by suggesting that, perhaps, the default state of being for the foreseeable future is one of renewal becoming the new normal.

Will Mooney MRICS
Partner
Commercial, Cambridge