The Biggest Risks and Opportunities in Latin America — ft. Monica de Bolle

Monica de Bolle, senior fellow at the Peterson Institute for International Economics, joins the show to break down Latin America’s economic landscape and examine how tariffs could impact its largest economy — Brazil. She explains who’s stepping in as Brazil’s key trading partner, what she sees as the country’s biggest economic tailwinds, and which Latin American nation she believes is best positioned for long-term success. Subscribe to the Prof G Markets newsletter Order "The Algebra of Wealth" out now Subscribe to No Mercy / No Malice Follow Prof G Markets on Instagram Follow Scott on Instagram Follow Ed on⁠ Instagram⁠ and⁠ X⁠ Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Flowing ad budget on metrics that look great till the CFO sees them. That's bull spend and marketers are calling it out in dashboard confessions.

• 0:09Speaker 01

  I remember telling my boss, it'll be good for the brand when leads were slow. Yeah, it it wasn't.

• 0:17Speaker 00

  Cut the bull spend. LinkedIn lets you target by company, job title and more. Advertise on LinkedIn. Spend $250 on your first campaign and get a $250 credit. Go to LinkedIn.com slash campaign. Terms and conditions apply.

• 0:30Speaker 02

  This episode is brought to you by Subaru. You know that place your mind always wanders to? The lake, the mountains, the homes of the people you love most? The completely redesigned 2026 Subaru Outback is built to help you get there. With legendary capabilities, standard symmetrical all wheel drive and the confidence to go further. The 2026 Subaru Outback. Love never looked so good. Visit Subaru.com slash Outback to learn more.

• 0:56Speaker 03

  Payday bars have a bone to pick with the other candy bars. Enough with the toppings and layers and stuff, kay? Payday bars are just salty crunchy peanuts and sweet caramel. Delicious. Payday Peanut Caramel Bar.

• 1:11Scott Galloway?

  Today's number 37. That's the percentage of the British public that says they swear every day. More than any other country. I don't have a joke about that because I am so excited. True story. Last week, property markets was two of the three most listened to episodes in the world.

• 1:29Speaker 05

  Wow.

• 1:30Scott Galloway?

  In business podcasts and what is really frustrating was that both those episodes, I wasn't on either of them.

• 1:37Scott Galloway?

  So Ed, look, you are you are progressing to a big time person with managerial responsibilities. You're now overseeing people and I just want to give you a pro tip about once an organization grows and there's a lot of people. The first thing you need to do, Ed, is you need to call in all hands. And you need to announce and say you're sharing something with them quite vulnerable. But that you've had, you were in a terrible accident.

• 2:05Scott Galloway?

  You're in a terrible accident and some of your emotional inhibitors have been damaged. And there's going to be some locker room talk and some and some inappropriate touching. But you trust they'll understand your journey back.

• 2:24Speaker 06

  Markets are bigger than us. What you have here is a structural change in the world distribution. Cash is trash. Stocks look pretty attractive. Something's going to break. Forget about it.

• 2:33Scott Galloway?

  I don't know. I find that so funny. It's got nothing to do with it.

• 2:37Ed Elson?

  Nothing to do with swearing?

• 2:39Scott Galloway?

  Yeah.

• 2:40Ed Elson?

  But that's your managerial advice for me.

• 2:42Scott Galloway?

  My inhibition sensors, sensors were damaged in a terrible accident. There's going to be some inappropriate touching. I appreciate your patience on my journey back. I gotta do that in all hands, just to see how Catherine responds.

• 2:56Ed Elson?

  Yeah, you should try that and see how that goes.

• 2:59Scott Galloway?

  Yeah. What's going on, Ed? What's going on with you?

• 3:01Ed Elson?

  Not too much. I'm just sort of fascinated by what's going on behind you. You've got like a dark, stormy. What is that? A painting? Where are you? What's going on?

• 3:13Scott Galloway?

  I'm in Aspen and the guy who saves my bacon is Drew. Came back here a couple of days early, rented a three bedroom apartment. And there's, there's audio equipment everywhere. And the last time I was here, I was on that white dudes for Harris thing. Was that exactly a year ago? I guess that was a year ago. And I looked so, I looked even, I looked my, I looked so ugly. I look like me. I looked, it was, I looked my age. And my natural lighting came through and I said to him, boss, you gotta, you, you, you, look what we're working with here. And so he set up great lighting and he found he and Catherine designed this little backdrop. It feels to me like a little bit like too many hits of acid.

• 3:54Ed Elson?

  I think it looks great. It looks very, you look very, very professorial.

• 3:58Scott Galloway?

  There you go.

• 3:58Ed Elson?

  Very sort of Timothy Leary or something.

• 4:00Scott Galloway?

  This is all true, but yeah, I'm in, I'm in Aspen. Where are you?

• 4:04Ed Elson?

  I'm in New York, living the dream. Recording some podcasts.

• 4:09Scott Galloway?

  You taking, are you doing anything with your girlfriend this summer? You going anywhere? Taking her anywhere?

• 4:12Ed Elson?

  Yeah, we're going to go to Sardinia.

• 4:13Scott Galloway?

  Oh, smell you. Someone's making a little too much cabbage. Someone's a little overpaid. All right, Ed, let's get to the interview. This is very exciting.

• 4:22Ed Elson?

  Okay, here's our conversation with Monica DeBol, senior fellow at the Peterson Institute for International Economics and the host of Policy for the Planet. Monica, thank you so much for joining us for the very first time on Prof G Markets.

