>> rose: welcome to the program. tonight we look at the unfolding events in egypt with fouad ajami ed hussein, david ignatius, david kirkpatrick, clarissa ward and naguib sawiris. >> let's consider the crisis of the secular democratic forces: a raid against the brotherhood and a raid against morsi. there was a parliamentary election, they lost it. there was a referendum on the constitution, they lost it by a margin of 2-1. so you have the -- the irony is the very same people who pledge allegiance to democracy don't like the version of democracy. and the army is in a pickle. the army does not want to rule. the army never expected to see

that kind of failure. and the ultimatum on the part of the army, 48 hours to meet the demands of the people, the demands of the people to be met in 48 hours? these are timeless demands. bottomless demands. i think army miscalculated as well. >> rose: from egypt to brazil, we look at that country with larry roeter ruchir sharma, and paolo sotero. >> the list of grievances is long and varied but if you want to boil it down and simplify it, you can say it's really about respect. you know, the country's been through an enormous period of growth. it has seen a lifting of 50 million people into the middle-class. and now that they're there, you know, the government, i think, thought that people would be grateful. instead, what the people are saying is if this is middle-class country, we want middle-class services. we want middle-class values

which include honesty, probity in public affairs. show us the real thing. don't just talk about it. >> rose: egypt in crisis and the future of brazil when we continue.

captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> rose: egypt's military has overthrown the government of president mohamed morsi. in an announcement on state television, the general said his offices had seized power to ensure confidence and stability are secured for the people. the constitution has been suspended. an interim government will manage the country until new elections can be held. morsi's camp, meanwhile, have called the move a military coup. in cairo the downfall of jiptd's first democratically elected president was met with fireworks car horns and thousands of people celebrating in tahrir square. violence remains a possibility. dozens of egyptians have died in recent clashes between morsi's muslim brotherhood and his

opponents. earlier today adds his rule was crumbling i taped a program about morsi, egypt, and the future of democracy in that country. that is the conversation that will be held in egypt in the months ahead. joining me on the phone from cairo, naguib sawiris, executive chairman of the free egyptian party. clarissa ward, foreign correspondent for cbs news, and david kirkpatrick. he is a cairo bureau chief of the "new york times". in washington, david ignatius. he is a columnist in for the "washington post". with me in new york is ed hussein, he is a senior fellow for middle eastern studies at the council on foreign relations. and fouad ajami, he is a senior fellow at stanford university's hoover institution. here is that conversation taped here in new york right before the overthrow of the president of egypt. fouad, you've been watching this for a long time. tell me what the moment is. >> well, the moment, in fact, is this great stalemate. it's a great stalemate between the secular forces as we know and the muslim brotherhood. and the idea that you can rely

on the army to break the tie is very dangerous very the very democratic forces. remember, 16 months ago these very same people who now look to the army for salvation were aching to get the army out of politics. so if you bring the army to save the democratic process, a price is paid. >> rose: david ignatius, what's the moment for the white house? >> well, i think the obama administration made a huge bet on the idea that the muslim democrats, the muslim brotherhood government of mohamed morsi could succeed in governing egypt, come out of the shadows, come out of the prisons. a year after morsi took office, that experiment seems to be failing. what the white house doesn't seem to want to do, despite pleas from the moderate opposition and probably from the military, is back a course for removing morsi. they want to play the role of mediator, counselor, speaking to

each of the parties, passing messages. but my sense is that they have refused to give a green light to the military to do what it's now as we record this, doing. >> rose: the interesting thing about this, david, is that there are very good connections between the egyptian military and the american military that have nothing to do at the diplomacy level, correct, fouad? >> yeah,. >> general dempsey, our u.s. chairman of the joint chiefs has talked in the last several days with general assisi, the chief of staff of the egyptian military. the ties remain close. again, my sense is that there's a very close relationship, but in terms of the green light that the military wanted, the explicit assurance that the this had u.s. backing, i don't think they've gotten it. >> rose: clarissa, you're on the ground there. having understood the context and been reporting from there, tell me where we are at this moment. >> well, i think right at the moment we're in this sort of

state of anticipation. it's almost electric. i don't know if you can hear in the background at all until the square, people are chanting, they're chanting slogans, beating drums, blowing whistles, they feel that virginia tech victory is so close. although that victory is still so ambiguous. this is not a unified opposition this is not a group of people who agree on a political vision for the future of this country or prove the next leader of this country could be, but the only thing that seems to really unite these people is the sense that morsi must go. >> rose: david kirkpatrick joins us now, bureau chief for the "new york times." david, what do you expect might happen in the coming hours? >> i don't know. but i'll tell you, it's ugly. i'm right now trying to get myself to a square where president morsi's islamist supporters are and i'm blocked from getting there from a row of

