Good afternoon, everybody. My name is Carl Meacham, and I am the director here of the America's Program. I'm very happy that you were able to come and join us today. This is an event that's part of the CSIS America's Brazil initiative, which seeks to engage you here in Washington and around the world, the folks that watch us through the web on a series of issues to improve understanding on issues related to Brazil. As you know, today, we're launching our latest publication, Brazil's Economic Identity, Motivations, and Expectations. The report can be accessed in PDF form on our website, csis.org, forward slash americas, and we've also posted it on our Facebook page and on Twitter. I think it's a really great publication. I think that it does serve its purpose in so far as advancing understanding with regards to Brazil, Brazil's role in the global economy, and understanding its motivations, and we do some prediction in it as well. So I recommend it to you all, and I hope you read it. And on that note, I'm lucky to have with us today Dr. Canuto, Dr. Octaviano Canuto, who's the senior advisor on the BRICS economies in the development economics department of the World Bank. As a discussant of today's paper, we're really, really lucky to have him here. He previously served as the bank's vice president and head of the poverty reduction network, as well as the executive director of the bank's board. So I really appreciate you being here. I know you have a very busy schedule, and you're doing really important work. So he's ideal for this launching today. As many of you know, this week marks the sixth BRICS summit hosted by Brazil in the city of Fortaleza. It brings together the heads of government and finance minister of the five prominent developing nations, India, Brazil, China, Russia, and South Africa. The importance of the BRICS to the global economy is self-evident. The group is home to 43% of the world's population, 30% of its land mass, 21% of global GDP, and 15% of global trade. In the past two decades, their share of global GDP has grown by some 150%. Despite their relevance as a bloc, the group is often criticized for its apparent failure to yield any tangible results for its member states. Even its supporters recognize that the group's greatest strength is its opening regular channels of communication between the five countries. But this latest summit may have changed all of that. Just yesterday, the five leaders announced that they agreed to establish their new development bank to be headquartered in China, run by the BRICS, and worth $100 billion. And keep in mind that the World Bank, the defining development bank, has a total worth of $324 billion. At the summit, Russian President Putin also proposed that BRICS set up an energy association to increase the energy security of emerging nations. This is not yet a done deal, but it's another step the group has taken to demonstrate that its potential extends far beyond communication. So it's interesting to see what's happening here. You're going from intention to action and possibly result. So the BRICS have made a clear statement in this latest summit. They mean business, and they aren't to be taken likely. In that context, then, it seems that now is the perfect time to shed some light on Brazil's own economic policy. Before I turn it over to Dr. Canuto so that he can provide his take on the role of Brazil and the BRICS in the global economy, I want to provide you all with a broad sense of what Brazil's economic identity is and how that influences its relationship with some of its many trade partners, which is the focus of our paper. Perhaps the least understood of the BRICS countries, at least in economic terms, Brazil has made itself increasingly relevant to global affairs, particularly over the last decade. It is no longer an optional market for the world's major players, but its economic motivations are ill-understood still. Brazil's international economic relationships are guided by its desire to consolidate and build upon its continued economic development. Rather than pursuing extensive bilateral free trade agreements, Brazil instead operates within the constraints of its involvement in the Mercosur and the World Trade Organization. Brazil's priority is to establish flexible, non-binding partnerships while developing new strategic partnerships in technology and manufacturing, all in the interest of furthering the country's development agenda. And Brazil's development agenda and economic growth have been hard won. It wasn't until 1988 that Brazil began to open its economy to international competition, cutting tariffs, reducing redundancies, eliminating special import regimes, harmonizing taxation, and dialing back discrimination against foreign investors. In a lot of ways, the extent of the transformation in the early years of that shift cannot be overstated. Between 1988 and 1997, Brazilian exports grew by more than 57% and its exports quadrupled. The volume of Brazil's total trade by 2012 stood at 26.5% of GDP compared to just 15.2% two decades before. Because Brazil shares a border with 10 countries and has a diversified industrial base, historically, the country has maintained a strong presence in South America. But recently, Brazil's insertion in the global market is also growing, again, an integral part of its own development agenda. In 2012, Brazil totaled 134 export partners compared to only 29 in 1990. In 1990, Brazil exported 1,642 different products. By 2012, Brazil, that number had almost doubled to 3,022 products. Brazil's developing relationship with BRICS is also intriguing. Though the bloc has been the target of some criticism, its flexibility is very appealing to Brazil. The summit-style arrangement enables Brazil to identify those areas in which cooperation would best suit its own development agenda and move forward from there. As far as the US-Brazil relationship goes, there's very much potential if only the two countries would seize on it. Despite the recent political disagreements that might indicate that things are cooling off between the two countries, the US still has one of the most longstanding and robust trade relationships with Brazil. Between 2000 and 2011, Brazil bilateral trade between the two more than doubled. Unlike exports to China, which are concentrated in raw materials, Brazil's trade with the US is highly diversified. Intermediate goods account for almost 37% of Brazilian exports to the US. Raw materials for 29% of raw materials for 29%, capital goods for 20%, and consumer goods for 14%. The United States also has a high degree of trade complementarity with Brazil, which associated with the size of its economy gives the US an appeal that neither the BRICS nor the Mercasur can claim. But that relationship lacks a legally binding institutionalized framework that would shield bilateral relations from political hiccups. Bilateral tax treaty, for instance, would increase incentives for Brazilian business to establish a stronger presence in the US and vice versa. Ultimately, what I hope you take from this event in the publication is this. An understanding of Brazil's economic strategy requires an understanding of their economic identity and the purposes of their policies. Brazil sees its trade and economic partnerships as channels to promote development. And the country is actively pursuing increasing engagement in international affairs, which also manifests in its economic relationships. But it's doing this on its own terms. Brazil has a lot to offer and also a lot to gain from its partners. The country can also serve as a bridge between the global north and south, both economically and politically. But bilateral relationships require confidence. So it might be time for the US to try to mend the political damage recent troubles, such as the NSA revelations have caused. A gesture of goodwill from the US might go a long way to do that. Opening the doors for maximizing the benefits of that relationship is important to both countries. So with that, I think we're going to go to our speaker. The usual rules apply. We're on the record and recording audio and video for the webcast on our website. We are going to have a Q&A period. So if you have a question, please raise your hand. And a member of my staff will go to you. If you have a question, it's even better. I know a lot of people might have opinions that they'd like to share, but please keep them brief. I think that these events are usually the best when they're conversational. So before we actually open it up to the Q&A, I think I'm going to have a couple of questions with you and try to get your views and the essence of these arguments. So without further ado, I want to welcome you all here. And the floor is yours. Thank you. Thank you very much. Better? Yeah, better. Thanks indeed, Carl, for not only inviting me, but also because I had the chance to read the report in advance. And I really enjoyed reading it. I think it's a very good summary of key questions. And you propose a framework. And that's what I'm going to highlight here in my remarks. I'll try to be as brief as I can so as to maximize the time that we have for our Q&A. I'll make three comments. First, I will comment on the key bottom of the line of the paper in my view and to highlight how spot on it is. Then I will make a couple of reflections and issue a couple of opinions about the relationship of the bricks, Brazil and the bricks, especially on the outcome of the sixth summit that is concluding today. And then I will dedicate thirdly a couple of comments on using the basic thesis of the paper to make my advocated guess on how the relationship between foreign policy and development policy will go or tends to go in the case of Brazil next year onwards after the election. So that's my target. Well, first, on the key bottom line of the paper and why I think it is spot on. On the beginning of the text, the report says, the paper seeks to bring clarity to Brazil's role in the global economy, its identity, self-perception and what can be expected of it as we move forward. And then it concludes, Brazil's primary motivation is its own development agenda. Now, why I think this is quite an important conclusion. There are trade-offs between foreign policy and economic development goals. Usually, the attention is given to the synergies or the win-wins between these two realms of policies, particularly when diplomats talk. They always tend to highlight for other reasons the win-wins, the connections. But the fact is that there are trade-offs. And the conclusion of the paper is important because it highlights the fact that in the case of Brazil, the balance in this trade-off between foreign policy and economic development goals tends, ultimately, to tip toward economic development goals. Given the history of Brazil, given the social structure, the relationship between state and civil society, given the DNA of the Brazilian political system, you