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Welcome here folks. It becomes a little too obvious to me on what is going to happen. It is not if, it is when. Let's reveal the thinking on why I say this. It all goes back to the Mystery on the 2022, mid-summer daydream run up. We are living in strange times. You don't need me to tell you that. From the surface of it, it appears as if we are going to hell in a handbasket, it is almost as if we are about to fall off a cliff, however, that hasn't happened, at least not yet. I get it, though at times, it may seem that I don't. The things we have experienced holding this stock are not normal, but neither are the times.
In the long term, Leronlimab shall become the CCR5 blockade of choice, the Gold Standard. That shall happen. It will be written into the medical journals and text books as the monoclonal antibody which cured humanity of HIV and shall become the standard of care in NASH and metastatic malignant tumors. Many of us here already know that this shall happen. So, I wanted to know more about Leronlimab and in order to explore LL, you need to know the company CytoDyn behind it and so I put together this page to help me understand them.
Both myself and a buddy of mine who you also may know, u/psasoffice do come together on occasion to lay down the dirt on that what it is. Today then becomes another instance of yesterday's conversation. I say this to say that in much of what follows, I am the messenger. The bike messenger who picks up the package, reads it while I peddle along, and then deliver it to you soon after the discussion. And let me tell you, u/psasoffice puts together the pieces, a puzzle master where no plot or twist is beyond his x-ray vision. As a matter of fact, He has been behind much of what I've written for over the past 6 months now; it might have been since October or even September of last year, when he sent me something which peaked my interest indicating that he liked what I was putting down, and then, with his perspectives and insights, it just kept expounding. You can see what I've written here , but somewhere around this post , I began talking with u/psasoffice and many of the articles thereafter have his influence.
There were many indications or hopes set that the hold will lift by a certain date. That didn't happen. It has been my notion, (not necessarily u/psasoffice's notion, but it may be), that when we see that Peace and Safety become raised of concern, then it shall be then when the hold lifts. Well, next week, America may default on its debt so then, the markets could quiver. That could lead to unrest. What I've said is that when there is rampant havoc & distress all around, and the masses screaming for Peace and Safety, so it is then when things shall begin for CytoDyn. I said it before and I'll say it again, that when this time arrives, we best remain still, stalwart, confident and quiet. We have seen the signs of where we are headed, and know, we have arrived, we are there. We have taken the exit off the highway and are nearing our destination. Therefore, when the strong winds blow, take a strong, solid and stout stance and know, that this moment was just one of the reasons why you bought your shares. This Initiating Juncture and the events which follow the triggering event of lifting the hold are not that far off, but rather, they are right around the corner. Actually, we have reached the destination, so get out of your car, take a breather and stretch. Shut your engines off. We are there. We did it. We've reached that point. Patience is a virtue. I sincerely appreciate all of you on this difficult journey together.
We have been living the same day again and again, like its Ground Hog Day over and over. All of us have been under the impression that all has been done. That all has been submitted. We understand that no more than 30 days should pass from the day the last submittal was sent before a Result is issued. However, we have the same lack of result day after day. Such a grueling process, what does all of this mean? It means that we have gone through the required process for so long and have paid a huge price, but despite becoming emaciated and haggard, we have finally arrived. Our heads were forced under water by manipulative hands for so long, fighting us against our wills to survive. Finding ourselves running out of air, we finally break free from the over whelming strength of that grip and take that needed breath. Those still here after so long shall find the answer they seek since their desire for this answer is as much as their desire for that breath of air. A Breath of fresh air is well worth the wait when forced underwater indefinitely, outside of your personal control.
Just 2 weeks ago, Cyrus took a leave of absence due to illness. Cytomight sensed he had something going on, but he probably was trying to stick it out, but in the end, he had to leave and now requires time to recover. Lets hope that when he recovers and is able to return, that the Result is already in by then. We already know that the Result shall be a positive one. Lets hope that on the day which he returns, that the NDAs, partnerships & collaborations which are all contingent on the hold being lifted have all or some, been already signed and activated, thereby allowing Cyrus to return as CEO. Wait! How can these agreements be signed if Cyrus lies in bed? Oh yeah, I remember now, we do in fact have an interim President Antonio Migliarese who is already versed in the signing these official agreements. What a Team Cyrus has put together. I love the profound wisdom of this strategic team and proud to own a part of it.
We recently got some awesome news in the way of CytoDyn's newly hired CMO, Dr. Melissa Palmer, who is nothing but a NASH specialist and long time expert in the field of Hepatology. Also, CytoDyn hired Dr. Salah Kivlighn, who has a rare blend of science and business acumen and has 15 years tenure at Merck & Co. What does that tell you? NASH is CytoDyn's #1 indication. Management at CytoDyn has been communicating that NASH is #1 on the docket for clinical trials since the time that Cyrus came on board, because it was his team which established NASH as having the highest revenue potential. Cyrus has been telling shareholders that NASH is to be CytoDyn's own, that is, without partnership, but this is becoming increasingly more difficult to adjudicate.
