SAO PAULO “It can not get any worse”

Fatih Eren*

I am going on analysing localities under global concern. A very problematic city, ‘Sao Paulo’, is going to be examined in detail in this volume.

Sao Paulo is located at the southern part of Brazil. With its population over 20 million, it is the largest metropolitan city of the country as well as the largest city of the South America. Sao Paulo is the gate of Brazil opening to the world. All foreign institutional investors have to visit this city in a way before doing an investment in Brazil because this big metropol is the leading financial, industrial, and commercial center of the country.

Before starting the examination of Sao Paulo as a global city, let’s have a look at the globalisation process of Brazil in general.

The year 1995 became a breaking point for Brazil in terms of globalisation. The State’s protectionist and inward-looking macro-economic policy turned liberal and outward-looking in 1995. In this context, several liberal economic reforms were put into practice after this date in the country. Thanks to these reforms, Foreign Direct Investments (FDIs) to the value of 45 billion dollars flew into the country in 2008 whilst the value of inward FDI flows was only 5 billion dollars in 1995.

Because of three main reasons, the Brazilian government has embraced a liberal economic policy since 1995: Firstly, the government wanted to modernize its macro-economy; secondly, it wanted to decrease unemployment rates in the country; and thirdly, it wanted to pay off all its public debt (total public sector debt was standing at more than 60% of GDP in 1995). Namely, the government considered that the only way to achieve these objectives was of attracting foreign finance capital into Brazil.

I could say that Brazil was not a country which submitted herself totally to globalisation process which was experiencing significantly in today’s world; but, it was a country which read this process in a true way. Brazil aimed to turn this process into its advantage so the country displayed a pragmatic attitude during its internationalization process. In other words, it tried to benefit as much as possible from opportunities which were provided by this inevitable process. For example, Brazil is going to host some international sport organizations in the near future (i.e. the World Cup in 2014, the Olympics in 2016). The country is expected to renew its insufficient infrastructure (esp. transportation and social service infrastructures) with foreign finance capital which will be obtained from these international events.

Coat of Arms of Brazil

On one hand, Brazil provided her natural and cultural resources for the benefit of transnational investors and then became one of the ‘passive players’ of the globalisation process. On the other hand, Brazil followed a multilateral foreign trade strategy and then developed into a ‘playmaker actor’ which managed the globalisation process actively in the world. In the context of the multilateral foreign trade strategy, Brazil was worked for the realisation of regional integration into the continental of South America (i.e. The Common Market of the South-MERCOSUL, The Union of South American Nations-UNASUR). In addition, the country developed commercial relations with many countries (esp. US, the European Countries, Japan, China) and established diplomatic relations with varied international organizations (i.e. United Nations-UN, Organisation for Economic Co-operation and Development-OECD, The Organization of American States-OAS).

Brazil’s pragmatic approach in its internationalization process and its multilateral strategy in foreign relations came to fruition recently. It became the world’s biggest eighth economy in terms of GDP in 2009. The balance of foreign trade in Brazil was excellent for an emerging economy because the country exported more goods than it imported in the last 9 years. In addition, the ratio of total public sector debt in GDP decreased in the last years; the gross public debt has diminished to 59% of GDP in 2010.

After looking at the general globalisation process of Brazil, I would like to finish this section with looking at business sectors which foreign investors were mostly interested in Brazil. It was seen that foreign investors invested in ‘capital-intensive’ and ‘technology-intensive’ industrial production sectors in the last 15 years in Brazil. It was natural that Sao Paulo benefited from foreign direct investments at the most in the country because it was the financial and industrial centre of Brazil. The foreign capital was involved in the city via privatizations (i.e. Tele- bras, Banespa, etc.), company acquisitions, and mergers. However, the state is trying to orient foreign direct investments to the Northeastern part of the country today (especially to real estate and tourism sectors in this region).