will never find there in Brazil a sort of full and permanent autonomy of foreign policy goals. If you think this is abstract, let me compare three BRICS countries, Brazil with two other ones. Think of Russia in the case of Ukraine. The options and the directions taken by Russian foreign policy have huge economic costs. Nonetheless, they are made, which express to some extent a primacy of foreign policy goals vis-a-vis, let's say, economic development goals. Take the example of China and all the issues related to the relationship in the neighborhood and so on, and the islands in the Pacific. This has potentially economic costs. And inside the Chinese system, one can gauge, even if we cannot observe directly, a, if not a, concentration, but a political dispute between the goals. You will not find anything similar in the case of Brazil. And that will give you a personal anecdote case, which I believe is very telling. When I was in the Brazilian government, I was deputy at the Minister of Finance for International Affairs. One of my attributions was to had the committee, the Interministerial Committee, responsible for approving the operations of support to Brazilian exports through the VNDS with funding from the Brazilian Treasury and an Interministerial Committee. And naturally, at the very beginning of Lula's government, there was a huge pining up of demands from abroad, from inside the country and from abroad. And of course, I was Minister of Finance. I was on the Treasury side. And once, in a meeting, I observed that if we were to attend all demands on using the support from the Treasury, there would be no budget space to provide, to give, to implement social policies. To which one interlocutor replied by saying, foreign policy is as much important if not more than social policy. And obviously, this interlocutor was wrong. And ultimately, this, but this is a good example of how sometimes, very often, foreign policy and economic development policies did not necessarily conflate into a single unified win-win situation. So that's why, particularly in the case of a country like Brazil, the balance between these two types of goals tends to tip more in favor of the economic development one than it is the case in other countries. So the bottom line of the paper is spot on. So if you wanna look at a natural corollary from the bottom line of Karl's report is look for domestic views in Brazil on the growth and development functionality of Brazil's foreign policy directions to gauge where the foreign policy tends to go, ultimately. Any, let's say, apparent full independence of the foreign policy is not sustainable in the long run. So there's gotta be a certain order. So look at how domestically the different components of the Brazilian political and social system see the feedback loop with the prevailing views of development to gauge to what extent that foreign policy is to be sustained. So that's my first point. Second, on Brazil and the Bricks. And then you will allow me the opportunity to be a little bit provocative tentatively. And I will, what I'm gonna say, the points that I'm gonna make, I'm gonna make them from the standpoint of a Brazilian who has worked in the Brazilian government and who has occupied for more than 10 years, it's no longer the case, but a senior positions in multilateral development institutions headquarter here in Washington. I worked, I was a vice president at the International Environment Bank. I've been a member of the board of executive director of the World Bank and until recently I was a vice president at the World Bank. And I will say following. First, I see in a symmetry with which people in Washington, G7 in fact, tends to establish benchmarks of performance for the Bricks grouping vis-a-vis, for instance, G7. There's so much talk about, wow, only five years later the guys are presenting deliverables. Wow, how these guys, these Bricks, they lack shared characteristics. The only thing they have in common is that they are big and middle income. They don't have any shared geography. They have no trade arrangements on the negotiation. So there is no unity or purpose. Well, why I'm saying that this is very asymmetric vis-a-vis the way one talks about G7. G7 is mostly a coordination device. Okay, everyone reads the outcomes in terms of communication, et cetera. And joint positions of these countries, as stated in the communication, matter dramatically, they're quite important, but ultimately, none of these countries abdicates of their autonomy when it comes to implementation of policy. When it comes to implementation of policies and taking decision. And I'll give a couple of examples. Apart from the coordination exercised, and it was very brief, on exchange rates in the 80s, you don't have many other examples in that regard. Think of the reaction to the 2008 collapse of the Lehman Brothers. Well, there were the meetings here in Washington at the time of the annual meetings of the IMF and the World Bank. There was such a, you guys may remember, those of you who were here at the time, all the frenzy and everyone was concerned with the abyss, and it was there, it was clear. But ultimately, the reactions came from each of the countries from there. Gordon Brown leaves Washington to announce his packages individually in England, not here in Washington. By the same token, what the Washington decides to do in the American case is not something that was agreed upon in the G7 meeting. And the coordination device functioned quite well because along the discussions here, it became clear to everyone the huge danger, the huge abyss that was looming, waiting for everyone. But it's a coordination device. And talk and the conversation goes as far as helping the countries individually to take their directions. Let me give another example. That's a provocative one. I have not seen any discussion within the G7 about, for instance, suspending the export ban established on shale gas despite the Ukrainian crisis. And that's probably because they are country, national objectives that go beyond this articulation. My point is that, let's be honest, if one is to compare deliverables, results, and so on of other groupings of countries, let's be realistic that I don't know of any case in which there was abdication and subordination of national priorities to some sort of grouping. So this issue of deliverables and so on, a semi-artistic should be used. I think this reflects a bit, which is understandable. Sometimes a mentality of us against them or fight for hegemony. Some discomfort with the idea of a multipolar world. It's, along my 10 years, I still, very often I hear people counterposing things like, it's either the US hegemony or them. No, the idea of multipolarity means that you have action taken place based from different poles. It is no subordination. Simply, we in the world will have to live with that. And this is not good because if you take one view such as this, us against them, or hope they want to supersede this or not, then the side of complementarity of cooperation is obliterated, is neglected. Which leads me to highlight exactly the complementary possibilities with the results of this summit. Look, there is a huge gap of long-run finance in the world. You read in the newspapers and the reports of banks and so on about the huge capital flows to developing countries since 2008. And it's true. You look at the figures, the global figures, after a dip in 2009, business returned apparently as usual. And at some moment, it became even too much. That's when the Montague came with that thing of the currency war and so on. And if you look at this here, you look at the recent reports of the IIF and things remain looking up. But when you break down the composition of these capital flows, you will note that the bulk of it is bonds, acquisition of bonds. The bulk of it is and not long-run bonds. You will see that the composition of this capital flows to developing countries, the part that corresponds to long-run lending and the presence of private agents that occupied an important role in the past is no longer there. The best example of that is the retrenchment of the European investment banks. And these banks were extremely important in the early stage of development finance in the past or at least the finance of infrastructure investments because no one has to be a specialist here on finance to understand that any complex project of investment like the ones in infrastructure, they go through phase. At the very beginning, the relationship between banks and the investors cannot be enormous length time. It has to be the banks, those financiers in the very beginning help to define the project in detail. They help solve technical details on the configuration of the project and so on. Only afterwards, particularly when the project it starts to be implemented and so on, is that bond holders come in. Namely, there is an initial stage in which the kind of finance is not the one that we see as comprising the bulk of finance, of external finance to developing countries nowadays. So, if apparently there is an abundance of capital flows of developing countries, in fact, there exists a huge scarcity and a retrenchment of real long-term basic development finance. Now, and that's why one can see attempting to fill this gap, the rising emergence of public development banks, sovereign wealth funds, resource-based finance, and new arrangements. It's a gap that is humongous and it's been tentatively filled and not entirely filled by new agents coming in. And frankly, the existing multilateral development institutions don't have the size and they have made a huge effort. My boss, the president of the World Bank, started implementing a program to make possible extending the financial capacity of the World Bank and that's a move in the right direction, but not enough. So, the deliverables coming out of the Fortaliza Summit, they not by chance include not only the new development bank, but also a protocol among development banks of these countries. There is also the currency reserve arrangement, but there's another thing that's an extension of existing bilateral arrangements to share liquidity like the Chiang Mai initiative in Asia, like the bilateral swap agreements that the Federal Reserve has with central banks of some emerging market countries like Brazil and so on. So, the novelty is in this increasing collaboration and the NDB. Now, gosh, I read the newspapers and of course I've been flooded. We all have been flooded with news since last week and since some time ago. I think they've all highlighted the competition as if the major issue was the new development bank proposed to supersede the World Bank. Losing sight, in fact, of the real problem, which is we need tens of NDBs. We need double World Banks because hopefully if we have these multilateral organized ways to provide this long-term finance or the void will be filled with experiments and other