If CytoDyn does in fact have a clinical trial for NASH in design and development and in the running, then the Mystery of which I speak is, how does CytoDyn pull this off?
Lets look at some of the details. A Phase 2 clinical trial for NASH would be pretty expensive ($35-50 million) and large, (150 to 200 patients) and it could take 12-18 months before we see any results. In the 12/7/22 R&D Update, Management stated that they had hoped to initiate it by 3q 2023 and to be fully enrolled by end of 2023.
As a reminder of the 12/7/22 R&D Update Investor Deck found here. :
Slide 98

• 1:31: 40: So in terms of what potential time lines can look like, I think it's really important to highlight that from a value-creation standpoint, and I've mentioned this before, we truly do need to generate a large robust and what I call unequivocal data set that will leave no questions left on the table, right? And that a strategic partner would find attractive and attractive enough to do a real value-accretive deal with the company.
• 1:32:14: And so we've gone through and knocked out what the potential time lines are across each of the different areas that we presented on today. And we're -- as I mentioned before, NASH & Oncology are our priorities. However, because this is all going to be funding dependent, we're going to focus on NASH initially and work with co-development partners to the extent that we can to develop in oncology.
• 1:32: 44: So what do we expect in 2023? So our largest priority is the removal of the clinical hold in HIV. This is essentially a gating step for us to be able to get back to normal operations as a company and do what biotech companies do, which is advanced therapeutics and try to bring them to market.
• 1:33:10: Following the lift of the clinical hold, we expect financing to fund operations and to achieve this value inflection point that I've just alluded to. We intend on initiating a new NASH trial. We would like to commit to an investment in and advance longer-acting CCR5 molecules, as this is potentially the future of at least certainly HIV therapy, as Dr. Sacha presented.
• 1:33:35: We continue to contribute in medical meetings and peer-reviewed publications. Again, the CD02 trial data is in process for that right now. We're going to continue to reshape our team and our capabilities in order to meet our goals. And at some point following the achievement of earlier metrics listed on the slide, we're starting a corporate rebranding as well.

Now back to what I was saying about the large and expensive clinical trial for NASH. What about the problem of recruiting the patients? There is huge demand for these patients. There is a lot of competition here. NASH patients are like gold to enroll as so many Pharmaceuticals compete for those patents for their own NASH trials. How does a small Biotech, pre-revenue company with only $5 million in available funds pull this off? Not only paying for the trial, but how can it show itself as having the clout required to round up those patients in a rapid way? My feeling is a partneCRO needs to be involved somehow.
First off, we know for sure, that the NASH clinical trial will not be entered into until the hold lifts. Once the hold lifts, we can expect near immediate revelation of how this will be accomplished. But, we can speculate as to how this will get done. u/psasoffice suggests that if we follow the money, we can find our answer. But you might ask, What money? We don’t have any. So then, what if we follow the share price?
Remember back to mid-summer 2022, when Cyrus was hired as President, share price was low and even fell following his hiring, but soon thereafter, in late July through August of 2022, the share price rapidly rose to $1.26 per share and then progressively diminished once again over the course of ensuing 6-9 months to where it is today.
Lets take a look at this so we can get to the secrets which will be revealed, where we can open the doors of the collaborations. You may ask, How did we get someone to accept a collaboration? When were the collaborations accepted? Along with Mazen Noureddin and Jonah Sacha, Cyrus presented the R&D Update Investor Deck on 12/7/22 and he was able to say all the things which were said then 6 months in advance and he said them essentially in a DEFA14A SEC filing. The forecasts made in this document and in this presentation were filed with the SEC in an 8-K.
So then, how long before Dec 7 did Cyrus know that the very things which he would plan for the company which he wrote about in the Investor Deck were so very possible to file it with the SEC? Let's say he knew of the strength of his forecast say 1-2 months in advance. Therefore, by mid October he was aware of secret agreements, Cyrus must have known of specific collaborations which would allow those prognostic statements to be made in the Investor Deck, but which were predicated upon the hold being lifted. Therefore, How long did it take Cyrus and collaborators to sit down and make the agreements of NDA? Again, another 1-2 months? So by August, 2022?
Now you can see why the share price inexplicably rose in July / August, 2022. A Collaboration on a NASH clinical trial occurred which also explains the result of these words spoken on 6/30/22 Conference Call by Scott Kelly after his trip to EASL in London: "37:10 Scott Kelly: OK, so we certainly acknowledge being more metered and conservative in our publicity. We will be announcing important presentations and studies on a going forward basis. Regarding the NASH, about how NASH attracted partnerships*, we just presented the PDFF and cT1 and biomarker data at* EASL in London*, just to shed some color on the importance of the EASL meeting, there were over* 7,000 delegates present or online from 114 countries*. There were* 1,722 abstracts presented*. There were only* 4 poster presentations selected for a walking tour with the chairman at EASL. And We were one of those 4*. I was present and I can tell you, it was* well received by the scientific community*. We* can not comment on potential partnerships. But there are multiple opportunities for NASH and NASH HIV."
