Tech giants face US Congress hearings on competition

Just came across this article on the US Congress hearings of the giant Tech companies Google, Facebook, Amazon and Apple. What called my attention was the approach from the executives (you know, corporate diplomats) in stating that they face competition and are not monopolies – which, let’s be honest, is not quite accurate.

I believe that the issue with governmental affairs professionals in private organizations is the short-sighted vision on matters of public interest. This is the core scope of their work and yet, governmental affairs specialists bring this fierce attitute of business strategy to the public debate – definitely not a win-win approach. This approach will only continue to get the exact conter-productive reaction they got from congressman David Cicilline, as reported by Wired:

“I don’t think there’s any question that we cannot expect them to regulate themselves. We’ve seen the total absence of any ability to regulate themselves, so I think it will absolutely require some action by congress.”

Would it be reasonable to say that the new data economy revolves around data as the raw material of its production systems? Does this mean that these tech companies are extracting data as a commodity?

They are arguing that they extract these commudities to serve their consumers. But, aren’t their consumers the people who they also extract the raw material from?

And what do the consumers/suppliers get in exchange? Not much except an overwhelming load of personalized advertising (is this a benefit, anyway?) and access to content creation and sharing platforms – which is the over-the-top (OTT) infrastructure of the production system.

Well, I believe that it basically comes down to the fact that the emerging production mode (knowledge production systems) does not close the economic feedback loop. In the industrial mode of production, in which raw material is in fact extracted from space territory, there is a feedback loop – concessions pay taxes and royalties to the States that have sovereignty over territory and wages to workers who provide labor to extract the material. However, in the emerging information age, the story is completely different. And my argument is that people – the data subjects from which raw material is extracted, hence data providers – are shut outside of the economic loop. This has something to do with the flawed assumption that all individuals performing economic agency (i.e. as both end consumers and data providers) are conscious homo economicus.

But anyway, this is a long academic argument which I will try to elaborate on further in my next article. Until then, I offer a couple of links to the respective US Congress hearings that made headlines this week.

[Podcast] The historical context of Corporate Diplomacy as an emerging practice

In this first podcast, I will be speaking about the historical context of Corporate Diplomacy as an emerging practice. This historical context is important because it will tell us how Corporate Diplomacy came to emerge as a practice in private organizations.

I am going to give you a few dates within a time frame so that you can be situated historically, which were taken from the United Nations` website. So, in 1865 and 1874 is when we saw the first international organizations to take form. But up until the Cold War approximately, we say in International Relations that we were living in an era of Realism, because we had a “realistic” international system: Nation States were the ony actors – the most powerful actors – who were able to negotiate their individual interests within the international system.

So, if that is pretty much how it was until the Cold War, so why is it exactly that I want to speak about international organizations? Because with the emergence of international organizations this scenario starts to shift a little. So, very lightly, in the beginning – 1865 and 1874 – with the first international organizations, which were the International Telecommunications Union and then the Universal Postal Union, we see these international movements where individual members started to get together to negotiate over particular subjects. Then we had the Treaty of Versailles in 1919 that became the League of Nations trying to establish peace right after the I World War (they weren’t very successful because we had the II World War, so they interrupted their activities). Within the Treaty of Versailles the International Labour Organization also took form. Then we had the II World War, and after we were done with that mess, in 1945 the institution United Nations was officially formed. And then in 1948, the GATT – the General Agreement on Tarifs and Trade – which later became the World Trade Organization – the WTO to establish some sort of negotiation in the international trading system.

These  international organizations started coming into the international scene and becoming more relevant, so they had more relevance in the negotiations – not only Nation States now had to negotiate these multilateral agreements and negotiations, but we also had the international organizations interested in the public good, of course.

But when we reache the 1980s and 1990s, we start seeing these internationalizations movements – the internationalization processes of corporations. You know, majorly American, European and Japanese private organizations that started to establish offices and branches overseas in other territories, and they became these networked private international organizations. These transnational organizations – transnational corporations – they started growing to the extent where some of them can actually be more powerful than some of the Nations States nowadays, and this is where we say that they became powerful enough where they have a lot of influence and a lot of power to come into the negotiation table in the international system. And this is where I say that we see the birth of Corporate Diplomacy, because these institutions are very powerful.

So, just to recap, we had the Nation States, they were the main actors, the most powerful actors, they would do all the negotiations. Then we started seeing the emergence of international organizations into the system and that is the beginning of the diffusion of power in the negotiations, and then more towards the 80s and 90s we see these private organizations – these transnational corporations – also taking form and becoming more powerful and starting to influence decision-making within the public environment.

