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The Brazilian Populist Earthquake · John’s Newsletter

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  [music]
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  SPEAKER_00: Good morning,
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  SPEAKER_00: everyone,
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  SPEAKER_00: We're not just looking at the boring, old, increasingly irrelevant G7.
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  SPEAKER_00: The emerging markets,
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  SPEAKER_00: the emerging powers,
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  SPEAKER_00: It's not just about Japan, Europe, and the United States.
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  SPEAKER_00: Now, you have to look further afield and know about Farsi and political economy and
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• 2:52
  SPEAKER_00: The headline document,
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  SPEAKER_00: incredibly important,
• 2:54
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• 3:07
  SPEAKER_00: The National Defense Strategy both focus on first and foremost in
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  SPEAKER_00: a multipolar world America's great advantage.
• 3:15
  SPEAKER_00: It actually has a sphere of influence nearby that it dominates.
• 3:19
  SPEAKER_00: Unlike the Russians who can't even make it to Kiev.
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  SPEAKER_00: Unlike the Chinese who have to deal with Taiwan and the first island chain,
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  SPEAKER_00: in a fairly uncontested way,
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  SPEAKER_00: the United States dominates Monroe Doctrine-style the Western Hemisphere.
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  SPEAKER_00: And after decades of neglect,
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  SPEAKER_00: Marco Rubio,
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  SPEAKER_00: that's just for you, Terry,
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  SPEAKER_00: Marco Rubio and the Trump administration have focused on our backyard again,
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  SPEAKER_00: and the results have been amazing.
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  SPEAKER_00: There has been,
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  SPEAKER_00: it seems that when you cut USAID funding to the left,
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  SPEAKER_00: USAID funded,
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  SPEAKER_00: it was supposed to be government building,
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  SPEAKER_00: which sounds so incredibly worthy and dull.
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  SPEAKER_00: In essence,
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  SPEAKER_00: the United States was funding left wing governments in our own hemisphere
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  SPEAKER_00: that hated us.
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  SPEAKER_00: And all the offshoots of them and the Trump administration,
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  SPEAKER_00: Doge was largely unsuccessful,
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  SPEAKER_00: but at USAID,
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  SPEAKER_00: very successful in stopping the plumbing of how money is funneled
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  SPEAKER_00: to left-wing Wilsonian causes themselves.
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  SPEAKER_00: And sure enough, if you don't fund the left in our own hemisphere, it's not very popular.
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  SPEAKER_00: And election after election after election has gone the way of the right and
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  SPEAKER_00: the populist right in our own hemisphere, which certainly suits American politics.
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  SPEAKER_00: You've seen this in places in Central America.
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  SPEAKER_00: You've seen this in Colombia.
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  SPEAKER_00: You've seen this in Chile.
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  SPEAKER_00: You've seen this, Bukele certainly is an example of this.
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  SPEAKER_00: You've seen this all around,
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  SPEAKER_00: but as Eric mentioned the other day,
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  SPEAKER_00: the two key states that have been outside this are Mexico and Brazil.
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  SPEAKER_00: Now, Mexico matters less because of geography, and we're back to former dictator 1917.
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  SPEAKER_00: And this is, of course, Mexico's blessing.
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  SPEAKER_00: And it's curse.
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  SPEAKER_00: It gets now involved through USMCA with being part of the American economic system,
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  SPEAKER_00: which obviously benefits Mexico.
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  SPEAKER_00: But on the other hand, it has very limited room for maneuver.
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  SPEAKER_00: There is going to be,
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  SPEAKER_00: by the way, a trade deal with Mexico, I think, in the They've cracked the nut.
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  SPEAKER_00: Populist leftist President Claudia Scheinbaum,
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  SPEAKER_00: very popular in Mexico,
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  SPEAKER_00: has become like her mentor AMLO,
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  SPEAKER_00: another populist leftist,
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  SPEAKER_00: a first-rate Trump whisperer, and they have agreed to not...
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  SPEAKER_00: A deal is likely to follow in the near term.
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  SPEAKER_00: They've been very good despite being populist leftists,
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  SPEAKER_00: or maybe because they're populist leftists, at average.
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  SPEAKER_00: Actually dealing with Donald Trump.