armored personnel carriers and military vehicles. the military is moving. they're moving towards the palace. they've surrounded the square where islamists are gathered and the islamists are saying we are -- we're not going to budge. this is an elected government, this is a constitution. to submit just because the military are the men with big guns is nothing but mob rule. not what they voted for in january. and to be honest they've got a point. so it's going to be -- you know, they have a certain moral authority on their part and i think over the long term they probably see benefits for the cohesiveness of their movement and its political future if they go down with a struggle. >> rose: and do you see that both people are prepared to fight to the end? is that the sense you have right now? >> yeah. i'm not sure what "fight to the end" means. but that's how they're both

saying. the islamists are saying "we condemn violence but we will not be budged except through force. if" that's what the muslim brotherhood is saying. but the muslim brotherhood has not spoken for all islamists here and i think there are some more conservative groups who are suspicious of dempsey to begin with. a few of them said to me this morning -- said to us this morning, "we put our trust in democracy and look what it's gotten us." we never went for this in the first place. i can see this becoming more militant alternatives. >> rose: thank you, david, stay with us. fouad ajami. >> let's consider the crisis of the secular democratic forces, a raid against the brotherhood and a raid against morsi. there was a parliamentary election; they lost it. there was a pro vings election, they lost it. there was a referendum on the constitution they lost it by a

margin of 2-1. so the irony is the very same people who pledge allegiance to democracy don't like the version of democracy. and the army is in a pickle. the army does not want to rule, the army never expected to see that kind of failure. and the ultimatum on the part of the army, 48 hours to meet the demands of the people. the demands of the people to be met in 48 hours? these are timeless demands. bottomless demands. i think army miscalculated as well. >> rose: naguib, i'm pleased to have you here at this moment. >> i am completely disn disagreement with the last speaker. >> rose: tell me why. tell me why you're in disagreement with fouad ajami. >> it's lacking in facts. if you are the president anywhere in the world he would have been impeached and removed a year ago because he has gone against the constitution, he's gone against the leadership in egypt. he's given himself powers which

are unconstitutional. he has for appointed against any rule of law here in egypt, jailed and put people in prison. the referendum it is gentleman is referring to were met with a lot of falsification, with a lot of adoptions that were made and nobody bothered to heed the position and review the situation and see exactly what went wrong there. that's why we are always calling for international supervision for any elections to take place. to speak about democracy and ignore the 30 million people in the streets of egypt today (inaudible) if you look at the pictures today, never in the history of mankind, not anywhere in the world 20 or 30 million people were on the streets calling for dick t dictator to fall down. so give us a break, you know?

>> rose: and if mr. morsi says "i'm not leaving," what happens? >> he already said he's not leaving yesterday. >> rose: i know. >> so he will be put down by the people. but, you know, any attempt to try show that this is a military coup is a farce, you know. you need to have someone here in cairo to tell you. i don't know a single person, friends, even enemies who are not on the streets today. this was a gang that took over egypt without any respect for the rule of law and order. they've animate it had judges. he took all the power in his hand. we have another fascist ruling egypt under the concept of a democracy that never took place. >> rose: you predicted this and talked about this -- that something like this would happen before the election even took place. >> yes, i know. i've bullpen telling you that all the time because the problem, the first time -- i told you that in the revolution they went home and left these

people to reap the fruits of a revolution who came instead of building a country they went on a revenge range and went against everybody and ruined the country in one year. >> rose: i want to bring other people in, so stay with me. ed hussein? listening to what naguib said, david said, fouad said, clarissa said? >> i can empathize what naguib is coming from in all this but this is no longer about egypt and egyptian politics. it's become a regional issue where is it possible for moderate islamists to be in power in a secular country and see out a four-year term without a popular uprising against them or without the west being seen to be against them, without the military triggering a coup against them. >> rose: so if morsi is taken out of power it means what? >> it means his more extreme salafi cousins will say "we told

