Today, we discuss the risks facing Brazil — according to the IMF. The recovery of the country’s electronics sector. And exclusive data on data protection-related quarrels.[sc name=”shortcode_daily”]
IMF: Brazil faces “exceptionally high” risks, but not all is bad
In a statement following an official visit to Brazil, the International Monetary Fund said the country[restricted] faces “exceptionally high and multifaceted” risk as it continues to struggle against the Covid-19 pandemic and its economic fallouts.
- The IMF warns about Brazil’s high debt levels, which are “projected to jump to around 100 percent of GDP in 2020 and remain high over the medium-term.” Back in May, we at The Brazilian Report had warned that high indebtment would prevent Brazil from having a rapid, V-shaped recovery.
- The commitment to fiscal responsibility and reforms that provide medium-term stability will be key to earning markets’ trust, says the IMF. In an attempt to create a welfare program that prevents a major social crisis in 2021 — when the coronavirus emergency salary is set to end — the administration has flirted with the idea of creating exceptions to the federal spending cap, which has scared off investors.
- Some of the risks, however, are outside of the country’s control. It remains uncertain how the pandemic will evolve — or when an effective and safe vaccine against the coronavirus will be available.
Yes, but … The IMF report also pointed out some positive aspects of Brazil’s current moment. Notably, the fund praised the emergency salary program — which “lifted the income of an estimated 23 million individuals (10 percent of the total population) above the extreme poverty line” — and employment retention schemes, which “helped protect formal jobs.”
- These measures allowed the economic crash to be less dramatic than expected — with current GDP growth projections at -5.8 percent. Earlier in the year, the forecast was at -9.1 percent. In 2021, the IMF projects a “partial recovery” of 2.8-percent growth.
- The record-low benchmark interest rate, combined with shortenings in average debt maturities “have allowed the government to reduce its borrowing costs to historically low levels (5 percent relative to a high of close to 15 percent in late 2016).”
- “Sizable international reserves, a resilient banking system, and a low share of public FX debt are important strengths. International reserves are about 150 percent of the IMF benchmark (ARA) metric and 250 percent of external debt, providing a comfortable cushion against external shocks,” writes the fund.
Reforms. With congressmen focusing on the municipal election, there is no time to pass structural reforms before the end of 2020. Still, Monday saw an important move towards some short-term political stability in Brasília: a truce between House Speaker Rodrigo Maia and Economy Minister Paulo Guedes. After a dinner meeting, they pledged their utmost support for the federal spending cap — while also promising to find welfare solutions that don’t blow up the deficit.
EXCLUSIVE: Financial sector gets most data protection complaints in Brazil
Just two weeks after Brazil’s General Data Protection Law (LGPD) came into effect, financial companies are already feeling the heat from disgruntled customers.
Consumer rights. Data from consumer protection institute Reclame Aqui — shared exclusively with The Brazilian Report — shows a total of 233 complaints related to data protection between September 18 and 30. Those with the most complaints are the usual suspects: banks and financial companies (20.6 percent), credit recovery agencies (10.3 percent), and telephony services (7.3 percent).
- Frequent calls, improper billings, and SMS spamming were the most-common issues reported.
Tradition. For years, banks and telecom companies have received the highest number of complaints in Brazil’s customer protection services. Companies’ self-regulation has done little to lower disgruntlement among customers.
Why it matters. Despite the data protection law being effective, the government has yet to set up a national watchdog. Without a proper regulator, courts will fill that role — which could lead to “unnecessary litigation,” according to data protection advocates.
- At least two companies have already been sued for mishandling consumer data, as we explained in our October 2 Tech Roundup.
Brazil’s electronics sector almost at pre-pandemic levels
The Brazilian electronics sector has netted 6,400 new jobs in August — the third-straight month of job expansion. With the recent rally, the sector now employs 293,100 people and has all but recovered its pre-pandemic workforce of 239,300 people.
Why it matters. According to Abinee, an entity that represents companies in the electronics sector, all economic indicators suggest that the worst is behind them.
- A survey carried out by Abinee shows that 82 percent of the sector’s firms improved their projections for the Brazilian economy in the short term and are more likely to invest and hire.
- Many sector players, however, believe this hiring “spree” will be halted if Congress does not strike down a presidential veto to keep payroll tax cuts for them.
No supply crisis. Earlier this year, the sector suffered with supply shortages as China nearly halted its economy to contain the coronavirus. The IT and electronics sector imports over USD 8.7 billion per year from the Asian giant, more than any other segment. Now, supply has normalized for nearly all companies.
- Despite the hiccup, 69 percent of companies which faced shortages have not launched plans to decentralize their supply chains, citing how complex it is to find new partners.
What else you need to know today
- Bolsonaro. Supreme Court Chief Justice Luiz Fux scheduled a trial for Thursday in which the court will decide whether President Jair Bolsonaro will be allowed to give written testimony as part of an investigation into his alleged illegal interference with the Federal Police. The case’s rapporteur, Justice Celso de Mello, wants the president to give testimony in person, “as any other suspect would.”
- Supreme Court. During a service at the Assembly of God neo-charismatic Evangelical church in São Paulo, President Jair Bolsonaro promised that he will nominate an Evangelical pastor to fill the next vacancy on the Supreme Court, which will open up next year. He asked those in attendance to “imagine Supreme Court sessions starting with prayer,” even though Brazil is, by law, a secular state. Mr. Bolsonaro picked a Catholic federal judge to a seat that will become vacant next week.
- Election. In that same event, the president broke with his vow of not endorsing mayoral candidates before the runoff stage, saying he is ready to support Congressman Celso Russomano in the race for São Paulo City Hall. Mr. Bolsonaro has a particular interest in that election, as he wants to weaken São Paulo Governor João Doria — who is eyeing his own presidential run in 2022. Currently polling first with 26 percent, Mr. Russomano hopes to avoid repeating his performance in his last two runs for mayor, when he started strong, but failed to qualify for the runoff stage on both occasions. Incumbent Bruno Covas — who is backed by Mr. Doria — is polling second at 21 percent.
- LGBTQ 1. For the first time in Brazilian history, transgender candidates will be allowed to use their assumed names when running for office. Until the 2018 race, only people who had undergone a full gender transition process were allowed to run with a new identification. For trans women, that is an important way to secure funding for their campaigns — as parties must have at least 30 percent of female candidates, who get 30 percent of their electoral funds.
- LGBTQ 2. Brazil’s National Justice Council also granted LGBTQ people the right to special conditions when serving prison sentences — potentially in separate wings from the rest of the inmate population, as a way to preserve their physical integrity. The decision should benefit trans women, who are usually incarcerated in male prisons with no separation whatsoever.[/restricted]