To add a little more of a theoretical perspective, within International Relations we have a few authors who really theorize this movement and explain what is going on with these dynamics. Robert Keohane and Joseph Nye have partnered in a couple of publications, but I mostly like this publication by Joseph Nye called The Future of Power, and also Susan Strange in her publication called The Retreat of the State: The Diffusion of Power in the World Economy. They both talk about how technology is not put at the center of this transformation, but gains a very significant aspect on why this transition happens. So, information and communication technologies were very influential in the transition of power and the diffusion of power. These two authors, Joseph Nye and Susan Strange in these two books, will explain this in a very concise and a very clear way.

So, with these private organizations having more significance and having more space to negotiate and promote their individual private interests, you have the employees who go out and relate to governments and other institutions and then negotiate their interest. But the thing is that we need to create the mindset in these professionals that they are actual diplomats from these organizations because of how powerful these private institutions are becoming, so they need to be trained as corporate diplomats. It`s a little complex to train these profesisonals, but they have to become more aware of their political influence in the external environment – outside of the organizations of course.

So this was the first podcast, and in the next podcast I will talk about the structure of the corporate diplomacy foreign policy. As much as public diplomacy has its foreign policy as a structured strategy for the State, we need to think of the Corporation as a state, as na institution that has a structured strategy to deal with the external environment.

Stick around, there is a lot more to come!

2018 Economic Outlook Brazil: Foreign Policy

This is the third chapter of the series of posts on the “2018 Economic Outlook Brazil” that is based on the Presidential Message delivered to the Brazilian National Congress in February, 2018 by President Temer. The official document, in its entirety, advises on the key national policies divided into five central pillars: Economy, Infrastructure, Social, Foreign Affairs and Public Administration.

Read below the policy highlights on Foreign Policy. The other posts are Regulated Markets and Structural Reforms.

1. Introduction

In a global scenario trending towards nationalism, Brazil continues to push forward a diplomacy of universalism by promoting multilateral dialogue and integration. Its foreign policy has been implemented towards the interests of economic recovery, job creation, border security and the promotion of welfare.

During the year of 2017, the Brazilian Government continued to give expression to the universalist vocation of its Foreign Policy. Beyond Latin America and the Caribbean, the Brazilian government tried to deepen its diplomatic relations with European countries, North America, Asia Africa and the Middle East. In 2017, Michel Temer visited China (during the BRICS summit), Norway, Portugal and Russia. He also participated in the meetings of G-20 in Hamburg, Mercosur in Mendoza, the UN General Assembly in New York and the WTO Ministerial Conference in Buenos Aires.

Its participation in multilateral institutions is also to be highlighted, having representatives working for the Inter-American Commission on Human Rights, Committee on the Elimination of Racial Discrimination, International Court of Justice and the International Law Commission. Brazil is also in the Presidency of the World Trade Organization.

2. Migration and Refugee Crisis

In 2017, the new Migration Law entered into force, establishing the guidelines for the Brazilian migration policy through which the country has acted in the UN negotiations for a Global Compact on Migrations. The government is also working on improving its mechanisms for granting refuge. Aiming to facilitate the instructions on the process of request for refuge, an electronic ordering system is under development (Sisconare), which will give greater speed, reliability and security to the processes. A working group was also established for the revision of the resolutions of the National Refugee Council (Conare).

3. China

In 2017, China remained Brazil’s main trading partner, and an important source of investment. During the Presidential visit to China, bilateral agreements were signed in the areas of tourism, health and consumer product supervision. The bilateral cooperation also advanced through the launch of the Fund for Brazil-China Cooperation for the Expansion of Productive Capacity.

4. Africa

The African continent is a permanent priority to the Brazilian Foreign Policy. During the UN Assembly, in September, President Temer met with the President of Egypt, Mr. Abdel Fattah Al-Sissi, to discuss economic opportunities for both countries. In the same month, the Mercosur-Egypt free trade agreement entered into force. Egypt is the main destination of Brazilian exports to Africa.

In 2017, the Brazilian Foreign Minister visited Namibia, Botswana, Malawi, Mozambique, south Africa, Sao Tome and Principe, Ghana, Nigeria, Côte d’Ivoire and Benin. During these visitations, cooperation agreements were signed in areas such as visa facilitation, social security, and air transportation, reiterating the country’s commitment to socio-economic development and the consolidation of peace and democracy in West Africa.

5. BRICS

Within BRICS, progress was made towards the consolidation of the New Development Bank (NDB) with the approval of the 2017 – 2021 General strategy, which included the bank’s second batch of loans and the opening of its first regional office in South Africa. In its 2017 summit, BRICS signed the Plan of Action for Economic and Trade cooperation and the Customs Cooperation Strategy.