you so, you can't trust the democratic model, you were brought down. the only way to create an islamic state is through armed struggle." and that's the risk people like naguib sawiris might think he's worse, wait until they see the salafis. egypt gave us the ayman al-zawahiri, so egypt is no stranger to extremism. there's a risk that if we disempower the muslim brotherhood from its four year term -- and to be fair to the brotherhood they have upheld the treaty with israel, they have been on balanced terms with the united states and they should be allowed to see out their four year term and if they fail, let them fail at the ballot box. >> rose: why do you think there are so many people in the streets? >> there are real issues as to why people are in the streets, including fuel shortages, including -- >> rose: islamic protests, do you think? >> to some extent. and at another level it's the fact that the brotherhood has isolated the opposition and the opposition hasn't been playing ball the way it should be. professor is ajami is right that

they've failed at the boston red sox box on five different occasion and there is a feeling of sour grapes but the way to bring down an elected government isn't through mob violence at the streets but contest them at the next election. >> rose: these events go way beyond, ed just said determining who rules egypt. there will portend enormous consequences for the rest of the middle east. do you see that? can you elaborate on that? >> well, as ed said, there's no question that what happens here is being watched across the region. this is kind of a trial period. egypt is the sort of model that all these other countries in their various arab springs or arab struggles, however you choose to categorize them, have looked very closely to. i think what this has also really highlightd is this deep division which you didn't feel as keenly before between the islamists, if you would like to

call them that, and the secularists. although in this case secularist is kind of a generalization because when you go out inside that crowd you realize it's a much more motley crew, a very different sort of -- it's a mosaic of different people with different interests. but i think, of course, there is a real sense when you go and spend time with pro-morsi supporters, they feel robbed here. they feel that they have -- they won in a democratically election and they feel this very strong sense of being maligned, that the whole system is stacked against them which really only feeds into this kind of psychology of victimization or martyr hood which obviously would have huger are par cushions for the entire region. >> rose: are they willing to engage the debate that naguib sawiris recommended that they've acted unconstitutionally in government in power? >> no. they're willing to concede that mistakes have been made, that perhaps the whole dealing of the constitution could have been done in a better way. but their argument-- or what you

hear them say over and over again on the streets-- is that listen, we were dealt a really bad deck of cards here. we inherited all of these problems, all of these failing corrupt sort of lumbering dinosaurs of state institutions. we were expected to sort of transform within a year and w simply don't have the mechanisms or the funding to have done that. so they're asking for patience. at the same time, when grow into tahrir square and talk to these people who say "we have rolling blackouts, tourism is dead, there's lines for gas, lines for bread" you understand why people are concerned that egypt would be heading towards a road of becoming, you know, if not a failed state, certainly on the brink of collapse. >> you know, charlie, i know you have tolerance for history and historians. egypt's been here before. it was there -- it was at the same point in 1952. the old regime failed, the muslim brotherhood was waiting in the wings and then suddenly came the intervention of the army. the temporary intervention of

the army which lasted six decades. egypt finds itself at the same cross roads now. what you see in egypt is the feeble nature of egyptian liberalism. and the liberals themselves have themselves to blame. go back. go back to the presidential election. the liberals ran three different candidates. so you have three different candidates, morsi from the brotherhood, shafiq from the mubarak forces. the liberals themselves, in fact dictated and decreed an election which left the choice, the stark choice between the brotherhood on the one hand and the regime on the other and the brotherhood won. let's again consider this. if anyone thinks that the army will come to the rescue and the army will not demand a sacrifice of the democratic process then they don't remember what happened in '50s. >> rose: they'll demand some kind of military rule? >> of course! of course! >> rose: david ignatius or david kirkpatrick.

either one? david ignatius. >> yes, i'd be surprised if the army was enthusiastic about return to military rule, outright military rule. i think they want to avoid that. i think a way the army has been trying to push the obama administration with its tour from deadline as fouad ajami said was not a smart idea, kind of push the u.s. into taking sides and maybe they're surprised the administration hasn't. one point that i would add to the discussion that we're having is the liberals in egypt have made so many mistakes. blunder after blunder. but they are uniting -- i mean, the number of people in the streets, the messages i get from friends in cairo, the tweets that you read, i mean, this is something that egypt didn't see even in february of 2011 when mubarak was forced out. so there is this movement to challenge morsi. morsi's popularity has collapsed

as he govern. it's interesting that the same kind of thing in the streets, challenging islamic parties, challenging clerical rule in iran is -- you just had an iranian election in which the most anti-establishment candidate ended up winning. you just had street protests in turkey against the very popular prime minister erdogan that really backed him into a corner for a while. so i sense there is something going on in this region and that it's a little bit more positive than fouad and ed were suggesting. >> i think two day's time what you'll see -- >> rose: naguib are you still there? >> yes, i'm still here. >> rose: i'm come to you in just a moment. >> in two days time we'll see the beginning of ramadan, the month of fasting in the middle east. every night we'll see tens of thousands of people going into the mosques every night. a huge potential for violence and greater violence. at the same time, there's a