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  SPEAKER_00: But there's limited room for Mexico to maneuver in a way that
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  SPEAKER_00: if it were further away from America,
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  SPEAKER_00: as President Diaz Riley noted in his prayer,
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  SPEAKER_00: they might be able to have more room for maneuver.
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  SPEAKER_00: Well, if they're out in Argentina, yes,
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  SPEAKER_00: it has some room for maneuver,
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  SPEAKER_00: but Argentina is run by Javier Malay,
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  SPEAKER_00: who is a hardcore Hayekian libertarian, very close to Donald Trump.
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  SPEAKER_00: So that doesn't work either as a bastion of opposition.
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  SPEAKER_00: About the only significant...
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  SPEAKER_00: Bastion of opposition left in the hemisphere is Lula da Silva's Brazil,
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  SPEAKER_00: which is big enough,
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  SPEAKER_00: has a big enough market,
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  SPEAKER_00: has enough area,
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  SPEAKER_00: has enough wherewithal that it's a significant player and in fact is the key player
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  SPEAKER_00: in a quiescent South America.
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  SPEAKER_00: And it's one of the few leftist holdouts in the hemisphere.
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  SPEAKER_00: Now, I want to stress that people in the hemisphere are not voting on this primarily
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  SPEAKER_00: about Donald Trump.
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  SPEAKER_00: Again, we westernize these things way too much.
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  SPEAKER_00: That's what unites them.
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  SPEAKER_00: Donald Trump is a secondary and important but secondary issue.
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  SPEAKER_00: Do you want to be close to China or close to the United States?
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  SPEAKER_00: And most folks would prefer to be close to the United States.
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  SPEAKER_00: Seeing the predatory way the Chinese go about dealing with their colonies in Africa.
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  SPEAKER_00: And so that is an issue, no doubt about it.
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  SPEAKER_00: But it's secondary.
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  SPEAKER_00: Most people vote domestically.
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  SPEAKER_00: How well is the economy going and do you have stability within your country?
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  SPEAKER_00: Those tend to be overriding universities.
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  SPEAKER_00: And on both these issues, the left have absolutely no answers.
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  SPEAKER_00: And that's why the right have won with caste in Chile, Bukele, Malay,
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  SPEAKER_00: Bolivia,
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  SPEAKER_00: there is a trend and now with the Brazilian populist earthquake,
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  SPEAKER_00: I'm about to describe this trend becomes a pattern.
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  SPEAKER_00: Of the populist right rising in the hemisphere over these two issues primarily.
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  SPEAKER_00: Aspirational efforts, they have all these resources and they need an outlet for them.
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  SPEAKER_00: Is it the US or China?
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  SPEAKER_00: But they want to be aspirational, capitalistic and do well themselves.
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  SPEAKER_00: And secondarily, they want security.
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  SPEAKER_00: They want to live in a society where grandma isn't beaten up at the favela.
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  SPEAKER_00: And to do that, the leftists had no answers across the board.
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  SPEAKER_00: And it turns out now Lula da Silva,
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  SPEAKER_00: probably the best known leftist in the hemisphere,
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  SPEAKER_00: who's actually been electorally successful, he's run into trouble.
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  SPEAKER_00: And this is fascinating.
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  SPEAKER_00: And that's why we're developing.
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  SPEAKER_00: And yes, of course, I'm going to get to the French strikes.
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  SPEAKER_00: Anybody who's been following me on X knows I can't keep my hands off what's going on in France.
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  SPEAKER_00: And let's just say as a spoiler, there's a clear winner this year for the miracle.
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  SPEAKER_00: Justly deserved winner for the miracle.
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  SPEAKER_00: As President Macron hides under his desk in a very anti-Charles de Gaulle way,
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  SPEAKER_00: this is a man normally we can't pry away from a television camera who's nowhere
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  SPEAKER_00: to be seen with the most momentous riots in memory in France with the bombings.
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  SPEAKER_00: With the French teetering on a much deserved economic crisis,
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  SPEAKER_00: riots in the streets,
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  SPEAKER_00: as Muslims,
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  SPEAKER_00: particularly Muslim kids,
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  SPEAKER_00: run rampant,
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  SPEAKER_00: beat people up, including their own teachers, and somehow burn down their schools.
