Buying Brazil (Buying Brazil Trilogy Book 1)

  BAWL & ASSOCIATES LLC

  MIAMI, FLORIDA

  Copyright © 2017 by Arthur J Rawl

  All rights reserved. No part of this publication may be reproduced, distributed or transmitted in any form or by any means, without prior written permission

  Publisher’s Note: This is a work of fiction. Names, characters, places, and incidents are a product of the author’s imagination. Locales and public names are sometimes used for atmospheric purposes. Any resemblance to actual people, living or dead, or to businesses, companies, events, institutions, or locales is completely coincidental

  ISBN 978-1-5136-1912-5

  Contents

  Prologue

  “Buying Brazil”: A Novel

  Chapter 2

  Chapter 3

  Chapter 4

  Chapter 5

  Chapter 6

  Chapter 7

  Chapter 8

  Chapter 9

  Chapter 10

  Chapter 11

  Chapter 12

  Chapter 13

  Chapter 14

  Chapter 15

  Chapter 16

  Chapter 17

  Chapter 18

  Chapter 19

  Chapter 20

  Chapter 21

  Chapter 22

  Chapter 23

  Chapter 24

  Chapter 25

  Chapter 26

  Chapter 27

  Chapter 28

  Chapter 29

  Chapter 30

  Chapter 31

  Chapter 32

  Chapter 33

  Chapter 34

  Chapter 35

  Epilogue

  About the Author

  Prologue

  During the last quarter of the 20th century as Brazil was approaching its 500th anniversary the country should have been preparing to celebrate a national success story of unparalleled length in the Americas. But, in 1985 when it ended three decades of military rule the nation was awash in corrosive uncertainty. There was no precedent for voluntary re-democratization as designed and executed by the country’s former military rulers.

  Almost 500 years before when Portugal established a South American foothold in what is now Brazil things were done very differently … without precedent. The Spanish explorers who led that country’s settlement of vast portions of the Americas were driven by dreams of riches, colonization and the spread of their Catholic faith. Unlike the Spanish their Portuguese contemporaries were in spirit and fact adventurers driven not by the quest for riches but by their indomitable character, curiosity and the powerful lure of the unknown. These uniquely Portuguese explorers formed themselves into small bands consisting of the heartiest souls and pressed deep into the interior of South America carrying Portugal’s banner deep into lands the Pope of Rome had given on May 22, 1529 to Spain by the terms of the Treaty of Zargossa. This most ‘sacred’ document first intended to settle only a limited mid-Pacific island dispute expanded in scope to ultimately draw a line around the globe dividing all unclaimed lands between richer, more powerful and favored Spain and its lesser favored neighbor, Portugal.

  A physically immense and visually moving monument in São Paulo, Brazil proclaims for all times the venturing spirit of Portugal’s intrepid, independent minded banner carriers, the Bandeirantes, who pushed Portugal’s domain so far inland from the coastal sliver left to them by the Pope that today Brazil’s borders enclose more than half of South America’s land area and is approximately the size of the lower 48 states of the United States. This monument also celebrates how these relatively few men who helped shape Brazil’s borders also bequeathed their ‘spirit of adventure’ to the nation to help shape future Brazilian life, its people and its destiny.

  The Spanish like the British and French built Empires on gold, plunder and the exploitation of the powerless. The Portuguese adventurers chose not to master these high arts as their European neighbors masters had done within their colonial possessions resulting in a different, more benign tempo of life being set for Brazilians. By the start of the 20th century the greedy former colonial masters of its neighbors having depleted their former colonies resources started targeting Brazil for exploitation by subterfuge clothed within seemingly reasonable and honest capitalist mechanisms. Brazil’s natural wealth, its minerals, its agricultural bounty and even the value of its currency was systematically bled from its veins over a period of five decades by devices such as unreasonably low transfer pricing, the price a Brazilian subsidiary would sell assets to its non-Brazilian parent, and foreign bank speculation against the Brazilian currency weakening it and further eroding prices paid for valuable commodities such as iron, beef, copper, sugar, food oils as well as hundreds of other strategic commodities and staples of life. By the 1950s Brazil’s economy was in its third or fourth tailspin of the century and its elected politicians were too weak or too corrupt to do whatever was necessary to prevent a national catastrophe.

  The necessary and not so unusual answer came in 1955 when the Brazilian Military lead by a Junta of powerful and respected Generals set aside civilian rule in a bloodless coupe. 1955 marked the beginning of three decades of self-imposed isolation for Brazil during which the flow of goods and services out of and into Brazil was brought to a halt. After the military established control the commercial rules inside Brazil became quite simple, if you wanted to buy something it had to be made in Brazil and if you wanted to sell something you had to sell it in Brazil. What is most surprising to outsiders, the following two decades of military rule have widely become known within Brazil as the ‘Golden Years’.

