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Brazil Daily

Lifting the lid on lobbying in Brazil

Today, we show you how lobbying works in Brazil. How banks’ woes in the stock market raise red flags about the economy. And coronavirus deaths at lowest since May.

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How lobbying operates in Brazil

The Brazilian Association of Institutional and Government Relations (Abrig) has published[restricted] a document offering a glimpse into the country’s lobbying sector. The activity is yet to be regulated in Brazil — and remains highly stigmatized in a nation so accustomed to corruption scandals.

  • Perhaps that’s why two-thirds of companies who use such services — whether by having its own lobbying sector or hiring outside counsel — are foreign.

Company profile. The top sectors for which lobbying professionals work are not surprising: health and pharma, food and beverages, as well as agro and tech. These are sectors with constantly shifting regulations — and firms want to have a grasp on the changes to come and influence them when possible. 

Startups. Between 2019 and 2020, however, the sector saw a big surge in startups who use such services — this type of company represented 6 percent of the lobbying sector’s clients last year, and has now risen to 9.4 percent. “They are acting preventively to avoid excessive regulation or to try and block new rules that are harmful to their activities,” said Carolina Venuto, chairperson at Abrig.

  • The sector is particularly sensitive to how the new general data protection law will be enforced in Brazil. So far, the government has yet to create a regulatory body to monitor the implementation of new rules on handling citizens’ personal information. Business associations warn that the lack of regulation will lead to unnecessary litigation and insecurity about how the new law will be interpreted.

Dirty word. Since the 1970s, the term “lobbying” has been used to qualify any attempt (usually illicit) to influence public officials, according to Andréa Cristina Oliveira Gozetto, a social scientist specializing in government relations and public policies at think tank Fundação Getulio Vargas. That’s why the sector prefers to call its work “government relations” instead.

Regulation, pero no mucho. Most lobbying professionals are in favor of their work being regulated, but with varying degrees of support. While 80 percent of consultancies and in-company government relations professionals support regulations, only 44 percent of law firms who work in the sector agree — perhaps out of fear that their field of operations may be narrowed.

  • Within the sector, there is also immense opposition to proposals in Congress that would establish a national database of lobbyists. Abrig claims it would limit the sector — saying that, “in a democracy, any citizen should be able to engage in government relations.”

Benchmark. Ms. Gozetto, the social scientist, argues that Brazil should use the Chilean model to regulate lobbying. Chile was the first Latin American country to adopt a regulation on the matter, back in 2014. Now, an online system logs meetings, donations, or any kind of contact between elected officials and lobbyists. Requesting a meeting with a senator or representative goes through this online public platform, shedding light on how interest groups operate.


Pandemic, competition slash banks’ share of stock market index

Between December 2019 and today, Brazil’s major banks have lost one-third of their weight on Ibovespa — the country’s benchmark stock index — according to 6minutos, the content division of C6 Bank. Late in 2019, banks made up 26.6 percent of the Ibovespa portfolio. Now, that share has fallen to just 19 percent.

  • The main reason for this change is that big banks lost a lot of market value during the pandemic. The index for financial companies (IFNC) is the second-worst performing in Brazil, down over 26 percent since the beginning of the year.

Why it matters. Investors’ skepticism about banks has raised some red flags around the Brazilian economy.

  • With the coronavirus crisis and a record-high unemployment rate, investors worry that banks will face massive default rates. The most recent data, from July, actually shows that fewer Brazilians are in default — but the numbers could be misleading, as many of these people were benefited by the coronavirus emergency salary. The impact is expected to be felt from December onward, once the benefit is over.
  • There is a similar concern when it comes to corporate debtors. The government put in place a series of measures to postpone debt payments — which investors fear might only delay the problem, in many cases.

Competition. There is also one positive reason for banks’ struggles in the stock market: increasing competition from fintechs and investment platforms. With lower (or zero) tariffs, these new players are rattling traditional banks and helping the inclusion of millions in the banking system — which could lower market concentration for financial services. This might be bad for shareholders but is certainly positive for the Brazilian economy.


Coronavirus daily deaths lowest since May

For the first time since May 7, Brazil’s 7-day rolling average of new daily Covid-19 deaths has fallen below 500 — showing a 28-percent decrease from two weeks ago. After 28 days of stability, the Brazilian death curve has seen a downturn over the past two days.

Why it matters. The data appears to indicate that the coronavirus spread — which has infected over 5.1 million Brazilians, killing 151,000 of them — could finally be slowing down.

Yes, but … Data collection has been sketchy in Brazil, and death reports tend to go down during the weekends and holidays (October 12 was a national holiday). So it’s hard to know if the reduction in deaths is an accurate depiction of how the virus is spreading. Back in September, Brazil observed a momentary decrease in deaths around the time of the September 7 Independence Day holiday. After that, the curve showed stability for nearly a month.

Vaccine. Mariângela Simão, the World Health Organization’s Assistant Director-General for Drug Access, Vaccines and Pharmaceuticals, said she is “positively sure” Brazil will not have enough vaccine doses in 2021 for a massive vaccination campaign. “The WHO advises Brazil to prioritize health workers and people over 65,” she told CNN Brasil.


