This week, we cover a major change at the Supreme Court. Brazil’s most valuable brands. And Jair Bolsonaro re-election prospects.[sc name=”shortcode_weekly”]
A big change at Brazil’s Supreme Court
On Thursday, the Brazilian Supreme Court will have a new chief justice in [restricted]Luiz Fux, who takes over the reins from Justice Dias Toffoli. Brasília correspondent Débora Álvares says Justice Fux is set to take on a less politicized approach to the position than his predecessor, who tried to act as a buffer between the federal government and Congress.
How it works. In Brazil, unlike the U.S., the Chief Justice position is rotative. The leader of the court serves a two-year term and steps down, being replaced by the Associate Justice who has served most time in the court without being Chief Justice.
Why it matters. The Chief Justice has agenda-setting powers, and can decide whether or not to bring to trial cases with major political repercussions. In recent months, the court has clashed with President Jair Bolsonaro on numerous occasions.
- In May, a frustrated Mr. Bolsonaro told aides he was willing to send troops to shut down the court.
Who is Luiz Fux? The first Jewish justice in the history of the Supreme Court, he was nominated by former President Dilma Rousseff and inaugurated in March 2011, after a stint as a prosecutor and serving a decade in the Superior Court of Justice (Brazil’s second-highest judicial body). Despite his reputation as a “good political interlocutor,” as sources describe him, Justice Fux won’t follow his predecessor in bending over backwards to try to nurture a good relationship with Brazil’s volatile president.
- “Under Mr. Fux, the Supreme Court should have a strictly formal relationship with the Executive branch,” a fellow justice told The Brazilian Report.
- Justice Fux is one of the main defenders of Operation Car Wash in the Supreme Court, and is only expected to bring cases related to the anti-corruption probe “when the climate is favorable,” sources told Débora Álvares. Infamously, Car Wash investigators declared in a leaked text conversation, revealed by The Intercept, that “in Fux we trust.”
Controversy. Justice Fux is a discrete judge and, unlike some of his peers, doesn’t use his votes on cases to score points against other justices. Still, his résumé includes some controversies. None was bigger than a 2012 report claiming that he hinted to government officials he would reward a Supreme Court nomination with verdicts in favor of the administration.
- The Workers’ Party government was facing what was at the time the biggest trial in Brazilian political history — when 40 politicians and bankers were on trial for operating a vote-for-cash scheme in Congress known as the “Mensalão Scandal.” Many of Mr. Fux’s votes, however, were against the people he had allegedly promised to protect.
Legacy. Justice Dias Toffoli ends his two-year term as the chief justice with a legacy widely considered as “extremely negative” even by his peers. One of them told Brasília correspondent Débora Álvares that he put the Supreme Court “in an unacceptable position of subservience” to the government — he went as far as describing the 1964 military coup as a “movement” just so he wouldn’t ruffle any feathers within the strongly pro-dictatorship administration.
- Perhaps his lowest moment came on May 7, 2020, when the president marched from the presidential palace to the Supreme Court building, flanked by Economy Minister Paulo Guedes and several business owners. The group asked the court to revert a previous ruling that social isolation measures were under state jurisdiction. At the time, governors were attempting to enforce quarantines, while Mr. Bolsonaro was agitating people to go about their business as usual.
- While justices generally agree that the president placed the chief justice in a terrible position, two of them told The Brazilian Report Mr. Toffoli “failed to assert the court’s authority” by hosting the group and giving it voice. Justice Fux is not expected to appease the government if faced with a similar situation.
Fake news probe. From a broader perspective, the most controversial part of Mr. Toffoli’s legacy might be a probe investigating the production and spread of false information online for political purposes. Many say the Supreme Court is overstepping its bounds and acting as judge, juror, and executioner — the court launched the investigation and is now conducting the probe, as well as being responsible for issuing the verdicts.
- When the probe was launched, in March 2019, many from the left and right called it a move straight out of the dictatorial playbook. But as investigators began zeroing in on pro-Bolsonaro supporters, outrage waned within the left.
Brazil’s most valuable brands
Kantar and communications group WPP presented their most-recent Brandz Brasil ranking of the country’s top 25 most valuable companies. Despite the coronavirus crisis, these major Brazilian companies had a combined 4-percent growth in brand value.
Biggest growth. Beer and banks continue to dominate the rankings, but the retail sector also saw significant gains, with a 72-percent growth in brand value from last year. That put Magazine Luiza in the 4th position (the company alone increased its brand value by 124 percent). Supermarket chains Pão de Açúcar, Extra, and Assaí also saw triple-digit growth over the period: 187, 219 and 192 percent, respectively.
Main takeaways. “Brands which invested in increasing clients’ digital experience earlier managed to have a better performance,” says Silvia Quintanilha, a vice president at Kantar.