types of finance that may carry more perils than these new ones. So, look at the complementarity side. Look at the huge need of long-term finance and I mean the basic finance. That one that includes on the side of the creditors, someone who helps the client to find better their investment projects and so on. That's what we need. We need more development finance. Also, the bilateral synergies. Look, the technique is referring to Argentina and I'm not gonna talk about everything that led to the current situation and the spat with the hold-out creditors. I'm not addressing this, but as of now. And you're not gonna talk about the world cup either. Yes, yeah. Only that the Brazil still has five cups. That's the only thing remaining, but it's better, train better and observe what's happening in the rest of the world to be less arrogant. Otherwise, we'll be superseded very soon. Touché. But the thing is Argentina. It's gonna take some time. Even in Argentina has been taking the steps toward normalizing its relationship with the financial. Oh, it restart negotiations with the Club of Barriers. Well, after so much hustle, managed to renegotiate the substantial bulk of its debt and so on. And then, well, now there's the hold-out creditors, which will be, I strongly believe, solved in the near future. But in any case, it's gonna take some time before Argentina gets full normalcy with respect to its relationship with financial markets. Now, and they have their Vaca Muerta. It's a terrible name, that cow, but that's the name of the reserve of shale gas. And Argentina needs and can benefit a lot of untapping the resource and investing. So will Argentina have to wait until finally, it normalizes its conditions with financial markets to start thinking of making that investment? No, if they can find other vehicles. So it's natural. And it's good for everyone. Brazil, railroads. Fortnightari there has been this awakening about the potential unexploited of using railroads in Brazil. And Brazil is getting late in the game and so on. Do I see many investors in the US interested in making huge investments in railroads in Brazil? Well, the Chinese have, because they have, among other things, the synergies that they expect to obtain with respect to the production of network resource-based products and so on. So what's wrong if these guys enact their bilateral relationships? To the extent that, what else, if we take the case of the US for instance, there has been a declared selectivity in the hierarchy of priorities regarding its foreign policy. So my point is accept the multiplicity, accept the complexity of the world, and then adjust to it, rather than simply see things and match things and attribute characteristics to things only on a binary, it's us or it's them. And I think, getting back to the paper, I like on page seven, when Karl says, the flexible bricks format is the best case scenario for Brazilian engagement in the world. The summit style arrangement and its inherent malleability are what make the forum so appealing to Brazil. Through the summits, Brazil is empowered to identify those areas in which cooperation would best suit its own development agenda, promoting peer-to-peer exchanges in those areas beneficial to Brazilian interests. They have opened regular channels of communication with potential partners and peers in every region of the world. And in his report, he has the sessions on the several channels, in the case of Brazil, highlighting how much scope there is for synergy in all of them, including between Brazil and the US. So my second point is, seems to be so much G7 centered in the appraisal of what's happening in these other poles of growth in the world. My third point, and I'm speaking longer than what I intended, is I will try to derive from Karl's line some considerations about some speculations about the future of the evolution of foreign policy and its relation to development goals in Brazil. Well, one corollary of the paper's main thesis is the following, as the global scenario evolves and it's evolving fast. And as Brazil itself evolves, this leads to occasional, then this will lead to a reappraisal and adjustments in Brazil's foreign policy in the future. And I would highlight the following. The global setting is changing, really. If, and I'm establishing if, significant to the lateral trade negotiations like TTIP and TPP are signed, that changed dramatically the scenario. If they are approved in a significant manner with important clause. Also, see, China and Mercosur, this is evolving. Look at the penetration of Chinese products in Mercosur. Look at the penetration of Chinese products in Brazil. Look at the, and by the way, this description, you will find a good description of this more intense relationship, trade relationship between Mercosur countries in China in the paper. Two pages dedicated to that. This puts into question and will oblige Brazil to review the framework with which it has established its relationship with the global economy. Brazil itself, now looking at it inside. As you all know, Brazil is living through a soft spot, a soft patch, as far as growth is concerned in the last few years. Basically, after the growth of 7%, above 7% in 2010, growth rates have been too low since 2011. And this year is not gonna be much better. In this, we flex to a large extent. We have written a lot about this. I wrote recently a piece with my colleague Phillip Schlacken, who's here. And the point is that clearly a successful and meaningful, particularly in social terms, growth period that the country lived through in the new millennium is gone. Don't measure the success of the Brazilian growth performance in the 2000s, simply looking at GDP figures. Look at the bottom of the pyramid. This is a very well-toed story. I will not spend time here on it, but the rates of growth of income at the bottom of the income pyramid in Brazil were at Chinese levels. But that was then, at moment when terms of trade, when the price of commodities were rising, and any country rich in natural resource becomes richer by gravity simply, without doing anything simply because when it's natural resource have their price going up. But also, given the bold policies of raising minimum wages and also the more cost-effective social policies implemented in Brazil, that led to a process of growth, a significant growth, particularly if one looks at the bottom of the pyramid. That yielded meaningful fruits, but that had a limit because at the certain moment, even if the rate of investment to GDP was coming up after the lows of 2003, 2002, 2003, it didn't rise enough to sustain and to keep the momentum of the economy and the consumption-led growth exhausted. And the country has been on a slow pace toward attributing a higher wage to investments, which is more easily sad than done. And that's when, and I will not give you any statement on whether this movement has been too slow or adequate. See, so we will not gauge what will be my positioning in the coming elections. But the point is something that has been done, some others need to be done. And there is an increase in perception, that's what I have, that's what I gauge when every time I go there and when I talk to people there. That things will have to change with respect, for instance, to the trade relationship in Brazil. The popularity of trade protection is going down. Private sector interpreters are adapting themselves. If you look at the VAT, the value added tax applied on manufacturing activities in the state of São Paulo, you will note strong statistical correlation between the VAT revenue on the one side and on the other, the penetration of Chinese imports. And that's not by chance. The Brazilian, the manufacturing industry is already adapting itself, despite the protection, to a world in which the existing framework of protection will not exist. And you can see increasingly voices questioning the protective way by which the manufacturing industry was protected. I'm not saying that the unfolding of this will be any sort of trading lateral movement, but I can tell you that things are changing down there. And also, to go back to my first comment about the trade-offs between foreign policy and economic development, BNDS. BNDS funding, differently from other countries like China or Russia and so on, has to come from Treasury. And no matter who wins the election, it's my view, a review of the public spending and some budget adjustment will have to take place. And there will be not much scope for doing foreign policy through the BNDS. It will have to adjust to a new reality. So things are changing there. Things are evolving. And following to finalize, to conclude, following exactly the lead proposed, the way proposed in the paper prepared by Carl, it's the economy's stupid. Look at the economy there to gauge whether it will lead to reappraisals of foreign policy goals because that's the nature of the relationship between, that's the identity, the economic identity of Brazil as well captured in the report. Thank you. One last thing. If one had an idea of how the changing global environment is bringing implications to Brazil, I would recommend a report that has been released this week and is available through the World Bank website prepared by a team led by Phillips Lackens, which is exactly implications of a change in China for Brazil, a new window of opportunity. That we may as well some other dates because here if you like. Thank you. So you get two reports from one here. That's great. So look, you were extensive and comprehensive and I think everybody was interested and engaged in what you had to say. I don't want to take a lot of time in asking a lot of questions. I think some people are going to want to ask their own questions, but there's one thing that I do sort of want to ask you before I open it up to questions from the audience. You said that it was good to have more development banks and I think few people would disagree that there's a need to have more availability of funding and technical assistance to help those in need. But I want to go and drill a little bit deeper. What are the effects of an active new development bank for the World Bank? And you touched a little bit on this with BNDS and how does it work with Brazil and BNDS and its involvement in a new development bank? And the last question that I'd ask you would be policy coordination. If the countries get together and this actually means policy coordination for development, that's a whole different sort of game and I would ask you if this actually would also mean new areas such as energy. I know President Putin was talking about some of these things within the BRICS but also in some of his visits to other countries. So those are my questions and then we'll open it up to folks. Very good ones. The first one, I don't see these institutions disputing the same market. They will have necessarily different features, different capacities. The