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  SPEAKER_00: This is a sign of caring about education.
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  SPEAKER_00: Anybody who believes this is frankly an idiot.
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  SPEAKER_00: It's the dumbest argument I've heard in a career where I've heard an awful lot
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  SPEAKER_00: of dumb arguments.
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  SPEAKER_00: You're not burning down your school in order to save it.
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  SPEAKER_00: This is just wanton antidote.
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  SPEAKER_00: Anti-civilizational, anti-Western goings on.
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  SPEAKER_00: And if you don't defend your society, you get it.
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  SPEAKER_00: Amnesty International peddling psychobabble is saying the kids want to be heard,
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  SPEAKER_00: meaning angry Muslim children who are second or third generation.
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  SPEAKER_00: French, that's the problem.
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  SPEAKER_00: They're within the system.
• 10:10
  SPEAKER_00: The barbarians are within the gates.
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  SPEAKER_00: And I wanted to have them seen too, in prison.
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  SPEAKER_00: You give people billions and they don't assimilate.
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  SPEAKER_00: Multiculturalism has failed in France and Macron's hiding under a desk.
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  SPEAKER_00: Decidedly, President de Gaulle would not be doing this, who I have real regard for.
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  SPEAKER_00: A realist who played bad cards very well.
• 10:33
  SPEAKER_00: So, yeah, I want to get to that issue.
• 10:35
  SPEAKER_00: Spain has just called a general election.
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  SPEAKER_00: I'm gagging to get to that one, too.
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  SPEAKER_00: There's so much going on.
• 10:41
  SPEAKER_00: But I'm talking about Brazil because I don't want to underestimate
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  SPEAKER_00: the populist earthquake that was the first round of presidential votes.
• 10:48
  SPEAKER_00: There will be a second round in the next couple weeks,
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  SPEAKER_00: but I am confident that Flavio Bolsonaro will win it.
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  SPEAKER_00: And here's why.
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  SPEAKER_00: Here's what happened.
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  SPEAKER_00: The Brazilian election,
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  SPEAKER_00: which took place yesterday, yeah, they can count their votes in one day.
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  SPEAKER_00: Well done, Brazil.
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  SPEAKER_00: Bad for California, certainly looking ludicrous.
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  SPEAKER_00: But Brazil had its first round of presidential elections.
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  SPEAKER_00: It now goes to a second round as no one candidate won 50 percent.
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  SPEAKER_00: But Flavio Bolsonaro,
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  SPEAKER_00: the populist right,
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  SPEAKER_00: the son of disgraced former president Jair Bolsonaro,
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  SPEAKER_00: won decidedly,
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  SPEAKER_00: and in opposition to the polls,
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  SPEAKER_00: which called it too close to call, is ahead of Lula da Silva.
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  SPEAKER_00: 47 to 45 percent.
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  SPEAKER_00: Everyone else had perhaps Lula had by a whisker, but neither getting 50.
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  SPEAKER_00: But there's a four or five point swing in the polls here where Bolsonaro did better
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  SPEAKER_00: than the polls allow for.
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  SPEAKER_00: And this is because populists don't like answering establishment polls.
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  SPEAKER_00: The shy Bolsonaro voter in the same way we got right, the shy Trump voter in 2024.
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  SPEAKER_00: That's what's going on.
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  SPEAKER_00: So they go to a second round with Bolsonaro now as the strong He's a favorite to win.
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  SPEAKER_00: And this is particularly because a number of the other smaller candidates
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  SPEAKER_00: who didn't make it to the runoff are on the right or the far right.
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  SPEAKER_00: And this totals about 4.3%.
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  SPEAKER_00: So they're illogical Flavio voters.
• 12:13
  SPEAKER_00: And if they vote for Flavio,
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  SPEAKER_00: And if he's at 47 and you do the math, he's at 51 or 52 without anything changing.
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  SPEAKER_00: Lula stuck at about 45.
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  SPEAKER_00: So overwhelmingly now Flavio is the surprise front runner and likely victor
• 12:29
  SPEAKER_00: the French presidential election.
• 12:31
  SPEAKER_00: But much more went on than even that.