What also happened in August? Only the removal of the first management player who’s experience was in Negotiation and Partnerships, Brendan P. Rae. No longer any necessity for Negotiation? I guess not. As time went quickly by, without any word of what was taking place, the share price began to fall. It became uncomfortably obvious that by mid November, Recknor had been let go. He was CytoDyn's most experienced scientific, medical and managerial player for NASH, but in the game of a collaboration, anyone and everyone is a commodity and all are replaceable. On the same topic, a significant stock bonus was paid to the president in September of last year after only two months on the job. Was a deal struck? Also, our very own CMO, Scott Kelly who coined the phrase: “There are many ways to structure a partnership.“ himself gets terminated in December 2022. A CMO possessing far more experience in the #1 indication than he could ever have was already being eyed and prepared to take that role for the biggest proving ground party that will show that Leronlimab eradicates steatosis and fibrosis in NASH and NAFLD. Welcome Dr. Palmer.
Once the NASH deal was struck in July/August, it wasn't long before the share price began to rise but just as quickly, it fell as well. Rumors of a partnership must have gotten out, the price ran way up, but then later, in late August, down it went. The stock price dropped because there were no announcements by either party backing the deal. That’s due to the fact that it is contingent on the hold lifting and that it could be a year out before this collaboration moves forward. The collaboration was put on hold along with the clinical hold. It was not revealed outright and therefore, shareholders were not aware of it, but it still exists and therefore CytoDyn remains confident. It is not a traditional partnership, but rather a non traditional one which we may use to answer the questions of how can the NASH trial be funded and how can CytoDyn have the utter confidence to put together such a timeline for proceeding in such a large scale Phase 2 trial in NASH without possessing the necessary funds itself.
How then can we define a Non traditional partnership? CytoDyn will not get a large upfront payment. Instead, CytoDyn continues on its own, however, all the CRO work shall be done by our collaborator. What’s is in it for the collaborator? They run the NASH trial because they believe Leronlimab helps their drug get over the finish line. But Cyrus was saying NASH would be Leronlimab monotherapy and wouldn't be combination therapy. CytoDyn just can't go it alone, it is too small, and a hard luck story company which has failed in its history thus far at every turn. For NASH, u/psasoffice is thinking GSK, while I'm leaning towards Merck.
All of us know that Leronlimab could do it alone in NASH, but that’s not how the Pharma game is played. CytoDyn needs help, and it has 4 different plays, and each play is devoid of a deep enough data pool which would bring in funding for that indication. Cyrus' long term goal is to build out a strong enough clinical trial data pool to present it to a partner or a buyer. So then, without any cash of our own, Cyrus' plan is to have someone else's funding, partner with CytoDyn and build for us that data pool and in the end, have exactly those same partners compete for the entirety of it, for the whole or part once that data pool is firmly in our grasp.
The same story goes for HIV-Prep and HIV-Cure which is probably being run by the 3rd party Research and Development Bio-Tech company Vir, in collaboration to develop the long acting or a more longer acting molecule of CCR5 blockade. Vir is pretty much a given with Scott Hansen's strong connections there. This was kept secret, but somewhat hinted at by Cyrus in the 4/11/23 Webcast .
We can apply the same logic in the Oncology study being run by MD Anderson using Merck's Keytruda in combination with Leronlimab. We had all been waiting to find out what had happened with the results of the MD Anderson study, and Cyrus threw us this line: "Leronlimab is currently being trialed in combination with Keytruda (pembrolizumab) in a breast cancer xenograft model in partnership with MD Anderson Cancer Center." From here, he gave us a hint of what is to come.
It can be assumed that as these collaborations are announced, there shall be share price inflection. In his astute fashion, Cyrus has given us the secrets, but, because of these strange times, the share price has not yet moved. But what it has done is it has held us here, because we are above the times. And we may be seeing a default on the debt in the coming week as well, but remember to remain strong.
CytoDyn knows its has a problem. Therefore, while our collaborators are running these trials for us, CytoDyn itself, remains detached as we pursue other similar non traditional collaborations. The perishable, flesh and blood CytoDyn uses the strategy of its intellect and the power of its IP to become the imperishable CytoDynasty. As Leronlimab has many, many, many indications, so shall CytoDyn have many, many, many collaborations. This is the direction until Merck goes up against GSK who bids against TAK , (thank you Jake!!), for the likes of little CytoDyn who at that point, possesses the grand data pool which Cyrus coveted which was freely obtained in only a few short years of time well spent.
Oh Black Hole, do yourself a favor and swallow and regurgitate everything you just read. Where then shall you find your victoryzzy? I see you stabbing yourself and choking on your own stinger of death. Cyrus spelled it out for you dumb ass. Watch it happen before your blind eyes and you still will deny it even occurred. Oh, I hear it at the door knocking. But you are both deaf and blind. Why are you here? Only to be robbed and the longer and deeper you choose to remain here, the worse it will be for you. However, it is easily avoidable. Cut the short position and go long.