6. Middle East

Brazilian Diplomacy is also attentive to the geopolitical situation of the Middle East. It defends the two-State solution to the Israel and Palestine conflicts, based on International Law and opposing to the illegal construction of Israeli settlements in Palestine. President Temer met separately, in New York, with the Israeli Prime Minister and the President of Palestine.

In May 2017, the Brazilian Minister of Agriculture, Livestock and Supply visited Saudi Arabia, Qatar, the United Arab Emirates and Kwait, helping to maintain the Brazilian beef exports. To attract investments, the Brazilian government went on a mission to Saudi Arabia, Bahrein, Kwait and Qatar.

7. Regional Integration

In 2017, Brazil prioritized advances in economic-trade relations and in the areas of border cooperation, physical integration and the fight against transnational crimes within the Latin America and Caribbean region. In commitment to the Ushuaia Protocol, members of Mercosur voted on the indefinite suspension of Venezuela from participation in the bloc. In articulation with other 11 countries in the “Lima Group”, Brazil seeks to favor the return of democracy in Venezuela. Internally, an inter-ministerial group was designed to coordinate the reception of the Venezuelan migratory flow in the Northern region of Brazil. A Resolution of the National Immigration Council made it possible to grant temporary residence to Venezuelan nationals for two years.

In April, the Protocol of Cooperation and Facilitation of Investments of Mercosur was signed, and in December, the block agreed on the Protocol for Public Procurement. A free trade agreement started to be negotiated with the European Free Trade Association (EFTA), formed by Switzerland, Norway, Ireland and Liechtenstein. The negotiations for an FTA with the European Union are still under negotiations.

Brazil has also maintained an active participation in the Amazon Cooperation Treaty Organization (ACTO), especially in the illegal deforestation monitoring program, in the projects for water resources management and forest firefighting in the Amazon basin.

8. Foreign Trade

The results of the Brazilian foreign trade have contributed to the return to growth, as the country recorded a surplus of USD 67 billion in 2017. Both exports and imports recovered some of the dynamism lost during the crisis. In May, Brazil requested access to the Organization for Economic Co-operation and Development (OCDE) and, in attempt to speed operational processes, began the implementation of the Digital Origin Certificates and the Consolidated Portal for Trade.

It is estimated the start of production and exporting by companies located at the ZPE in Ceará (Export Processing Zone) has contributed to leverage the state economy. Other ZPEs are already in advanced stages of implementation in the states of Piauí and Mato Grosso.

Source: Presidential Message to Congress 2018 (adapted translation)

2018 Economic Outlook Brazil: Structural Reforms

This is the second chapter of the series of posts on the “2018 Economic Outlook Brazil” that is based on the Presidential Message delivered to the Brazilian National Congress in February, 2018 by President Temer. The official document, in its entirety, advises on the key national policies divided into five central pillars: Economy, Infrastructure, Social, Foreign Affairs and Public Administration.

Read below the policy highlights on Structural Reforms. The other posts are Regulated Markets and Foreign Policy.

1. Economic Outlook

The year 2017 presented the end of the longest economic recession ever recorded in the Brazilian history. The Gross Domestic Product (GDP) is increasing, inflation has slowed and unemployment and interest rates dropped. The year ended with an inflation rate of 2.95% p.y. (Extended National Consumer Price Index, or IPCA for Portuguese) and with the basic interest rate of 7% p.y. (Selic – Sistema Especial de Liquidação e de Custódia), the lowest since 2002.

Desempenho PIB 2017

2. Cash Withdraws From Severance Funds

Cash withdraw measures adopted in 2017, from public funds, contributed to the reduction of household debt and the expansion of consumption. The Federal Government facilitated access to the FGTS accounts (Guarantee Fund for Length of Service) of 26 million beneficiaries, which injected R$ 44 billion in the economy, along with the anticipation of R$ 2,2 billion in withdraws from 1,6 million retiring beneficiaries of the PIS/Pasep accounts (Social Integration Program and Heritage Formation Program for Public Servers).

3. Fiscal Reform

The Constitutional Amendment No. 95 of December 15, 2016 was responsible for creating the new Fiscal Regime, which limited public spending growth, modified the fiscal policy and, along with other proposals related to public accounts, reduced the uncertainties regarding fiscal policy conduct in the country.

4. Regime for the Fiscal Recovery of States

The Complementary Law No. 159 of May 19, 2017 established the Fiscal Recovery Regime (Regime de Recuperação Fiscal – RRF), seeking to enable the recovery and solvency of states suffering from serious financial crises. In general terms, when adopting the RRF, both State and Union recognize the financial imbalance of the State and specify the adjustment measures, with respective impacts and deadlines, as well as the sources of funding that will be used in the period of the recovery plan.