• 12:34
  SPEAKER_00: Jair Bolsonaro,
• 12:38
  SPEAKER_00: Jair Bolsonaro's second son,
• 12:39
  SPEAKER_00: Carlos, and his wife, very popular, who ties into evangelicals.
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  SPEAKER_00: There are various groups that really make up the right.
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  SPEAKER_00: In Brazil,
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  SPEAKER_00: one are Pentecostal Evangelical Christians,
• 12:54
  SPEAKER_00: where it's very popular, one are old business in Brazil, and then military types.
• 12:59
  SPEAKER_00: The military types, the business types, and the So a great night for the Bolsonaro family.
• 13:05
  SPEAKER_00: The youngest son, Jair Jr., in essence, was elected to the Congress.
• 13:25
  SPEAKER_00: Probably even more importantly than the good night for the Bolsonaro family,
• 13:29
  SPEAKER_00: beyond even what Flavio got up to,
• 13:31
  SPEAKER_00: was that Bolsonaro,
• 13:32
  SPEAKER_00: Jair Bolsonaro's former infrastructure minister,
• 13:36
  SPEAKER_00: Tancisio de Freitas, who has been a leading force within
• 13:42
  SPEAKER_00: He was reelected governor of Sao Paulo,
• 13:45
  SPEAKER_00: which is Brazil's most populous and economically important state.
• 13:49
  SPEAKER_00: So the major state of Brazil has voted for an ally of Jair Bolsonaro.
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  SPEAKER_00: His second son,
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  SPEAKER_00: his wife,
• 13:55
  SPEAKER_00: and his youngest son all got elected to the Senate or Congress
• 13:59
  SPEAKER_00: beyond Flavio Bolsonaro.
• 14:01
  SPEAKER_00: His other son being the favorite now to be president.
• 14:04
  SPEAKER_00: So that's a pretty impressive performance on a night that was supposed to be
• 14:09
  SPEAKER_00: a 50-50 sort of night.
• 14:11
  SPEAKER_00: Critically, of 54 senators elected, 34 went for the right.
• 14:17
  SPEAKER_00: So 34 to 20 went for the right.
• 14:20
  SPEAKER_00: So that's a decisive win in the Senate.
• 14:22
  SPEAKER_00: Critically, the
• 14:26
  SPEAKER_00: Supreme Court justices and de Moraes,
• 14:30
  SPEAKER_00: the bugbearer of Elon Musk,
• 14:32
  SPEAKER_00: a man who believes in absolute authoritarian forms of democracy at best,
• 14:38
  SPEAKER_00: and is a leftist authoritarian,
• 14:40
  SPEAKER_00: who believes Wants to censor pretty much anybody saying anything he doesn't like on
• 14:44
  SPEAKER_00: the right in the country.
• 14:46
  SPEAKER_00: And he's also involved in a corruption scandal.
• 14:48
  SPEAKER_00: I'm shocked, shocked in Brazil.
• 14:50
  SPEAKER_00: A Supreme Court authoritarian leftist is involved in corruption.
• 14:54
  SPEAKER_00: He's now in danger of impeachment with these numbers.
• 14:58
  SPEAKER_00: Obviously, Brazil matters.
• 15:00
  SPEAKER_00: It's Latin America's largest democracy in terms of wherewithal, geostrategic hafted economics.
• 15:07
  SPEAKER_00: And this is a pretty darn good night for the populist right.
• 15:10
  SPEAKER_00: So we come to, as ever, the key question in political risk and what we do.
• 15:15
  SPEAKER_00: Why?
• 15:16
  SPEAKER_00: Why was this surprise result the result?
• 15:20
  SPEAKER_00: Well, as I said, Demores is involved in a Supreme Court scandal.
• 15:24
  SPEAKER_00: This tarnishes the idea that there's some sort of establishment,
• 15:29
  SPEAKER_00: institutional Olympian above the fray group
• 15:32
  SPEAKER_00: and makes him look like just another corrupt leftist.
• 15:35
  SPEAKER_00: This bleeds out onto Lula.
• 15:37
  SPEAKER_00: It's not directly Lula's fault in any way, this.
• 15:40
  SPEAKER_00: But this bleeds out onto him because his close ally is involved with his hand in the cookie jar.