• 4:35Speaker 08

  Thank you for having me. It's a pleasure to be with you.

• 4:41Ed Elson?

  So you are a macroeconomist, you are a global policy expert, a professor, many things, but you are also an expert on Brazil. And Brazil has been in the news a lot recently. As most of us know, Trump has threatened this 50% tariff on Brazil, which has brought up a lot of questions for us about what is this due to Brazil, what is going on in Brazil, what is Brazil's relationship with the United States, et cetera, et cetera. So that is why we're very happy to have you. And we thought that now would be a great time to get your take on things. So we really appreciate you being here.

• 5:21Speaker 08

  Thank you. It's my pleasure to be here. And I'll just say that I'm also Brazilian.

• 5:26Ed Elson?

  Yes.

• 5:26Speaker 08

  And I was in Brazil when they announced the tariffs.

• 5:29Ed Elson?

  Well, maybe let's start with there. I mean, let's just go, what is the tariff situation? You know, Trump has threatened this 50% tariff on Brazil. He said it's because of a, quote, witch hunt against the former president, Bolsonaro. Just for those of us who have like no idea what any of this means, or what the situation is, give us the rundown. What is the political situation in Brazil? And how did people react when you were over there in this tariff news hit?

• 5:56Speaker 08

  So in a nutshell, the situation with former President Jair Bolsonaro is that he's been under investigation and now his trial is actually upcoming in a few days or in a few weeks, perhaps, over his involvement in the 2023 January 8th uprisings against the Brazilian Congress, the Brazilian Supreme Court, and also the presidency. There was a, there was an insurrection on January 8th in, in Brazil, not unlike what happened in the United States on January 6th, two years before that. And Bolsonaro was heavily involved.

• 6:38Speaker 08

  I mean, it's not even an allegation anymore at this point, because the investigations have shown that he was clearly involved in organizing and orchestrating a part of this insurrection. And that is what's, what's happening at the moment, is that these investigations have now come to a close, and it's at the point where he's going to be tried, and he will likely be. Well, not just indicted, but convicted. And we will have to see what kind of penalties the Brazilian judicial system is going to impose. But nonetheless, that's the situation. It took everyone by surprise when this announcement came from the White House,

• 7:19Speaker 08

  the tariff announcement, specifically linking it to the investigations concerning former President Bolsonaro and what is currently going on in Brazil, which pertains uniquely to Brazil, one should say.

• 7:33Ed Elson?

  Why do you think Trump cares about this? Why would this political situation in Brazil cause this outburst from the president over here? And why is he using tariffs as a way to sort of punish that behavior? I know we can't really get inside of his head, but generally speaking, like, how would one justify this?

• 7:55Speaker 08

  I cannot justify it under any reasonable logic. I mean, in a sense, what is currently happening in Brazil is Brazil's business. What is currently happening with regard to former President Jair Bolsonaro is Brazil's business and Brazil's business alone. It has no implications whatsoever for the United States or for the US economy, for that matter. So it really does not stand to reason, you know, why would the US do something like this? It doesn't make any sense. And it makes no sense from an economic point of view because Brazil and the United States have always had trade relations. They've always been pretty good.

• 8:36Speaker 08

  There's never been much of anything that's going on between the two countries. Some, you know, skirmishes here and there, but nothing, nothing serious over decades and decades of involvement between the two countries. So this decision or this announcement really was taken with a lot of surprise by Brazilian authorities, the media, everybody. And no one understands what is the rationale behind it. What is clear, of course, Is that the investigations, the trial, everything that's currently ongoing will obviously continue because these are sovereign decisions. And like I said, they have to do with Brazil alone.

• 9:19Ed Elson?

  So say this tariff goes through, and I think there's a lot of debate of whether they will actually happen. But say the 5% tariff goes through in Brazil, what would that do to Brazil? How would that affect Brazil's economy?

• 9:32Speaker 08

  So Brazil and the United States have, as I said, a long, very, very long commercial trade relationship and investment relationship for that matter. There are US companies that have been in Brazil for over a century. There are Brazilian companies that have been in the United States for also a very, very long time. There are lots of things that the the two countries buy and sell from each other, lots and lots of different products and different categories of of things and goods and services and everything in between. Brazil is, as you know, Latin America's largest economy. It's larger than Mexico.

• 10:13Speaker 08

  And of course, you know, it it can obviously withstand the 50% tariffs, although it will hurt a lot of sectors in Brazil. But it should be said, it will also hurt a lot of sectors or would hurt a lot of sectors in the US if that tariff were to come into effect.

• 10:31Ed Elson?

  When that announcement happens and you were in Brazil, what is the feeling among Brazilians? Is it sort of like, this is kind of crazy and funny and this guy is stupid? Or is it, this is really scary and this is escalating a relationship that we depend on? Is it this is just more drama and it's more TV and it's kind of exciting? Like, I think in America, the answer is often sort of all of the above. I think a lot of us find it just it's it's entertainment in a lot of ways at this point because it's just it's it's getting so crazy and oftentimes it never goes through. But as someone in Brazil,

• 11:12Ed Elson?

  what is the feeling when a headline like that comes out, which should have this massive consequence, but as we know, maybe it's just funny news?