Gilmore Girls came in handy when solving this crossword clue 🤣 typed in CULDESACS, then heard Lorelais voice in my head say "the plural of cul-de-sac is CULS-DE-SAC"

My wife and I recently completed our first road trip in the new Lightning ER. The photo is of the truck’s first ever DC fast charge, which happened to be next to a Pro. The trip was from Atlanta GA to Point Pleasant WV, overall about 1200 miles round-trip (and yes, for some crazy reason, our first long trip was to roughly the middle of one of the largest DC fast-charging deserts east of the Mississippi). Overall, I would say that the truck performed well, but there are still issues with long-distance driving in an EV.
I used ABRP to plan the trip — the overall route was Atlanta - Chattanooga - Knoxville - Lexington - Point Pleasant, and the reverse to get home. We stayed overnight in Chattanooga, Huntington WV, and Point Pleasant. Level 2 J1772 charging was widely available in Chattanooga — I parked at a ChargePoint in a garage across the street from our hotel, and paid $8 for charging and $7 for parking … compared to the $14 the hotel wanted to charge to park in their lot. I was able to fully recharge from a Tesla destination charger in Huntington using a TeslaTap adapter (the hotel was pretty terrible, but the charging worked). Our hotel in Point Pleasant didn’t have a charger, but kindly offered me a 120V 20A plug, but the Lightning’s inability to accept more than 10A from a Level 1 charger limited the charge I could get (which significantly impacted our drive home).
I used Electrify America fast charging at Williamsburg KY, Georgetown KY, Knoxville KY, and Chattanooga TN (in most cases on both the outbound and return legs). There was never a stop where Plug-and-Charge didn’t work, never a stop where I couldn’t charge … but out of 6 charging stops, only two charged at 100kW or more, and only one exceeded 150kW.
The truck got between 2.1 and 2.3 miles/kWh on the highway portions of the trip. In general, I drove about 5 MPH over the posted speed limit, so much of the trip was done at 75 MPH. I don’t fully trust FordPass charging or trip logs, because for one segment it reports that I went nearly 150 miles on 0.4kWh, for a whopping 425mi/kWh (see the screenshot above). During the trip I got more comfortable with the guess-o-meter as it burns down range remaining in the battery versus distance to the next stop.
During the trip I learned to use the truck’s built-in navigation, and in general like it better than attempting to use ABRP over CarPlay. I wasn’t able to figure out how to completely mute the navigation system’s prompts , but did manage to change them from voice to chimes. In my previous vehicle (a Ford Flex), I was able to completely mute the navigation, which was nice.
Issues
The biggest issue is charging at the far side of a parking lot in a rural Walmart — in general, we didn’t feel safe, either in the store, in the parking lot, or at surrounding businesses. During this trip, we had two encounters (one at Walmart and one at a nearby restaurant) where customers were actively hostile towards us.
In general, the DC fast-charging experience is not as good as a typical chain gas station (RaceTrac, QuickTrip, etc.), and I would really like to see a concept like a DCFC Buck-ee’s proliferate. At a minimum, we should really have covered, pull-through charging locations with trash cans and windshield squeegees adjacent to the chargers. Having restrooms, snacks, and drinks nearby (not all the way across a big box store parking lot) would be a huge plus.
To say that FordPass is buggy is an understatement. I work in the computesoftware industry, and I’ve put developers on notice for less. If nothing else, their testing regime and release process needs a revamp. In addition to the buggy trip logs, the charge completion estimates were basically random numbers: it would often project that fast charging would be finished an hour or so before it started, or that Level 2 charging would take 10 to 15 minutes.
My wife isn’t the most patient person, so 30-40 minutes spent charging is a half-hour wasted compared to an ICE vehicle. On top of that, I also planned poorly — having heard that Electrify America is unreliable, I’d planned more-frequent stops than strictly necessary. On the return trip I could have skipped at least one, and possibly two charging stops. So overall, the return trip (which was ~600 miles all in one day) was excessively long.
She also felt that the seats weren’t as comfortable as the ones in our previous vehicle (the afore-mentioned Ford Flex), and that climbing in and out of the truck is awkward for her (she feels as if she might fall and hurt herself). I’ve asked for recommendations on these issues in a separate post.

Introduction
Here's another effortpost on Brazil! This time I'll be talking about why the Brazilian economy stagnated, and what we can expect from Lula in terms of economic policy (I've talked about this in the past but now I'll go into more detail).
Between 1920 and 1980, Brazil was a clear economic success story. For 60 years, our GDP per capita grew at an average of 4% a year. This 'golden age' ended in a hyperinflation crisis, which made the 1980s become known as a 'lost decade', and since its resolution in 1994 with the Plano Real, our economy has experienced minimal growth: from 1980 to 2020, the average GDP per capita growth rate was only 0.7%.
Evolution of the Brazilian per capita product, at 2010 prices, from 1900 to 2021. The scale of the graph is logarithmic in base 2.
In this post, I'll try to explain the reasons for Brazil's low growth in the last four decades and what Lula's plans are to address them.
The debate
Before delving into the actual causes of the "semi-stagnation", I would like to explain the economic debate in Brazil. This debate revolves around two major groups of economists: the "developmentalists" and the "liberals." The term "developmentalism" may be unfamiliar to many people here, but it is very present in Latin America. A decent explanation for it could be "dirigisme with Latam characteristics."