• 15:45
  SPEAKER_00: And Brazilians tend to say, oh my gosh, the left are horribly corrupt.
• 15:49
  SPEAKER_00: That is depressed turnout for Lula, no doubt about that.
• 15:52
  SPEAKER_00: There's an affordability crisis going on, not just in America, also in Brazil.
• 15:58
  SPEAKER_00: Where inflation is always a problem,
• 16:00
  SPEAKER_00: always something to watch for people struggling,
• 16:04
  SPEAKER_00: lower middle class voters struggling to get ahead.
• 16:07
  SPEAKER_00: Now, Flavio is talking about capitalism, which they want, and aspirational capitalism.
• 16:13
  SPEAKER_00: The left has no answer to affordability,
• 16:15
  SPEAKER_00: and the lower middle class left are traditionally Lula voters.
• 16:19
  SPEAKER_00: So he depresses turnout with the Marais Supreme Court scandal.
• 16:22
  SPEAKER_00: Not his fault.
• 16:23
  SPEAKER_00: More his fault, the affordability crisis.
• 16:26
  SPEAKER_00: And then lastly, the guy is creaking.
• 16:28
  SPEAKER_00: He's not quite Joe Biden, but he's not totally there either.
• 16:32
  SPEAKER_00: At 80, to start another term,
• 16:34
  SPEAKER_00: his fitness for office,
• 16:36
  SPEAKER_00: after two brain surgeries, I'm not making this up, is a real problem.
• 16:40
  SPEAKER_00: Lula has been unable to have a succession.
• 16:43
  SPEAKER_00: He can't get out of the way.
• 16:44
  SPEAKER_00: It's always Shakespeare is the operative read for almost anything political.
• 16:49
  SPEAKER_00: And here we have King Lear again.
• 16:51
  SPEAKER_00: He sees himself as indispensable.
• 16:54
  SPEAKER_00: And if history teaches us anything, it's that no one alive is indispensable.
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  SPEAKER_00: And so he's not had a succession.
• 17:02
  SPEAKER_00: And so he's clung on too long to where he's frail and feeble and not
• 17:06
  SPEAKER_00: the force he was in his first two terms when he puts in Bolsa Familia,
• 17:10
  SPEAKER_00: which is very popular with Brazilian voters.
• 17:12
  SPEAKER_00: This term he's done very little except say, I'm not the right wing.
• 17:16
  SPEAKER_00: And that's not enough for Brazil,
• 17:17
  SPEAKER_00: which is an aspirational country that ought to be doing a good deal better
• 17:22
  SPEAKER_00: than it is.
• 17:23
  SPEAKER_00: Now, the Trump aspect of this is in recent months,
• 17:26
  SPEAKER_00: the Trump administration has been accused of meddling in Brazilian affairs
• 17:31
  SPEAKER_00: by using tariffs, which they're allowed to do.
• 17:33
  SPEAKER_00: I mean, Lula and Trump are no friends, obviously, ideologically.
• 17:37
  SPEAKER_00: But using tariffs...
• 17:40
  SPEAKER_00: And the designation of two Brazilian organized crime groups as terror groups
• 17:45
  SPEAKER_00: to increase Flavio's campaign chances.
• 17:47
  SPEAKER_00: Flavio said straight up,
• 17:48
  SPEAKER_00: I want closer ties with America,
• 17:51
  SPEAKER_00: less with China, more with America as we go our way.
• 17:55
  SPEAKER_00: And Trump has played into this.
• 17:57
  SPEAKER_00: Now, the key thing about designating the two organized crime groups
• 18:00
  SPEAKER_00: as terror groups is that's how it feels to people in Brazil.
• 18:03
  SPEAKER_00: Again,
• 18:04
  SPEAKER_00: I think crime is the number one issue in the hemisphere that explains the rise
• 18:08
  SPEAKER_00: the populist right.
• 18:10
  SPEAKER_00: Trump administration are underlining this.
• 18:12
  SPEAKER_00: And again,
• 18:12
  SPEAKER_00: this is the skillful work of Marco Rubio actually knowing what's going on there
• 18:17
  SPEAKER_00: to make that point.
• 18:18
  SPEAKER_00: And then the tariffs just squeeze Brazil when they least need squeezing
• 18:22
  SPEAKER_00: and they have an affordability crisis.