• 11:22Speaker 08

  The first reaction was sort of shock and astonishment. Yeah, I won't say shock and awe, because there's no awe element to this. So it was shock and astonishment. Everybody was just completely taken by surprise. And there was an element of what? What is going on? What is this about? Why? Why are they doing this to Brazil at this point? When Brazil doesn't even have, I mean, the typical rationale that you see coming out of the US administration for tariffs. Yes, they can use anything under the sun that they like. But more typically, they've pointed to trade deficits as a reason for why tariffs are warranted on a particular country at a particular time. Not that the trade deficit rationale really has any economic bite to it, but at least

• 12:07Speaker 08

  that's how they framed it before. With these tariffs on Brazil, they haven't used any trade issue to kind of underpin or underlie the decision. Because Brazil doesn't have actually a surplus with the US. Or rather, the US doesn't have a trade deficit with Brazil. It's the opposite.

• 12:27Ed Elson?

  Right.

• 12:27Speaker 08

  The US has a trade surplus with Brazil. So Brazil has a trade deficit with the US. So by that usual logic, you know, the 50% tariff doesn't work. And then when people realize that the argument, the underlying argument, was political in nature, there was a kind of a combination of, I would say, all of the above. So there was some entertaining aspects to that. Because of course, people saw it as, no.

• 12:58Speaker 08

  The US can't interfere in our business. So there was an element of that. There was an element of indignation, and that element is still present, given that, you know, there has been some turbulence way in the past. So we're talking here about the 1970s and the 1980s between Brazil and the US, and also the US and other Latin American countries at that point. And that memory, you know, yeah, it was a long time ago, but it is still a very present memory to a lot of people. So whenever they see, you know, the US attempting to, in their view, interfere with things that are Brazilian, of Brazilian, you know, concern and Brazilian concern only, of course,

• 13:43Speaker 08

  that doesn't rub people the right way. So, you know, people get somewhat irritated by that. So there was an element of irritation. And then lastly, yeah, people are also scared, you know, because of course, the the the impact of a tariff of this size is very big. And it can have a huge impact on many, many sectors of the economy and many, many sectors that the economy relies on to grow. Agribusiness being at the center point of of this. Um, when we speak of, you know, where the damages may lie and so on. So I would say, you know, there's a combination of things going on at the moment. But I would underscore one thing.

• 14:26Speaker 08

  The the before the announcement of the 50% tariff, the situation in Brazil was that they're they're going to be general elections in 2026. These are presidential elections, congressional elections, and elections for governor throughout the country. And so this is a pre-election year. And of course, things, of course, things are already gearing up for the election. And prior to the announcement, the current president, Lula, Luiz Inácio Lula da Silva, was actually not doing very well in the polls. What's happened since the announcement was made is that there's been quite a rally behind Lula. And of course, you know, not unlike what happened in Canada.

• 15:10Ed Elson?

  In Canada, yeah.

• 15:11Speaker 08

  You know, he's he's now doing somewhat better in the polls. And the and the the far right in Brazil, which is somewhat aligned with, you know, the current US administration, they're kind of lost because they can't really make a case for why 50% tariffs would be defensible under any circumstance. So in a way, you know, the announcement has sort of, is sort of right now, at least, helping Lula politically.

• 15:43Ed Elson?

  The reason he does them is Largely to threaten another nation into getting something that he wants, or it's a negotiating tactic, or whatever it is. It sounds like this isn't working at all because, as you said, they're just going to proceed with this indictment of Bolsonaro. And so what I'm hearing from you is there is an impact on enacting a 50% tariff on Brazil, but it's not nearly big enough for the government in Brazil to change anything about what they're doing or how they're proceeding with this lawsuit. In other words, it sounds like the threat is not working at all. Is that right?

• 16:25Speaker 08

  That's right. It's not working at all.

• 16:27Ed Elson?

  Well, I just wanted to confirm that.

• 16:28Scott Galloway?

  Well, it's actually, it's likely, I think it's likely to backfire based on what we've seen elsewhere. I feel as if I've been an evangelist for Brazil for the better part of the last 15 years and since then I've been going to Brazil two or three times a year. And it just has all of the underpinnings and all of the assets of an economy and a society that should be increasing its role on the global stage in economic growth. Incredible natural resources, huge domestic market, incredible agribusiness, even some great tech companies. I've gotten to know the management team at New Bank. Unbelievable natural beauty and tourism potential, leadership in renewable energy.

• 17:11Scott Galloway?

  And yet it feels like Brazil's always a nation that is on the verge of happening. It's always tomorrow. It never quite seems to get out of its own way or command the space it could occupy. What do you think? Well, first off, do you agree with that? And two, what is holding Brazil back?

• 17:28Speaker 08

  I share that view completely. It is a country that gets in its way every single time, I think. The reasons are many for why Brazil doesn't actually ever quite take off. It's always on the brink of taking off and then something happens.

• 17:47Scott Galloway?

  Yeah.

• 17:49Speaker 08

  A lot of it has to do with, you know, the country's very turbulent history. So Brazil has a history of political crises, economic crises and, you know, crises that just keep on happening.

• 18:02Speaker 08

  Um, over and over again, not quite like Argentina, because in Argentina, that situation by and large has continued to the present day in a way that it hasn't in Brazil. So in Brazil, things have kind of stabilized. If we go back sort of, I don't know, 15 years or so, or maybe even a little longer. You know, it is a country that has by and large at least stabilized itself on the economic front. But politically, things continue to be very, very complicated. It's a country that's undergone at least two very serious impeachment proceedings with actual impeachments of sitting presidents. And the country has been oscillating a lot in the last few years between different political camps.

