Buying Brazil (Buying Brazil Trilogy Book 1) Read online

  “What’s bothering you?”

  “… a feeling. I’m not sure.”

  “Maybe Brazilian voodoo …” Robin didn’t take the bait. “We’ve been sitting here too long. You’ll feel better if we get moving. The weekend is coming so try some retail therapy yourself. It will also help you get a feel for the local consumer. I’m planning to have a look at my neighborhood on Saturday for the same reason.”

  “You should leave your credit cards at home. The forty to one hundred percent import duty on the things we normally use really hurt. The local stuff is surprisingly good and so cheap you can buy it with petty cash. Food and booze are unbelievably cheap for a big city. A bottle of beer is cheaper than a bottle of mineral water. The politicians really know how to keep the streets quiet. The ordinary people are well fed with a happy beer buzz while puffing their two cent cigarettes.”

  “I am quite sure there is a bit more to learn about the common man and those who complicate his life. I am also quite sure it will take us more than a weekend to sort it out. For now, we should get back to the office and start working our way to closing this deal.”

  Thursday and Friday were filled with market data and projections about Brazil’s expanding middle class and its use of the telephone. Very much like other emerging economies vast areas beyond the limits of Brazil’s crowded cities that had been without telephone service are now being served by comparatively cheap cellular telephone towers and repeaters. When measured the cost of this new technology against the massive cost of building a landline network, the rollout of cellular service was the only efficient way to bring Brazil’s multitudes of rural poor into the ‘communications age’.

  State owned BrasTel moved quickly into cellular under government mandated modernization programs and today holds four times as many geographic operating concessions as do all of Brazil’s foreign owned or controlled independent cellular companies combined. On paper, BrasTel is a natural target but unlike many seemingly attractive acquisition targets its reality was richer than most in unanswered questions any one of which could be a potential deal killer.

  First among these questions was whether the concessions would remain exclusive territories particularly those in the states of São Paulo, Rio de Janeiro, Parana and Minas Geries. These states with both large urbanized areas and countless rural micro-economies distributed over massive land areas represented significant sources of revenue for BrasTel. The states could provide the revenue and profits necessary for BrasTel to finish developing their rural markets and the long neglected as well as the resource rich equatorial north. Open these states to competition and the loss in market share and related competitive downward pressure on prices could render the rollout of service no longer internally self-funding and unprofitable to develop without subsidy. In short, limiting competition could be the best way forward but it was one that was politically unpopular and the Federal Government wanted to pass this hot potato to the private sector dressed up as a natural part of its post re-democratization privatization program.

  The issues driving potential challenges to geographic exclusivity were not only political but also economic. Exclusivity discouraged foreign investment needed for continuation of National growth while avoiding unpopular tax increases. If Cardoso’s reformers remain in power after the upcoming election there would be a track record that could be helpful in evaluating and measuring investment risk in pricing the deal. If the PT won the Presidency you could just flip a coin. Trying to stretch the bidding until after the election didn’t fit either the changing political realities, possible competition for BrasTel or Sam Watson’s schedule. Of the three or four big items on his ‘to be resolved list’ the future exclusivity of BrasTel’s concessions seemed the one with the largest number of uncontrollable variables and therefore the hardest to get a handle on. But, Sam was convinced delaying the acquisition could slow and possibly stop his grand scheme.

  Our lawyers in New York suggested we petition the regulatory commissions in one or two states for private rulings on the future of the outstanding concessions. While this might work in United States or Western Europe, in Brazil rulings meant little or nothing. Several years ago a U.S. based electric generating company petitioned the Federal Income Tax Commission for relief from the business succession laws as part of an acquisition deal. The target government owned Brazilian electric company owed hundreds of millions in unpaid taxes. Under Brazil’s succession law a new owner of ‘substantially’ the same business or business type operating in the same geographic location was liable for all the predecessor business’ unpaid debts.

  The Government’s intent for the succession law was to prevent people from shutting down one business, defaulting on all its obligations and opening a new business in its place. In practice the law’s application was so broad that there was little or no protection for new owners where any possible connection to a predecessor could be made. Using the Government’s intended purpose for the law as its basis, the Federal Tax Authorities issued a clearly written opinion that the acquiring foreign power company would not be liable for the unpaid taxes of the predecessor company as a result of closing the proposed transaction.

  Two years after the opinion’s issuance and one year after closing the deal the acquirer was served with a bill for almost a billion Brazilian Reis in unpaid past taxes, interest and penalties. The accompanying letter said the original written opinion on the matter had been officially withdrawn and provided no explanation for its withdrawal. The Federal Tax Authority’s position was later confirmed by three levels of Brazilian state courts with the Supreme Judicial Court granting the Government the right to confiscate all assets of the Acquirer within the country as satisfaction of the outstanding debt if it was not paid in thirty days. The story went through the investment banking community like wildfire giving cross-border deal-makers nightmares and shrinking foreign investment into Brazil by half for several years.

  The geographic exclusivity question was number one. Number two was finding out what was hiding in BrasTel’s past, particularly the military years, and doing whatever had to be done to put a wall around it. These kind of things were at the heart of a deal … they were what Skip would never learn.