What else you need to know today

  • Trade deal. In a push to show that the EU-Mercosur trade deal has support in Europe, the Agriculture Ministry released a statement saying Portugal backs the agreement. Last week, the European Parliament passed an amendment to the common EU commercial policy stating that the deal “cannot be ratified as it stands,” citing environmental concerns.
  • Military. Newspaper O Globo revealed today that, after the Brazilian government decided to make all Venezuelan diplomats personae non gratae in the country, the Army ran military tests in the Amazon, simulating war against a hypothetical “red country.” The operation involved 3,600 troops and happened between September 8 and 22 — on September 18, U.S. Secretary of State Mike Pompeo visited the Brazilian-Venezuelan border, lashing out at the country’s president, Nicolás Maduro.
  • Aid 1. Brazil’s National Development Bank announced it will extend the temporary suspension of debt collection on companies — one of the first measures taken by the government to mitigate the economic effects of the pandemic. The program was set to end in September — but will continue for another six months for specific sectors, including automakers, clothing industries, and hotels.
  • Aid 2. President Jair Bolsonaro signed a decree extending the possibility of companies suspending or cutting workers’ hours and wages for another two months. Back in September, Economy Minister Paulo Guedes let slip that the measure would remain in place, but the extension has only been formalized now. The program is considered to be successful in avoiding millions of layoffs, but has created doubts around how workers’ Christmas bonuses — established by law in Brazil and known as the “13th salary — will be paid, as they are calculated based on monthly wages.
  • Payments. As Brazil gets ready to launch the Central Bank’s instant payment tool PIX, Visa is also beginning to shift its business model in the country. The company is selling fraud prevention and transaction authentication services to PIX participants, in a bid to expand its business beyond credit and debit cards. Only a few days after Brazilians were allowed to sign up for PIX, cybersecurity companies found at least 60 fraudulent websites offering fake registration forms — aiming at getting people’s financial information.
  • Rio de Janeiro. A justice of the Superior Electoral Court issued an injunction suspending the ineligibility of Rio de Janeiro Mayor Marcelo Crivella — who has been convicted of electoral crimes. Wildly unpopular, Mr. Crivella is polling at 12 percent, 15 points below former Mayor Eduardo Paes, who tries to win a third stint in office, after serving as mayor between 2009 and 2016.
  • Supreme Court. With the retirement of Justice Celso de Mello from the Supreme Court yesterday, lawyers representing former Justice Minister Sergio Moro wasted no time in asking Chief Justice Luiz Fux to reassign the case in which President Jair Bolsonaro is investigated for alleged illegal meddling with the Federal Police. If no party in the case had made such a request — Mr. Moro was the one who accused the president — the case would automatically fall into the hands of Justice Mello’s soon-to-be replacement, Federal Judge Kássio Nunes Marques, who was handpicked by Mr. Bolsonaro.[/restricted]
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Brazil Weekly

Forget mayors, the House Speaker election is the race that counts

This week, we take a look at the behind-the-scenes moves leading up to February’s election for House Speaker. And the crisis sparked by a divided Supreme Court.

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The election that matters

Brazilians head to the polls on November 15 and 29 to select their new mayors and city councilors, [restricted]but President Jair Bolsonaro has his eyes on another election, which he sees as being much more consequential. In February 2021, members of Congress will vote to pick the new House Speaker and Senate President, and incumbents Rodrigo Maia (House) and Davi Alcolumbre (Senate) cannot run for another term — barring an amendment to the Constitution. Therefore, this clears the path for the government to put forward its own candidates.

The key election. Mr. Bolsonaro’s main interest lies in the House Speaker election, as the leader of the lower house holds all the power to initiate (or block) impeachment proceedings against the president.

  • While the president will officially remain neutral during the election process, he is backing Congressman Arthur Lira, a high-ranking figure from the so-called “Big Center,” a loose coalition of conservative, for-rent parties that now makes up Mr. Bolsonaro’s congressional support base.

Yes, but … Brasília correspondent Débora Álvares reports that, despite enjoying a good relationship with the Big Center as of late, Mr. Bolsonaro still doesn’t trust the congressional establishment — and may pull a curveball in the Speaker’s race. He is considering endorsing Tereza Cristina, the current Agriculture Minister, for the position.

  • Senior government officials told The Brazilian Report that Mr. Bolsonaro believes (rightly so, we may add) that the Big Center’s support is only circumstantial — and a shift in the political mood could see him held hostage to this self-serving group. That’s why he wants one of “his own” in the Speaker’s chair.
  • A congresswoman, Ms. Cristina is the former leader of the Rural Caucus, one of Brasília’s most powerful lobbies. She claims she does not want to leave the cabinet and enter the Speaker election — but she would, if the president asked her to. 
  • Government sources say Ms. Cristina is frustrated with her cabinet colleagues Ernesto Araújo (Foreign Affairs) and Ricardo Salles (Environment), who have helped cause an image crisis for Brazil’s agribusiness — due to attacks on China and recent environmental disasters.

Why it matters. The move, if confirmed, could be seen as a betrayal of the Big Center, a group that has ensured some stability to the Bolsonaro administration. Our sources say that Jair Bolsonaro could compensate Big Center officials by offering them key cabinet positions.


