The New Colonels

A businessman who comes to work in Brazil expecting to follow the official rules would hardly succeed, and is not likely to stay there long. One needs to create a broad network of personal contacts to feel any positive effect from one’s investments. This should be done in those regions where you plan to do business, for it is there – and not in the capital – where the key decisions are going to be made, and it will be the local administration that will decide the fate of any project.

The nexus between business and power in Brazil has everything to do with its decentralisation, and the two-hundred-year-old tradition of coronelismo (a term derived from the Portuguese word for colonel). In the middle of the 19th century the country’s national guard granted regional oligarchs, whose powers over the provinces alone already afforded them a great deal of authority, the special status of colonels and backed them with significant military resources. It was only in 1934 that the country adopted a constitution banning the acquisition of heavy weapons by state police.

From the very outset economic activities evolved differently across various parts of the country. Sugar production flourished in the north, while other regions lived off agriculture and cattle farming. A sugar mill required a large territory and many slaves, which in turn laid the foundation for large-scale land farming. Prominent landlords in the northeast of the country were much richer and more powerful than the local authorities; they enjoyed what was virtually an unlimited level of influence. With private paramilitary units at their disposal to control the slaves, they did not wage wars against their neighbours at all: class solidarity was characteristic of everything they did. In this divided country, which had no railroads and could rely on sea communications only, federal governors depended on rich people. This phenomenon later became known as coronelismo.

Capitals often changed. The city of Salvador in the north became the first capital of the country. However, when gold was discovered in the south, the government moved to Rio de Janeiro. In the early 20th century São Paulo emerged as the country’s economic centre and later the capital was moved to Brasilia, a city built especially for that purpose on a high plateau. Today the country has at least four large centres, but the regions traditionally put much emphasis on their own political significance.

The decentralisation process also benefited from the limited suffrage: at first the law granted the right to vote only to the rich, then to the literate. Elections were held based on open ballot; one can imagine what it looked like in rural areas. Electoral commissions were formed by the very same colonels and naturally depended on their say. Who would dare speak against their boss in an open vote? Therefore, election results tended to be very predictable. As for the Federal Parliament, its role was limited to coordinating the interests of various states, which were mostly commercial in nature and ranged from coffee and sugar production to cotton mills and cattle farming. Specific production aspects determined the economic models, which in turn shaped interregional policies.

At a later stage, population growth in the cities triggered some forms of democratisation. Colonels were replaced by populist politicians who in many ways resembled their predecessors. However, without the formal resources that used to be afforded to the colonels, the new leaders had to compete for the support of their electorate.

Today there are 20 parties in Brazil and no single-candidate constituencies; during the elections votes are cast not only for the party but also for the candidate from the party. The individual comes to the forefront yet again. Having won a majority of votes, a charismatic politician can bring to the Federal Parliament up to seven or eight candidates who did not enjoy much popular support. In other words three or four powerful players are perfectly capable of forming a faction of 25 members. Considering that the Chamber of Deputies consists of roughly 500 representatives, such a faction could really shift the balance of power, put forward their own demands, and derive such benefits from supporting the ruling coalition as seats on boards of directors in state-owned companies, and appointments to the ‘right’ committees. In that way several people can enjoy a mechanism that enables them to make money and further promote their cause. However, once in the seat of power, they repay their debts to the electorate by taking part in the ‘proper’ redistribution of federal funds. The most advanced among them are keen to bring foreign investors on board in their regions.

To this day the main political power in Brazil rests in the hands of the states and their representatives, or the ‘new colonels’, and not so much with the federal parties. These new colonels are not too poor and not too rich; they are not a part of the economic elite, even though several generations of their ancestors were well off. They love power more than money, and they are skilled at manipulating people. They charm the public with their improvised speeches and artfully build their relations with the local elites. The entire power of the new colonels is predicated on a system of personal relationships, on their ability to get the right people to join their teams.

What sort of lessons can a foreign business learn from this situation? You should negotiate at the regional level. The local governor and the state assembly call more shots around here than meets the eye. Similarities with Russia are obvious, yet there is a major difference. In Russia, governors are appointed by the central government, while in Brazil governors are independent. Governors and senators are friends of the local press and often even control it. The mass media at the federal level are virtually non-existent.

One of my friends, an entrepreneur, was very surprised to learn about the attitude to commitments in Brazil: “Nobody keeps their promises around here – how do people live?” I suppose that a part of the reason why the cooperation between Russia and Brazil is not developing as fast as it could have lies in the lax attitudes intrinsic to both countries. It would take a foreign national a long time to build long-term relationships. Therefore, my advice is to learn Portuguese. In an environment where the informal side of things plays the decisive role, and a joint fishing trip or game of golf are more likely to open doors to the local business reality than the best business case possibly could, one cannot survive without the language. Brazilians regard English as an alien language, and two alien languages in the same equation equals alienation squared. A Brazilian who speaks English would come across more as an American and this can be disorientating. He or she would never say what is truly on their mind; they would have to remain too politically correct. Parenthetically, the Portuguese language is sufficiently easy to learn – all you have to do is immerse yourself in the language for three months. This kind of knowledge will be repaid a hundredfold.