SAO PAULO, Brazil - Brazil's economy is in freefall. The party is over. The lights are out. The joke is up. At least that is how the headlines sound.
"Party’s Over: How Did Brazil’s Economy Get So Bad So Fast?" was this sobering one.
"The Brazilian Ego Falters Along with the Brazilian Economy," was this ego-deflating headline.
"Can Brazil Still Be Classified as an Emerging Economy?" was the question posed in this headline.
"Rousseff ‘Very Worried’ About Brazil Economy, Plans Steps," said this one, presumably not referring to a Stairmaster.
"…Brazil’s Awakens From Dream," shook Brazilians everywhere out of bed with this headline.
"Brazil’s Economy: Going Nowhere," was this particularly succinct banner.
True, the once hot Brazilian economy is now choking on barely two per cent growth. No spinning that.
According to a new study by the Economic Commission for Latin American and the Caribbean (ECLAC), Brazil will have the second worst growth of any country in Latin America this year, only above Paraguay. Panama, Haiti, Bolivia, Peru, Colombia – heck all of them except Paraguay – will have stronger growth, predicts ECLAC.
And all the articles linked to above are accurate snapshots of Brazil’s economic collage I am not here to argue the merits of them.
I don't claim to be an economics specialist or a financial markets reporter.
But, I – for one - will plead guilty to remaining bullish on Brazil's economic future, despite all the doom and gloom.
Here are four reasons why.
1 - Middle Class
All foreign correspondents in Brazil who have been around a while have filed about 246 re-incarnations of the “Brazil’s Booming Middle Class” story over the past several years.
It's has become one of those Brazil 101 stories.
Google ‘Brazil, Middle, Class' and you’ll get over 19,000 hits. Take your pick.
There is something to it.
In the past eight years roughly 35 million people have been lifted into Brazil's 'middle class.' Perspective: Entire population of Canada is 34 million.
This year, for the first time in history, Brazil's middle class makes up about half of Brazil's total 199 million population. Half. Brazil – the world's fifth most populated country – is also a place where half the people qualify as middle class.
Think about that for a second.
An economy built to last – to outlive a global economic downturn - is an economy with a thriving and expanding middle class, where jobs are plentiful and salaries are rising. Brazil has that. And that is not debatable.
Those who cast doubt on Brazil's economic future disregard the middle class equation at their own peril.
2 - Fundamentals
While growth rates in Brazil are miserable, the fundamentals of the economy remain strong, or at least fairly stable and/or improving.
Fundamentals which I will break down in three broad stroke categories:
1) Demand - equaling consumer confidence/consumption and the like. Very strong in Brazil, no doubt.
2) Supply - equaling tax rates, interest rates, business confidence and the like. Mixed bag on this one, but Brazil lagging behind here, but slowly making progress in some areas.
3) Institutions - equaling government transparency/corruption, infrastructure, economic policy and the like. Again, mixed bag, but Brazil also improving in this category everyday as well. Not as fast as some would like, but improving nonetheless.
And it's important to remember Brazil has $378 billion in foreign reserves. In September alone the reserves rose by $1.5 billion, and so far in 2012 rose over $27 billion. It's a necessary and smart buffer against international financial uncertainties.
Yes, Brazil's economy often is a clumsy and cumbersome ball tightly wrapped in bureaucratic red tape. Singapore, it's not.
But the fundamentals of the Brazilian economy could be worse. Much worse.
3 - World Cup and Olympics
The 2014 World Cup and 2016 Olympics – both in Brazil - have almost become the apocalypse days on the Brazilian calendar. It’s like the only dates everyone is waiting for, when the country will suddenly and magically transform into this new and improved hyper-efficient super state where everything, well, for a lack of a better term….works.
I – for one - don't but it.
Brazil is Brazil. And Brasil is Brasil.
The dirty little secret: Brazil will likely change the World Cup and Olympics more than the World Cup and Olympics will change it. FIFA and the IOC just haven't got the memo yet.