• 18:47Speaker 08

  So you've got, you know, your kind of leftist political camp and your right wing political camp. Those two have become more extreme over the last few years. And whenever an election pops around, what we've been seeing in Brazil a lot is that from one election to the other, the pendulum just swings wildly. So it often goes from one end of the spectrum to the other. At least that's what we've seen um, since about 2018 or so, or maybe slightly before that, 2016, which was the year of former President Dilma's impeachment. So given that, given those circumstances, given the very high levels of uncertainty that exists in the country with respect to,

• 19:30Speaker 08

  you know, the political situation broadly speaking and the economic situation, although less so, I think that became and has become over the years a very serious impediment for, you know, more reforms or other things that the country needs to sort of get a higher standing um, in, in global markets. Policy decisions have been very complicated by, you know, this ongoing political turbulence. And so all of that kind of underpins, you know, the sort of lackluster performance that we've seen um, in Brazil over, I guess, the last several, several decades at this point.

• 20:10Scott Galloway?

  And bringing it back to tariffs and this, um, I don't know, new complexion or approach to traditional trading partners that the US has, has adopted.

• 20:23Scott Galloway?

  As Brazil, I would imagine, feels less of a bond with America, and we have been great allies, who's filling that void? Is it China? Or is Brazil similar to other countries? Our thesis is that Trump's tariffs, or his threats of tariffs, have in fact inspired a flurry of deal making. But our thesis is that the deal making is happening around us, not with us. Any thoughts? Is that a valid thesis? And what do you see happening in Brazil, not only with respect to its trade relationship with America, but if and who else is filling that void?

• 21:00Speaker 08

  Well, that is definitely a valid thesis. We do see a lot of countries trying to reposition themselves when it comes to global trade and investment and partnerships with different countries around the world, especially as the US has proven to be more and more a kind of unreliable partner in a sense. And certainly for Brazil, that has been the case this time, because, as I said, you know, the decision, the current decision on the 50% tariff, the announcement, as it were, was a complete surprise. I think a complete surprise to everybody there. What Brazil has been doing consistently over the past several years, but that has certainly

• 21:41Speaker 08

  gained momentum more recently, is becoming closer and closer and forging ever stronger ties with China. So yes, definitely, there is a China element in this equation, which absolutely cannot be ignored. And, you know, the fact that the tariff announcement came at the heels of the BRICS summit, which was held in Rio, and I was there as that was happening, I don't think that's a coincidence. I mean, I realize that the rationale given for the 50% tariff had nothing to do with the BRICS, at least outward, it wasn't outwardly spoken that way. But certainly, the fact that, you know, the summit was held in Rio recently, that there

• 22:26Speaker 08

  were, you know, a lot of communications about how these countries were trying to come together and form a group that would perhaps have some more significant trade relations in the future. Since they don't have much of that now, with the exception of China, Brazilian China ties. That certainly has, I believe, served to irk the US administration somewhat. So I think there's a, there's an element here that, you know, that, that is, that is definitely present. But as for the ties, the economic ties with China, those, as I said, have been growing ever stronger. And in fact, what we have seen over the past few years and very recently is a great influx of Chinese investment

• 23:09Speaker 08

  and Chinese direct investment in the Brazilian economy with the setup of Chinese companies in Brazil. So there, there are now a lot of Chinese companies that are competing with not only US companies, but also European companies that have been in Brazil for a long time for the domestic Brazilian market, which, as you said, is huge.

• 23:34Ed Elson?

  We'll be right back after the break. If you're enjoying the show so far and you haven't subscribed, be sure to give Prof G Markets a follow wherever you get your podcasts.

• 23:50Speaker 00

  Flowing ad budget on metrics that look great till the CFO sees them? That's bullspend and marketers are calling it out in. Dashboard, confessions.

• 24:00Speaker 01

  I remember telling my boss, it'll be good for the brand when leads were slow. Yeah, it, it wasn't.

• 24:08Speaker 00

  Cut the bullspend. LinkedIn lets you target by company, job title and more. Advertise on LinkedIn. Spend $250 on your first campaign and get a $250 credit. Go to LinkedIn.com/campaign. Terms and conditions apply.

• 24:21Speaker 02

  This episode is brought to you by Subaru. You know that place your mind always wanders to? The lake, the mountains, the homes of the people you love most? The completely redesigned 2026 Subaru Outback is built to help you get there with legendary capabilities, standard symmetrical all wheel drive and the confidence to go further. The 2026 Subaru Outback. Love never looked so good. Visit Subaru.com/Outback to learn more.

• 24:47Speaker 03

  Payday bars have a bone to pick with the other candy bars. Enough with the toppings and layers and stuff, kay? Payday bars are just salty crunchy peanuts and sweet caramel. Delicious. Payday Peanut Caramel Bar.

• 25:08Ed Elson?

  We're back with Prof you Markets.

• 25:10Scott Galloway?

  I recognize Brazil is your focus, but I wanted to talk a little bit about Argentina. And that is granted, it's it's coming from a pretty bad place. My understanding is that the end of World War Two, I think Argentina had the third largest economy and Argentina has just been, I mean, Brazil, Brazil, while it's kind of the big engine that we keep or the sleeping giant, it feels that like Argentina is just in a coma and wakes up every once in a while to make a really bad decision and then drifts back into an economic coma. And it feels as if Milley is actually, well, people such as myself who are progressives are a little bit cringe at some of his statements.