A split Supreme Court

This afternoon, Brazil’s Supreme Court will lose one of its pillars: Justice Celso de Mello, who retires after 31 years on the most prestigious bench of the country. Furthermore, this change will take place as the court undergoes a moment of deep internal division. Two recent events have widened this split between justices:

  • Operation Car Wash. After President Jair Bolsonaro said he had “ended” the task force because “there is no more corruption in the government,” Chief Justice Luiz Fux moved to transfer all trials related to the operation from a five-justice panel — a mechanism to reduce the court’s backlog — to full-court decisions. One of the two panels in the Supreme Court has become known as the “Garden of Eden,” due to its propensity for ruling in favor of defendants, while the chief justice himself is a known supporter of Operation Car Wash. Members of the “garden” reacted badly to the decision, calling it “nonsensical.”
  • PCC gang leader. Over the long weekend, the Supreme Court granted a habeas corpus request to a high-ranking leader of the First Command of the Capital (PCC), the most powerful and widespread organized crime faction in Brazil. The decision, made by Justice Marco Aurélio Mello, was issued after prosecutors failed to renew the prisoner’s preventive detention request. The chief justice overturned the decision within less than 24 hours, by which time the gang leader was already at large. Justice Mello was left disgruntled by the turnaround, saying that “the chief justice is not [his] superior.”

Why it matters. A split Supreme Court can aggravate some of the body’s biggest flaws, notably its lack of consistency and respect for precedent.

  • There is a running joke in Brasília, according to which Brazil has not one Supreme Court, but rather 11 — as each justice plays by their own rules. Never has this seemed so apt. 

Dangers. Meanwhile, the court has been the victim of several attacks — including from radical far-right groups operating under the auspices of the First Family (who ask for the shutdown of the court altogether). With their erratic behavior, justices spare these groups from having to discredit them.


Markets

October will be a month for tech IPOs in Brazil. Suno Research recommends investors to take part in broadband provider Triple Play’s offering if prices are up to BRL 14 per share. Triple Play has 75 percent of its network in flagship fiber-to-the-home technology and a strong presence in small- and medium-sized cities, a segment where internet penetration is growing and competitors still rely on outdated network infrastructure.

Natália Scalzaretto


New study ties informal labor to Covid-19 deaths

On multiple occasions, we at The Brazilian Report have explained how Brazil’s (and Latin America’s) highly informal economy contributed to its harrowing coronavirus epidemic. Without minimizing the responsibility of government authorities and their failed response to the pandemic, the truth is that millions of people simply could not afford to socially isolate.

A new study by the Federal University of Rio de Janeiro took five Brazilian cities with different proportions of informal labor and compared their Covid-19 death rates, with the results corroborating the hypothesis that unregistered workers could not stay home. For every additional 10 points in cities’ informality rates, contagion rates rise 29 percent and death rates, 38 percent.


Looking ahead

  • War budget. The government still has no solution for its plan to roll out a new welfare program while simultaneously adhering to the federal spending cap, which prevents the administration from raising public spending without extra revenue. The government is considering extending the so-called “War Budget” until 2021, which was a solution pushed through by Congress to create a parallel budget for coronavirus-related spending, as a way to bypass the cap. Analysts, however, say that using that mechanism for current expenses would create a confidence crisis among markets.
  • Priority list. The November municipal election gives the government practically no time to push through broad reforms in 2020. Instead, the administration will focus on three priorities for Congress: passing the new regulatory framework for the gas sector, opening up the cabotage navigation market, and breaking the monopoly state-owned company Correios has over postal services, thus clearing a path for the firm’s privatization.
  • Infrastructure. Tarcísio de Freitas, Brazil’s Infrastructure Minister, has begun a tour in Congress to gather sponsors for selected projects the administration hopes to push through to completion in 2021. One-third of his ministry’s budget will come from parliamentary grants, by which individual officials request a share of the federal budget to go toward projects in their constituencies. 
  • Vaccine. President Jair Bolsonaro has said on multiple occasions that “nobody can force anybody” to take a Covid-19 vaccine, but Brazilians don’t seem to agree. Over 70 percent of people in four major urban centers (São Paulo, Rio, Belo Horizonte, and Recife) want a vaccine against the coronavirus to be mandatory, once it is available. However, enthusiasm for the vaccine is lower among wealthier classes.

In case you missed it

  • Supreme Court. Celso de Mello, the longest-tenured Supreme Court justice, retires today after 31 years in Brazil’s highest court. He distinguished himself as the court’s most fervent defender of individual liberties and his peers say he will leave big shoes to fill. For his replacement, President Jair Bolsonaro went for Federal Judge Kássio Nunes, who has been endorsed by traditional political parties in Congress. A confirmation hearing is scheduled for next week, and Mr. Nunes already has a majority in the Senate’s Constitution and Justice Committee.
  • Economy. Once heralded Brazil’s economic tsar, Economy Minister Paulo Guedes now seems to be losing prestige by the day. After publicly scolding him on multiple occasions, President Jair Bolsonaro is now considering splitting up Mr. Guedes’ fiefdom into multiple ministries — recreating the Labor Ministry, and possibly the Trade Ministry, as well. That would give the president more horse-trading power with Congress. 
  • Trade deal. In a 345-295 vote, the European Parliament passed an amendment to the common EU commercial policy which was seen as a rejection of the EU-Mercosur free trade agreement signed just last year. The amendment highlights the need for ensuring fair competition and compliance with European production standards — adding that, due to environmental concerns, “the EU-Mercosur agreement cannot be ratified as it stands.”
  • Financial inclusion. PIX, an instant payment platform created by the Brazilian Central Bank, officially opened registrations last week. The number of individual ‘keys’ issued reached roughly 24 million. The new payment system, which will allow for instant cash transfers, begins its operation on November 16. Besides allowing near-instant transfers and payments outside of commercial working hours, the system is free to use for sending and receiving money.[/restricted]
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Brazil Daily

New agreement to improve Brazilian trade with U.S.

Today, Brazil and the U.S. try to improve trade relations. Brazilians’ distrust for science. Senate tries to uphold company payroll cuts. And a Supreme Court trial that will affect Petrobras.