The impact of global concern for Sao Paulo: Analysis

At the beginning of my analysis, I might say that Sao Paulo has always been a city marked by sharp social inequalities. More than 50% of the country’s revenue is gone to higher-income class which consists 10% of the total population in Brazil. The government has put many social and economic reforms into practice in order to give more share from country revenues to the low-income class recently. In line with this, the government spent almost one-quarter of its GDP on these social programmes last year. However, when I looked at the case of Sao Paulo, it was clear that these governmental efforts were inefficient in decreasing social inequalities in the city. Importantly, most of the richest people of the country and again most of the poorest people of the country live in Sao Paulo, today. Here, I might ask this general but very important question: “Does globalisation process bring a social justice to Sao Paulo?”

Foreign Direct Investments between 1995 and 2009 in Brazil (UNCTAD)

Balance of Foreign Trade in Brazil

The congestion of population is the basic problem of Sao Paulo. This problem is a candidate to develop into a bigger problem in the globalisation process. Internal migration (from the other cities of Brazil towards this city) is going on in Sao Paulo because this city is already the economic motor of the country. It is clear that the city is needed a de-centralization in terms of population because the managing and planning of the urban area with its population over 20 million is being more difficult year-to-year in Sao Paulo.

The city is at the first stages of its internationalization process, now. Economic vitality has increased in the city and this vitality brought a prosperity to the residents of the city. However, this economic prosperity may be ‘temporary’ as well as ‘permanent’ for the residents. If it is permanent, it does not a matter very much but if this prosperity is temporary, this temporary boom process then must be managed cleverly by the authorities of Sao Paulo.

The local government is expected to build 2 million affordable housing units by 2014 in Sao Paulo. However, land prices are now increasing gradually in the city as a result of global concern for Sao Paulo. Unfortunately, land prices will continue to increase in the near future due to new urban developments and investments in this locality. The increase of land prices may affect the realisation of these social house developments negatively. If the prosperity of residents is temporary in Sao Paulo, these social houses then must be developed rapidly in this prosperity phase; by this way, people in low-income class can afford these houses easily in this period. Again, these social houses can be built using the surplus-value of new urban developments and in- vestments in the city (through value-capture tools, yield-sharing methods, etc.). Thus, the surplus-value of this temporary process can be transferred to low-income class in a direct way.

It has been mentioned above that the government was trying to orient foreign investments to the Northeastern part of the country. However, I must say that undoubtedly foreign investors will be interested in Sao Paulo and its region much more than the northeastern part of the country in the near future because of some logical reasons. First of all, the high population of the city will unavoidably fuel new shopping centre developments in Sao Paulo. Again, Sao Paulo is the financial centre of the country so new A-class office developments will be increased in the city as well. Besides, Sao Paulo is a commercial centre and its ties with other countries is increasing every year; so new hotel developments will start in the city, too. As a result of new shopping centre and hotel developments, new storage areas will be a huge necessity for this locality; so logistical developments will follow shopping centre, office and hotel developments in the city. Namely, many new developments will begin in various property sectors of Sao Paulo. I can say that all these property development activities will decrease unemployment rates in the city to some extent; again, some local people will benefit from these developments positively and they will go up into a higher social class (especially from low- income class to middle-income, from middle-income class to high-income). These are looking as the positive sides of the globalisation process. However, I must say that all kind of investments towards this city will make the decentralization of the urban population impossible in Sao Paulo. Remember the rule that if there is an accumulated value in a place, people move on to that place. As long as the urban population will not be decentralized, all problems which are connected with over-population will continue increasingly in Sao Paulo in its internationalization process.

Figure 5: Low-density neighbourhoods in Sao Paulo

The local government of Sao Paulo is trying to place urban sprawl under control in the city for a long while (i.e. Green Belt of the Biosphere Reserve of the Atlantic Forest) because uncontrolled urban growth evidently causes environmental degradations in Sao Paulo. Therefore, I can say that urban regeneration and redevelopment projects will take the place of Greenfield projects in the city in the next years. New urban regeneration and redevelopment projects will probably make a pressure on the low-density neighbourhoods of Sao Paulo (favelas). The 10% of the urban population is living in these neighbourhoods. Importantly, the rate of property ownership is about 80% in these areas. Therefore, the protection of residents’ property rights in the regeneration and redevelopment process of these neighbourhoods is very important for decreasing social inequalities in Sao Paulo.