  These were years of great creativity and productivity so rich in domestic investment and reinvestment that Brazil’s feet were set upon a path toward international leadership when it would take its rightful seat among the powerful within the community of nations. Still, periods of change and growth can be messy and even dangerous times and Brazil was not immune to stress cracks within the fabric of its society and the deep scars such times leave behind. Scars carried in hidden ways and places by the many and not the few. Industries deemed to be of great importance to the national interest became owned by the State with the stroke of a pen and were showered with new money necessary to position them for growth. With another equally firm stroke of the same pen industries that did not fit comfortably within the new national Brazilian business reality simply disappeared.

  The intentional destruction of hard won success over many generations is exemplified by Brazil’s pre-1964 dominance of the United States coffee market. Purposefully under the Military’s cold edict the United States coffee market was abandoned with all supporting coffee fields torn from the ground down to levels needed for domestic consumption. In doing so Brazil made a gift of great value to Columbia who became the dominant U.S. market player in the coffee segment. It was a very generous gift that had little relevance to the Junta when measured against its new national priorities. It was a gift that uncaringly brushed aside strong foundations underpinning certain leading families for generations. But, despite intended and unintended setbacks, by the early 1980s progress and stability appeared to have taken permanent root within Brazil’s battered economy while inflation, the disease of weakened economies, had disappeared over the horizon so naturally the Junta turned to ‘step two’.

  But, things are different in Brazil and so would be step two. Instead of absolutely securing its position and power the Junta, after a period of tumultuous internal debate that is said to have become fatal for dissenters, a plan was drawn and implemented to return Brazil to civilian rule through a carefully measured incremental process over several years. Re-democratization became the hushe
d word on all Brazilian lips and in 1985 to the celebratory noise of millions re-democratization became a full reality with the last of the civilian governmental institutions back to work administering Brazil under a new constitution crafted by the military to rebalance power between the central government and state governments in order to create and protect the new Federal Republic.

  However, scars do not heal nor are pain and loss forgotten no matter how loudly and happily crowds shout. Fear of foreign bankers and far too experienced foreign businessmen continued the period of economic isolation into the 1990s. When opportunities did come for foreign trade many if not most of the early ones were lost because of distrust harbored by a generation of managers who were without any meaningful international experience. At the same time international trade was struggling to re-establish itself, demands upon the new government for services were rapidly expanding creating financial burdens and the need to raise tax revenue from the broadest, most efficient and growing economic base. The collection of strong nationally owned industrial companies accumulated during the military years were valuable assets representing if sold a potentially immense source of immediate cash and a stream of increased tax revenues stretching into the future for decades if not centuries. As certainly as night follows day, re-democratization would be followed by the privatization of most if not all formerly nationalized industries.

  The government took the somewhat controversial decision to start migrating many of its commercial holdings back to the private sector. As soon as the course of action entered public discussion the shadow of past corruption stained the plan with an almost overwhelming taint. It became critically necessary for the national good to execute privatization in a manner that was both transparent and reflected the true value of these national assets in the world market. The need for international merchant bankers to develop offering documents became obvious as did the need for an open pricing and selling mechanism to shape the privatization process into one conforming to widely recognized equitable and ethical standards. This was of critical importance to the newly empowered politicians who feared for their own futures because the assets to be sold belonged to all two hundred twenty million Brazilians and the Military would most certainly take a great interest in their disposal. Yes, the Government was selling highly important stakes in Brazil’s future and to many prospective buyers the high level of difficulty encountered in shaping deals at times made it seem as if they were Buying Brazil.

  “Buying Brazil”

  A Novel

  Warm breath caressed my cheek as she leaned down to whisper, “I am Alana, please senhõr”, extending a well-sculpted tanned hand, “come with me.” An almost intimate whisper in a deep, honeyed, Portuguese accented voice. Not the lilting musical accent I now recognize identifies Rio’s Cariocas. No, her voice contained a resonant undertone marking a Paulista rich in São Paulo’s urbanity. Inviting and commanding, perhaps promising … it was meant to leave no room for refusal.

  Last week in a dull New York briefing I was cautioned about Brazil’s antiquated laws and uniquely South American norms. There had been warnings about beautiful women who were not always ‘what’ they seemed. They were no more than dusty, dry words accomplishing little more than subconsciously conjuring up Hollywood’s vision of bronzed beach goddesses. However, since arriving in São Paulo I had seen few approaching these mythical creatures until my eyes answered her voice.

  Alana exceeded Hollywood’s vision in every way. Tall, slim but not thin, narrow in waist and hips almost boyish except for full breasts accentuating her stylishly low cut black dress. Still close enough to whisper, she radiated the warm scent of sun on a hot spring day. Her knowing emerald green eyes brightening the tanned olive skin of her chiseled face. A perfect face framed by glistening ribbons of jet black hair flowing carelessly over wide bare shoulders. Caution fled as did any thoughts of remaining seated.

  Standing, my eyes level with hers, “Please sit down.”

  A captivating, almost angelic smile danced on full, tempting unpainted lips, “Perhaps another time, we have to go now.”

  “Where …?”

  Without a word, she slid her warm hand into mine and with the slightest pressure began toward the door.

  “I haven’t paid my …”

  Another smile, “They know you live close and …” her eyes holding mine, “… they understand when to be discreet. Next time, they will remind you.”