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BREAKING

On Tuesday, the Federal Police launched an operation against two state secretaries in Pará, accused of embezzling money earmarked for healthcare. Now, the police are carrying out a similar operation targeting Santa Catarina Governor Carlos Moisés. He is suspected of siphoning money from the purchases of ventilators for Covid-19 patients.


Brazil-U.S. trade could get a boost

Brazil and the U.S. have reportedly concluded [restricted]negotiations over a plan to facilitate trade between the two countries — which should be signed within the next few days. The idea is to reduce costs with bilateral exchange (USD 29.8 billion between January and August) by 15 percent. 

What is on the table. The agreement is predicated upon three pillars: trade facilitation, regulatory practices, as well as anti-corruption efforts. That would help eliminate red tape and facilitate customs control.

  • Brazil already has similar trade deals with Chile, the European Union, and Mercosur.

Global Entry as a trade booster. Another move to boost exchanges between the U.S. and Brazil is Washington’s decision to launch the second phase of the Global Entry program, which allows fast-tracked clearance at airports for pre-approved, low-risk travelers. Today, 20 executives from the Brazil-U.S. Business Forum, a group aimed at improving trade ties, benefit from the program — which is now set to be extended to a total of 100 executives.


Brazilians skeptical about scientists

A new survey published by the Pew Research Center shows Brazil as the country in which fewer people trust that scientists do what is best for society, among 20 surveyed nations. While in most of the countries skepticism towards science runs along political lines — with the right wing tending to be less trusting of scientists — there is no such ideological cleavage in Brazil: only 22 percent of Brazilian right-wingers trust scientists ‘a lot’, the exact same rate among left-leaning individuals.

Why it matters. The findings suggest Brazil is fertile ground for anti-scientific discourse. During the pandemic, a disregard for scientists’ recommendations — often coming from the far-right government — has been an obstacle in controlling the spread of the coronavirus.

Mistrust and disgust. Brazilians distrust institutions in general. The country has some of the lowest trust rates for government (9%), news media (12%), or business leaders (just 4%). There is also a significant self-image problem, as three in four Brazilians say they are unsatisfied with how things are going in their country — the third-highest rate out of 20 surveyed nations. As part of that general sentiment of frustration, positive perceptions about the country’s scientific achievements are disproportionately low when compared to other countries — usually in the single digits.

  • The result is a country in which just 41 percent of people believe decisions should be made by experts. Most Brazilians say “practical experience” is a bigger asset for decision-making.

Brain drain. The biggest problem for Brazilian science, however, is not a lack of high-quality scientists — but rather a scarcity of funds and structure. Funding for scientific research in public universities has been cut to the bone over the past decade, and many of the country’s top-notch scientists have left to work at foreign institutions. And the Education Ministry has already announced that it will make further cuts to the budget for federal research institutes and universities.

  • The Maglev-Cobra project, a superconducting magnetic levitation train prototype developed by the Federal University of Rio de Janeiro, reached a technology readiness level of 7 (out of 9) and had transported over 20,000 people on an experimental capacity — but was halted due to a lack of funding.

Lawmakers could strike down veto on payroll tax cuts

Senate President Davi Alcolumbre scheduled a vote for today on President Jair Bolsonaro’s veto of the extension of payroll tax cuts to companies in 17 sectors until the end of next year. The government tried to negotiate in favor of upholding the veto, and will try to stall the vote by convincing allies not to show up for the sitting, trying to prevent a minimum quorum from being reached.

  • Mr. Bolsonaro had vetoed a piece of legislation allowing companies to pay taxes based on their revenue, instead of a 20-percent rate on their payroll.

Why it matters. The standoff has lasted for three months, and it is already affecting businesses’ economic planning for 2021.

What they are saying. The government is trying to avoid any loss in revenue as it scrambles to come up with welfare programs for next year, when the coronavirus emergency salary will end. However, companies are lobbying hard for the tax cuts, saying that upholding the veto would force them to lay off staffers and prevent up to 6 million new jobs from being created.

  • The possible overturning of the veto has also been used by Mr. Alcolumbre as a bargaining chip. He wants to change the Constitution in order to get another term ahead of the Senate — and could comply with the government’s wishes in exchange for support for his strategy.

Supreme Court to rule on Petrobras privatizations

The Supreme Court will hold a trial today on whether state-controlled oil company Petrobras has the right to slice its assets into multiple subsidiaries in order to fast-track their privatization.

  • The court has previously ruled that parent companies controlled by the government need congressional approval to sell off assets — but that they would have autonomy over subsidiaries. In light of this, Petrobras decided to transfer the control of oil refineries to their subsidiary companies as a push for divestments. Congress, however, has called foul play.

On the line. Petrobras is attempting to sell eight of its oil refineries through subsidiaries.

Why it matters. The decision is pivotal for Petrobras’ strategy to reduce debts and focus its efforts on pre-salt deepwater reserves. The company has boosted this plan during the pandemic, as the coronavirus crisis slashed oil prices worldwide.

The trial. So far, three justices have voted — all three in favor of an injunction to suspend the privatizations.