Prospective property development projects mentioned above have a potential to change social inequalities in Sao Paulo. The lack of social infrastructure (i.e. school, hospital, sewer, open and green spaces, etc.) is one of the main problems in the city. So, it is clear that an integrity between commercial projects and social infrastructure projects is needed in all regeneration and redevelopment processes. This is crucial for Sao Paulo because it has presently a very inequitable social structure, and regeneration and redevelopment projects always play a key role in increasing or decreasing social inequalities in a city. As long as the metropolitan government of Sao Paulo takes the social aspects of urban projects into consideration seriously, the urban tension will decrease in this locality.

Every investment will bring a value increase in the properties of Sao Paulo during its internationalization process. The success for reaching social peace in Sao Paulo is strongly related with the fairly sharing of these value increases among the residents. The anger and frustration of the poor residents against the rich residents is growing day-to-day in this city. The level of this anger can be measured from rap songs which were produced by poor people in the city.

“…in the party with us you don’t go We here, you there; each one in his place
Did you get it?
If life is like this, am I to blame?
The world is different on this side of the bridge…”

This rap song has been written by one of the most famous rap group in Sao Paulo (the Racionais MC’s). Therefore, the question of ‘Who will benefit from these value increases?’ is seen very important for Sao Paulo. If the answer of this question is ‘all residents of the city’, in this situation, I can assert that the anger of losers (very poor people) against the privileged few may diminish in time in the city. Keeping in mind that crime rates are a positive function of ‘social frustrations’ in a city.

Sao Paulo stands in an environmentally-rich geography. The globalisation process may have both positive and negative impacts on the natural resources of this city. On one hand, some international organizations (i.e. UNESCO, Green Peace, etc.) are making a pressure on Sao Paulo to maintain its natural resources sensitively because these environmental resources have a value not only for Sao Paulo but also for the world. The UNESCO’s Man and Biosphere Programme which was started for Sao Paulo’s Atlantic Forests in 1994 can be a good example for this international environmental pressure.

On the other hand, Sao Paulo has already been showed one of the best places to live for pensioners in some international property magazines (i.e. A Place in the Sun, etc.). Besides, international tourism agencies tried to attract more tourists into the countryside of Sao Paulo. Namely, the warm climate and the green nature of this city makes this locality (esp. its rural area) very attractive for tourists and foreign individual investors. Therefore, It is possible to see an increase of new luxury residential developments in the rural areas of Sao Paulo in the near future. Again, It is possible to see an increase of commercial activities for tourists in the natural world of Sao Paulo (i.e. Safari, golf, camping, hunting, etc.). This rising concern will increase the vulnerability of the city’s countryside to soil. The city is already fighting against environmental degradation; a microclimate came into being up to the city in the last 10 years because of its high- population and the lack of green spaces in its built environment. This microclimate makes the protection of the ecosystem and the bio-diversity very difficult in Sao Paulo in any case. When the number of people spending time in the natural areas of the city increase, the environmental degradation will speed up in this locality.

I want to complete my analysis with future transportation problems of Sao Paulo associated with its internationalization process. Today, the average daily transportation time is 2 hours by public transport in the city. Importantly, most of crimes is committed in public transport vehicles. Tourists and foreign businessmen are oriented to private cars, cabs, for-hire vehicles and tourist couches because of security reasons. In addition, the level of income is rising thanks to new foreign investments in the city so the private-car ownership may increase to a certain extent in the future. In relation to new shopping centre and hotel developments, cargo and service vehicles will be seen in traffic much more than before in Sao Paulo.

In the light of evaluations mentioned above, it can be said that the city will face with a severe traffic congestion in may be 5 years. The present state of transportation infrastructure is accepted very in- sufficient by public authorities in Sao Paulo. Huge investments are definitely required for the transportation infrastructure of Sao Paulo. However, the government is putting a pressure on Sao Paulo’s metropolitan government to cut substantial spendings in the city in order to meet the deficit in public budget. Here is the question: How will Sao Paulo solve its increasing transportation problems without any huge investment in its transport infrastructure? PR


* Fatih Eren is Doctoral Researcher in Department of Town and Regional Planning, University of Sheffield.


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