In short, liberalism in this context is associated with economic orthodoxy and a pro-market orientation in economic policy, while developmentalism leans towards economic heterodoxy and advocates for direct state interference in the economy. This debate is, in theory, separate from the traditional right versus left political divide, as we have had governments from both ends of the political spectrum adopting policies aligned with either school of thought. For instance, Lula I (2003-2007) represented a left-wing liberal government, while Geisel (1974-1979) presided over a right-wing developmentalist government. However, in practice, liberalism is associated with the right-wing while developmentalism is associated with the left-wing.
One area of major divergence between those two groups is full employment. Liberals argue that the Brazilian economy generally operates at full employment, which means that there are well-defined supply-side limits and restrictions in the economy, whereas developmentalists believe it tends to operate below that level. This implies that the economy's natural state is one of perpetual aggregate demand deficiency, and thus the government could just increase spending to mobilize idle production factors and stimulate economic growth.
Furthermore, liberals typically view direct state intervention in the economy with distrust, opposing increased public investments in infrastructure and most forms of industrial policy. Their preference generally leans towards reducing government spending and relying on a 'crowding in' effect, together with supply-side reforms. Conversely, developmentalists perceive state intervention as a necessity to stimulate the economy, favoring a robust industrial policy and increased public investments.
Those are significant oversimplifications, and many economists do not align themselves with either group. In any case, I would say this categorization reasonably represents the current debate.
It's a tradition in Brazil to divide ministries between liberals and developmentalists to ensure a balance between the two. The current Finance Minister, Fernando Haddad, believes in a middle ground approach, with some of his secretaries (e.g., Guilherme Mello) leaning more towards developmentalism, while others (e.g., Bernard Appy) lean more towards liberalism. Planning Minister Simone Tebet and Industry and Commerce Minister Geraldo Alckmin are firmly in the liberal camp. However, due to the nature of his ministry, Geraldo Alckmin will probably concede more to developmentalist policies (as he's already doing). Aloizio Mercadante, the President of the National Bank for Economic and Social Development (BNDES), is considered the leader of the developmentalist branch of the government, along with Workers' Party President Gleisi Hoffmann (some people jokingly refer to her as the main opposition to Fernando Haddad and the 'Twitter Shadow Finance Minister' due to some of her tweets).
Without further ado, let's get to the causes of Brazil's stagnation.
Guido Mantega (Finance Minister between 2006 and 2014) and Antônio Palocci (Finance Minister between 2003 and 2006). Mantega is associated to developmentalism and Palocci to liberalism.
Education
First of all, the significant growth of the 20th century left a terrible educational legacy. Brazil only began to have a somewhat consistent educational policy in the 1990s and 2000s, when basic education was universalized. To put it into perspective, in 1990, the average number of years of schooling in Brazil was 3.8 years. Even Sub-Saharan African countries like Congo, Zimbabwe, and Zambia had higher average schooling levels than ours. Approximately a quarter of the population were illiterate.
The key change came with the 1988 Constitution, which decided that Brazil would try to become an European-style social democracy. Since then, considerable progress has been made, but clearly not enough. The main educational bottleneck lies in Elementary School II, which typically spans the ages of 12 to 15. It is during this stage in Brazil that the discrepancy between age and the appropriate grade level drastically increases, leading to higher rates of grade repetition and students falling behind in their education.
This problem is probably related to the transition from a single teacher trained in pedagogy in Elementary I to several specialists teaching only one subject. This transition also occurs at the onset of adolescence, which is naturally a turbulent phase already, with the introduction of drugs, alcohol and various forms of prejudice being normal. The result ends up being a distancing of the student from school.
Two Brazilian states, which have been governed by center-left parties for many years, serve as examples in Brazilian educational policy: Pernambuco and Ceará.
A highlight in Ceará is the Programa de Afabetização na Idade Certa (Program of Alphabetization in the Right Age), which aims to ensure that all students in the state's public school systems achieve literacy by the age of 7. The plan was based on the following pillars: (1) the elaboration of a specialized literacy curriculum that was adopted in all the municipalities, with structured materials for teachers and students containing a daily routine of classroom activities and homework assignments; (2) pedagogical practices to encourage reading in the classroom; (3) financial incentives for the municipalities that achieve better results in education; and (4) evaluation and monitoring of the program, with a census and diagnostic test that is applied at the beginning of every semester.
Pernambuco has implemented a Full-Time High School system that stands out. The system is based on the following pillars: (1) the introduction of a subject called "life project," which encourages students to create plans with goals and objectives for their lives; (2) guided study, providing a space for autonomy in learning and fostering self-directed learning skills; (3) hands-on, practical classes that combine theory and practice; (4) youth clubs, where collective interests of young people are pursued; (5) tutoring, where teachers (tutors) interact with students to support their development; and (6) full-time education, of course.
Both plans have been tremendous successes and could be implemented nationwide. The Member of Parliament Tabata Amaral has proposed the program "basic education like Ceará's, high school like Pernambuco's." We might see that put in practice. Izolda Cela, the mind behind Ceará's basic education plan, is the Executive-Secretary of the Ministry of Education, and the current Minister of Education is Camilo Santana, the governor of Ceará between 2014 and 2022.