  “Hey … you going to pack it in?” Robin crumpled onto the sofa in my office, “It’s past eight.”

  “Why, you got a Friday night date?”

  “No, but I want to get back to the hotel and take a bath. It wasn’t easy to find a place with a real tub. All the new hotels are so damned space conscious they only have stall showers.”

  “That’s all my flat has.”

  “Poor Carl … do you miss your bubble bath?”

  “No, my rubber duck does. What do you have on for the weekend?”

  “Saturday I’m going shopping. On Sunday, after church, I’m going to curl up with my laptop and make some changes to the deal model so we can start running alternative theories of the deal.”

  “Where are you going shopping?”

  “A mall or two, where else would I go? I heard they’re a little different down here. More upscale and the good ones have real sit-down restaurants and movie theaters. They’re in the middle of town and not the burbs like the U.S. so it should be a short cab ride. You know my theory; you can tell a lot about people by the places they shop.”

  “Why don’t you use José Carlos? I don’t need him. I’m going to walk around my neighborhood to get some exercise. I’ll have some coffee, smoke a cigar and buy a few foreign newspapers. My head’s ripe for taking Saturday off.”

  “What about dinner on Sunday? You know the maid’s not around.”

  “There’s a little French bistro down the street I’ve eaten at the last two nights. The food is first rate and the prices aren’t bad.”

  “Damn you’re predictable. Three days in town and you’re already in a rut.”

  “It makes life easy.”

  “Yeah, and down here it might be a liability. The rich folks try not to be predictable to
keep the bad guys guessing.”

  “You shouldn’t let the New York briefings scare you. No one’s interested in us.” Pushing the papers on my desk into a pile and then into my briefcase, “I’ll tell José Carlos to pick you up at the Maksoud in the morning.”

  Robin slid off the sofa, “Home sweet home and it’s a few minutes by foot from the office.”

  “Talk about a rut. One whole block away. Why didn’t you stay at the nice modern place next door? It’s so much closer.”

  “I told you, no bath tubs and, the Maksoud has an indoor pool so I can swim laps in the morning before I have to face this stuff.”

  “… yeah, I remember the deal in Egypt where you couldn’t swim your laps. You were a real pain in the ass for three solid weeks. Can we drop you off? Campinas is one way so we have to pass the hotel.”

  “No, I’ll walk. See you on Monday.”

  Chapter 2

  A Brazilian friend in New York said weekends in São Paulo felt different from the work week and I felt it as soon as I woke. The air was clean, crisper. The acrid taste I had in the back of my throat since arriving was gone.

  The city’s traffic chocked streets and industrial plants stained its air with their foul presence during the work week overwhelming the cool cleansing breezes from forested surrounding mountains. Only on weekends did the persistent breezes succeed in blowing the city free of the week’s oily residue. For five days São Paulo seemed to be a smog filled bowl like Los Angeles but unlike L.A. it was more than two thousand feet above sea level on a wide plateau open to the east above where Santos, the port of São Paulo and South America’s largest, baked in sub-tropical discomfort. Unfortunately for those below, any possible coolness was lost during the air’s trip from the mountains to the sea however not the pollution being swept from the city above that never missed the whole trip.

  Spring in New York, fall in São Paulo, this Saturday morning was cool with bright sunlight promising a warm afternoon. Sliding open the apartment’s glass window sashes filled the rooms with fresh air carrying the sweet scent of flowing bushes rising from the garden below along with the sounds of the City coming awake. Sidewalks being washed, barking dogs, neighbors leaving for their country houses; other than the freshness in the air I could have been in New York. In the fall the was little humidity with temperatures falling at night into the sixties Fahrenheit and rising to near eighty by late afternoon.

  When Shelly and I were married our Saturday, mornings were always filled with errands. Our last apartment was in London’s fashionable West End off Sloane Square and our usual first stop was breakfast at Oriel, the very French bistro on the Square’s east side. When we could, we would sit at an outside table hoping to see the horses from the Horse Guards’ barracks below Pimlico Road being taken to their duty stations. We shared the dream of a country house in Berkshire filled with dogs and horses. Hoof beats echoing along Lower Sloane Street focused us on the future we believed we were building together. I had my work and Shelly hers and our dreams held us together until she found someone else to dream with. A more established someone else whose career no longer required him to be on airplanes more than he was at home.

  Our divorce was one of six at Hansen that year. It was an occupational hazard as was the heavy drinking that had filled the next two years while I was building my reputation as Hansen’s leading deal maker. It wasn’t until Lord Hansen explained that I had no future with the Bank unless I gave up drink, buried the ghost and tried to move on.

  “Carl you can go only so far on instincts. Yes, yours are better than most but in the long run your ability to think clearly will be what counts. If your brain is muddled by alcohol you will embarrass the Bank one day and I will not let that happen.” As if to make a point he knocked over his wine glass. “Take a month’s holiday and come back your old self.”