potential for morsi and his muslim brotherhood to get the messaging right and get the military to return to barracks so we're at an interesting juncture that things can go into either direction. >> rose: naguib, so this is a military coup and some of the people sharing this conversation suggest once the military achieve this is it won't give back power. >> it's completely off track. i mean, what do ubt to believe? do you want to believe the pictures 306 million egyptians in the streets so egypt calling for morsi to step down or do you want to believe the conspiracy theory? we are the ones who told the army to come into -- the president himself threatened bloodshed in case he's removed. and with all due respect in the west, you read the headlines, you read this guy was democratically elected and you don't go behind and see how he was elected. he was elected with 800,000 voices by a judge that was appointed minister as a reward. all the allegations and the things we told them about, the

rigging of the election was neglected. we asked morsi three months ago to have a provision on the election, give us a neutral government and he refused. this is not a modern kind of tea party that rules. they play all the tricks. this is a bunch of gangsters led by a fascist who instead of fixing all the problems of the country he decided to go and put all these people around the country, he appointed people and jail it had opposition, he tried to take over the judges, the political system. he was building a power play instead of seeing how to fix the country. how on earth did he think (inaudible) rule a country when they are a minority.

(inaudible) brought them to the -- >> rose: but naguib, people have been raising the question in this conversation. why not wait until the flexion election to do this. >> because he refused to have a neutral government. if i mean, i love the way americans are. you think things happen in egypt like it happens in america. you have computers and you have your i.d. card and you can go remotely and electronically. we have ballot boxes that are picken up by a truck and then switched. we have people who vote ten times with ten different i.d. cards and why? because the muslim brotherhood were there for eight years, they're organized and we poor liberals who you are criticizing now are one year old. the army put us in front of them. we were never politicians. we didn't even have a party because mr. mubarak ruled alone.

he didn't rule against the muslim brotherhood but he also went against the liberals. >> rose: ed hussein and then back to clarissa and bring fouad back in. >> it's simply not true that the egyptian party wasn't there. it's that kind of patronizing attitude that americans don't understand the middle east. you know, it's only understand who understand the middle east in the middle east, everyone doesn't. it's not true. these elections were monitored by international committees and they seem to be on balance fair and square elections. you don't achieve the building blocks of a democratic process by trying to constantly undermine the last election. you look forward and you mobilize and bring in leaders and offer a manifesto. the current egyptian liberal secular opposition has failed on all counts and as a result is trying to mobilize the masses on the backs of economic grievances to overthrow -- >> how can we mobilize the masses?

>> rose: are you suggesting the way to solve political problems is to go to the streets and demand >> i try to explain to you the guy took all the powers in his hand. he took the political system that should be independent, he tried to overtake the army, he canceled parliament. (inaudible) without any opposition. he took -- they took the power -- it's in fact what hitler did. hitler came also with a democratic election. don't forget that. >> rose: naguib, listen to him. this is ed hussein. >> with all respect, naguib sawiris, when you start fighting hitler and start calling morsi a dictator one year into power you lose the argument and you've already gone to an extreme. >> you have nothing -- >> with all respect, you may have -- >> he would have been impeached anywhere. >> see this is the problem. >> rose: okay.

so something convince it had military to do something. was that the natural instinct of the military fouad or did they say we cannot let this continue? >> i think david ignatius sketched the military in a very convincing way. for the military this is not exactly what they wanted. ideally for the egyptian military the rule of the brotherhood would have been successful through the ballot box. the military would be left with peace with israel, relations with the united states and to be left with this enormous economic prerogatives because the military in egypt is a huge economic institution. they have to step in. they came in and i think we -- again, to repeat this same thing. the idea of a tour from ultimatum, abbreviating and aborting the democratic process was a mistake on their part. they made a terrible mistake and i think salvation may come in the form of the collapse of the morsi cabinet. you can find some way around it. >> rose: you think there's a way

out of this? >> well, you can always appoint some caretaker, prime minister that would have national profile but you cannot have the mind-set of naguib sawiris, with all due respect to him, i know he's a very successful businessman. >> rose: he's not intimately involved in all this. >> i understand but i think his impatience with the other camp and the way he speaks of them, it's very indicative of a state of mind where 64% of egyptians voted in the constitution that naguib doesn't like. they're owed some respect by him. >> rose: clarissa, let me go back to you. is there more happening on the ground? any more sense of when we might have this statement from the army or when we -- do we have any sense-- and it's hard, i know, to move around the city to get answers to the questions you want answered. any sense of what's going on as we speak? >> well, the arabic channels or some of the arabic channels, i should say, are recording that a statement has already been recorded by general assisi, so that would seem to indicate that