The problems Brazil faces now will likely exist after the World Cup and Olympics.
But there is something important about both events, and here it is: Brazil was in the middle of unprecedented economic transformation period even without the World Cup or Olympics. The value of both mega events is not that they alone with re-invent the country, but rather that both events are simply forcing Brazil to work faster, smarter, and harder than it otherwise would to achieve benchmarks imposed on them by people with European mindsets of ‘efficiency’ and ‘progress.’
The process has been rough at times. Just ask a guy named Jerome Valcke. And more troubles lie ahead that will provide lots of fodder for reporters.
But the process Brazil is going through right now is a healthy one.
And, in the end, Brazil will be ready for the World Cup and Olympics, despite all the billions in checks being written by the government.
In my view, the economic foundation of the country will be better off too because of it.
4 - Brain Gain
There is something else happening in Brazil that I think is significant, telling, and gives me hope about Brazil’s economic future: Brazilians are coming home.
If you follow Brazil closely, you’re likely heard the stories of Italians, Portuguese, Spanish, Brits, and Americans – to name a few – who are flocking to Brazil in recent years to take part in "Brazil's boom".
What's much more interesting – to me at least - is the Brazilians with one-way tickets back home, brining with them knowledge, language skills, and know-how from years abroad.
They're returning en masse in recent years partly to avoid financial crisis abroad but equally as much to start small businesses and re-invest money made abroad in Brazil.
It's the guy who I interviewed a couple years ago in Minas Gerais state who was undocumented in America, washed dishes at a diner, and came back to Brazil with enough money to open a restaurant in his small town.
Or the young, well educated Brazilian who lived in Silicon Valley, ran with the Facebook's and Google's of the world, but who gave it all up to come back to Sao Paulo to start a now-thriving local startup called Peixe Urbano.
In Brazil, the brain drain has morphed into the brain gain.
When Brazilians suddenly find it worth their while to leave places like London, New York, Zurich or Palo Alto to come back to places like Sao Paulo, Rio de Janeiro, Porto Alegre and Belo Horizonte, in my mind there is something fundamentally right going on in Brazil.
When these same people suddenly start leaving Brazil again is when I'll start to take notice and worry that perhaps the economy really is a mess.
Brazil: Worth the bet?
Does Brazil have problems? Yes. A tonne of them.
Here's a random few: There could easily be a housing bubble. Consumers with little education in healthy spending are playing a dangerous game of gorging themselves on new credit. The public education system is not of world class standards, to put it mildly. Airports and road infrastructure are decades behind places like, for example, South Africa. Institutionalised corruption still absorbs tens of billions of dollars from government coffers each year (some say well over $100bn annually).
Big Brazilian private and state companies like Petrobras, Embraer, and EBX are innovating, but there are still too few innovators at the grassroots level too few patents being issued from Brazil – the fewest of any of the BRICS.
The country still has extreme poverty, you just have to look a wee bit harder to find it. But not that far.
Just get out of Sao Paulo, fly to Recife, rent a car and start driving west to the Brazilian interior and you'll meet some of the nicest people in the country, but also some of the poorest. They cobble together a monthly salary that is equal to what some upper middle class folks in Sao Paulo spent on one night at a local pizzeria.
Heck, next time you fly into Rio's international airport, instead of having the cab whiz you straight to Copacabana, ask the driver to take you to a place called Bangu and let me know what you think.
Yes, Brazil is a complicated place – where half the population is 'middle class,' but tens of millions still live in favelas. Brazil: Not for beginners, as the saying goes.
Maybe Brazil's economy really is (or was) one giant mirage the past several years. Maybe it will collapse like a deck of cards back to earth, if it hasn't already.
I don't gamble.
But if I did, that's still a bet I'm not willing to make.
Follow Gabriel Elizondo on Twitter: @elizondogabriel