  I thanked him, took the month and then immersed myself completely in my work. Three years later I was regularly being quoted in the ‘Financial Times’ and had appeared on the cover of the ‘Merchant Banker’ along with the announcement of several history making deals I had put together. During those years I put away enough money for our dream house in the country and a herd of horses but the dream itself was gone. Deals filled my days and nights. They provided excitement and satisfaction as well as ensuring I had time for little else.

  There were no women since Shelly except for the occasional night visitor who was never re-invited. I had no time for them and never really wanted to make any available. I had gotten over Shelly but maybe not the episode and the drinking it had provoked. Now I had too many things and a great deal of money and I was smart enough to know what many of the women who tried to become too friendly too fast were interested in. Shelly and I had little more than each other and the future when we married. Now I had too many other things to consider. My step father didn’t think about them after my mother died and his second wife left him with a lot of property but barely enough money to bury him after he drank himself to death. No, I didn’t need problems.

  “Bom dia Senhor, will we see you tonight?” The waiter, who served me the last two nights at Café Antique interrupted my thoughts as I walked downhill from my apartment on Rua Haddock Lobo and somehow interrupted his widow cleaning.

  Recognized even in the polo shirt, khakis and dark glasses carefully selected to help me blend in, “Yes, about ten-thirty.”

  “I will reserve your usual table Senhor.”

  “Obrigado”, I continued downhill another block to the small, very modern, shop on the other side of the street just above Rua Oscar Freire selling an eclectic collection of books, newspapers and magazines from Europe and the U.S. I bought yesterday’s Wall Street Journal that had arrived in São Paulo earlier in the morning transforming it into today’s edition in Brazil. The Journal would be my breakfast companion at a small cafe around the corner. José Carlos told me what he thought I needed to know about the neighborhood’s shops and restaurants to get me through my first weekend. After breakfast, I planned to start filling in the blanks on my way to what he described as the best cigar store in town. Breakfast was as far as I got.

  Halfway through the Journal a woman led a little girl, perhaps six, into the restaurant followed by a uniformed servant carrying packages. The woman, casually well dressed, was uniquely ordinary but the little girl was like … like a fine porcelain doll. Fair, blue eyed with blonde ringlets dancing around her face, she was everything her mother was not. She was exactly how Shelly used to describe our imagined first little girl. I had not thought about Shelly in years now twice within an hour. Why now … I had so much else on my mind.

  After breakfast, I walked the steep uphill two blocks back to the apartment and the waiting files. I needed to get my head under control and keeping focused on BrasTel would certainly do it. There was no time to waste on the past. But, my head fought against the need to drive distraction away. Had I slept too soundly last night or was it the late dinners?

  A movie set in Rio I had seen years ago claimed time moved differently on either side of the equator and in Brazil its tempo was more feminine than the rest of South America. Was Brazil pushing Shelly back into my thoughts after so long or was it the result of corrosive uncertainty? Like Robin, I felt this deal was different in a way I didn’t yet understand. It was like when I finished at Oxford and somehow everything became new and different.

  Over time I came to understand every deal was different and at the beginning of every one I wasn’t sure where they would lead or where I would end up. I also learned that while the path to the desired outcome might vary I was more than capable enough to steer our progress to the desired goal. Of course some crossings were rougher than others but each one in its own way strengthened my absolute belief in my ability to create success no matter the hemisphere or the relative position of the equator to the deal site.

  During those early years I had Shelly to calm my ‘new deal’ fears and as I outgrew them we seemed to drift apart. Now there was
nobody, nobody I could really trust enough to let in. Now getting a deal was largely the result of my absolute and unshakable belief I would get it done. It had to be that way because as soon as anyone on either side of a transaction had doubts about reaching a successful outcome the deal started falling apart.

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

  After a moment of reflection, I became certain her invitation somehow had to do with BrasTel and my initial doubts faded. Our all too public arrival at Rubiyat earlier in the week must have raised someone’s interest and whoever it was had done some digging. Following her into the sedan, “What do you have planned?”

  “Just a short ride, the Senator is waiting.”

  My mind ran over the stacks of memos and documents from the candy deal and BrasTel. I remembered nothing relevant concerning a senator. “Senator …?”

  Alana remained silent. Her face outlined by the passing streetlights touched mine with intimate shadows holding my attention, igniting my imagination. She remained motionless as we left high-rise Little Manhattan entering the heart of the Jardims, Gardens, with street after manicured street lined with walled mansions each marked by pools of security light and uniformed guards.

  Through the early years of the twentieth century these homes were suburban retreats for the wealthy then in mid-century paralleling the movement of the national capital from Rio de Janeiro to newly built Brasilia in the remote center of the central plains small sleepy São Paulo burst its borders rushing past engulfing the Jardims in urban sprawl. Now, surrounded by one of the world’s largest cities, these were the homes of super-rich members of Brazil’s oligarchy. In this country of one-hundred seventy-five million people, twenty-five thousand families controlled most of the wealth. Of these, only the wealthiest and most powerful had homes in the Jardims.

  “I thought everyone goes to the country on the weekends.”

  “They do Sr. Matthews.”