we would hear it or it would be televised sometime soon. but there is, yo you know, military movement now on the streets of cairo. we know that the military has started to surround several pro-morsi rallies. there are also armored vehicles outside the state broadcasting headquarters. soldiers are reportedly patrolling headquarters of that building and we've also heard reports that airport officials have issued a travel ban against the president and also against the leader of the muslim brotherhood. but there is still an enormous amount of ambiguity here. people are cheering in the streets but it's not really clear yet what tomorrow will bring, who takes over, who assumes leadership of this enormous country. and i think that's a question that when you ask people they keep saying "well, for now it's the military and then we'll dee with that problem tomorrow." but there does seem to be a capriciousness here. 18 months ago i was here and people were chanting "down with

the military government." and now the choppers are flying over tahrir square and they're cheering "yes, yes, the military." so there's a sense of real ambiguity that we're sort of staring into an abyss here and it's not quite clear which way this will go. >> rose: that is as good a summary of where we were as i think i will hear. >> i can give you some answer if you want. >> rose: go ahead, naguib, tell me. >> listen, there has been a meeting now. the head of the army has invited (inaudible) and some other politicians but mainly dr. elbaradei, the idea is to put a temporary forum and have a technocrat government for one year and elections will be done for the parliament and presidential election transparently in one year. that's the plan right now. >> rose: all right, thank you very much, naguib. thank you very much, clarissa ward from cbs news, naguib sawiris, chairman of orascom but

involved in the problems that rose out of mubarak and today, david kirkpatrick had joined us from the "new york times", he's making his way through the streets of cairo. david ignatius from the "washington post" in washington where the administration sees. here we many ed hussein council on foreign relations and fouad ajami, thank you all. >> thank you. >> we'll be right back. stay with us. remember as you watch this broadcast we taped it in new york between 1:30 and 2:00 p.m. back in a moment. stay with us. >> rose: the grass-roots protests that have flaired worldwide over the last few years came to brazil in early june. what began as demonstrations over bus fares has turned into unrest sweeping across the country. the list of grievances is long and varied. at the fore are poor public services, corruption, extravagant spending on the world cup and the olympics.

brazilian protest dilma rousseff has proposed a series of reforms. joining me now is larry rohter, a former rio de janeiro bureau chief of the "new york times" and also author of "brazil on the ride." ruchir sharma, author of "breakout nations" head of emerging markets and global macro and paulo sotero joins us from washington, d.c., he is the director of the brazil institute of the woodrow wilson international institute for scholars. i'm pleased to have them talk what about is going on in brazil. larry, what is happening? >> everything. as you indicated, the list of grievances is long and varied. but if you want to boil it down, simplify it, you can say it's really about respect. the country's been through an enormous period of growth. it has seen a lifting of 50 million people into the middle-class.

and now that they're there, you know, the government i think thought that people would be grateful. instead of what the people are saying is "this this is a middle-class country we want middle-class services, we want middle-class values which include honesty, probity in public affairs. show us the real thing. don't just talk about it." >> rose: was it bus fares that set it off? or was it simply a -- something waiting to happen? >> in a sense it was something waiting to happen. and the bus fares were, in fact, the detonator. it is kind of odd because i lived in brazil for 14 years. the bus fares go up every four, five, six months and sometimes larger than this particular one. it's the conjunction of these various factors with the bus fares, i think, that led to this really fascinating state of

affairs. >> rose: what would you at to that, ruchir. >> it's not the hundredth straw that breaks the camel's back, it's the 99 before. this country has been stuck in a middle income trap which is that you get a decade of great growth and the boom unwinds. what we're seeing now i think is an unwinding of that boom. so even before these demonstrations came to the fore the fact that brazil's economy was stalling, economic growth last year fell to just 1%, it's unlikely to do much bet they are year. at the same time inflation is creeping higher. here you have a country which invests very little yet has one of the most bloated governments in the world. government spending as a share of g.d.p. in brazil is one of the highest -- >> rose: spending it on what? >> exactly. spending on the wrong things. because infrastructure spending in brazil is among the lowest in the world at just 2% of g.d.p. and they spend a lot on the bloated welfare state system, on