Investors are paying close attention to Brazil’s cellulose sector. With state-owned bank BNDES wanting to sell its stake in sector giant Suzano, packaging producer Irani has become the new belle of the ball. Brokerage firm XP Investmentos gives Irani a “buy” recommendation, with a BRL 8.50 target price. Analyst Yuri Pereira says the company has good exposure for the food industry — which is still growing during the pandemic — and expects a surge in demand for packages.
Pandemic doesn’t dent Bolsonaro’s electoral stock
A recent survey by renowned pollster Ibope shows that 33 percent of Brazilians hold President Jair Bolsonaro responsible for the coronavirus crisis in Brazil. The country has recorded the third-highest number of infections (4.1 million) and second-highest death count (127,000). However, a recent poll conducted by Ideia Big Data still suggests that Mr. Bolsonaro would win re-election against every other candidate, including former President Luiz Inácio Lula da Silva — who all but launched himself as a presidential candidate, putting himself “at the service of the country” in a speech delivered last night, despite being ineligible for office due to his conviction for passive corruption and money laundering.
One piece of data helps explain why: 65 percent of voters believe the president is the guy responsible for the coronavirus emergency salary, which has kept tens of millions from falling below the poverty line and even reduced extreme poverty rates in Brazil.
It remains far too early to predict the 2022 race, but the data shows just how important cash-transfer policies are in Brazil. Especially in a moment like this unprecedented crisis.
- Recovery. Two pieces of data will help assess how the Brazilian economy is recovering from the Q2 2020 9.7-percent GDP drop. On Thursday, the official inflation rate for August will be published — and analysts expect the IPCA index at 0.35 percent. However, increases in food prices could complicate matters. Also on Thursday we will have data on retail sales in July, which could influence share prices of Brazil’s sector giants (Magazine Luiza, Via Varejo, B2W).
- Telecommunications. A shareholders’ meeting will vote today on Oi Telecom’s proposal to alter its court-supervised recovery plan. The proposal includes selling mobile networks, towers, data centers, and part of the company’s optic fiber network — to raise BRL 22 billion for debt repayments and investments. While major bondholders are in favor of the move, Oi’s main creditors — Brazil’s top banks — are attempting to block it.
- Justice. Lawmakers will demand House Speaker Rodrigo Maia to reopen the works of a special committee to analyze the constitutional amendment proposal to legislate for the possibility of allowing defendants to go to jail after a single failed appeal. Congress has begun discussing that last year, shortly after a 6-5 Supreme Court majority decided that defendants can only be arrested after all appeals are exhausted. One of the results of the Supreme Court decision was the release of former president Lula da Silva.
- Education. Starting today, schools in the state of São Paulo are allowed to provide tutoring services and sporting activities to students. The authorization applies to cities in an advanced reopening state, with flattening or descendant infection curves. A recent survey shows that 72 percent of Brazilians believe classes should only be resumed after a coronavirus vaccine is available.
In case you missed it
- Budget 2021. Last week, the federal government presented its budget proposal for 2021. Among the highlights are the cuts to the Health Ministry’s funding to BRL 136.7 billion (USD 24.9 billion) — even less than the BRL 138.9 billion expected before Covid-19 arrived in Brazil. Meanwhile, the budget for investments in 2021 is slated to be BRL 28.6 billion — 56 percent more than what was expected for 2020.
- Optimism 1. According to the Brazilian Institute of Geography and Statistics (IBGE), 37 percent of Brazil’s 3 million-plus companies still felt the negative effects of the pandemic by the end of July. Still, a major improvement has been recorded from June, when 62 percent of companies reported feeling the negative effects of the crisis.
- Optimism 2. A survey by pollster PoderData shows that 45 percent of Brazilians expect the country’s general outlook to improve within the next six months — with only 20 percent saying things will get worse. Confidence levels seem to be linked to support for President Jair Bolsonaro, as the demographics that make up his base (males, elderly citizens, people from the South of Brazil) register the highest rates of optimism.
- Window protests. Pot-banging protests — which took place on a nightly basis during the beginning of the pandemic, but then faded away — were once again heard in at least six state capitals as President Jair Bolsonaro addressed the nation in a televised speech. He talked about being committed to democracy, while praising the 1964 coup that inaugurated a 21-year military dictatorship in Brazil. Rather predictably, at no point did the president mention Covid-19.
- Coronavirus. One pioneer study headed by the Federal University of Rio de Janeiro documented the case of a woman who remained infected with the virus for 152 days — the longest infection period recorded in the world. Identified as “Patient #3,” she presented mild symptoms for only three weeks, but the virus stayed in her body for five months, being able to multiply and contaminate others. The study could help researchers understand how asymptomatic patients spread of Covid-19.
- Vaccination. For the first time in 20 years, Brazil hasn’t met immunization goals for any of the vaccines recommended for infants of up to one year old. Vaccination rates have been declining over the past few years, but the pandemic has worsened the trend. Experts warn about the risks of outbreaks of diseases which had been thought eradicated — such as polio or measles.[/restricted]