World Bank has an enormous, important accumulated knowledge and experience with development. And whereas by its own nature, it is not, and why it may be crucified for that, but everything has a trade-off. It's safeguards which are important because they are a benchmark for everyone. They make disbursements, for instance, slower than what these more direct institutions can provide. I know that, I work at the IDB and the IDB is quite close in that regard to the World Bank but I also watched the uprise of Corporacionandina de Fomento, which now calls itself Development Bank of Latin America because it came out from the Indian countries and incorporated Brazil and Argentina and so on. These institutions, they have different features. So depending on the attitude of shareholders and their management, they can cooperate. Take the World Bank, IFC. In my view, among the most impactful projects imported by the IFC, the private sector or the World Bank, are the ones in which the IFC works as a catalyzer to bring in syndicated lending from private banks. In many other projects, the World Bank cooperates. Think of the involvement of the World Bank, which was minimum as compared to the size of the venture with the Panama Canal. It was also huge and the World Bank worked with the IDB. So my point is the institutions can act complementarily. For instance, it's there at the memorandum, I think I read it in the memorandum, that the currency reserve arrangement, for instance, its use will require the program with the IMF. So it's stated there, which is an acknowledgement that these new institutions don't have to try to supersede and duplicate what has been built in the existing ones. So I stick to the view that there is more scope for complementarity rather than competition. And as far as policy coordination, what do you see? Yeah, I see more, at least as of now, more of an intense network of bilateral relationships. Like an example that I gave on Baca Muerta in Argentina, more than anything else. And in energy, well, Baca Muerta is energy. Whenever there is something, there is a book for the bank in the two countries. Let me open it up to questions while there's a lot. Okay, so what we're going to do is we're going to take two and we're going to let you answer it, and then we'll take two more after that. So why don't we start here up front? Ian? There's also here. So we're going to go two and then two. Thanks. Jennifer Chen with Schringer Media Group. Yes, so how do you see the setup, the new development going to affect the World Bank, especially is there any policy change, possible policy change in World Bank in the future? Thank you. There's one. We're just going to take two and then one. And the lady here. Hi, I'm Jennifer Lee with Hong Kong Phoenix TV, also a question about the BRICS banks. I wonder, do you think what's the significance of the BRICS bank, given there's a discussion that the size of the economy, the five countries size economy or their motivation, even the region are very different so that it will pose challenge on the policy coordination or the resource allocation in the future. And the second one is also, it's a follow-up question. Do you think how the World Bank can help the BRICS banks so that they can complement each other? Thank you. Yeah. Great. This gives me the chance to repeat the caveat. I've been here on a personal basis. I'm not representing the World Bank. I'm just a clerk. Right? But I'm no longer even vice president. You're just a worker. Yeah, just a worker, a senior advisor. And institutional positions have to reflect management and the board and so on. But as far as I'm concerned, from my opinion, there is no reason why a new policy has to be enacted. What certainly has been already expressed by my boss is the World Bank preparedness to cooperate. He has said this through several vehicles. And I think, and in my view, the feeling in the institution management is this, ready to rock and roll. Dimensions. People have focused on the size of the initial capital, which I think it is a wrong focus. How come? Would these countries have to build, how long did it take in the case of the World Bank to reach the proportion that it has? It took long. The initial capital subscription can obviously be adjusted upwards as it goes. I think having the size that was defined is like stepping a stone at a time. Doesn't that sound familiar? Crossing the river stone by stone. So it's the bucket for an initial stage. And again, it is not indebted to other initiatives like the Asian infrastructure bank, like the expansion of the development bank of Latin America that I was mentioning, like the expansion of the activities of the national development banks of these countries. And your question wasn't the help. How could the World Bank particularly, I would say making available the experience the knowledge acquired. And the terms of this cooperation is something to be defined as it goes. Two folks over here? He's a member of the board of sector directors of the World Bank. I represent Portugal at the World Bank. I'm an elegant friend of Ottaviano. So I was a brilliant intervention as always, but a couple of comments and questions that were inspired by what you said. I find the idea of relationship between economic development and foreign policy very interesting, especially the comparison between what happened in Brazil and the examples you gave between comparing Brazil with other BRICs and the tension that may exist. And that led me to think a little step further that of course I agree with you with the complementarity and the need for all development finance needed and that the BRICs bank will complement the World Bank. But as you know, the devil is in the details. So sometimes when you're going to discuss investments, environmental safeguards, you know, respect for some indigenous people's rights, you know, sometimes tensions arise between cultural values, foreign policy and economic development. And so although, you know, as the BRICs bank will certainly get into action, we may see those difficulties. We know that the Bretton Woods Institution don't engage in political issues or in human rights, but we all know that in several areas, environmental safeguards are the typical ones. There are ingrained values that are not necessarily seen the same way everywhere in the world. So I just wanted to throw this. And the second one is just a little bit of a provocation. I noticed a little sleep of language when you said that the world at some point in the global arena is evolving fast and Brazil is evolving. And I just said on the second part, the fast wasn't really there. So I follow your diagnosis and I'm always, I've been agreeing with you. So how do you think that emerging consensus of moral openness, the bureaucratization, you know, inserting Brazil in the global chain, you know, all fast will that consensus impose itself independent of political results. In the Brazilian society. And what is your evaluation of that? And you know, since we are in Washington and using Raymond Manuel, are we going to need a crisis or since a crisis is an opportunity to be wasted? Just leaving that in here. Thank you. Hi, I'm Dr. Dona Wells. I'm an expert in the Russian language internet. Can you discuss Brazil's natural gas industry, the state of the infrastructure for moving it relative to other Latin American countries? Thank you. Could you repeat that? Could you discuss Brazil's natural gas industry, the state of the infrastructure for moving it, especially relative to other Latin American countries? Thank you. Great. We'll do those two. I think we're going to do two more and I think there's a tweeted question. And you know, we've gone a little bit over, but I appreciate you being willing to go over. Okay. That's a question. Yeah, we can go. Okay. So I think we're going to take two more after that and the tweeted question and I think we're going to wrap up. Fantastic. Is that okay? Yes, perfect. Yeah. The first question made by Dr. Mota Pinto. Two. I agree with you. Cultural values. The assessment of safety guards, on the one hand, they may differ in practice. True. One has to consider. And what can be done about it? Live with it. Because there is no way the old guard would be able to ebouze. On the positive side, the experience as we have all learned with experience, including countries that were skeptical about those safeguards, how in the long run it pays off to follow these safeguards? Think of environmental safeguards. Even, let's say, countries that were not paying due in addition to now they're filling the price of it. So I'm optimistic that the safeguards will prevail, the good ones, as long as the experience shows, and the experience has shown how they pay off to all of them. So I would be less afraid in that regard because of this propensity. Environment is the typical case. Will Brazil need a crisis to really speed up the process of transformation? Not necessarily in why is that. Because to some extent Brazil is already, if not in a crisis, but it has been undergoing a long process of low growth. And that has started to bother and to be taken into account that something needs to be done. Secondly, to be honest and to be correct, the government, for instance, the incumbent government has already been evolving and taking steps on that direction. Some of the Brazilians say it should have gone faster. Whereas some others will say, well, it took the time that it was necessary. But think of how the framework for the participation of the private sector in infrastructure evolved dramatically in the last few years until we found the government as looking for a model of concessions in which the government abdicated from capping the rates of return and abdicated from some of the measures of before. So the government evolved. Think of the law of supports. Gosh, we could have got there a long time ago. But the reality is that interest fought. But we got there. So I think there is already an underlying transformation. This year is not, as it happens everywhere, election years in a democracy are not years in which one may expect dramatic change because of the political embeddedness of the process. But independently of who wins the election, there will be an agenda of transformation that will impose itself to the Brazilian government in the future. So hopefully no full crisis will be necessary. And in infrastructure, the Brazilians have lagged behind dramatically even vis-a-vis other countries. Developing countries' emerging markets by far but even in the region. I would say that infrastructure investments is the easiest pick if the country wants to raise the growth rate in the following few years because there is the drag on Brazilian growth coming from the absence of infrastructure investment is so heavy that the lousy state of the Brazilian infrastructure already takes a huge toll, a heavy toll on the productivity of the private sector. Yes, natural