public pension funds, retirement benefits, those kind of unproductive investment. brown brown is there any difference in lieu la and dill ma? >> well, i'd say lula was much more charismatic, but he had one big benefit. he was in power when massive commodity boom was taking place and he was able to ride the tail wind quite well. dill ma is encountering a global head wind and she has a tail wind. dill ma. >> rose: is this directed at one person or -- >> it's directed at all the parties and their leaders. >> rose: in egypt they're calling for their president's head. >> no. i think what's interesting is to see the polling that shows this

surge of the chief justice of the supreme court as a possible candidate in next year's elections. he's not even a candidate at all but he's the symbol -- well, he's not a political figure that dilma is or opposition leaders. he is a symbol of cleanliness and uprightness and therefor this there's been this surge which represents a rejection of both of the main parties. >> rose: paulo, these protests have taken place -- brazil is a country of soccer. think of the great soccer players that have come out of brazil and yet the cities, it has taken place in cities that will host the world cup next year. how do you factor that in? >> well, the fact is that it was very healthy debate about priorities in public spending. we could have done the exact same thing if we were more care it feel way we spent money.

brazil needs to have a debate about public spending priorities because growth model based on consumption has xused itself. brazil needs to improve the quality of its economic growth by investing more, investing for infrastructure, in education reform the tax system and i would like to goo go back to one thing that was said initially. i think the detonator of this was not bus fares, was abusive use of police force against demonstrators. this starts as a civil rights issue and there is a lot of civil rights manifestation in this. this is a mature democracy. this is not tahrir square. we had that 30 years ago in brazil. this is a country -- it's very interesting, i was just there and it's interesting because the mood is one of affirmation of democracy, we need, we want more

and better of everything. we were going to a place that we like which is more prosperity, more -- better shared prosperity and you know, there is a sense of anxiety because the economy has stalled, inflation is up and people are saying we are still going to get there so politicians do what's necessary to get us there. >> rose: let me see if i understand what you said. that, in fact, youed that protest against bus fares but it wasn't that that led us to where it is. it's what the government did in response to the proest? >> the state of sao paulo, the police in sao paulo, it's a huge city with enormous traffic jams and people were protesting and when the the police started using force, beating with rubber

bullets and stuff like that people that were against the students protest joined in. that led to this outpouring of grievances and people saying this is our country, you are not going to treat us that way and, by the way, we need -- we want the other things. better education, better health systems, this was a very interesting way of saying we need if we are a middle-class country if we are going there, we need global standards first world standards for everything and this is obviously what's going to be the challenge now. >> i agree with paolo about the role of the police in all this. because what you saw, what the entire country saw, was middle-class mostly white people being treated the way the residents of the favelas, the squatter slums on the outskirts

of brazilian cities who are mostly black or brown, the way they're treated everyday. and, you know, there was a sense of transgression involved. and, you know, it's liked aing fuel to the fire. >> rose: i mentioned the protests have spread. if you look at turkey, that had to do in part with government's response, if you looked at what's happened in egypt in terms of the same kind of thing. >> it's interesting to see in brazil, though, how the government is scrambling "what can we do to satisfy you?" >> rose: in other words they're trying to ms. -- instead of saying -- instead of muzzling them, saying what can we do for you? >> we need to look at the brazilian model again. what has worked last decade isn't working anymore. the fact of the matter is that the taxes people pay are among the highest in the world. taxes are highest for any developing country. >> on paper. those who pay taxes.

but there are so many people who don't pay taxes at all. >> taxes are very high in brazil >> rose: as bad as greece? >> i don't think it's as bad as greece but it's a problem. >> there are a few people paying lots of taxes and they're demanding to get quality public services and they're not getting them in return. but the fact of the matter is there that there's one common element that brazil does have that it has with a country such as egypt that is huge amount of government spending and very little investment. investment as a share of its economy is the lowest among any developing country and infrastructure spending is among the lowest. so people understand the right to demand that you better get better public services for the people who do pay taxes they carry the burden a lot. >> rose: paulo, how do you measure the size and power of these demonstrations in comparison to other demonstrations in brazilian history? >> well, one in rio it's estimated now there were