What else you need to know today

  • Economy. According to think tank Fundação Getulio Vargas, confidence levels among industry and commerce business owners has reached levels that exceed those of the immediate pre-pandemic period. In the case of industry, optimism got to its highest since January 2013 — that is, before the 2014-2016 recession. However, optimism in this case is purely short-term — when it comes to looking six months ahead, business owners already become less enthusiastic about Brazil’s economic outlook.
  • Environment. A federal court in Rio de Janeiro issued an injunction to suspend decisions made by the National Environmental Council (Conama), lifting protections on coastal areas, citing “clear risks of irreparable damage.” The Solicitor General’s Office can appeal the ruling, but has refused to comment.
  • Trump-Biden debate. When trying to make a point about U.S. President Donald Trump’s leadership, former Vice President Joe Biden used Brazil as an argument. “The rainforests in Brazil are being ripped down […] I would be gathering up and making sure we had the countries of the world coming up with USD 20 billion and saying: ‘Here’s USD 20 billion. Stop tearing down the forest. And if you don’t you are going to have significant economic consequences.'”
  • Emergency aid. According to the Citizenship Ministry, roughly 5.7 million people will no longer receive the coronavirus emergency salary. Over the next four months, the government will make payments of BRL 300, and has raised the bar for people to qualify for the aid. One official said the move was the result of lessons the government has learned about the policy.
  • Justice. The Supreme Court will begin a trial today on whether or not the “right to be forgotten” should exist in Brazilian law. While the right to privacy constitutes protecting information that is not publicly available, the right to be forgotten involves removing information that was publicly known at a certain time and not allowing third parties to access the information. This right does not technically exist in Brazil, though it is frequently used as an argument in cases brought before lower courts. Legal scholars struggle to agree on the issue, claiming that this right could increase internet censorship and allows for the rewriting of history.[/restricted]
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Brazil Weekly

Bolsonaro to make first Supreme Court pick

This week, the frontrunners for a Supreme Court vacancy. The government’s proposal for a new tax. Brazil’s over-reliance on trucks persists.

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Who will Jair Bolsonaro appoint to the Supreme Court?

On Friday, Supreme Court Justice Celso de Mello announced he will retire on October 13, [restricted]ending what is the longest tenure by anyone in Brazil’s highest court, after taking the seat in August 1989. Justice Mello was already set to retire on November 1 — when he reaches the mandatory retirement age of 75 — and his decision to bring his retirement forward 19 days was not trivial, as Brasília correspondent Débora Álvares reports.

  • Justice Mello presides over an investigation into President Jair Bolsonaro, and upon retirement, all his cases would normally be handed over to his replacement … who will be appointed by President Jair Bolsonaro. According to sources within the Supreme Court, Justice Mello’s early retirement put pressure on Chief Justice Luiz Fux to draw lots to determine who will take over the investigation.
  • Regardless, government officials have celebrated the retirement announcement, as Celso de Mello has been among the members of the Supreme Court who has most opposed the Bolsonaro administration. Earlier this year, Justice Mello compared Brazil’s current political situation to the crumbling of the Weimar Republic in Germany, as Adolf Hitler became chancellor.

Why it matters. Justice Mello’s retirement will hand Mr. Bolsonaro his first Supreme Court appointment.

Frontrunners. In May 2019, Mr. Bolsonaro announced he would appoint then-Justice Minister Sergio Moro to fill the first available vacancy in the court. That bridge has been burnt, after Mr. Moro left the government accusing the president of malfeasance. Débora Álvares goes through the leading candidates for the country’s highest court.

  • Ives Gandra Filho. A member of the Superior Labor Court, the uber-religious Mr. Gandra Filho is a favorite among Jair Bolsonaro’s military advisors. He is seen as an “incorruptible” man who donates half of his salary to charity and lives in a small room in a Brasília parish. His father recently said President Bolsonaro has a “legal” way to stage a military coup, as he mischaracterized an article of the Brazilian Constitution.
  • Jorge Oliveira. If the pick is made among Bolsonaro’s sons, it would go to the current Secretary-General — who Mr. Bolsonaro calls Jorginho (“little Jorge”). A lawyer and retired member of the Military Police, Mr. Oliveira has worked for the Bolsonaros for over 20 years, and has a personal bond with the president’s family.
  • André Mendonça. The current Justice Minister is a respected legal scholar, with over 20 years of experience in the Solicitor General’s Office. He would check the box of being “extremely evangelical,” which Mr. Bolsonaro has said will be a prerequisite for a Supreme Court appointment. Moreover, Mr. Mendonça’s actions as Justice Minister showed loyalty to the president — including actions widely disapproved by legal scholars, such as creating a secret dossier with information on almost 600 civil servants and law enforcement agents monitored for being self-declared “anti-fascists.”
  • Other potential picks. Prosecutor General Augusto Aras and João Otávio Noronha, a member of the Superior Court of Justice (Brazil’s second-highest judicial body), are also in contention — albeit in the outside track. They have distinguished themselves to the president by bending over backward to please Mr. Bolsonaro with their legal decisions, in what observers say is an attempt to audition for a Supreme Court seat.

Consequential. Besides Celso de Mello’s seat, Jair Bolsonaro will have at least one more Supreme Court nomination before the end of his term — as Justice Marco Aurélio Mello retires next year. If he wins re-election in 2022, Mr. Bolsonaro would have two more seats to fill, meaning he could have four appointments out of a total of 11 justices.


The government’s plan for tax reform

After weeks of negotiations, the Bolsonaro administration will present Congress with its second set of proposals to reform Brazil’s tax system — which are rumored to include the creation of a new levy. According to the Economy Ministry, a novel 0.2-percent tax on financial transactions is the only way the government can make ends meet in 2021. In exchange, the government proposes a cut in payroll taxes.

