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RIO DE JANEIRO—We’ll get to the unalloyed optimism in a moment.

The ocean-grabbing vista from the corporate headquarters, featuring floor-to-ceiling windows overlooking Copacabana. The trim CEO’s lifestyle of running the length of Ipanema beach, religiously, every evening, in the sand. The contrast between the Brazilian ethos and, shall we say, the rather dour demeanour of what we will sweepingly generalize as “The North.” But first, consider that Marcio Mello, Mr. Optimism, is wearing Crocs — yes, the moulded, perforated, jellylike footwear — with his navy blue pinstripe suit. They are ugly. His proper shoes are in his desk drawer. My pumps are encased in little white operating-theatre booties, a requirement of all visitors — there’s a machine right inside the front door of HRT Oil & Gas into which you place one foot, then the other, and voila, disposable booties envelop each shoe. The booties are ridiculous. To state it gently, this is odd. A more generous observation: the freedom of being one’s own boss accommodates the fulfilled expression of such fetishes, including a distaste for what dirt will do to an offwhite corporate carpet, not to mention Mello’s preference for prefacing an annual report with the unconventionally swooning statement: “One look makes you discover love.” Agreed, then, that Mello is a transformational and unconventional CEO, and as such serves as a convenient proxy for the new Brazil. Mere months before Goldman Sachs economist Jim O’Neill caught the Brazilian wave in

Mello threw over his 26-year career at the state-owned oil company. And the world is still not fully focused on the degree to which oil and gas is reshaping Brazil into an emerging superpower. Marcio Mello takes some credit for such success. . as the company likes to say — is named after the increasingly mythic former Brazilian president Luiz Inácio Lula da Silva. and that’s why people call me Mr.).S. Petrobras is big. a moment he poetically and mysteriously alludes to in the manner that evokes the inimitable Inigo Montoya in A Princess Bride: “Never betray your feelings. and set out on his own. It has thumbed its nose at skeptics with its offshore deep drilling of the “subsalt” or “pre-salt” layer. Go Deep!” he exalts. The company aims to double its current oil production of 2. READ MORE: Our Emerging Markets series Let’s stop there. Exxon’s market cap is a mind-boggling $378 billion (U. (The Lula field — an El Dorado at the bottom of the sea. and the company has crowed that it hopes to overtake Exxon Mobil as the world’s largest oil and gas producer. Petrobras. now stricken with cancer. If you betray your feelings. “I’m the guy who helped to predict all this sub salt. he pulled the plug on his career. Petrobras.6 million barrels a day by the end of the decade.2001 and prophesied that growth in the newly named BRIC (subsequently BRICS) countries could outpace the group of industrialized nations then known as the G7. by market capitalization. Mello’s ex-employer.000 metres. is on a tear. within a few short years. Still.) It’s only a slight exaggeration to state that new discoveries are announced almost daily. In other words. 200 kilometres off Rio’s shores at an incomprehensible depth of more than 7.

Plus. natural resources. He took HRT public last autumn in an initial public offering that raised 2. he continues enthusiastically. The Summer Olympics will overtake Rio in 2016. Second. HRT announced an agreement with a Brazilian subsidiary of Russia’s TNK-BP. “We are in a magic moment!” Mello enthuses about the prospects for his country. To appropriate Mello’s own outlook: what’s not to love? Brazil. is unique. Mello believes. and a vast holding of close to 100. launched a handful of companies before creating HRT. The World Cup of soccer is on its way (2014). And right out his window the peacock pageant that is Rio — bathing attire is microscopic — unfolds as if it were Mello’s personal playground. In late October.5 billion reais (about $1. Brazil is expected by some analysts to claim fifth spot by the time the Olympics arrive. it’s the largest agricultural land in the whole planet. There is no other country on the planet with so many natural resources.you betray your soul. (Brazil is an enormous beef producer. a petroleum geologist with a PhD in molecular geochemistry. through which TNK gained a 45-per-cent stake in Solimões in exchange for $1billion.4 billion). You are dead. Now the world’s eighth-largest economy. with Petrobras’s own deep-water successes off the Brazilian coast. a geological match. the largest poultry producer . The Ontario Teachers’ Pension Plan took a small stake in the HRT exploration story. Why? “Why? People.” Instead Mello. It all sounds so upbeat.000 square kilometres off the coast of Namibia. which is chiefly focused on the hunt for oil and gas in two regions: the Solimões sedimentary basin in the Amazonian rainforest. making Brazil the first South American country to host the Games.