• 18:24
  SPEAKER_00: You add in the Supreme Court scandal,
• 18:26
  SPEAKER_00: the affordability crisis,
• 18:28
  SPEAKER_00: the fitness for office, and Trump using leverage, which again, this is politics.
• 18:33
  SPEAKER_00: It's not beanball.
• 18:34
  SPEAKER_00: You know, you're allowed to do that.
• 18:35
  SPEAKER_00: You're allowed to use politics here.
• 18:37
  SPEAKER_00: It's a tough sport.
• 18:39
  SPEAKER_00: And he would rather have Bolsonaro than Lula.
• 18:41
  SPEAKER_00: I think everyone alive knows that.
• 18:43
  SPEAKER_00: But rather skillfully through Rubio, this has been affected.
• 18:47
  SPEAKER_00: And you do see the results.
• 18:50
  SPEAKER_00: All right.
• 18:50
  SPEAKER_00: If that's the why, why does this matter?
• 18:53
  SPEAKER_00: It continues.
• 18:55
  SPEAKER_00: We now have not an indication,
• 18:58
  SPEAKER_00: but an actual trend that the hemisphere is moving to the right just
• 19:02
  SPEAKER_00: as America is paying more attention to this.
• 19:05
  SPEAKER_00: This really secures the Western Hemisphere as possible.
• 19:09
  SPEAKER_00: An American sphere of influence.
• 19:11
  SPEAKER_00: It gives America a chance now to increase economic ties with the region.
• 19:15
  SPEAKER_00: Already strategic ties are closer,
• 19:17
  SPEAKER_00: but it gives us breathing space to move from Marco to Scott Besant and try
• 19:23
  SPEAKER_00: to really put this together,
• 19:25
  SPEAKER_00: to combat crime together,
• 19:26
  SPEAKER_00: which is an overriding issue in the region,
• 19:29
  SPEAKER_00: and to secure the sphere of influence,
• 19:31
  SPEAKER_00: which in a multipolar world is America's great advantage over, say, China or Russia.
• 19:37
  SPEAKER_00: And so that's why this matters geostrategically.
• 19:41
  SPEAKER_00: Politically,
• 19:42
  SPEAKER_00: this matters because the wind continues to blow for the populist right in
• 19:46
  SPEAKER_00: the hemisphere,
• 19:47
  SPEAKER_00: which makes this process ever so much easier
• 19:50
  SPEAKER_00: than having outstanding forces shaking their fists at America,
• 19:54
  SPEAKER_00: as Lula was tempted to do,
• 19:56
  SPEAKER_00: given his background as an anti-American, anti-gringo kind of leftist populist.
• 20:01
  SPEAKER_00: But that seems to have run its course.
• 20:04
  SPEAKER_00: What was a trend has become a pattern.
• 20:07
  SPEAKER_00: And that's why this matters.
• 20:09
  SPEAKER_00: The Brazilian populist earthquake,
• 20:11
  SPEAKER_00: given all the other noise about Europe, we're constantly overstressing Europe.
• 20:15
  SPEAKER_00: And it annoys me, but of course I'll be delving into both Spain and France as soon as I can.
• 20:21
  SPEAKER_00: But I did this one first because in the long run,
• 20:24
  SPEAKER_00: from an American point of view, certainly, this may matter even more.
• 20:28
  SPEAKER_00: This is a fundamental significant moment as populism makes its home and ruse in
• 20:34
  SPEAKER_00: the whole of the Western Hemisphere.
• 20:36
  SPEAKER_00: Thanks very much.
• 20:37
  SPEAKER_00: Hope you enjoyed this.
• 20:38
  SPEAKER_00: Very fun to do this one today.
• 20:40
  SPEAKER_00: Please do give, and I'll be back very, very soon.
• 20:43
  SPEAKER_00: If I don't do another today,
• 20:44
  SPEAKER_00: which I might,
• 20:45
  SPEAKER_00: but if I don't,
• 20:46
  SPEAKER_00: you'll see me with John tomorrow,
• 20:47
  SPEAKER_00: making sense of the fantastic murder mystery that is the Brothers Karamazov.
• 20:53
  SPEAKER_00: Everybody take care.