  • This need for increased revenue becomes all the more pressing as President Jair Bolsonaro leads the creation of a new welfare program to replace the coronavirus emergency salary, which is set to expire in December. 

Why it matters. The emergency aid has had a tremendously positive impact on Mr. Bolsonaro’s approval ratings (more below). But the cash-strapped government still struggles to structure a new program for 2021 and beyond.

  • The government’s new tax is a new version of the CPMF — a tax on financial transactions which was enforced between 1997 and 2007. Brazilians loath this levy — and the fact that 2020 is an electoral year makes it a tough sell to Congress.
  • President Jair Bolsonaro has reportedly signed off on the new tax — as long as the Economy Ministry finds a way to avoid it harming his public image.

Maia. The government hopes that House Speaker Rodrigo Maia’s vanity could work in its favor. After success in 2019’s pension overhaul, Mr. Maia wants to go down in history as the Speaker who managed to approve two major reforms in as many years. But Mr. Maia — who is weighing up running for governor in Rio de Janeiro in 2022 — might not be so keen on attaching his name to such a reviled tax.

  • According to sources in Congress, Mr. Maia is likely to lend his support to another tax reform bill being discussed in the House. This proposal merges several federal and state taxes into a single VAT charge.

Calendar. Don’t expect major reforms in 2020. Activity in the House will decrease, as members engage in local electoral races. And contentious reforms usually take several months to pass, even in a best-case scenario. 


Markets

Global banks saw their share prices plummet last week, after a journalistic investigation showed that major institutions had engaged for years in knowingly handling up to USD 2 trillion in dirty money. In Brazil, however, banks’ share prices went up. Analysts are particularly keen on the state-controlled Banco do Brasil — which has seen profits soar in recent years, as well as having a conservative portfolio focused on payroll and agribusiness loans, and hefty provisions in case delinquency rates go up.

Natália Scalzaretto


Road transportation still massive bottleneck for Brazil

A new study by the Infrastructure Ministry shows that most of the ethanol, biodiesel, and jet fuel produced in Brazil is still transported by road. That’s why, in 2018, an 11-day truckers’ strike nearly halted the country and caused a fuel shortage in several states. Since 2016, the federal government has tried to map cargo transportation bottlenecks and opportunities, in order to structure the sector through popular cargo routes, identifying where investments are needed — and how to avoid exposure.


Looking ahead

  • Unemployment. On Tuesday, the Economy Ministry will publish August’s formal employment data; on Wednesday, the Brazilian Institute of Geography and Statistics releases the official unemployment rate until July. Government data showed a positive balance between formal hirings and firings in July, but analysts are cautious to treat the data as a sign of a recovery. Unemployment rates are going up as Brazilians begin to leave social isolation — and millions are now falling into another category: discouraged workers, i.e., when people stop looking for jobs in the belief they won’t find one.
  • 2020 election. Even though voting is mandatory in Brazil, voters may ignore their duty if they justify their absence at the polls — or pay a fine worth less than USD 1. Since the return of democracy in 1985, abstention rates have climbed election after election, and a recent poll suggests that voter turnout could be historically low in 2020, as a result of the pandemic. Pollster Datafolha says 34 percent of São Paulo voters don’t feel safe to go out and vote on November 15. Furthermore, Brazil doesn’t have a mail-in ballot system like the U.S., or a vote-by-proxy system, like France.
  • Coronavirus. Three weeks after the September 7 Independence Day holiday, Rio de Janeiro saw a spike in ICU occupancy rates, which now stand at 87 percent — nearly 10 percentage points above July levels. Experts say the uptake in admittance of patients with severe Covid-19 cases might be linked to the loosening of social distancing observed during the holiday, with thousands flocking to beaches, bars, and restaurants.

In case you missed it

  • Bolsonaro. A new poll by Ibope shows that 40 percent of Brazilians believe Jair Bolsonaro is doing a ‘good or great’ job as president. Mr. Bolsonaro gained ground among poorer and less-educated voters, suggesting that the BRL 600 (USD 107) emergency coronavirus salary has made him more popular. However, interviews were made before the benefit was halved to BRL 300.
  • Economy. Many industrial sectors have regained their optimism toward the Brazilian economy, according to a preliminary study by the Brazilian Institute of Economics at Fundação Getulio Vargas (IBRE-FGV). “This optimism signals that productive sectors may ramp up production,” writes economist Renata Mello Franco.
  • Borders. The Brazilian government has lifted restrictions on the entry of foreign nationals at every airport in the country — revoking a March rule that barred the influx of tourists in six states. A 30-day restriction remains for the entry of foreigners by land and sea. Venezuelan citizens, however, are granted an exception due to humanitarian reasons.
  • UN. Jair Bolsonaro’s address to the United Nations General Assembly tried to deflect responsibility for Brazil’s environmental crisis and the coronavirus pandemic. The president lashed out at indigenous communities, “spurious” international interests, and “unpatriotic” organizations for leading a “brutal smear campaign” against Brazil — denying official data that shows a massive surge of fires and deforestation since he took office.
  • Rio. On Wednesday, the State Congress in Rio de Janeiro moved forward with its impeachment process against Governor Wilson Witzel, who is accused of embezzling funds earmarked for the state’s anti-coronavirus effort. One day later, an electoral court declared Rio’s Mayor Marcelo Crivella ineligible for office for committing electoral crimes. However, Mr. Crivella may still be able to run for re-election in November, thanks to the possibility of dragging the case through multiple appeals.[/restricted]
Categories
Coronavirus Power

Brazil Senate goes back work after high-profile Covid party

After a six-month coronavirus hiatus, the Brazilian Senate is once again holding in-person sittings. And the upper house hasn’t beaten around the bush, approving a request to summon Foreign Minister Ernesto Araújo to provide clarifications about the visit of the U.S. Secretary of State Mike Pompeo to the Brazil-Venezuela border.