Izolda Cela (Executive-Secretary of the Ministry of Education) and Camilo Santana (Minister of Education).
Public Investments
Furthermore, there is a general consensus that the significant decrease in public investment since 1980 explains part of the problem. During the Golden Age of Brazilian growth, public investment mounted to about 6% of GDP, whereas it currently stands at approximately 4% since the lost decade. Liberal economists tend to attribute this to the expansion of the welfare state, that came with a substantial increase in the tax burden (from 25% of GDP in the 1970s to 35% in 2000). On the other hand, developmentalist economists point to the decline in public savings due to the privatization of state-owned enterprises in the 1990s.
In his second government, Lula created the Programa de Aceleração do Crescimento (PAC) (Growth Acceleration Program), whose objective was precisely to expand public investments. Unfortunately, the plan ended up with highly controversial results, primarily due to the low administrative capacity of the Brazilian State and corruption (some like to call the plan the Corruption Acceleration Program!).
But now the Workers' Party has gained new experience. Many of its state governments became famous for extensive investment programs in partnership with the private sector, delivering positive results. Chief of Staff Rui Costa, in particular, had a successful experience with public-private investments during his tenure as the governor of Bahia. He is now expected to lead the "New PAC", which will probably be announced at some point between today and July. (The project still has no name and is provisionally being called "New PAC").
Here's what Rui Costa has said about the project: "We will have, in an unprecedented way, investments with Public Private Partnerships (PPIs) at the federal level. Many states, including Bahia, have made PPI projects. [...] We are negotiating with the Ministry of Finance the conditions for guarantees so that we can leverage these projects."
Lula wants to meet with the 27 state governors to determine which state projects the Union should prioritize for its investments. In recent weeks, Costa has held individual meetings with the state governments to define which projects will be included in the new PAC. In all, eight governors have already been heard.
In a speech on the May 1st holiday, Lula said the following about the project: "We are inviting foreign businessmen to invest in Brazil and we are showing them the great projects that we are going to present in the third PAC. It will be the largest infrastructure project in this country."
Former Governor of Bahia (2014 - 2022) and current Chief of Staff Rui Costa.
Deindustrialization
Another problem is the early deindustrialization that is taking place in Brazil: we are losing our industry before becoming rich. In the beginning of the lost decade, the industry accounted for one-quarter of the Brazilian GDP, whereas today it represents around one-tenth. The reason for this process is complex, and once again, economists disagree. Liberals point to the new form of production organization that emerged with globalization, where the manufacturing of goods was fragmented into different stages, each executed in different countries. According to this line of thinking, Brazil failed to adapt to the new industrial configuration and remained stuck in an unrealistic autarkic dream. On the other hand, developmentalist economists usually argue that after the end of hyperinflation, Brazil fell into a trap of having an overvalued currency and high interest rates, demolishing the industry's competitiveness. (I am more inclined towards the first thesis, although it is a fact that the Brazilian exchange rate was detrimental to the industry after the Real Plan).
Now I want to talk a little bit about the Brazilian industrial bourgeoisie and its problems. In the 1960s, the then sociologist and future president Fernando Henrique Cardoso published his thesis on the Brazilian industrial entrepreneurs. Based on his research, he concluded that Brazilian industrialists did not have any national project, and (1) "only cared about their personal interests when speaking on behalf of the class" and (2) "[their] political action consists of personal participation in the patrimonialist game." Brazil has a serious problem related to what we call 'patrimonialism,' which refers to the capture of resources from the Brazilian state to benefit private interests.
Unfortunately, industrial policy in Brazil often results in tax exemptions, subsidies, tariff protections, etc., for an inefficient, patrimonialist, and somewhat broken industry that was developed in the 20th century. The Workers' Party itself fell into this outdated corporatism while in power, especially during the first Rousseff administration (2011-2015). It is a shame that advocating for greater state involvement in the economy ends up becoming a defense of those interest groups.
In this sense, I find myself opposed to both liberals and developmentalists. While the latter end up promoting an agenda that only benefits private interests, albeit with good intentions, the former dismiss any state planning, believing in an 'economic abiogenesis.' Since 2016, we have been reducing the role of the state and waiting for a crowding in effect, but with no success. We need strong a industrial policy, but it has to be transparent and not perpetuate the old game of patrimonialism.
In the words of the brilliant economist Laura Carvalho: "We want a State that identifies ways to stimulate technological innovation and product development in partnership with the private sector. But this policy cannot become hostage to the existing private sector. We have remnants of our industry of the 20th century, for example the automobile industry, and when we do industrial policy, we end up just giving incentives to them. This is a state that does not choose winners, but rather is chosen by losers. Those who are struggling in the industry try to eat the resources of the state to survive."
Unfortunately, the signals from the new Lula government are quite negative. Industry and Commerce Minister Geraldo Alckmin recently announced a plan of incentives for the automobile industry, which is essentially the same program that has failed several times in the past. There are positive things coming from his ministry, but few of them have much to do directly with a well-made industrial policy. It's a shame.