gas and all the others, natural resource in general. I'll talk about Petra Rass. And Petra Rass I use, I can point it out as an example of the evolution that I was referring to in my response to Nuno Mota Pinto. Namely, the overhype after the discovery of the pre-salt oil layers and so on led to some hubris and to over-burdening of Petra Rass. Suddenly Petra Rass had to simultaneously collaborate with the fight against inflation. It had to, through suffering a loss by having the price of gasoline, having a lid on the domestic price and so on. Petra Rass also was obliged to help through the local content policy which implied led to a toll on Petra Rass and Petra Rass also had to overextend it financially in order to participate in all pre-salt oil ventures. That stretched Petra Rass. Little by little this has been partially reversed. The local content policy has been slackened. Everyone knows that the gasoline price will have to, you know, it's one of the administered price that will be adjusted last year, next year. Namely, the tapping of natural resource, including natural gas, will depend a lot on whether the agents that can lead this process are recapitalized and can perform this job. Okay, I think we're going to go to the last group of questions and there's lots of hands up. So what I will do is we will just go through the questions and you're going to pick which ones you want to answer. Okay, so if we had a microphone up here, the three questions that are up here and one question up here, I don't think we'll have time for the tweeted question. So why don't we start here? Thank you. I actually wanted to follow up on the energy question and thinking of where the Brazilian economy stands today and the levers or opportunities that Brazil will have in order to revamp its economy. I think that, you know, you just mentioned the pre-salt. So I was wondering what is your view on potential changes regarding the pre-salt legislation, particularly to increase the speediness or the level of development in the pre-salt, which would be a great lever to revamp the Brazilian economy and particularly given the current changes that we're seeing in other parts of the region, particularly with Mexico. So I was wondering on your views on that. Cito, go ahead. Well, then we can go with you. Go for it. So my question was going to be about... Can you identify yourself? Right, so I'm Hamza Faroukh. I'm a student from Williams College doing econ policy. My question was, given that many of these BRICS countries, and I'm talking particularly about China and India, per se, you see a lot of development, but at the same time, there are vast expanses of poverty as well. And a lot of people have not really benefited from the trickle-down wealth that was imagined that would come with this development. So do you think with the construction, with the setup of this new development bank or with these newer conferences happening, is there going to be a shift in the focus so that not only are macro indicators indicative of the macro development, but also incorporate levels of poverty in that development? Okay, good question. Cito? Cito and myself, Brazil. I just have a quick question about the interactions of economic, domestic economic policies and foreign policy. And I agree with Dr. Canute that this can be observed in other countries as well. Don't you think that these interactions could be seen in Brazil internally? I mean, Brazil is a very big country. It's complex. For example, the importance of policies of social inclusion or you have the case of industrial policies, for example. Sometimes in the paper, perhaps you could see a stronger link between industrial policies and exports, but knowing Brazil, industrial policies can be used to other goals. You have the importance of domestic investment, for example. It is also mentioned industrial policies in the context of high-tech first, but industrial policies in Brazil can be used, for example, to support the small and medium enterprise. Thank you. And the last question in the back. Good afternoon. I'm Elias Lyon with the NAFTA and Trade Division of the MSc of Mexico. So after examining the concept of economic identity, do you say that Brazil is allowed to gain and offer both economically and socially? So how do you think Brazil can ultimately achieve its needs and confidence vis-à-vis the BRICS Group? Thank you. Okay. All great questions. Yes, yes, yes. Of course, we could go on here on the energy side. There's so much, and that's one of the strongholds of this institution. And I'm walking here in the main field. I think we're going to have to invite you back. Right. But certainly the following, the scenario has changed since 2008, obviously. You forgot to mention the U.S. gas, right, and the impact on the world price. So much of the hype associated with the pre-salt oil and gas has diminished because there are other producers. Mexico is doing the right thing. It's untapping its potential and so on. But still, regardless of the political risk associated with Ukraine and the Middle East and Iraq and so on, I don't know of any forecaster to be saying that the price of oil and gas will slump. The shale gas revolution has been very good for the U.S. It is not something that it's easily exportable. I can't concede of Europe having this urban space being overwhelmed with just to produce gas or the shale gas. So it's not, it's very good for America, but I don't foresee a slump of price of oil and gas. There has been a re-evaluation. So the investments in pre-salt oil will adjust accordingly. Now, one important thing of, and I forgot to mention it, it was a collateral damage of the anti-inflation task attributed to the Petrobras. With the artificial lowering of the domestic price of gasoline, the biofuel industry suffered a blow. So it's not only the issue of the price of gasoline, there are other issues as well. The adaptation of the industry to the entry of foreign investors interested in short-term profit maximization, that led to bad policies of renewal of sugarcane fields and so on. There is also the fact that the learning curve of the automation of the production process is still, but basically the blow on the sugarcane industry, on the biofuel industry has been a collateral damage from the, look at that because it's not gonna save, let's say, but the share of bioenergy bioelectricity can certainly raise, rise two or three percentage points in the next five years. That's what I hear from the pundits. So certainly the prospects are being revaluated given the change. On China and India, agree with you. I don't think it is, well, in picky times, people only focus to inequality. But when it comes to China, it's true that inequality has increased as it always happens in the growth patterns like the Chinese one, but on the other hand, the number of people lifting above poverty levels has been humongous. So China is a success as far as poverty reduction is concerned. That's not the same case in India. It was aptly pointed out. For that to happen in India, some structural reforms will have to take place. I will tell you my favorite one, the one where I would put my bets. It's in the labor market regulation. It's inconceivable that a country with a potential like India has, not only on the top of the scale of capacities in some areas like telecommunications and service and science and so on. While China is losing competitiveness in labor-intensive segments of the manufacturing industry, it's inconceivable that the transfer of these production processes has gone to countries like Vietnam, Cambodia, some spots in sub-Saharan Africa and so on. But as India, we could use this as an opportunity to make the utter newest transition what other developing countries have done, which is exactly to generate jobs, employment for a huge part of the population. After that, the labor market cannot be as it is today, over-regulated and so on. So my point, I agree with you, but it's up to the countries to take the decisions and to implement the process of structural reforms that the country needs, which leads me to the answer to your question. No, not the new development bank. You know, I will tell you something I regret saying it, but I can't hold it. I'm getting too old. You guys who never work that... those of you, particularly young people, who never work in the wood-lap institution, you guys overestimate the power of these institutions. You really believe that the NDB or the World Bank will rule the roost which is what to do in Calva night. Well, small countries, particularly in the past, when they needed the IMF money, then they would have to do what the IMF told them to do. But this is no longer the case. So don't put your hopes on... When I was younger, all the science fiction movies that I watched, they all had, when a Martian landed here on Earth, take us to your leader. And then the Martian was taken to the UN. Right? I was raised with this idea. That's where the world had to... But it's only in movies. Industrial policy... With the tag of industrial policy, you'll see it all. You'll see sheer protection. You'll see interests and so on. You'll see rent seeking and so on. My point is that it's a mixture. It may be wishful thinking. But is that all these industrial policies, they're costly. They end up implying in a tall bid by the public at large, either through taxes or through paying more for goods and service. And this means that the bill got very high. So inevitably, there will have to be some selectivity. No matter who wins the election, I strongly believe that there will be a screening out of the current state of things that are there with the tag of industrial policy to check out which ones really have performed well, which ones really are justifiable either for poverty reduction reasons or for helping with economic progress and which are not. Yeah. I think you've covered everything. So thank you. On Mexico? Yeah. Yeah. Because I follow very closely. I love Mexico. I have many Mexican friends and I worked with Mexico and the IDB and in Mexico is doing the right thing, which is incomplete. Mexico has done a fantastic job on the macro side, has done a fantastic job on the human capital side is performing reasonably well. It has done a good job as well, obviously, in trade integration. But it has not eliminated the bias that is embedded in the incentive system against the extension of the formal side. The challenge for Mexico is to increase the degree of formalization. So as to... Mexico today has exhibits two paces of growth, the one of the formal modern side and the one of the traditional side. Mexico has to make sure that the formal side grows and absorbs the informal one. If Mexico manages to do that, it can raise up income and reach top levels. So we have a lot of attention to social policies. Excellent. So thanks for supporting the report and for giving your opinions on all these things. Thank you so much. A real pleasure.


