Buying Brazil (Buying Brazil Trilogy Book 1) Page 6

  “You know the military left most companies in private hands. They took control in industries where they could affect people’s lives like food production. They also took control of a company when it would help strengthen their hold on the country. BrasTel, like most of the public utilities, was government owned before the military took over and still is. It’s only in the last few years that Cardozo started to introduce the utilities into the private sector through privatization.”

  “I know but was there anything special about BrasTel during the military years?”

  “There’s nothing in the offering memorandum and nothing jumped out in the background searches. Even if there was something, it’s been more than ten years since re-democratization in 1985. I could ask Rossi if he knows anything.”

  “No, the background report on his firm said he was head of the São Paulo Court System for the military from sixty-four to eighty-five. I’m sure he still keeps in touch with his old military buddies even if it’s only social. It’s a bit sensitive for now. I don’t know how far we can trust his objectivity. Maybe we’ll ask him later.”

  ‘Sensitive’, was I serious? Aranni made it clear he knew what we were doing and didn’t approve. I was worried, no, uncomfortable about Aranni finding out we were checking on him. ‘Different’ went through my mind already darkened by threatening clouds. I didn’t want to call a storm down. I’d been part of many deals and there had been threats but this one did feel different. It wasn’t abstract, it wasn’t ‘just business’ … it felt personal.

  “This damned place is huge and it’s in the middle of the city. Look at its at least ten thousand square meters. It’s probably the biggest in the city.”

  “My wandering around tells me its less than average size for São Paulo. You’re used to New York and London where markets get stuffed into shoe boxes. Walk around, look at prices and selection.”

  I started walking toward the produce department, “Don’t make me work too hard Robin. What’s your point?”

  “There are a bunch of them. First the prices, they’re so damned low even in this fancy store most people can eat well. Second, the beer is cheaper than bottled water. Third, almost everything in the store is Brazilian, made in Brazil regardless of brand name, and that’s the direct result of the Military Government’s import substitution program. Today the economy is largely self-sustaining.”

  “So?”

  “Political stability, you’re looking right at it and you don’t see it. The man in the street may have some complaints but he got work making this stuff, his family is well fed even at his low wages and they’re all comparatively healthy because of the nearly free healthcare system. He’s not going to upset the apple cart over someone else’s abstract notions of how a country should run.”

  “Sure but stability hasn’t been the rule in South America.”

  “Brazil isn’t like the rest of South America. It doesn’t have a Spanish history or personality. Its people are more accepting of their lives and when Lula wins the next election he’s going to be politically just left of center not far from President Cardozo who is just right of center. Sound familiar … like the US, Brazil has begun to understand the politics of the center and its real economic benefits.”

  “That’s a big leap from the supermarket shelves.”

  “Pick any major consumer product category and convert Brazil’s prices into the hours that have to be worked to earn the money. Then compare the results to the same calculations for Europe and the US. Brazil falls in the best position and miles ahead of the rest of the emerging countries. For the man on the street, Brazil’s a pretty good place to live and it’s getting better. That’s both the military’s and the government’s doing.”

  Looking around the excessively air conditioned market with its heavily stocked shelves, customers with full carts all set off with typical bright lighting and energy that seemed to mark everything Brazilian. I wondered if the politics of living could be summed up so simply. “Sure, but Brazil has the largest income disparity in the world.”

  “That’s right but the average Brazilian knows his family is better off now than his parents had it. He also believes that with work his children will be better off even if they aren’t rich. It’s all relative. Numbers like income disparity are nothing more than interesting calculations for international politicians who want to meddle in other peoples’ lives.”

  “Robin, I’m surprised. I thought I knew you better. You sound more than a little left of center. What happened to the cold-eyed investment banker?”

  “I was born in New York but raised out west by my mother for our safety. My father stayed in New York where he was an organizer for the Textile Workers Union. He was the one who taught me about street level economics. In many ways I think New York in the forties and fifties was very much like São Paulo today. Robber Barons and the everyday man squeezed together in the same small place.”

  I picked up a bottle of cherry jam labelled in style of the fanciest European jams. ‘Made in Brazil’ and the ingredient list was short and simple, pitted cherries, sugar, water and pectin. Shelly always said the shorter the list the better the product. She loved cherry jam and didn’t want hers polluted with chemicals and artificial flavors. The price R$1.60, less than fifty cents American. Two hundred-fifty grams of honey in the next aisle priced just over thirty cents American and a pack of cigarettes twenty-five cents. Brazilian beer at twenty cents for a large can was a few cents cheaper than a liter bottle of mineral water.

  “How do they do it, price controls?”

  “Some controls over key categories like food, electricity, oil and a few others. The trick is to control wages at the same time and then produce everything inside the same economy to limit inflation. The Military put the framework in place with its ‘import substitution program’ and the good parts of the program have been kept in place since the Military stepped back in 1985 and let the civilians play.”

  “Enough education, I didn’t have breakfast. I want lunch.”