But while a return is necessary — Congress has conducted its debates and votes remotely, but the pandemic has halted all activity in issue-based committees — it seems ill-timed. Senators are returning to meet in person just 12 days after a massive dinner party held at the official residence of House Speaker Rodrigo Maia, who has since tested positive for the coronavirus.[restricted]

The Covid party

The September 9 event — gathering everyone who’s anyone in Brasília politics — was in celebration of the inauguration of Luiz Fux as the new Supreme Court Chief Justice. Members of Congress were in attendance, as well as members of high courts, and prominent business owners.

While no-one is keen to owe up to the fact, The Brazilian Report was able to confirm that — beyond Mr. Maia and the guest of honor, Chief Justice Fux — among those in attendance were next-door neighbor Senate President Davi Alcolumbre, senators Nelsinho Trad and Chico Rodrigues, and lower house members Baleia Rossi, Carlos Sampaio, Efraim Filho, Fábio Trad, Marcos Pereira, Aguinaldo Ribeiro, and Arthur Lira. 

On the day after Luiz Fux was sworn in as Chief Justice, at least six authorities confirmed they had contracted Covid-19. Besides Mr. Maia and Chief Justice Fux, Attorney General Augusto Aras, head of the Superior Labor Court Maria Cristina Peduzzi, and Superior Court of Justice members Luís Felipe Salomão and Antonio Saldanha Palheiro. 

In the Senate, 38 of the 81 members are aged over 60, and several suffer from pre-existing conditions that pose Covid-19 risks, such as obesity and high blood pressure. The chamber’s press office did not respond to The Brazilian Report‘s inquiry about how many senators have been infected by the coronavirus, saying it “habitually does not divulge Covid-19 case numbers among its employees and members.”

According to Agência Senado, six senators had contracted Covid-19 until June, including Senate President Alcolumbre.

The Senate’s return to work is regulated by a normative act issued last week, which sees the installation of hand sanitizer dispensers at strategic locations in the chamber, increased distancing between senators on the floor, and ‘drive-thru’ voting stations allowing at-risk politicians to stay out of the main chamber.[/restricted]

Categories
Coronavirus

Brazilian Senate to begin in-person activities next week

The Steering Committee of the Brazilian Senate greenlit the reopening of in-person sittings, starting next week. Between September 21 and 24, senators shall hold confirmation hearings on the nomination of multiple government officials, according to the Senate’s Official Gazette

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Categories
Coronavirus

Brazil’s House Speaker tests positive for Covid-19

House Speaker Rodrigo Maia has tested positive for the coronavirus. 

The diagnosis makes the Speaker the fourth person to catch the virus after attending the new Chief Justice Luiz Fux’s inauguration ceremony, last Thursday. Before Mr. Maia, the chief justice himself, as well as two members of the Superior Court of Justice, also confirmed infections.

With Mr. Maia’s and Chief Justice’s Luiz Fux’s infections, Vice President Hamilton Mourão remains the only person in the presidential succession line to not have contracted the coronavirus. Senate President Davi Alcolumbre was infected back in March, while President Jair Bolsonaro said he contracted the virus in July.

This is a developing story.

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Categories
Brazil Daily

Two months until Election Day: what is at stake

Today, what you need to know about the election season. The devastation of the Pantanal wetlands. And why you shouldn’t expect reforms in 2020.

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Election countdown: 60 days

In exactly two months, Brazilians in 5,568 municipalities will elect new mayors and city councilors. [restricted]Last week, we explained the country’s plan to hold safe elections during a pandemic. Now, we explain what will be at stake on November 15.

Why it matters. While the themes of municipal elections are local, these races have become increasingly important for national politics, and will set the stage for the 2022 general elections.

  • It doesn’t mean the 2020 election will be a prediction of what will happen in 2022. In politics (especially in Brazilian politics), two years has proven to be a long time.

How the election board is set. The Brazilian Social Democracy Party (PSDB) has the strongest foothold in major centers, with controlling 30 of Brazil’s 96 biggest cities. The party rose in the local elections thanks to a growing anti-leftist sentiment among voters in 2016 — until Jair Bolsonaro emerged, the PSDB was the major conservative force in Brazil. 

  • On the left, meanwhile, the Workers’ Party does not govern a single municipality among the top 96, it is stronger in smaller, poorer cities.

Bolsonaro. At least publicly, President Jair Bolsonaro says he will refrain himself from taking part in municipal races. However, his aides confirmed to Brasília correspondent Débora Álvares that the president will use his newfound popularity to influence the outcome of elections in São Paulo (which has the biggest budget in the country), Rio de Janeiro (his electoral home), as well as other major urban centers, such as Porto Alegre (1 million voters) and Belo Horizonte (1.9 million).

  • The president, however, “will only enter disputes he knows he can win,” said an adviser. “That’s why his plan is to wait until the runoff stage to make endorsements. That way, he can pick whoever has the best chances of winning.”
  • Mr. Bolsonaro’s main goal is to use the election to weaken his political nemeses: São Paulo Governor João Doria, former Justice Minister Sergio Moro, former Health Minister Luiz Henrique Mandetta — and, of course, former President Luiz Inácio Lula da Silva and his Workers’ Party. 