His plans beyond industrial policy appear positive, as shown in the following excerpt, at least: "Brazil had an early deindustrialization. Europe also deindustrialized, but ours was precarious and severe. More than reindustrializing, we need a neo-reindustrialization. A central issue is the competitiveness agenda. There is a principle in medicine that says: suppress the cause and the effect ceases. We have to act on the causes of low growth. Our tax model generates an absurd cost for companies. It is not fair. We have an absurd judicialization that leads to legal insecurity and hinders exports. The whole world has a VAT (value added tax. I defend it. I think Haddad is doing well and I am a great enthusiast of the tax reform."
Probably more than any other politician of expression today, Haddad positions himself as a republican and talks about reducing the patrimonialist distortions of the Brazilian public budget. He talks about "closing the drains of what is called Brazilian patrimonialism" and "ending a series of abuses that have been committed against the fiscal base" of the country. He says that many sectors have been "overly" benefited "with rules established over the decades and that have not been reviewed by any outcome control. Many have expired from the point of view of efficiency, and need to be revoked."
Former Governor of São Paulo (2001 - 2006; 2010 - 2017) and current Vice-President of Brazil and Minister of Industry and Commerce Geraldo Alckmin.
Business Environment
Brazilian productivity has been stagnant for decades. What is causing this? The main suspect is the Brazilian tax system. There is an enormous complexity in the various indirect taxes (ISS, ICMS, PIS/Cofins, and IPI), which forces every company to have an excessively large department dedicated to tax payment. Additionally, numerous divergences of interpretation arise between the Federal Revenue, state authorities, and businesses. On every corner of our cities, there is a specialized tax law office to assist companies in dealing with the extremely high level of litigation in our taxation system. To make matters worse, our indirect taxes discourage investment in locations with higher social returns, as the tax complexity and special tax regimes artificially alter the profitability of investments and production. A general simplification of these taxes, with the adoption of a Value Added Tax, could have an impact on the economy's efficiency equivalent to the Plano Real, which ended hyperinflation.
Even beyond the tax issue, the Brazilian business environment is terrible. According to the World Bank's Doing Business 2020 report, which measures the ease of doing business in 190 countries, Brazil ranks 124th. This problem is related to excessive bureaucracy, unexpected judicial decisions, loopholes in regulatory frameworks, and disrespect for contracts.
The Tax Reform is going to be the government's main priority after the approval of the New Fiscal Anchor. Planning Minister Simone Tebet summed up the reform as follows: "The Tax reform is the only silver bullet that we have to save Brazil."
And here's what Finance Minister Fernando Haddad has said about it: "There is no way to grow Brazil's productivity with this tax system [...] We are developing a tax reform that is even more modern, because it introduces in the national tax system a Value Added Tax that solves a good part of the flaws of the current system that, in my opinion, is the great villain for the low growth rates of our productivity." The idea is to approve the Tax Reform still this year (Haddad talks about doing it in the first semester!).
Special Secretary for Tax Reform Bernard Appy.
Economic Isolation
Brazil has a very closed economy. Among the 160 countries analyzed by the World Bank, the Brazilian economy is only less open than that of Sudan. The average protection applied by Brazil to capital goods is 14 times higher than in Chile and 25 times higher than in Mexico. This is probably the most expressive cause of the low productivity and deindustrialization in Brazil, together with the tax system. Here, I quote the brilliant economist Edmar Bacha: "[The closure of the Brazilian economy during the Geisel government (1974 - 1979)] caused a tremendous drop in the economy's productivity and an increase in the cost of capital goods. And this, I believe, is what lies at the root of our stagnation after the so-called economic miracle (1968-1974). Our industry became unable to compete internationally. And we were forced, because the industry has this extraordinary lobbying capacity, to prevent the redesign of the Brazilian industry to participate in global value chains."
Bacha's argument makes sense: the collapse of GDP growth coincides with the collapse of capital accumulation (the growth rate of the capital stock) after Geisel's government. Why did capital accumulation collapse? Bacha explains that using a decomposition of the investment = savings relationship: K' = s(1/p)v - δ, where K' = capital accumulation, s = savings rate, p = relative price of investment, v = output-capital ratio, and δ = depreciation rate.
Between 1950-1980, the "golden age" of Brazil, K' grew at nearly 9% per year. Between 1981-2014, this number was 3%. Why? Looking at the historical series, the difference is not in savings or depreciation. What happened was that the output-capital ratio fell by about one-third, and the relative price of investment increased by one-third. In other words, the capital requirement per unit of output increased significantly, and at the same time, the price of investment goods rose significantly. According to Bacha, this process occurred between 1973 and 1983, a period in which the Military Government pursued an autarkic economic policy.