  “Sam, I’ve got everything in place and we’re ready to call BrasTel tomorrow and officially throw our hat in the ring.”

  “Good, you’re on schedule. Remember we need this deal so go lightly on the details and tighten them up later.”

  “… anything new from your friend at State?”

  “No, there’s nothing other than their concern over Lula winning the next election. They think the place will go to hell in a hand basket. What’s it looks like on the ground? Should we put a risk discount in the price?”

  “It’s too early to propose a risk adjustment there is too much national pride around here. I’ll keep it in the punch list for later. Regarding Lula, the talk here seems to favor him. There is also talk that he’ll ask Cardozo’s Finance Minister Arminio Fraga to join his government.”

  “That’ll never happen. Fraga will want out of politics so he can make some real money. I doubt if he’s that much of a patriot.”

  “I agree but it’s interesting because talk from PT functionaries seems to be endorsing Fraga’s policies and Lula has been surprisingly quiet on the economy.”

  “You got the contact information for BrasTel?”

  “Yes, we’ll confirm the time with them today and I’ll call Salés in the morning.”

  “He’s a good guy. His English is good. He said he spent ten years with G.E. in South America. He seems to understand how business is done and has hired Morgan Stanley to advise. I spoke with him for half an hour and liked what I heard. No push-over, but I think we can do business with him. He’s C.E.O. but that’s really a political appointment so he’s got to be close to Cardozo or his people. The election seems to be worrying him. Lula wins and he’s out on the street. If he helps us close the deal I promised him he would have his job.”

  “I’ll keep that in mind. Anything else …?”

  “Nothing, just call me after you talk to Salés.”

  “Right …”

  The usual butterflies
were circling in my stomach. I’d done a hundred deals and everyone had me nervous the night before. “Hey Robin, we got lift off. Are you ready?”

  “As ready as usual. I’m sure some shit will come out of the woodwork at the last minute that’ll screw everything up. That said, all the data from the offering memorandum is loaded in the model and I’ve programmed three different simulations all linked so any changes we make will hit them all. The base case is in the middle and we can adjust for windage.”

  “What’s the base case range?”

  “The price in Dollars is between nine hundred million and a billion. The sensitivity factor is whether we can get all the step-ups for both Brazilian and US taxes. The language of the final contract will need to drive the tax treatment the way we want. I’m sure we’ll get a better feel if BrasTel wants a really quick closing and then we can fine tune.”

  “The upside case says what?”

  “A billion three, a billion four … a few bucks either way.”

  “I won’t ask about the downside. If I know you it has everything including the outbreak of nuclear war in it.”

  “You never know they say, shit happens.”

  “Sam was talking about a political risk discount for the election.”

  “On the JP Morgan index, Brazil is carrying a country risk premium of seven hundred basis points above US Treasuries. It will automatically adjust for political risk as the election comes closer. I expect the risk premium to grow quite a bit. Maybe it will hit twelve to fifteen hundred basis points above Treasuries for six months or a year. If we factor that in it could be worth about seventy-five or a hundred million. The base case and the downside models have one of the risk factors tied to the Morgan index. I didn’t bother with the upside case because you guys will be capitalizing the dust on the floor to make the deal numbers work.”

  “All of the dust or just part of it?”

  “You forget the damned Alliance Stores deal. By the end of the auction you were sweeping it in from the street.”

  “Yeah, and I walked away from that one. The debt service almost broke Federation a few years after they closed the deal.”

  “My hero, if Federation blinked first our dear client would have sued our asses off when the whole thing cratered.”

  “I want to call BrasTel at about ten Thursday morning. Call before five today and try to schedule the call with Salés. Sam said he’s primed for us so there shouldn’t be any problems.”

  “Where are you going?”

  “Home, I didn’t sleep last night. I need a clear head for tomorrow so I’ll just take a last look through the deal book and make it an early night.”

  “Your kitchen is stocked. José Carlos left three-hundred fifty Reis change for you. That was after buying a nice shiny espresso machine. You can have coffee tomorrow before I have to put up with you.”

  “Thanks, I’ll see you in the morning.”

  I knew I wouldn’t look at the deal book but having it with me helped with my nerves. Once talks started I know I would be fine just like every other deal and, like every other deal the night before I was always sure we had missed something. A lot of great actors said they had stage fright even after a hundred openings. I wasn’t immune.

  “Senhor Carl, there will be rain tonight. I have put an umbrella in the apartment. If you do not want to use it, the rain will stop and start again. If you stay close to the buildings when you are walking you can use the doorways. People always do and no one bothers them.”

  “Thanks José, I’m not planning to go out.”

  “Should I call my sister? She will cook for you. It is early, only seven”

  “No thanks, I want to go to sleep early and you Brazilians eat too late for me.”

  “There is a place on Al. Tiete. You know Tiete; it is the first street down the hill from where you live. It crosses Haddock Lobo?”

  “Margherita Pizza is on the corner.”