• 25:53Scott Galloway?

  I think it's hard to deny that Argentina did need some sort of shock therapy and that he's applying it. And my understanding is that inflation has dropped dramatically and there's a certain amount of optimism around Argentina that we haven't seen in a while. One, do you do you agree with that? And two, how would you assess the situation, the economic situation in Argentina right now?

• 26:11Speaker 08

  The underlying structural situation in the Argentinean economy, in particular on the fiscal side, as well as on, you know, many things pertaining to the size of government and the the way by which the provinces in Argentina have a kind of autonomy that, you know, always brings about fiscal consequences, which make the situation for the country overall extremely hard. There was a need to kind of get into these issues and try to do as much as possible. I'm avoiding the use of the word reform on purpose because I don't think what has happened in Argentina to date, although it's been a lot and Milley has indeed done a lot, but

• 26:54Speaker 08

  I wouldn't exactly classify it as a reform as such because the underlying issues, the underlying political problems between the provinces and the central government, the arrangements that exist between those entities that, you know, will eventually backfire on the fiscal accounts in some sense, none of that is gone. I mean, that all of that is still in place. What Milley has done is that he's managed to downsize some parts of the government that significantly needed that downsizing. And so far, he's been very successful in sort of managing a fiscal situation that looked untenable, you know, two years ago, or a little over two years ago.

• 27:37Speaker 08

  So that has man-- and, you know, he's secured an IMF program and all of that has sort of given Argentina, you know, a sort of a, some breathing room, I would say. Um, where does the country go from here? I think that's the big question because I don't think anybody really knows. I mean, even for those people who are very optimistic about Argentina's prospect, I think most people realize that there are still significant vulnerabilities that remain. In particular, and one thing that I will underscore is the fact that Argentina is a country that operates with two currencies. They have their own currency, the peso, but they use the dollar for everything.

• 28:18Speaker 08

  And the population at large is so used to the idea that they can count on the US dollar that it's almost like the dollar is another currency, or almost like, no, I would say it is another currency in Argentina. So basically, it's a country that functions with the currency that they issue and with the currency over which they have no control, that one being the dollar. And that is always a problem for them because whenever there's a scarcity of dollars or a lack of dollars in the Argentinian economy, the country flips into crisis mode. Things hasn't, haven't changed enough for that not to happen. So that kind of crises that we've seen in Argentina over and over again

• 29:00Speaker 08

  is still a possibility in spite of the many reforms that Milley has put in place.

• 29:06Scott Galloway?

  Another one of our big theses, um, for the year is that we would see, I mean, over the last 20 years, my sense is there's been capital flight from the majority of Latin American nations. And as a result, you've had-- Kind of multiple contraction in the stock markets, which is it's very difficult for any stock or any company to outrun a multiple contraction. And, you know, unless you're MercadoLibre, there's just very few stocks that have rewarded investors. And as a result, it's been kind of a doom loop where more and more capital leaves Latin America. And that's this is true globally. Everyone's basically been drawing capital out of the market and putting it in U.S. growth.

• 29:51Scott Galloway?

  But it appears maybe that the rivers of capital might be reversing flow. One, do you see that? And how have markets responded in LatAm? Is there a new sense of optimism across the region in terms of its own equity markets?

• 30:05Speaker 08

  The region as a whole is is so difficult to sort of kind of put under one single umbrella.

• 30:11Scott Galloway?

  Generalize, yeah.

• 30:12Speaker 08

  That I think it's more of a country by country story, right? So when you look across, you know, the set, when you look at the two largest economies, so when you focus on Brazil and Mexico, yeah, those two countries are very much influenced by global conditions. You know, it matters that global economic uncertainty is currently at an all time high. That, of course, affects a lot of things for for both of these economies. But the two, both of them have been doing actually somewhat better than was expected, I guess, a few months ago. And therefore, you know, there is some optimism going on both in Mexican markets as well

• 30:53Speaker 08

  as Brazilian markets in view of this better than expected performance. So in the case of Brazil, which is a country that I'm most familiar with, what we've seen is that economic growth has actually surprised. It's not that great. It's still kind of lackluster, but it has surprised people on the upside. So it's been somewhat better than what was expected. The dynamic in labor markets and what's been happening in labor markets and unemployment in Brazil has also been surprising people on the upside. And there's also been a good inflation story. Brazil is also a country that faced, just like the U.S., very high inflation a while back. And inflation, you know, kind of stayed at a very high level for a while.

• 31:35Speaker 08

  But over the past few months, it has been coming down gradually. Mind you, Brazil has just about the highest nominal interest rates in the world. So in the central bank has been hiking rates. So interest rates currently stand at fifteen percent, um, which is really a lot. Um, and that of course is helping to um bring down inflation. But having said all of that, the economy at the moment actually looks quite okay. In spite of the big fiscal problems that it still needs to solve, but none of those are imminent. And so, you know, things are looking quite okay, which has led to this influx of of optimism. And, you know, um, markets have rallied and and things have looked all right.

• 32:21Speaker 08

  The question is, is this going to continue now with this with with this tariff threat on the horizon? We haven't really seen any big moves in relation to that announcement or anything that has really spooked markets at this point. I think everybody sort of, as things usually go with these things, they're waiting it out to see if this is really going to stick. Or if this is again, one of those things that gets announced and then, you know, it gets back backpedaled or put on the back burner for a while or whatever it is. I think the expectation at the moment is that the fifty percent is never going to come to fruition. But if it does, um, then I would expect to see a bigger impact on markets and also a bigger impact on the currency.