The ideal scenario for Brazil would be to open its economy and have an export-oriented industry. The industry we have developed is heavily reliant on our domestic market, without external competition. In the words of economist Nelson Barbosa: "Brazil cannot produce ships, but it can produce airplanes. Brazil does not have car manufacturers, but it has bus manufacturers. Brazil cannot have a domestic production of microelectronics, but it has a good domestic production of electric motors. So we need to study what worked in these sectors to see if it can be replicated in other sectors. All these successful sectors, Embraer, Weg, Marco Polo, are sectors that are competitive in Brazil and in the world. Here is the first clue: correct industrial policies create domestic production that competes domestically and internationally. They are integrated products that import and export extensively. Value chains."
However, an open trade policy without a plan may not be positive either. In Nelson's words: "Development always means increased productivity. Opening the economy can stimulate productivity, but it can also lead to a negative specialization. You can open your economy and become a country that only exports commodities, with an inflated services sector that only sells domestically, with a significant portion of your population relying on informal jobs. Which is what happens in Brazil. So I think trade openness is inevitable, more developed countries are more open, but thinking that just opening up will automatically lead to development is naïve and something we shouldn't do in the 21st century. I believe that strategic trade integration is crucial and necessary for development. Unilateral openness, without any plan, will only reinforce the specialization we already have today."
In any case, it is certain that the current excessive protectionism cannot be maintained. Opening up would allow broader access for companies to (1) cheaper and higher-quality inputs and (2) foreign-produced capital goods and technology, (3) create significant competition effects to invigorate the economy, and (4) create a 'selection effect' that would eliminate losers and favor winners.
But this is the agenda that I am least hopeful about. Trade openness is a topic that faces strong opposition from the Brazilian left and would likely only occur under a moderate center-right government. I hope, at least, that some trade agreements can be reached to open up the economy. The European Union-Mercosur trade agreement would have a significant impact and would be very important but I'm not very hopeful that it'll be approved.
Haddad is still optimistic, though! He said that a more emphatic diplomatic effort will be made starting in the second semester, in a movement that will take advantage of Brazil's leadership in Mercosur and Spain's leadership in the European bloc.
Simone Tebet (Planning Minister) and Fernando Haddad (Finance Minister).
Credit
Interest rates in Brazil are much, much higher than the global average. Our credit is scarce and dysfunctional. Lula likes to repeat that Brazil is a capitalist country without capitalism because there is no credit.
Brazil has the second-highest bank spread in the world, second only to Madagascar. This means that banks in Brazil charge very high interest rates for lending money. To give you an idea, Brazil's bank spread is higher than the average observed in countries at war. There are several reasons for this, but some stand out: (1) savings in Brazil have historically been very low (around 20% of GDP), (2) the government consumes a significant portion of savings to finance itself, and (3) the Brazilian banking sector is extremely concentrated, with a few banks dominating the entire sector.
The other issue in this discussion is the current policy interest rate set by the Central Bank. Brazil currently has the highest real interest rate in the world, at around 9%. The debate about whether this interest level is correct or not is quite active in Brazil, with its proponents arguing that the current Brazilian inflation is demand-driven and pointing to inflation in the services sector and core inflation, while its critics argue that inflation is not demand-driven, pointing to the fact that Brazil has had a negative output gap since 2015 and that supply shocks can explain the inflation in services.
This debate is complex, and it is hard to determine definitively which side is right. Nevertheless, the Central Bank is strongly adhering to the first thesis.
The current Chairman of the Central Bank, Roberto Campos Neto (RCN), is the grandson of an economist of the Military Dictatorship and was appointed by Bolsonaro. He will remain in his position until 2024 due to the new autonomy granted to the Central Bank in 2021. In this scenario, Lula engaged in a public war against RCN, urging him to lower interest rates. The situation became tense, but Lula never showed any willingness to take effective action to remove him, remaining only in rhetoric. Throughout the conflict, Haddad positioned himself as a moderate, playing a certain "good cop, bad cop" game with Lula and gaining trust in the financial market. Apparently, Lula intends to nominate former executive-secretary of the Finance Ministry Gabriel Galípolo to replace RCN in 2024. He was recently appointed as director of monetary policy at the Central Bank, and is widely identified as a heterodox economist.
Haddad's current plan is to stabilize Brazil's deficit to allow for a monetary loosening. Here's what he said: "We are not at a point where fiscal expansion is going to help the economy. If there is room for any stimulus, it will be monetary. If we know how to make the transition, there is room for a lower interest rate, you just have to give security to the monetary authority." He does not seem to be concerned about banking concentration, though.
Chairman of the Central Bank Roberto Campos Neto.
TL;DR
The Brazilian economy has seen very little growth since the the lost decade in the 1980s. One of the primary factors contributing to this stagnation is the economy's low productivity. There are several reasons behind this low productivity, including:

1. Inadequate infrastructure and insufficient investments in its development.
2. A significant delay in comparison to other countries in terms of investing in education.
3. Unreasonable economic protectionism.
4. Private groups exerting undue influence and capturing the Brazilian state (patrimonialism).
5. Failure to adapt our industry to a globalized world.
6. Excessively high bank spreads.
7. A terrible business environment, particularly due to the tax system.

There are other reasons for sure, but I'd say most people would agree those are the most important ones. Also, here's my effortpost on the Workers' Party, in case you haven't read it.