5. Modernization of Labor Laws

The labor market also presented significant changes and signs of mild recovery. The modernization of the labor laws, a reform approved in July 2017, resulted in the Law No. 13.467/2017, which updated the Consolidated Labor Laws (CLT) framework. The new structure reduces uncertainties and allows greater autonomy for workers and employers to enter into agreements. With the newly adopted legal framework, the government expects to reduce informality in employment and increase job posts and wages.

6. Social Security Reform

In 2017, Social Security registered a record deficit of R$ 268.7 billion. The National Congress is currently debating over its Social Security Reform as an essential component of the reform package for economic recovery, aimed at balancing the public social pension accounts.

The demographic dynamics of the country is imposing significant challenges on policy-making, and in the case of social security, the impacts are direct. Brazil is experiencing an increase in life expectancy, and consequently, in the amount and duration of payments of the security benefits. Added to this is the decrease of reproduction rates, which alters the proportion of active individuals in the job market. This is a relevant fact because the Brazilian social security system is based on simple allocation, being that active workers pay the benefits for those who have withdrawn from the labor market. In 1980, there were 13 adults for each elderly person. Today, there are nine adults for each elderly person. The demographic bonus for federal and state public servers is in an even more critical condition: 1,2 and 1,4 active worker for each beneficiary, respectively.

7. Long Term Rate for Public Financing

The new Long Term Rate (Taxa de Longo Prazo – TLP), established by Law No. 13.483 of September 21, 2017 replaced its former equivalent, as the basis for compensation on the main sources of long-term financing in Brazil. The new TLP will remunerate these financings when applied by the official credit operators contracted from January 2018 onwards. The new rate is composed by the variation of the National Consumer Price Index (Índice Nacional de Preços ao Consumidor Amplo – IPCA) and by a monthly prefixed interest rate that is based on the earnings of the National Treasury Notes – Series (NTN-B) for a five-year period. This term reflects the average time for the BNDES (National Bank for Economic and Social Development) loans that use such rate as a basis for compensation.

Source: Presidential Message to Congress 2018 (adapted translation)

Brazilian government announces new privatization plans

The Brazilian government has just announced the agenda for a series of new plans for auctioning public assets, aiming to raise government income in order to meet fiscal objectives.

This is the follow up stage of a series of privatizations and concessions announced in September 2016, which included in its first phase 34 projects. In this second phase they are releasing 57 new assets. The plan is parto f the Investment Partnership Program, which discusses concessions and privatizations.

Earlier this week the Ministry of Mines and Energy had already announced a proposal to the privatization of Eletrobras, through selling part of the shares owned by the Federal Government, though maintaining its veto power.

The government announced that wishes to auction part of its BR-364, a federal highway running from the state of Rondônia and Mato Grosso and rebid part of BR-153 between Goiás and Tocantins. BR-153 was auctioned back in 2014 during Roussef’s administration, but the concessionary Galvão did not meet the contracted investments and had its contract cancelled. These auctions are currently scheduled for the last quarter of 2018.

The Ministry of Transport is also proposing the concession of 15 port terminals, which are áreas dedicated to cargo handling in ports. They are located in Belém (LPG and liquid bulk cargo), Vila do Conde (liquid bulk cargo), Paranaguá (grains) and Vitória (liquid bulk cargo). The government also included the early extension of fertilizers terminal of Itaqui Port and the authorization for capacity increase in the Terminal Agrovia Nordeste, located at the Port of Suape. All biddings scheduled for 2018.

The Private Investment Partnership also foresee the concession of 12 airports, in two regional blocks: Nordeste (cities of Maceió, Aracaju, João Pessoa, Campina Grande, Juazeiro do Norte and Recife) and Midwest (cities of Cuiabá, Sinop, Alta Floresta, Barra do Garças and Rondópolis). The plan also confirms the intention of selling shares from Infraero at Guarulhos, Confins, Brasília and Galeão airports.

The Ministry of Defense also included the intention of a Public-Private Partnership in the modality of a 25-year administrative concession for the services of telecommunications signal transportation for the Department of Air Space Control (Decea) and military organizations in the country.

The Ministry of Mines and Energy will also propose 11 concession projects for the instalation of electric transmission (transmission lines and substations) located in the states of Bahia, Ceará, Pará, Paraná, Paraíba, Pernambuco, Piauí, Rio Grande do Norte, Minas Gerais e Tocantins.

Source: This article was originally posted on G1 News in the Portuguese language and translate by Juliana Michelon Alvarenga. BSc. International Relations, MBA Business Intelligence. [julianama@aldeotaglobal.com]