• 33:05Speaker 08

  The currency has suffered some impact in the last few days, but not nearly as much as would be justified if everybody's seriously concerned about the effects of these tariffs.

• 33:16Ed Elson?

  Yeah, I'm just looking at the Brazilian stock market trading basically near record highs right now. It's up thirteen percent year to date. Compare that to the S and P, which is less than seven percent. So it's basically like double the performance of the S and P so far this year.

• 33:35Ed Elson?

  What would you say are like the main tailwinds for Brazil? What are Brazil's main strengths? If you're making a bull case on investing in Brazil, what are you excited about?

• 33:47Speaker 08

  Well, there are lots of things actually to be excited about because Brazil is moving quite a bit on the climate agenda and Brazil has a lot when it comes to opportunities in the energy sector, in renewable energy, or anything that has to do with climate adaptation and transition. Brazil is at the forefront of that game, or at least it's one of the countries, you know, one of the developing countries, I should say, at the forefront of that game. And it is a country that's very well positioned to do well on climate adaptation issues and on, you know, reforming the economy for climate adaptation. And we have seen that with the, you know, private interest that is coming from abroad in things like green hydrogen, you know, and the development of green hydrogen plants

• 34:32Speaker 08

  in the northeast of the country, which is something that has been happening and there's really not been any much, much government involvement in that at all. It's a complete private sector initiative thing that's, that's playing out there. So I think, you know, investors overall see these possibilities very clearly. I think they also see clearly that the, the stronger ties between Brazil and China are bearing fruit for both countries, but are specifically bearing a lot of fruit for Brazil. Brazil has always been dependent on a lot of foreign investment to get things off the ground, to get its own investments off the ground, its own investment agenda off the ground.

• 35:14Speaker 08

  And the fact that there's now such a big player as China, interested and invested in all senses of that word, in Brazil, also gives the country a different footing going forward and also with respect to attracting, you know, investment and capital from abroad.

• 35:33Ed Elson?

  If you had to identify the biggest problems for Brazil, I'd love to get your views on just Latin America in general, but I take your point that that is extreme generalization. But, you know, when I think about like the issues that have ailed Europe as an example, probably I think the first thing I would say is like a lack of innovation. When I look at China, maybe it would be the housing market and perhaps, you know, having to be under this authoritarian rule, which has been good for them, but also bad for them at times. In America, probably polarization has been kind of like the big issue. What would you say is the big problem in Brazil right now?

• 36:16Ed Elson?

  And if you can generalize it in South America, Latin America at large?

• 36:21Speaker 08

  Polarization is definitely a huge one for Brazil and for the for the region as a whole. And then I would include everybody. It's not even parts of the region. It's for everyone.

• 36:32Ed Elson?

  Okay.

• 36:33Speaker 08

  So polarization is a big one, a very, very big one. The the other one I'd say is is pretty complicated as well, and it's more of an economic issue, is the fiscal situation that these countries face. Because for every single one of them, what you see, I mean, to varying degrees, all of them have fiscal problems. The nature of the fiscal problem differs. So for some countries, it's one thing, for other countries, it's another. But by and large, all of them are running high deficits and all of them have high levels of debt. And that's certainly the case in Brazil. Very high levels of domestic debt, very high deficits, fiscal deficits, which are quite difficult to control in the case of Brazil, because there's a there are a lot

• 37:17Speaker 08

  of expenditure items in the budget which are constitutionally mandated. So you can't exactly cut them down. You can't exactly cut spending in the usual fashion that you would do when you have so much of that spending that is being, you know, is is directly linked to constitutional or or things that are in the constitution, which obligate the Brazilian government and the Brazilian state to spend such amounts. So you you would need a constitutional reform of sorts to properly handle these issues. And then, as I was saying before, the political situation in Brazil being what it is, there

• 38:00Speaker 08

  certainly isn't going to be any reform of that kind. So the fiscal problems are certainly a bottleneck.

• 38:08Ed Elson?

  To what extent is that a reflection of the culture of Brazil? And the reason I bring that up is because it's what you're describing is basically like the opposite problem in Germany, where they have a constitution which basically forces them to not spend. And they're trying to figure out, how do we adjust the constitution such that we can spend more money? And we've talked about this on our podcast. We believe that that is, you know, very linked to this culture in Germany of austerity and being conservative and, you know, being generally worried about the future. So I'm just, I'd be interested to hear how the fiscal picture in Brazil and in Latin

• 38:49Ed Elson?

  America is reflective of perhaps a cultural scene and whether those two are linked.

• 38:56Speaker 08

  That's a perfect question, and it is an excellent one. And it has everything to do with the Brazilian case because the situation such as it is, the fiscal situation comes off of a very troubled history and a very troubled past. So the constitutional issues that I was mentioning just now, they go back to what was happening in the country in the 60s and the 70s and the 80s, when Brazil had a 20 year military dictatorship, which, you know, stripped people of a lot of, a lot of things, a lot of rights, a lot of access to things. And, you know, it was just a very difficult period in Brazil overall.

• 39:38Speaker 08

  And in 1988, after the country was redemocratized, that happened in 1985. So the military dictatorship was gone in 1985. But then Brazil sort of needed, after 20 years of military dictatorship, Brazil needed a new constitution. And then in 1988, that new constitution came about. And that constitution, which is the current constitution, is one that tried to fix a lot of the problems that Brazil had had in its past. And in particular, it tried to address inequality. It tried to address, you know, the lack of access for part of the population to things like education and health.