Thank you, Naseema, for the introduction and giving the opportunity to talk about this topic. So as Naseema said, I am Sudeshwara Guru, I work for TURN. So today I'm talking about the making drone data open for scientific research. So this is basically the work in progress, you know, what we are exploring and what are the thought process behind that. So just a quick introduction when we say drone. So what is drone? It's nothing but it's aerial vehicle, you know, it may be controlled by the on-ground remote control or onboard computer. So drone, you know, it has got different names, you know, commonly used as UAVs or the RPAS. I liked RPAS partly because, you know, it's a gender-neutral name rather than unmanned. And so predominantly, you know, if it's rotary wings, it's predominantly called as a drone. And then even the big wings, fixed wings, you know, aerial vehicles are also in this category. Some are pretty big, which is as big as the aircraft, and then which over this sky and then gather data. And the rotary wings, the smaller one, you know, it runs in a control environment where you find scale resolution and then runs predominantly in the battery and then get the data. So one of the main thing about the drone is, you know, it become, you know, quite cheap to run it. So that's why it's become quite popular in the various applications. So some of the applications is, you know, drone, technology was started in the surveillance and then, you know, currently, you know, it's a fair bit of the applications in the agriculture and widely in the environmental space as well. I would call it as a scientific research. And then it's not used in the disaster recovery, especially in it's very difficult to send a human being. So the drones are quite popularly used. So in turn, basically, we use drone in the remote sensing capability aspects of the thing.  So a lot of data will be derived from the measurement that is done in the drone.  So a lot of data is measured. So drone is a really good technology which runs, you know, underneath the cloud, below the cloud and take, you know, good final resolution pictures and then do the, and the researchers can do the analysis. So in this context, you know, the common sensors used in drone, so in drone, so basically drone is a platform and then the sensors are, you know, attached to the drone. So in our case, you know, it's a fairly popular things used are the multispectral, hyperspectral, LiDAR, video and the thermal infrared sensors. So from a data management perspective, you know, it's basically the, it's a fair bit of a challenge partly because it's dynamic both space and by space and time. Just keep on moving at the both the spatial and temporal scale. And then the, because of its ability to capture finer scale information, you know, it's a massive amount of data is collected in that one. And the, we should have a capability to basically ingest that and then the process that data and make that data available to the users. And the other part is, you know, there's a fair bit of the commercial companies who work in the drone industry and even at the research aspects of the thing, you know, there's always a partnership with the commercial entity where they will run the drone and then, you know, collect data and give it to the researchers, especially there are consultants, especially in the mining community in the mining area, etcetera. The other thing you should be aware that, you know, you need to, you need a permit to do this from a CASA to operate this. And then you should be an operator. You should have a license to the operate this as well. And with all this, you know, the identifying a data owner is important. I will come to that later why it is important.  So these are the four aspects of the principle, you know, we just see how the drone data will fit in side of the thing. So if we take the first one, you know, data is adequately described, searchable and should have an identifier.  And then the raw data files from the measurement it tooks, and then the files, and then the log from the flight. And once it's the process, then the, all the derived products as well. And we should also provide the auxiliary files, like a QA QC files from the processing. So these are the different files, you know, that is, that is a part of a data publication aspect.  So all this data should be made available. And then the, especially for the provenance aspects of the thing, these, all these data should be made discoverable. And then that should be accessible from a user perspective.  So basically, you know, there should be a standard to describe this data. So we, so, you know, we use ISO standards. We're not sure whether the, you know, so for example, ISO 19115 completed describe everything or maybe we may have to, we may have to provide a customized profile of that ISO standard. And then if you make it available as part of a catalog then, you know, it's a discoverable and then once we put it in a catalog, it would have an identifier and then that's, that looks fine. And then the next aspect is the, you know, the, one of the principles is the data retrieval using open protocol. So if you look at the instruments or the sensors that are used in Trone, you know, it provides by default, provides a, as a raw data, you know, from a different file format. And then even at the publication level, if you look at the, you know, the open standard, you know, in the open data policy, they say that, you know, all the file format should be of the open format. So the file format, you know, generally in the, you know, depending on the, which of the instruments, you know, it may be a GIF, GeoTIV, KML, SHIP file, or LAS especially in a, in a point cloud aspect, aspect of the thing. So with, with such a kind of a veracity of the, you know, file format, then the tools must be available as well to translate or manipulate even the analyze the data.  If it's too confusing, so for example, if somebody don't know, don't have a clue about, you know, how to access the LAS file, then probably it's worthwhile to provide a program so that, you know, it's embedded, so that, you know, that is embedded in the, embedded in the R program so that they can start writing the program. So that is the one of the thing, sort of thing. And the next one probably is the, the, the data use vocabulary and qualified reference to other metadata. And then, so we use a, you know, a fair bit of a domain specific vocabulary is like a GCMD is quite popular, especially keyword search first. And then, you know, because the, because the drone and then you have a technology as, has come so fast, probably there may be, you know, it may be invent some of the terminology, you know, incorporate into the vocabulary so that it's, it's accurately represented with, as I was explaining the, the different data types and, you know, when each of the data type, each of the, you know, files should be referenced and then it should be made as a link and then hopefully as a persistent identifier and then all those should be a query as well. And then the, the final, you know, principle is basically data, metadata in domain relevant community standards with clear data usage license. So we use a, you know, ISO standard, you know, there are 115 or 139 in the domain, which may fit well as I said before that, you know, maybe we may have to create a profile to accurately represent the, describe the data. And a lot of the standard is fine. If you want to fit the human actionable, you know, discovery, query and access, that means that the human go and click couple of things, probably we may have to look at the, you know, machine actionable, machine actions, accessible, you know, actionable, discovery and exploration sort of thing, where, you know, it's a machine to machine query when, then that may be a issue, partly because of the, so much of the interrelationship with the files and et cetera. It's also depending on the, you know, the, what kind of file. If we are looking at the source file, then definitely that will be a issue. And then the, talk about the data usage, you know, so what it says is, you know, you should provide as an open license thing. Even though, you know, we may say, we provide the all of our data in the creative commons by attribution, the identifying the owner is a key, partly because, you know, even at the creative common attribution, the copyright subsist with the data, and then you need to identify who owns the copyright. As a, for example, if you are, if you are a, if you are a researcher, who is using a consultant to collect the data, so technically, if you look at that aspect, the person who collected data is the owner of that data, unless you have a contractual obligation arrangement, make sure that the ownership is transferable to the researcher. So why this is important is that, you know, for the attribution aspects of the thing, so that if somebody uses your data, they need to know who is attributed as a researcher, you want the attribution to go to you, not the person who just collected the data. And, and the thing is, if somebody's owner, they can do whatever they want with the data. The IP is with the owner, so what you want is the, as a, as a principal investigator, you owns the IP about the data. Still there are a fair bit of a challenge. One of the things, you know, we face is the, you know, it's just the amount of data said that is collected. We still struggle to, you know, make that data, the ingest the data into one place and then the process everything and then the delivery, delivery of that data. So we, we think that the cloud platform, you know, the managed platform to do everything would be a useful thing. And there are few initiative going on as well at the community level who are looking exactly the similar problems. So one is the OGC domain working group and the other one is the RDA interest. So with all the aspect, you know, we want, we don't want to change a complete, you know, data management practice of the term. So we retrospect, retrofit everything to the term data management practice. So a lot of the, whatever the data, you know, we intend to, you know, make the metadata and ISO standards and then catalog in the geo network.  And then currently we are storing, you know, data in the FTP server and then make that link available. And we are still in the process of, you know, processing a lot of data. But having said that the, all the raw files are there. So if somebody is really interested to use that data, they can process the data as well.   So we collect, you know, we have done a campaign across, you know, 11 sites across Australia. So we are working on that. They called it as the field data. And then we are working on the portal where, you know, all those 11 sites data is accessible as well, especially at the LiDAR level. So if you look at the drone, you know, it is quite popular in the research community, you know, especially in the environmental science, there is a massive uptake of the drone technology, partly because of the ease of use, and then the final resolution of the data it provides. And moving ahead, partly, you know, probably it is worthwhile to build an IOT platform to manage the research drone data. It is not at the institution level, at the overall research level. So this probably enabled the interconnection of devices. Basically, based on the type of sensor you use and what is the application you are running, and that will enable to build a common data platform so that each of the individual does not, you know, repeat the same grappling with the same problem. And if you look at the commercial word, you know, this is already happening. There are a lot of commercial players working in this space. It may be, you know, off the shelf as well. And then there are even a lot of the open source technology already started appearing, especially the management aspects of the thing. So what we want in this one is a researcher has got a platform, they put the sensors, they collect the data, and we need a platform where that data is ingested somewhere, the processing happened, and then the product, derived product is basically available for the third party researcher to analyze that data. So at the individual level, you know, people are working, but they make the everything as a pipeline and then provide that as a service to the complete community. We are still working on that one. It's still a work in progress. Thanks for the opportunity to talk about this topic.