  “Yes, go to the left and in the middle of the block on the left side is a small French restaurant with the name Laurent. It is owned by the same people as Café Antique. It is simpler and less costly but the food is good. There, if you want, you can sit at an outside table and eat something small. Then you will sleep easier.”

  “Maybe, first I need a shower. Thanks. Pick me up at eight tomorrow morning. I’ll be in the café on Oscar Freire. Tchau.”

  A hot shower always turned the day, no matter how bad, to something a lot better. Tonight it only made my thoughts run faster. Alana said she had only cold water when she was little and Robin’s lecture on her father’s street level economics. Perhaps Brazil was different. It had one foot firmly rooted in yesterday and the other somewhat shakily planted in today. I couldn’t believe that was what Aranni had meant. He had let the word hang in the air like some ominous specter … threatening who knows what.

  Leaving things hanging in the air was Shelly’s favorite way of complaining. She wouldn’t say she was unhappy or make threats. No, she would let me fill in the blanks but somehow I missed her message, then, she was gone. We were better off when we had just a little hot water to shower with. Our first flat South of the Thames ran out of hot water too fast so most nights we ended up in the shower together. From shower to bed in each others arms was the natural next step that became less natural when there was more hot water and more money.

  My work was the excuse but in reality we just drifted apart. Shelly had her friends and I had my deals and building my reputation. She wanted kids and a house in Surrey and that’s what she got only it was with someone else who had less money and more time. The hot shower echoed Aranni’s words, “… consider whether there are other directions you could take that might help both Brasil … and yourself.” Had I lost Shelly because I wouldn’t consider whether there were other directions?

  After the shower, leaning against the bedroom window frame, I looked at the city lights glowing from thousands of windows. Behind most were families doing whatever they did at the end of the day. Behind others dreams were being built on hopes and desires. Then there had to be a few like mine where the end of the day was simply the end of the day and a prelude to tomorrow.

  Down on the street below a couple walked hand in hand just like lovers around the world. An old man walking his old dog stopped to enjoy the aura of young love as it gently touched him on the way past. Yes, life had many directions for all of us to choose. If we didn’t make a choice someone else would do it for us. Shelly had chosen for me and then Lord Hansen. Now Sam Watson was doing it. I had changed jobs, changed continents but things somehow remained the same. Now Aranni was trying to choose for me. Was I afraid to take responsibility for setting my own direction? Was the risk too great? Whatever the reason, it had to stay hidden or the BrasTel deal would go adrift and that was something I wouldn’t allow.

  The city’s lights dimmed in the rising sun and I was still at my window turning over the past and searching for answers about about the future.

  “Thank you for taking my call Jão. Sam Watson filled me in on your conversation and I look forward to working with you and your people.”

  “Yes, Sam told me I could rely on your skills and discretion. This is very important to me. BrasTel is part of Brasil’s past and one of the keys to its future. I’m sure you understand the sensitivity of our conversations particularly with the national election coming.”

  “I understand the importance of BrasTel and the difficulty of your job.”

  “My Board of Directors is different from other Boards. I have the Governors of four of the richest states and the Minister of Internal Affairs on the Board. Each of them has a different future in mind and they are very jealous of each other.”

  “Jealous, that’s an interesting word.”

  “Jealous … they worry one of them will get more than the other but it is not personal greed. It is their image in the public eye they worry about. No matter how I try, we have a lot of theater at our meetings and little gets done.”

  “
I understand. How can I help you avoid problems?”

  “Work only through me and those I designate. We must keep as much as possible to ourselves until the time is right.”

  “Naturally, when do you suggest we meet and start our work?”

  “There is no reason why we cannot start tomorrow as long as we can be assured of security. Sam said you have taken an office on Av. Paulista at Campinas. I would like to bring two or three people to meet you in the morning. There will be less eyes and therefore less talk. Is it convenient?”

  “Certainly, what time is good?”

  “We will arrive at ten-thirty.”

  “I’ll have a light breakfast for us.”

  “You are very kind, thank you. Until tomorrow then …”

  Robin and Skip were waiting in our small conference room. “They’ll be here tomorrow at ten-thirty. I got the usual ‘keep things under tight control’ speech but it had a positive spin. Sam did a good job setting the tone so we’re off and running.”

  “Dad told me things seemed to go well yesterday.” Then, trying to fill the heavy silence, “He called me about my mother, she hasn’t been feeling well.”

  “… hope it’s nothing serious.” Robin trying to move on, “Is there anything we need for tomorrow Carl?”

  “It’s her hay fever. She has a problem every spring.”

  I was watching Skip’s eyes and there was something there I didn’t like. It wasn’t that he was a bad liar. No not that. It was that self-satisfied look saying he thought we were stupid enough to believe him.

  “There’s nothing to do but get some pastry and coffee in the morning.” Then just for Skip’s benefit, “Tomorrow is a beauty contest. Both sides try to impress each other with how good they are. It’s all part of the usual deal mating dance.”

  “What should we be prepared to do?”

  “Nothing Skip, we have to smile, say as little as possible and try to look smart.”