• 40:21Speaker 08

  And, you know, um, giving also, there was a concern about pensioners and giving pensioners their due. And, you know, so that after years and years of very high inflation during the military dictatorship, when these pensions were eroded, so that, you know, this would not happen again in the future. The same applies to the minimum wage into minimum wage legislation that was put in place and things that were enshrined in the constitution with respect to the minimum wage. So all of these things that, you know, the formulators of the constitution back in eighty eight tried to fix because of historical wrongs that were perceived, they kind of went overboard um with a lot of that. And thus, you know, much of the enshrining of spending

• 41:06Speaker 08

  that we currently see in Brazil that makes it very hard to adjust, you know, the, the, the budget, um, that really comes from that history. So I'm very glad you asked that question because the link is direct.

• 41:19Ed Elson?

  And it sounds like, I mean, Javier Millay, who comes out with the giant chainsaw and the idea is he's trying to reverse that trend in Argentina. It feels like he might be, I don't know, maybe an indication of what's to come for the nation surrounding Argentina. I mean, it sounds like that was Argentina's solution to their problem, which was specific, but sounds similar to the issues that you're describing. Do you think that we're going to see more Millay-type politicians and leaders in South America?

• 41:56Speaker 08

  That is certainly already happening. Um, and in fact, you know, if you look at former President Jair Bolsonaro himself. He was sort of a Milley, you know, precursor of sorts. I mean, not exactly, but in some ways, yes, because he was a defender of the so-called minimal state. So he really wanted to cut things down to the bare bones, which in Brazil is really hard because the inequality, like in Argentina too, but in Brazil, the situation is a little bit worse. When it comes to inequality, the levels of poverty, the number of people who are completely excluded from anything you might imagine. You just can't take a chainsaw to the state like that and expect that, you know,

• 42:40Speaker 08

  the population is going to be well-served by it, because in fact, it won't. You know? Even given the fact that, you know, some things need to be done on the fiscal side. But how to actually go about that in a country with such high levels of inequality and social injustices all around is not trivial. You know, it is really, really difficult. And it needs a properly functioning political system for things to happen. And the lack of that is what kind of leaves Brazil hanging in this situation. And yeah, I mean, Milley-like figures are popping up everywhere. And I expect that we will see a lot of that going into the 2026 elections in Brazil.

• 43:23Ed Elson?

  Yeah, I guess the distinction that we'd have to make with Milley, and which I'd probably give him credit for is like, he campaigned on the chainsaw.

• 43:31Speaker 08

  Yeah, he did.

• 43:31Ed Elson?

  But it seems like actually his form of governance is not so much chainsaw, and it's a little bit more strategic than that. And also, he's not an insurrectionist, and he didn't attempt a coup, which is also good.

• 43:47Ed Elson?

  Stay with us.

• 44:28Speaker 02

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• 44:53Speaker 03

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• 45:14Ed Elson?

  We're back with Prof G Markets.

• 45:15Scott Galloway?

  So last question for me. If you were to go long any one of the countries in Latin America, and I'll say, well, I was going to say not including Brazil because I think you, like me, have a bias because you have a faction for Brazil. But what would, what country do you think is set for the most success based on where they are at this moment?

• 45:37Speaker 08

  Chile without a doubt.

• 45:38Scott Galloway?

  Huh. Was not expecting that.

• 45:40Speaker 08

  Well, you know, Chile is a country, there's a lot of political issues there, there's a lot of political turbulence there. But when I look at Chile as a Brazilian, so as somebody who's from the region and kind of looking across and trying to see, you know, where things seem a little bit more stable, they do seem a little bit more stable in Chile. Now, it's not a country that has nearly the same size as, you know, a Brazil or an Argentina or a Mexico. It's a much, much smaller economy. It is an economy that is very dependent, as you know, on mineral exports and in particular on metals and, you know, copper and whatnot, the things that they export.

• 46:20Speaker 08

  So they're very much subject to whatever's happening in global markets on that front. But all that being said, you know, they did do a very comprehensive reform or economic reform back in the day, and they have reaped the fruits from that, you know, over the years. And in that way, they have distanced themselves somewhat from the Brazils and Argentinas of the region. So they are a little bit farther ahead than most, and I think they're a little bit more resilient than other countries. Now, that resilience has, you know...

• 46:53Speaker 08

  Has had, has suffered over time. So it, it's not the case that, you know, Chile is the same economy or the same country that it was, say, ten, fifteen years ago. Was certainly somewhat stronger at that point. So things have been degrading. But I would say it's still the country that, to me, looks more politically and economically sound than, than others, than, than some of its peers.

• 47:19Ed Elson?

  If there was anything that you think America and Americans could learn from Brazil and from Brazilians, what would that be and why?

• 47:30Speaker 08

  Well, it's ironic that I would say something like this, but I will say it. Look at our institutions.

• 47:39Speaker 08

  Our institutions have been working. That is actually something that we haven't seen very often in Brazil. You know, the institutions working as well as they have been. But they have been working pretty well. And, you know, the fact that the country was able to withstand an attack such as it did in 2023 and kind of come out on the other side. I don't want to say completely, but at least in part, is really impressive. And, you know, that does go back to lessons that we learned when we actually had a 20-year dictatorship. So there are things that, you know, have been learned in Brazil and that have been thus used to erect these institutions,

• 48:23Speaker 08

  which are currently solid. Now, that doesn't mean they can't be destroyed. That can happen. And as a matter of fact, that's what was being attempted back in 2023, and it failed, but it could succeed, you know, at some point.