Welcome back to HPE Discover 2021, the virtual edition. My name is Dave Vellante, and you're watching theCUBE's continuous coverage of HPE's big customer event. Patrick Morehead is here, more insights and strategies. The number one analyst in the research analyst business, Patrick, always a pleasure, great to see you. Dave, great to see you too. And I know you're up there fighting for that number one spot too. It's great to see you and it's great to see you in the meetings that we're in, but it's even more fun to be here on theCUBE and I love to be on theCUBE. And every once in a while, you'll even call me a friend of theCUBE. Oh, unquestionably, my friend. And so, and I can't wait, second half. I mean, you're traveling right now. We're headed to Barcelona to Mobile World Congress later on this month. So, we're going to see each other face to face this year, 100%. So, looking forward to that. So, you know, let's get into it. You know, before we get into HPE, let's talk a little bit about what you're seeing in the market.  It's maybe taken a while, but we're seeing as the service models emerge. I think it's resonating with customers. Clearly not everything's moving to the cloud. There's this hybrid model emerging. Multi-cloud is real, despite what some cloud players want to say.  What are you seeing in the marketplace? Yeah, Dave, it's as exciting as ever in, just to put in perspective, I mean, the public cloud has been around for about 10 years and still only 20%, around 20% of the data and 20% of the applications are there. Now, albeit very important ones, and I'm certainly not a public cloud denier, I never have been, but there are some missing pieces that need to come together. And, you know, even five years ago, we were debating Dave, the hybrid cloud. And I feel like when Amazon brought out Outposts, the conversation was over, right? And now what you have is cloud native folks building out hybrid and on-prem capabilities, you know, the classic on-prem folks building out a hybrid and as a service capabilities. And I really think it boils down to two things. I mean, it's wanting to have more flexibility. And, you know, I hate to use it because it sounds like a marketing word, but agility, the ability to spin up things and spin down things in a very quick way. And, you know, what they've learned, the veterans also know, hey, let's do this in a way that doesn't lock us in too much into a certain vendor.  Well, you have to lock yourself into something. It just depends on what you want to lock yourself into, but super exciting. And what HPE, you know, when they threw their ax in the sea with GreenLake, I think it was four years ago, I think really started to stir the pot.  This thing, ours is the only industry, Patrick, where legacy is a pejorative. But so, but the point I want to make is I feel like there's been a lot of sort of fear from the veteran players, but I've looked at it differently. I wonder what your take is. I think I calculated that the CapEx spending by the big four public clouds, I'm including Alibaba last year, was $100 billion. That's like a gift to the world. Here we're going to spend $100 billion like the internet. Here you go, build. And so, and I feel like companies like HPE are finally saying, yeah, we're going to build, we're going to build a layer and we're going to hide the complexity and we're going to add value on top. You know, what do you think about that? Yeah, so I think it's, now I wish, I wish the on-prem folks like HPE you would have done it 10 years ago, but I don't think anybody expected the cloud to be as big as it's become over the last 10 years. I think we saw companies like Salesforce with SaaS taking off, but I think it is the right direction because there are advantages to having workloads on-prem. And if you add an as-a-service capability on top of that, and let's say you even do a colo or a managed service, it's pretty close to being similar to the public cloud with the exception that you can't necessarily swipe a credit card for a bespoke workload if you're a developer. And it is a little harder to scale out, but that is the next step in the equation, Dave, which is having these folks make capital expenditures make them in a colo facility and then put a layer to swipe a credit card and you literally have the public cloud. Yeah, so that's a great point and that's where it's headed, isn't it? So let's talk about the horses on the track. HPE, as you mentioned, I didn't realize it was four years ago. I thought it was, wow, that's amazing. So when everybody's followed suit, you see Dell has announced, Cisco has announced, Lenovo has announced, I think IBM as well. So everybody's sort of following suit there. The reality is, is it's taken some time to get this stuff standardized. What are you seeing from HPE? They've made some additional announcements at Discover. What's your take on all this? Yeah, so HPE was definitely in the rabbit here and they were first in the market. It was good to see first off, some of their announcements on how it's going. They talked about $4.8 billion in TCV that's been booked, 1200 customers, over 900 partners, and 95% retention. And I think that's important. Anybody who's in the lead, and I remember what AWS used to do with the slide with the amount of customers that would just get bigger and bigger and bigger. And that's a good way to show momentum. I like the retention part two, which is 95%. And I think that says a lot. Probably the more important announcements that they made is they talked about the GA of some of their solutions on GreenLake and whether it was SAP, HANA, ML Ops, HPC with Ansys, and VDI with Citrix and NVIDIA. But they also brought more of what I would call a vertical layer. And I'm sure you've seen the verticalization of all of these cloud and as a service workloads, but what they're doing with Epic with EMR and USIS with financial payments and Splunk and Intel with data and risk analysis. And finally, a full stack for Telco 5G, one of the biggest secrets, and I covered this about five years ago, is HPE actually has a full stack that Western European carriers use, and they're now extending that to 5G. So more horizontal and more vertical. That was one of the big swipes that I saw. There was a second though, but maybe we can talk about these. Yeah, okay, and so the other piece of that, of course, is standardization, right? There was a lot of customization leading up to this, and everybody's sort of, everybody always had some kind of financial game they can play and say, hey, there's as a service model, but this is definitely more of a standardized, scalable move that HPE is making with what they call lighthouse, right? Yeah, that's exactly right. And I've talked to some Green Lake customers and they obviously gave it kudos or they wouldn't have, HPE wouldn't have served them up and they wouldn't have been buying it, but they did say it took a while, took some paperwork to get it going. It's not 100% a push button, that's partially because HPE allows you to customize the hardware. You want a one-off network adapter, HPE says yes, right? You want to integrate a different type of storage, they said yes, but with Green Lake lighthouse, it's more of a, what you see is what you get, which by the way is very much like the public cloud, right? You go to a public cloud product sheet or order sheet, you're picking from a list and you really don't know everything that's underneath the covers aside from, let's say the speed of the network, the type of the storage and the amount of the storage. You do get to pick between let's say an Intel processor, Graviton 2 or an AMD processor. You get to pick your own GPU, but that's pretty much it. And HPE lighthouse, sorry, Green Lake lighthouse is bringing, I think a simplification to Green Lake that it needs to truly scale beyond, let's say the lighthouse customers that HPE has. Well done. So, and I hear your point about, we're 10 years in, we're plus, and to me, this is like a mandate. I mean, it's okay, good job guys, about time, but if I had to sort of look at the big player, like can we have an oligopoly here in this business? It's HPE Cisco, you got Dell, you got Lenovo, you got IBM, they're all doing this. And they all have a different, little difference ways to skin a cat. And to your point about simplicity, it seems like HPE is all in, and Tony's like, okay, here's where we're going. He announced that a while ago. So, and they seem to have done a good job with Wall Street and they got a simple model. Dell's obviously bigger portfolio, much more complicated. IBM is even more complicated than that. I don't know so much about Lenovo. And then Cisco, of course, has acquired a ton of SaaS companies. And it's sort of, they've got a lot of bespoke products that they're trying to put together. So they've got, but they do have SaaS models. So each of them is coming at it from a different perspective. How do you think, and so, and to the other point, we got Lighthouse, which is sort of phase one, get product market fit. Phase two now is scale, codify, standardize, and then phase three is the moat. You know, build your unique advantage that protects your business. What do you see as HPE's sort of unique value proposition and moat that they can build longer term? That's a great, great question. And let me rattle off kind of what I'm seeing at some of these players here. So Cisco, ironically, has sales the most software of any of those players that you mentioned with the exception of IBM. And they have more. Yeah, CICS, DB2, right by the way. Yeah, and they're the number two security player to Microsoft's number one. So, and I think their valuation on the street indicate, you know, shows that. I feel like, you know, Dell Tech is a very broad play, right? Because not only do they have server storage, networking, and security, but they also have PCs and devices. So it's a scale end-to-end play with a focus on VMware solutions, not exclusively, of course. And then you've got Lenovo, who is just getting into the as-a-service game and are, gosh, they're doing great in hyperscale. They've got scale, they're vertically integrated. I don't know if too many people talk about that, but Lenovo does a lot of their own manufacturing and they actually manufacture NetApp storage solutions as well. So yeah, each of these folks brings a different game to the table. I think with HPE, what you're bringing to the table is nimble. When HPE and HPE split, the number one thing that I said was that HPE is gonna have to be so much faster that it offsets the scale that Dell technology has. And the HPE's credit, although I don't think we're getting credit for this in the stock market yet, and I know you and I are both industry folks, not financial folks, but I think their biggest thing is speed and the ability to move faster. And that is what I've seen. As it relates to the moat, which is a unique competitive advantage, quite frankly, I'm still looking for that Dave in what that is. And I think in this industry, it's nearly impossible. And I would posit that any, even the cloud folks, if you say, is there something that AWS can do that Azure can't, if it puts its mind to it or GCP, I don't think so. I think it's more of a kind of land and expand. And I think for HPE, when it comes to high performance computing, and I'm not just talking about government installations, I'm talking about product development, drug development. I think that is a landing place where HPE already does pretty well, can come in and expand its footprint. You know, that's really interesting observations. So, and I would agree with you, it's kind of like a, this is a copycat industry. It's like the West Coast offense, like the NFL. Oh, yeah. And so the moat comes from, you know, brand execution. And your other point about when HPE and HPE split, that was a game changer, because all of a sudden you saw companies like Veeam, it was had a long-term relationship with HPE or HPE, but then they came out of the woodworks and started to explode. And so it really opened up opportunities. So it really is around execution, isn't it? But go ahead, please. Yeah, Dave, if I had to pick something that I think HPE needs to always be ahead in as a service. And listen, I both know, announcements don't mean delivery, but there is correlation between if you start four years ahead of somebody, that other company is gonna have to put just, I mean, they're gonna have to turn that ship and many of its competitors are really big ships to be able to get there.  