EPILOGUE
São Paulo, October 2037
Luiz Soares is a worried man. His family engineering firm – Soares Tecnologia, S.A., which his grandfather, Jose Antonio, founded in 1997 – is on the brink of collapse.
The first years of Soares Tecnologia were difficult. The high interest rate policy, which lasted between 1994 and 2009, severely constrained its ability to borrow and expand. But, by 2013, it had grown into a solid middle-sized firm producing watch parts and other precision equipment, thanks to Jose Antonio’s skills and determination.
In 2015, Luiz’s father, Paulo, came back with a Ph.D. in nano-physics from Cambridge and persuaded Jose Antonio to set up a nano-technology division, which he headed. That proved a lucky escape. The Tallinn Round of the WTO concluded in 2017 abolished all industrial tariffs except for a handful of ‘reserved’ sectors for each country. As a result, most manufacturing industries, other than low-technology, low-wage ones, got wiped out in most developing countries, including Brazil. The Brazilian nano-technology industry survived the so-called Tallinn tsunami only because it was one of the ‘reserved’ industries.
Paulo’s foresight paid off. Soon after he took over the firm in 2023, after Jose Antonio’s yacht sank in a freak hurricane in the Caribbean (a result of global warming, they said), Soares Tecnologia launched a molecular machine which converted sea water into fresh water with greater efficiency than its American or Finnish rivals. It was a big hit in a country that was suffering from increasingly frequent droughts due to global warming – by that time, the Amazon forest was barely 40% of its 1970 size due to lack of rain (with a helping hand from pasture-hungry cattle ranchers). In 2028, Paulo was even selected as one of the world’s 500 leading technology entrepreneurs by the Shanghai-based Qiye (Enterprise), the world’s most influential business magazine.
Then disaster struck. In 2029, China was hit by a massive financial crisis. Back in 2021, commemorating the 100th anniversary of the foundation of its ruling Communist Party, China had decided to join the OECD (Organisation for Economic Co-operation and Development), the club of rich countries. Opening up its capital market was to be the price of its membership. China had already been resisting for some years the pressure from the rich countries to behave ‘responsibly’ as the world’s second biggest economy and to open up its financial market, but once it started negotiating the terms of OECD accession, there was no escape. Some urged caution, saying that China was still a relatively poor country, with an income level that was only 20% of that of the US, but most others were confident that China would do as well in finance as in manufacturing, where its ascendancy seemed unstoppable.Wang Xing-Guo, the pro-liberalization governor of the People’s Bank of China, the central bank (granted full independence in 2017), summed up this optimism perfectly: ‘What are we afraid of? The money game is in our genes – after all, paper money is a Chinese invention!’When it joined the organization in 2024, China revalued its currency, the renminbi, by four times and fully opened its capital market. For a while, the Chinese economy boomed as though the sky was the limit. But the resulting real estate and stock market bubbles burst in 2029, requiring the largest IMF rescue package in history.
Soaring unemployment and IMF-imposed cuts to government food subsidies led to riots and eventually to the rise of the Yuan-Gongchandang (Real Communist) movement, fuelled by the seething resentment of the ‘losers’ in a society that had moved from the near-absolute equality of Maoist communism to Brazilian-style inequality in the space of less than two generations. The Real Communists have been contained, at least for the moment, following the arrest of all their leaders in 2035, but the resulting political turmoil and social unrest marked the end of the Chinese economic miracle.
The Chinese economy being so big by then, it brought the whole world down with it. What came to be known as the Second Great Depression has been going on for several years now and there seems to be no end in sight.With its largest export market collapsing, Brazil has suffered greatly, although not as heavily as some other countries.
The other leading Asian economies – such as India, Japan and Vietnam – went belly up. Many African countries could not survive the collapse of what, by then, was the biggest buyer of their raw materials. The US economy suffered withdrawal symptoms from the massive flight of Chinese capital from its Treasury bill market. The ensuing deep recession in the US economy triggered an even deeper one in Mexico, leading to an armed uprising by the Nuevos Zapatistas, the left-wing guerrillas claiming to be the legitimate heirs of the legendary early-20th century revolutionary Emiliano Zapata. The Nuevos Zapatistas swore to take Mexico out of the IAIA (Inter-American Integration Agreement) – the high-octane version of NAFTA that was formed by the US, Canada, Mexico, Guatemala, Chile and Colombia in 2020. The guerrillas were narrowly defeated after a brutal military operation, aided by the US air force and the Colombian army.
The Second Great Depression was bad enough for Soares Tecnologia, but then came the coup de grace. In 2033, driven by his free trade convictions and using the dire economic situation as a means to bully the opposition, the maverick Korean-Brazilian president, Alfredo Kim, a former chief economist of the World Bank, took the country into the IAIA.
For the Brazilian nano-technology industry, it was a catastrophe. As a part of the terms of entry into the IAIA, all federal R&D subsidies and government procurement programmes – lifelines for the industry – were phased out within three years. Tariffs in nano-technology and a few other ‘reserved’ sectors that had survived the Tallinn Round were immediately scrapped vis-à-vis the IAIA member countries. With the overall level of technology still 20, perhaps even 30, years behind US firms, most Brazilian nano-technology companies collapsed.Even Soares Tecnologia, considered to be Brazil’s best, survived only by selling a 45% stake to a firm from – of all countries! – Ecuador. Ecuador had done surprisingly well after forming the Bolivarian Economic Union with Venezuela, Bolivia, Cuba, Nicaragua and Argentina in 2010 – the BEU members left the WTO in 2012 in protest at the Tallinn Round agenda.
But even survivors like Soares Tecnologia were devastated by the new patent law that had now come into force. The US had already extended its patent life from 28 years (instituted in 2018) to 40 years in 2030. By contrast, Brazil was one of the few countries still clinging on to the 20-year patent life allowed under the increasingly obsolete WTO TRIPS agreement of 1995 (most others having moved to 28 years or even 40 years, in the case of the IAIA countries). When Brazil joined the IAIA, the main concession it had to make – in return for the abolition of beef and cotton subsidies in the US (to be phased in over the next 25 years) – was the patent law, which the Americans insisted should be applied retrospectively. At one stroke, the Brazilian nano-technology firms became liable to patent suits, and American nano-technology corporations parachuted in their army of patent lawyers.
With no tariffs against American imports, disappearing subsidies and shrivelling government procurement programmes, compounded by a flood of lawsuits, Soares Tecnologia was in a dire state when Paulo – may his soul rest in peace – had a massive stroke and died in 2035. As a result, Luiz was forced to quit his MBA course at the Singapore campus of INSEAD, the French business school (which, by that time, was considered to be better than the original campus in Fontainebleau), break up with Miriam, his half-Xhosa/half-Uzbek girlfriend (a distant cousin of Nelson Mandela on her Xhosa side), and return to Brazil to take over the family firm at the age of 27.