700,000 people. the most famous protest in brazil was before that were 1968 is the same as 100,000. those were massive. the widespread nature of -- there were rallies in brazil in 360 plus cities. in all-important states they were mostly peaceful. there were some events that obviously get more attention but the protests are organized as you probably know thanks to new media, social media, facebooks and things like that and they are amazingly well organized. political parties. it starts with the workers party of president lula and president dilma tried to join and were rejected. the organizers or the people in the streets said, oh, no, you don't represent us anymore, go back to brasilia, fix this

political system and then we'll talk. but it's a very healthy event. the only thing that i agree about the comparisons, the only thing when you talk about egypt, it's very different because brazil is a true democracy. it works and it is working now. actually, one of the signs that i really like about this is the one that i mentioned about, you know, we are improving the country, there is this attitude in brazil that i think very promising, very healthy. >> rose: are the reforms that doma is offering, are they appeasing the protest or not? >> well, i think that in terms of -- it's a bit early, but i think what happened is very interesting which is that her approval ratings have plummeted. it was 60%, 70%, the latest poll shows she's down to 30%. but here's an interesting bit. that's typically -- the approval ratings of lula and dilma after

that were the highest for any president in the history of brazil. that typically the approval rating for presidents in brazil tends to be about 350%, 40%, even for good ones. so these people experience an unusual amount of popularity and what you're seeing now is a more return to normalcy, which is a much more fragmentation of the policy -- >> rose: hasn't brazil always had a large number of political parties? >> yes, it does. but no presidents have been as popular as lula and now dilma. so their popularity is returning to a normal level. >> she's his creation. she never held elected public office until he anointed her as his successor. so >> so what's going to happen? how will this unmold? >> oh, i think more of the same. a little bit of a cooling off but there will be demonstrations popping up.

the issues have to be addressed and there will be continuous pressure to do so. we're aa year away from the world cup. there's going to be continued dissatisfaction with the way the money is spent as stadiums run behind schedule, in terms of construction as the cost overruns mount. as was the case with the pan american games 2007. people see that the stadiums are constructed in a shoddy fashion in some cases. all of this will help maintain the pressure. >> rose: any good news here? >> yes, i agree 100% with paulo that this is a democratic country and people have, i think for the most part engaged in this we restraint and good humor we're talking about the average citizen. >> it is said -- i'm interested in how brazil-- a country i've

visited and loved-- it is often said that in brazil first of all you have cultural differences and secondly you have a significant impact of social movements and third you have a country in which the poor make demands and the people in power respond. right or wrong? >> well, thank goodness. maybe not traditionally but really the chief characteristic of the last 19 years has been three presidents in a row-- not just lula and dilma but their presidents-- fernando cardozo trying to address this yawning historical gap, this lack of social justice between the rich and the poor and making enormous strides. i mean, i disagree with mr. sharr ma on many points about the utility of what's been done over the last 19 years because i don't think all that spending is wasteful. you're investing in human capital, you're lifting the poor into a middle-class existence,

you're making them consumers, you're educating people in the past couldn't even read. these the hallmarks of this 19-year period. >> brazil has made some progress but here are the bare facts. the economy's growth rate has stalled. it's not growing even at 1%. >> rose: that was last year. >> last year and this year. >> you know, the government has just lowered its forecast from 3.1% to 2.7%. let me put it this way: it will be a growth rate we here in the united states would be happy to have. >> rose: well, if we have two then it would be 2.5. >> but brazil is a much poorer country than the united states. so to compare the growth rate is misleading. it's one-fourth the level of brazil per capita. i suspect brazil's both rate will be% to 2% lower than u.s. >> rose: paulo, where what do

you want to say? >> i think you have compare brazil with brazil. this idea that 40 million people joined the consumer class in brazil, they liked it. they like keeping inflation flow brazil is a priority for the public. what we had a a phenomenon explosion of anxieties of protests and grievances that has completely reshaped the political landscape. we are going to have the world cup next year but more important we are going to have a presidential election, president dilma rousseff was seen as a favorite for that race, no longer true. there are candidates in the opposition that can take advantage. they're going to have to work very hard. what i cannot see is first there is not a political crisis in brazil. there is a crisis in terms of a moment of the political system improving and i don't see anxiety about that in brazil. i don't even see an economic

crisis the brazilian economy collapsing. if it is, challenge it now by reality to become a more productive, to sort of reorient itself as mr. sharma said and i think all parties would agree with that. there is excessive statism in brazil, excessive intervention. that is on the table up for debate. >> rose: who's most likely to succeed dilma if she loses. >> that's a completely open question because 2014 i think even now the betting markets would say she's a favorite but this is a very open contest because you have new and can its coming up. >> this is assuming she's going to be the worker's party candidate. i have a feeling that if it comes to a perception in the party that dilma will lose then you may very well see lula coming back in.