Right, because it, I think it is in the lead and as a service holistically, doesn't mean they're gonna be there forever, but they have to stay ahead. They have to add more horizontal solutions. They have to add more vertical solutions. And I believe that at some point, it does need to invest in some CapEx at somebody like an Equinex, put a credit card swiper on top of that. And Dave, you have the public cloud. You don't have all the availability zones, but you have a public cloud. Yeah, that's going to happen. I think you're right on. So we see this notion of cloud expanding. It's no longer just a remote set of services somewhere out in the cloud. Like you said, outpost was the sort of signal, okay, we're coming on-prem. Clearly the on-prem guys are connecting to the cloud. Multi-cloud exists, we know this. And then there's the edge. But that brings me to that sort of vision. Everybody's laying out of this seamless integration, hiding the complexity, log into my cloud, and then life will be good. But the edge is different, right? It's not just a retail store or a race track. I mean, there's the far edge. There's the Tesla car. There's going to be compute everywhere. And that sort of ties into the data, the data flows, the real-time inferencing at the edge, AI, new semiconductor models. You came out of the semiconductor industry, you know what inside and out. Arm is exploding, it's dominating in the edge with Apple and Amazon Alexa and things like that. That's really where the action is. So this is a really interesting cocktail and soup that we have going on. How do you see it? Dave, if the data, most data, I think one thing most everybody agrees on is that most of the data will be created on the edge, whether that's a moving edge, a car, a smartphone, or what I call an edge data center without tile flooring, like that server that's bolted to the wall of McDonald's when you drive through, you can see it, versus the Walmart, every Walmart has a raised tile floor. It's the edge, too. Economically and performance-wise, it doesn't make any sense to send all that data to the mother ships, and whether that's on-prem data center or the giant public cloud. More efficient way is to do the compute at the closest way possible. But what it does, it does bring up challenges. The first challenge is security. If I wanted to, I could walk in, and I could take that server off the McDonald's or the Shell gas station wall. So I can't do that in a big data center. So security, physical security is a challenge. The second is you don't have the people to go in there and fix stuff that are qualified. If you have a networking problem that goes wrong in McDonald's, there's nobody there that can help you fix that. So this notion of autonomy and management and not keeping hypercritical data sitting out there, and it becomes a security issue, becomes a management issue. But let me talk about the benefits, though. The benefits are lower latency. You want answers more quickly. When that car is driving down the road and it has a 5G V2X communication, cameras can't see around corners, but that car communicating ahead that ran into the stop sign can, through V2X, talk to the car behind it and say, hey, something is going on there. You can't go to the big data center in the sky to make that happen. That is to be in near real time, and that compute has to happen on the edge. So I think this is a tremendous opportunity. And ironically, the classic on-prem guys, they own this space aside from smartphones, of course. But if you look at compute on a light pole, companies like Intel have built complete architectures to do that, putting compute into 5G base stations. Heck, there was an announcement this week of Google Cloud and its gaming solution putting compute in a carrier edge to give lower latency to deliver a better experience. Yeah, so of course, there is no one edge, it's highly fragmented, but I'm interested in your thoughts on kind of whose stack actually can play at the edge. And I've been sort of poking at HPE about this. And the one thing that comes back consistently is Aruba. We can take Aruba not only to the near edge, but to the far edge. And that, do you see that as a competitive advantage? Oh gosh, yes. I mean, I would say the best acquisition that HPE has made in 10 years has been Aruba. I mean, it's fantastic. And they also managed it in the right way. I mean, it was part of HPE, but it was managed a lot more loosely than a company that might get sucked into the board. And I think that paid off tremendously. They're giving Cisco on the edge an absolute run for their money. They're first with new technologies, but it's about the solution. What I love about what Aruba looks at is it's looking at entertainment solutions inside of a stadium, a information solution inside of an airport as opposed to just pushing the technology forward. And then when you integrate compute with Aruba, I think that's where the real magic happens. Most of the data on a per bit basis is actually video data. And a lot of it's for security, for surveillance, and quite frankly, people taking videos off their smartphones and downloading video. I just interviewed the Chief Network Officer of T-Mobile and their number one bit of data is video, video upload and video download. But that's where the magic happens when you put that connectivity and the compute together and you can manage it in an orderly and secure fashion. Well, I have you, we have a ton of time here, but I gotta pick your brain about Intel, the future of Intel. I know you've been following it quite closely. You always have. Intel's fighting a forefront war. They're battling AMD.  They're taking on TSMC now and foundry. And I'll add China for the lunar threat there. So what's your prognosis for Intel? I liked Bob, the previous CEO. And I think he was doing a lot of the right things. But I really think that customers and investors and even their ecosystem wanted somebody leading the company with a high degree of technical aptitude. And Pat had a great job at VMware. I mean, he had a great run there. And I think it is a very positive move. I've never seen the energy at Intel, probably in the last 10 years that I've seen today. I actually got a chance to talk with Pat. I visited Pat last month and talked to him about pretty much everything and where he wanted to take the company, the way he looked at technology, what was important, what's not important. But I think first off, in the world of semiconductors, there are no quick fixes, OK? Intel has probably another two years before we see what the results are. And I think 2023 for them is going to be a huge year. But even with all this competition, though, Dave, they still have close to 85% market share in servers and revenue share for client computing around 90%. And they've built out their networking business. They've built out a storage business with Optane. They have the leading ADAS provider with Mobileye. And listen, I was one of Intel's biggest, I was one of Intel's biggest, I was Intel's biggest customer when I was a compact. I was their biggest competitor at AMB. So I'm not, you know, obviously not overly pushing or they've just got to wait and see. They're doing the right things. They have the right strategy. They need to execute. One of the most important things that Intel did is extend their alliance with TSMC. So in 2023, we're going to see Intel compute units, these tiles they integrate into the larger chips called SOCs, be manufactured by TSMC. Not exclusively, but we could see that. So literally, we could have AMD 3-nanometer on TSMC CPU blocks competing with Intel chips with TSMC 3-nanometer CPU blocks. And it's on. With regard to NVIDIA, I mean NVIDIA is one of these companies that just keeps going, charging, charging hard. And I'm actually meeting with Jensen Wong this week and ARM CEO Simon Seger to talk about this opportunity. And that's a company that keeps on moving. Interestingly enough, NVIDIA, if the ARM deal does go through, will be the largest chip licensee, CPU licensee, and have the largest CPU footprint on the planet. So here we have AMD, who's CPU and GPU, and buying an FPGA company called Xilinx. You have Intel, CPUs, GPUs, machine learning accelerators, and FPGAs. And then you've got ARM slash NVIDIA with everything as well. We have three massive ecosystems. They're going to be colliding here. And I think it's going to be great for competition, Dave. Competition is great. When there's not competition in CPUs and GPUs, we know what happens, right? The beat just does not go on, and we start to stagnate. And I do feel like the industry on CPUs started to stagnate when Intel had no competition. So bring it on. This is going to be great for enterprises and then customers too. And then, oh, by the way, you have the custom chip providers. AWS has created no less than 15 custom semiconductors. It started with networking and Nitro and building out an edge that surrounded the general compute. And then it moved to Inferentia for inference. Trainium is about to come out for training. Graviton and Graviton 2 for general purpose CPU. And then you've got Apple. So innovation is huge. And I love to always make fun of the softwares eating the world. I always say, yeah, but it has to run on something. And so I think the combination of semiconductors, software, and cloud is just really a magical combination. Real quick. Handicap the NVIDIA ARM acquisition. What are the odds that they'll be successful? They say it's on track. You got it at 2 to 1, 3 to 1, 10 to 1? I say 75% yes, 25% no. China has been the odd man out for the last three years. They scuttled the Qualcomm NXP deal. You just don't know what China is going to do. I think the EU with some conditions is going to let this fly. I think the US is absolutely going to let this fly. And even though the IP will still stay over in the UK, I think the US wants to see this happen. Japan and Korea, I think, will allow this. China is the odd man out. In a word, the future of HPE is blank. As a service. Patrick Morehead, always a pleasure, my friend. Great to see you. Thanks so much for coming back in theCUBE. Yeah, thanks for having me on. I appreciate that. All right, everybody, stay tuned for more great coverage from HPE Discover 21. This is Dave Vellante for theCUBE, the leader in enterprise tech coverage. We'll be right back.


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