• 48:38Ed Elson?

  What would those lessons be? Like, what do you think Brazil has gotten right in terms of maintaining institutions, maintaining their integrity?

• 48:47Ed Elson?

  What are they doing that perhaps the US is not doing?

• 48:51Speaker 08

  I think the one thing that is very clear is that autocratic regimes, they, you know, may actually do fairly well for a little while. So if we look at the experience in Brazil with the dictatorship, we did see a bit of an economic miracle in the late 60s and early 70s, which lasted for about five years or so. As a result of, you know, this regime coming into being and thus controlling a bunch of things and trying to, you know, run the economy all on its own and doing this and doing that and sort of meddling with different things. That seemed to work for about five years. But then the country went into a period, a very lengthy period

• 49:37Speaker 08

  of more than 15 years because this outlasted the military dictatorship of massive economic turbulence and political turbulence at that, but massive economic turbulence. And that turbulence came in the form of extremely high inflation, very, very high unemployment, a lot of disenfranchising of people. You know, it was just a mess. It was a mess. I lived in Brazil while it was a mess and I can't, I can't overestimate or exaggerate how much of a mess it was. So I do think that, you know, those kinds of experiences, people learn from that and they learn to see, you know, where things have functioned, where they have not and why it is that, you know, fully autocratic regimes

• 50:21Speaker 08

  are simply not good. And they may, they may be OK in the short run, but ultimately they'll bring the country down. And that's what happened there.

• 50:31Ed Elson?

  Yeah, that makes a lot of sense.

• 50:34Ed Elson?

  Thank you so much for joining us. Monica DeBol is the Senior Fellow at the Peterson Institute for International Economics and she's also the host of Policy for the Planet. This was great, Monica. Appreciate your time.

• 50:46Speaker 08

  Thank you and thanks so much for having me on the show. I enjoyed it a lot. And Scott, I'm glad to hear that you're a Brazil fan.

• 50:54Scott Galloway?

  Every year, every year I go with friends to Floripa. I love Sao Paulo. My, I'm a huge fan of not only Brazil, but

• 51:03Scott Galloway?

  there's no way to say this without it sounding douchey. My favorite hotel in the world now is the Rosewood in Sao Paulo. I love the.

• 51:11Scott Galloway?

  I just, and I used to go to Rio, now I go to Sao Paulo. I absolutely am in love with Brazil and Brazilian people and Brazilian culture. And so very much rooting for your homeland.

• 51:23Speaker 08

  Thank you. Yeah, we're all hoping that, you know, this will, this will help us. It is helping so far.

• 51:30Scott Galloway?

  There you go. Thanks, Monica.

• 51:32Speaker 08

  Thank you.

• 51:42Scott Galloway?

  Ed, what did you think?

• 51:43Ed Elson?

  Well, it was really interesting. I thought the most, probably the most interesting point was this idea of the perils of an autocracy just being fresh in the minds of Brazilians. And the idea that that resonates for them when they start to see dictatorship or authoritarianism. It's a lot more scary when you've seen it in your lifetime. I just wonder if other countries around the world are looking at America. And it's bringing up memories of when they were ruled by authoritarians. I don't want to get too pessimistic or doomsday about this, but it is interesting that that was,

• 52:23Ed Elson?

  that is one of the takeaways is that Brazilian institutions, there's more trust in them and more interest in them because of that. I wonder if that brings up any thoughts for you?

• 52:33Scott Galloway?

  Well, it's interesting. Brazil appears to have a more resilient democracy than we do right now. Its institutions are holding. They had sort of this Diet Coke insurrection and they immediately charged the president who incited the insurrection, which seems to me what you would need to do.

• 52:52Scott Galloway?

  So it's, they have obviously, it's an interesting thought. They have such an ugly history around dictators in Latin America and strongmen. That I wonder if they're, whereas it's kind of like new and interesting for us, it feels like.

• 53:08Ed Elson?

  Yeah.

• 53:08Scott Galloway?

  So, hey, let's see if this works. Whereas they're, they've kind of been there and I think I've, are having a healthier gag reflex in us right now.

• 53:18Ed Elson?

  Yeah, it feels like in America, we see that and we think, oh, this is forceful. This signifies strength. It's machismo. But I think for others, it's like, this is a very slippery slope to a very dark path that has happened over and over again in history.

• 53:39Ed Elson?

  This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Mia Silverio is our research lead. Our research associates are Isabella Kinsel and Dan Shalane. Drew Burrows is our technical director and Catherine Dillon is our executive producer. Thank you for listening to Property Markets from the Vox Media Podcast Network. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.

• 54:41Scott Galloway?

  So Ed, you're taking your girl from the Sardinia and I want you to know on that beautiful blue water and having romantic dinners, you're gonna, you're gonna think, you know, maybe I should be a more sensitive boyfriend. But I just want to tell you not to go there. That sensitive boyfriend, all that happens is you end up in the car, both of you crying and that parallel parking spot is still empty.

• 55:05Scott Galloway?

  I'm on a roll of mediocre jokes today.

• 55:07Ed Elson?

  Yeah, at least that one, that one feels accurate. That's true. That's very true to me.

• 55:11Scott Galloway?

  There you go.