  “What if I don’t come back?”

  Reassuringly natural, “They know you will.”

  The polished black Mercedes waiting at the curb was not a surprise. That it was empty but for a uniformed driver was. Although I suffered more than my fair share of male vanity, I doubted she had simply chosen me out of the crowd. I expected the reason for the summons to be waiting for us. Doubt or perhaps the crisp late night air returned reason and I slid my hand from hers as she effortlessly glided into the back seat.

  “What is it Mr. Matthews … do I make you afraid?”

  Looking back into Café Antique with its soft tan-yellow walls, crisp linen and intimate murmur punctuated by the ring of fine crystal my doubts grew. One in the morning and the only empty table was the one I had just left. São Paulo’s luxurious Jardims barrio catered to Brazil’s ultra-rich and the restaurants here on narrow tree-lined Rua Haddock Lobo and nearby Rua Oscar Freire ranked with the best anywhere in the world. Café Antique’s French cooking could hold its own even in Paris’ chic 15th. Still resisting her outstretched hand, “How about a drink …? It’s a little early to call it a night.”

  “Our night is far from over Querido, come.”

  As with most business trips a rushed phone call launched this one, “… and I want you in São Paulo Monday morning. You have to be on the ground there to take control of the BrasTel deal. At the most there’s four, maybe five weeks to size up and structure the deal and then let me know what it’s going to take to close it. You understand?” Not waiting for an answer, “Keep me up to date and watch out for the damned Brazilian taxes. There’s hundreds of them. Yeah … and they say Cardoso’s in the last weeks of his last term as President so everyone going have his damned hand out. Watch the politics, considering the current situation and Brazil’s history with the military they got to be a minefield”

  Not a warm word. No good wishes or even a simple ‘take care’ … just orders to a subordinate with no room for anything but the expected results. That was Sam’s way. Four or five weeks for five or six months’ work … a new job with the same pressure as the old. I thought I could ease off when I cashed in my gilt-edged Hansen House Ltd. investment banker’s portfolio for a plum corporate job eight months ago. Yes, some things did ease off, bonuses were a lot thinner and the stock options could be worth nothing. Still, it could work out. As Senior Vice President - Acquisitions the decision to join Laser Telecom might just prove to be one of my best.

  Sam Watson, Laser’s CEO is what the street, Wall Street, calls an economic opportunist. When garbage haulers were hot in the market he put together a group of them and took it public on the American Stock Exchange. Then he did a cosmetics play followed by a big box retail offering that earned Sam a lot of money and a high profile reputation. Now with telecom Wall Street’s hot sector Sam had become a tech expert using his well-worn buy and build formula in order to bring another hot stock to the public market.

  Under Sam’s leadership Laser Telecom, the reincarnation of a tarnished communications industry legend, was building or buying the first global telecommunications network. Of course he was using very little of his own money and a mountain of venture capital. Sam’s exit plan was to flip the deal in a monumental public offering at fifteen or twenty times the invested money a year or two. With that kind of exit pricing, my share would be more than I could earn in a dozen years when the tens of billions in profits were carved up. The BrasTel deal was the key to Laser’s South American strategy and critical to maintaining the all-important illusion of ‘deal momentum’
for Wall Street’s pundits, publishers and analysts.

  Sam’s past deals had been purely domestic U.S. plays involving small troubled companies. He bought them cheap, put them together and dressed them up as industry consolidations that filled a well-scripted need and in doing so added what he called ‘real’ value before selling them off in the public markets over a year or two.

  Laser’s need to complete a series of international acquisitions including large companies like BrasTel in less than two years was why Sam decided he needed someone like me. His analysis was that the tech bubble would burst in no more than three or four years and, above all else, he wanted to be completely out of Laser before the blood started running in the street. Sure, he made me an offer I couldn’t refuse but considering Sam’s history I knew he couldn’t be trusted in the long run. My lawyers responded by shaping an employment contract that was heavily weighted in my favor when what I believed to be an inevitable separation became reality.

  Joint venturing with a tottering German telco had completed Europe. The Indian sub-continent fell in line by purchasing a wireless license along with certain influential regional politicians. Indonesia needed only the gift of a ten percent interest in the local subsidiary to members of the commission issuing the operating concession. Discussions with the Chinese were off to a good start but Japan was dead in the water. Speed in South America, particularly the powerful Brazilian sector, would clearly show important movement and keep money flowing in from cash rich tech funds. It would also provide Laser unique income reporting opportunities because of the integrated tax and accounting rules within Brazil’s outdated Business Law.

  One of my last deals at Hansen involved a bitter proxy fight ending in the acquisition of a leading Brazilian candy company by our largest Swiss client. I never got to Brazil on that one so now the BrasTel deal would provide the opportunity to fill in the blanks left after reading staff reports concerning the candy deal. I had to be on the ground to get the full picture particularly an understanding of BrasTel’s short list of troubled operations and the extent of political meddling in the Company that was customary with state owned companies everywhere in the world.