) We have 20 per cent of the fresh water. . “I was doing everything. We are a young generation and our culture is different. who passed swiftly through the shanty on a tightly controlled tour last March. a canal of waste. every day we give good news and the shares go down. yes? No. Shares in HRT are off by 70 per cent. they have suffered so much. the city of slum housing thrown against hillsides to which more than a million residents cleave. “The Anglo-Saxonic culture. The officer manning the police post on the perimeter of the City of God favela falls into conversation.S. a reality that brings Mello pause. they worry about the future and they don’t live day by day. but if you live day by day with worries. give or take.” he bleats. We are an optimistic people. He traces the fever line of HRT’s stock performance and stops in the summer at the point coinciding with the Greek debt crisis. The others. This is the other Rio.” All good news for Marcio Mello and all good news for his country. Shakira came to visit recently. We believe in the future and we live day by day. Jesus Christ. adding the Latina pop singer was more accessible than U.” A chestnut horse is being led across a bridge that crosses a stream of sewage. “The company was wonderful. if you know what I mean. President Barack Obama.in the world and claims second spot to the United States in soybean production. They are pessimists. pivotal examination points to any understanding of Brazil’s transformation of the past decade. he says. it’s a nightmare.

“It’s part of the whole act of the state trying to initiate social contracts with areas outside the state. of absent public services. “bring governance to these areas. When I went to parties with friends people would be literally flinching when we passed windows.” says Muggah of the program. . UPPs have been established in 19 favelas. fly-out storm-trooper tactics aimed at stamping out innerslum violence. along with the introduction. a Canadian fellow at the International Relations Institute at Rio’s Pontifical Catholic University. bala perdida. . Muggah has been working in Rio on and off for 10 years. like what we have in Afghanistan. build.000 troops secured Rocinha. Robert Muggah.” . “The long-term objective is to formalize settlements.” Thus far. and the pacification program has been a public relations win with a big push on to secure twice as many shanties by the time of the World Cup. or the reintroduction. within favelas. as Muggah says. security. A decade ago. the government launched a major initiative. By midafternoon. shape. establishing so-called Police Pacification Units.” I had met Muggah in October at a coffee shop in Cobal do Leblon. Tapping on his BlackBerry. a notorious favela infected with drug dons and gun runners. “people were leaving in droves because it was a death trap.” he says. “Clear. hold. he says. .” That’s lasting governance. Lawrence Market is to Toronto. or UPPs. to integrate “the hills with the asphalt.Last Sunday.” Or. as effective as stamping out one fire as the forest smoulders. Friends exited for one reason and one reason alone: “Security.” In 2008. as they put it in Rio. a bustling market that is to Rio what St. Muggah called the taking of Rocinha a “major symbolic victory. security. “It looks a lot like counter-insurgency. had hopped a cab to the foot of the favela to watch the hoisting of the national flag. designed not only to secure the peace but. make them part of the city. 3.” He elaborated: stray bullets. No more fly-in.

” City of God. Sueli is 56. if not constant. a chatty. Her son died in September: drinking and drugs. but many are shanty clusters. a brand they’re selling at home and abroad. . especially in the run-up to the Olympics. has been branded. puts the number at 600. there is a photo-op aspect to the exercise. Electricity is. Sueli leans into a door jamb. Before the UPP settled in there were shootings every day. And as much as crime indexes have declined. where most of the Olympic activities are scheduled. improved image.) The UPP focus has been largely in the city’s south. the favela has become a highly visible test case in the city’s attempts to sell a new.The short-term prognosis. each doll encased in plastic packaging. with the country anxious to project an its-safe-to-come-here impression. Other residents similarly attest to a change in mood. acknowledging the cynicism that comes with the statement. Raimundo de Sousa.” says Muggah. Life is better. Sueli says. There are as many as 1. Plastic dolls dressed in baby pink and baby blue sit on top of the television in the background. dressed in a loose muumuu. in Muggah’s assessment. the cigarette pincered by nails polished bright red. in this sense. “UPP has become a brand. 31-year-old fresh-faced barber. he says. places a new Lord platinum blade into his razor. an NGO established in the city in 1993. In midday. at least semi-reliable. (Viva Rio. Famous as the backdrop for the 2002 movie of the same name. is “islands of safety. “I think this is a huge branding exercise. the accumulating ash defying gravity. More peaceful.000 favelas in the city.” The long-term effects are unclear. her cheeks caving as she takes a long draw on her cigarette.