even though he says he -- >> rose: he's having a battle with cancer, isn't he? >> well, he's much better. he's been out there campaigning, he's a factor in all of this. >> rose: has he always intended to come back, do you think? >> no. >> rose: he did not? >> i think it's a bad idea for leaders to come back because the historical record of that is not too good. so once leaders are in power for eight years they should retire. >> rose: here's what i get so far. paulo, you seem to be bullish and optimistic about brazil. you seem to be -- >> i'm not bullish. >> rose: what are you? >> whoever bets against brazil in the last 30 years was wrong. brazil is a country that has found a path to develop in democracy. that's no easy feat. it's an important thing. i'm hopeful, what i see in brazil is people engage it in, changing loss and improving a

system so it becomes truly more representative of people's aspirations as to the political system with the political system responding with producing concrete answers to real problems. that is what i see. i don't see -- if you put the representatives of different parties together in a room and give them 15 minutes to set the priorities right i think they come out in ten minutes with those answers. the question is that the political system has not -- much like other countries that we know where the political system does not allow for the solutions to be implemented. this is is the challenge now but again, i'm hopeful. >> rose: sounds like a country i know! >> i agree with paulo paulo. brazil had years of chinese rates of growth. but that was under a dictatorship. and if you ask brazilians -- >> rose: china or brazil?

>> right. if you ask brazilians would you wrather have 11% growth under a dictatorship or 7.5%-- which hay had in tweb-- under a flourishing democracy they're going to opt for democracy. >> rose: so would the chinese. >> if they were asked. >> rose: but the point is are there circumstances that, in fact, have made that achievable in -- >> we need not to exaggerate this notion that brazil only produces commodities. it produces 3.5 million vehicles a year, exports chemicals. >> rose: and china is the leading market. >> on and off. the u.s. and china jockey back and forth. it depends on what month. >> brazilian trade as a share of its economy is the lowest in the world. >> rose: but what happened? >> it's a very closed economy. lots of tariffs, lots of protective variances and the prices are very high. >> but less than it used to be. >> rose: so we're talking about

the plight of brazil and what's happening to brazil, one of the -- we talked about the brick countries, b was for brazil. emerging markets, they were creating new demands and would make a runaway economy look very good. we're talking about that model yet over here there are protest that may have to do with the economy or not and do those protests because they are political in nature as well as economic have a life of their own and how will they play themselves out? will they in the end as has been suggested simply be apleased by a government. the not only appease, which is a loaded word. will the government say look, we realize we have to change or we will lose the support of the people and therefore we change. >> the political class, especially congress, which is seen as a nest of corruption and

has been for 20 years, you know, there's the whiff of desperation in all these offers that they're making. we'll give you this; we'll give you that. we won't pass the law that would limit the ability of the prosecutors to look into corruption. we'll have a plebiscite. we'll have a referendum. we'll have a constitutional convention. i think people in the streets and the people at home can smell that desperations. >> here's my question. is mexico the new brazil? >> no. i've lived in both countries. you know. >> everybody's going to mexico saying oh, my god, look at the growth rate here. this is exactly what they were saying about brazil. >> fernando enrique cardozo, the president i mentioned, had a great line about the tendency of the money to rush in and rush out. he said the situation was never as good as they thought it was then, it's not as bad now as they think it is. there's always this exaggeration. >> i think what happens in emerging markets is that the

leadership changes all the time. the czars of one decade are rarely the stars of a subsequent decade. so mexico went through a decade of stagnation and there was a sense in mexico that brazil is leaving them behind and they elected a new leader now who has launched a new economic reform cycle and that's what's leading to optimism about mexico. in brazil after a decade of success there was a lot of complacency which set in and that complacency has been shaken up by these riot bus i feel it's going to be a while before brazil can regain its mojo and it will be the lager of the continent for the coming decade. >> rose: paulo? you have the last word. >> brazil hasn't lost its sense of optimism. it's working very hard. i use the analogy of soccer we like so much. you saw what happened on sunday. when you have to right coaches, when you have the right government, when you allow the talent of the country to emerge, lots of new faces, new people, you know, and allow them to

play. and this is sort of what needs to happen in the country in government. we have to open up, we have to open up our economy to allow new players to come. dilma will be the last president of a generation that fought a dictatorship. all upcoming leaders are people that grew up politically in democracy. i think we are at a good place and going to a better place. >> rose: you mean political leaders that never spent time in prison? >> precisely. (laughter) >> rose: thank you all, thank you very much. the thank you, paulo, thank you very much. thank you for joining us. see you next time.