” Neri says. 29 million people entered “Class C. “Most analysts look at GDP growth. Marcelo Côrtes Neri is the chief economist for Fundação Getulio Vargas. To say the country has a lot of catching up to do is a seismic understatement. levels. is not a very egalitarian society. Kathleen. Is de Sousa’s story meaningful? As it happens. approximately $5.126 reais.” There are other micro social indicators that. which is not that interesting. Five years ago the scene was dramatically different.” he says in an interview in his office. . Brazil is quite interesting in terms of social performance. while still grim. If Brazil continues on the same path toward reducing inequality. Not now.S. 20 million Brazilians emerged from poverty (in a country of 203 million). “And you know.” or the middle class. but not in terms of what it used to be. “I think Brazil is very much at odds with the other BRICS. In the six-year period to 2009. FGV released a substantial 115page study titled The New Middle Class in Brazil: The Bright Side of the Poor. it will take two decades to reach U. He was able to enrol his 7-year-old daughter. What is significant. Neri points out. is the number of Brazilians who have been lifted out of poverty starting in 2003. in the midst of a precision haircut for which a Bay Streeter would pay 50 bucks. a Rio-based educational centre renowned for its social sciences research. Raimundo charges nine reais.” Neri adds. the year Lula assumed the presidency. “the U. in a nearby school. In the five years that followed. “It’s still a very bad picture. Guns were common on the streets.S. yes. or $650 monthly.He has running water in his home.” In September of last year. The baseline for “middle-class” income is exceedingly modest: 1. he says.

so Brazil is just becoming a normal country. Mello is doing the big sell on the exploration excitement in . when the U. a group currently comprised of 16. but we have a very active social policy. what’s the big deal? The place of children is in school. The quality-of-education picture remains bleak. But this transition from an abnormal to normal country is a revolution in itself.S. defined as a monthly income of 70 reais ($45 U.2 million Brazilians.5 per cent a year just because of this education transformation. “We respect market groups.” The “revolution” is credited to Lula and his predecessor.are showing marked advances.) or less. Norway’s largest financial institution. who introduced Fome Zero.” “I think Brazil has found a different way. a company that must have considerable allure.” it lauded the country’s approach to “inclusive growth. “The incomes of the 30 per cent poorest should grow at 5. Neri likes to say that Brazil has chosen a “middle path. It was Lula.” Neri says.” Current President Dilma Rousseff recently announced a poverty-eradication initiative.S. followed by Bolsa-Família. yet Neri notes that while 16 per cent of children between 7 and 14 were out of school 20 years ago. with a deadline of 2014 to eliminate extreme poverty. Fernando Henrique Cardoso. a factory worker with the common touch. that number has been reduced to less than 2 per cent. or the Zero Hunger program. Council on Foreign Relations decreed that Brazil “is on the short list of countries that will most shape the 21st century. You may say. Marcio Mello is standing before a small gathering of investors from DnB NOR.” Last summer. given its commercials currently feature George Clooney. welfare payments for the poorest of the poor.

There’s a smattering of questions. On the ride back to the office. welcome to Brazil!” The sheer size of operations. at least not yet. he regains his optimistic footing. mentalize that?” Sadly. The Norwegians? “Norwegians are crazy people.” . during which Mello grows impatient with his driver. like. “Brazil is the land of the possible.the Amazon and Namibia. At least not outwardly. They are so cold.” he points out eagerly — holds much appeal. with Brazilians moving from Class C to B and B to A.” Brazil. he says. Imagine! “Can you guys. “That’s a huge social transformation!” Not everyone is going to get it. “Okay guys. “We are growing at the pace of five or six Norways in two years!” he trumpets. but nothing to suggest that Mello’s stock — “The company is really cheap today. the cool Norwegians do not appear to love him. They’re cold and emotionless.