Left. The Workers’ Party has a lot at stake going into the elections. Since the 2014 election, the biggest party of the Brazilian left has lost support in all regions except for the Northeast. “We have hit rock bottom,” former Justice Minister Tarso Genro, one of the most independent voices within the party, told The Brazilian Report. “The Workers’ Party faced its darkest hours during the peak of Operation Car Wash. But it has proven it is a durable and politically strong institution that can lead an effort to unite the left.”

  • There is some unity forming on the left, but it hasn’t included the Workers’ Party so far. The Democratic Labor Party (PDT) and the Brazilian Socialist Party (PSB) have forged alliances in 45 big and medium-sized cities (including eight state capitals). It could be a dress rehearsal for a national alliance in 2022 — which could weaken a Workers’ Party-led presidential ticket.
  • Moreover, the party is poorly positioned in São Paulo — with even far-left candidate Guilherme Boulos, from the Socialism and Liberty Party (PSOL) outpolling the party’s nominee, Jilmar Tatto.

The Pantanal drama

pantanal fires deforestation
Photo: Mayke Toscano/Secom/MT

The federal government has declared a state of emergency in the state of Mato Grosso, as wildfires continue to devastate the Pantanal biome. The government of neighboring state Mato Grosso do Sul has also declared a state of emergency. Until Sunday, 14,500 fires were recorded in the region this year — destroying 17 percent of the entire biome. An area bigger than the entire territory of Israel has been damaged in 2020 alone.

Why it matters. The Pantanal is the largest wetland region in the world, home to over 2,000 registered plant species and over 1,000 animal species — some of which only exist there.

  • The region also has one of South America’s main basins. “The region has an enormous capacity to absorb carbon‚ which makes it even more important in the context of climate change,” says Geraldo Damasceno Jr., a professor at the Biology Institute at the Federal University of Mato Grosso do Sul.

Causes. Besides rampant deforestation, the region has suffered from one of the worst droughts on record. Water levels in June — the peak of the wet season — were the lowest in 47 years.

Tourism. The fires will also affect the tourism industry — already ravaged by the pandemic. And tourism in the Pantanal has not only economic importance, but also has been a means to preserve wildlife. One such example is the Encontro das Águas State Park, a reservation where jaguars are protected. Around 62 percent of the park has already burnt down.

Budget. Despite the spike in deforestation rates, the Environment Ministry has reduced the funds earmarked for protection agencies.

pantanal
Photo: Lucas Ninno/TBR

No time for reforms in 2020

Government leaders in Congress advertised the idea that it is possible to approve major pro-market reforms in 2020. But history says otherwise. According to a study by think tank Metapolítica, the median time frame for lawmakers to pass constitutional amendments is no less than 246 days. It takes even longer during election years such as 2020: 327 days.

Why it matters. Just like last year, many of the projections about how amendments will progress in Congress seem to be the product of wishful thinking rather than actual analysis.

Why is it so hard? Constitutional amendments require 60-percent majorities and must undergo two rounds of voting in both congressional chambers. It takes a lot of negotiating in a system as fragmented as Brazil’s. And negotiation hasn’t exactly been the forte of this administration.

  • That being said, the 2019 pension reform passed quickly, in relative terms. But it was much more consensual among political elites than a tax reform — which will put many conflicting interests against one another — or an overhaul of civil service — which will enrage one of the strongest lobbies in Brasília.

What else you need to know today

  • Interim no more. For the past four months, Army General Eduardo Pazuello has been Brazil’s Interim Health Minister — but on Wednesday he will finally have the interim tag removed from his job title. His tenure has been heavily criticized by experts, who have denounced his poor management of the ministry’s funds. He also faces criticism for signing off on chloroquine purchases by the administration — an antimalarial drug touted by President Jair Bolsonaro as a “possible cure” for Covid-19, but with absolutely no proven benefits.
  • Covid-19. The coronavirus has so far killed 132,000 Brazilians. A study by the Institute for Applied Economic Research (Ipea) argues that the pandemic — the single deadliest event in the country’s history — has lowered Brazilian males’ life expectancy from 72.5 to 71.5 years. Men account for almost two-thirds of Covid-19 casualties in Brazil. Economist Ana Amélia Camarano, who conducted the study, says the impact wasn’t bigger because 75 percent of those who have died were aged 60 or older.
  • Vaccine. Phase-3 trials of a potential coronavirus vaccine developed by the University of Oxford in partnership with British-Swedish pharmaceutical company AstraZeneca will double the number of Brazilian volunteers to 10,000. “With more volunteers, we increase the chances of proving the efficiency of the vaccine sooner,” said Sue Ann Costa Clements, who coordinates the trials in Brazil. The study had been suspended last week, after a UK patient showed adverse reactions to the vaccine, but resumed on Monday.
  • Car Wash. Prosecutors presented new money-laundering charges against former President Luiz Inácio Lula da Silva. He is accused of accepting bribes from the Odebrecht construction group in exchange for hefty government contracts. Lula has accused Operation Car Wash of conducting a witch hunt against him, and said the probe uses “illegal methods” to reach political goals.
  • Rio de Janeiro. The Federal Prosecution Office charged Wilson Witzel, the suspended Rio Governor, his wife Helena, and ten others for criminal association. The group allegedly embezzled funds originally earmarked for the anti-coronavirus fight in the state. Mr. Witzel denies any wrongdoing and said the charges are a political stunt. Next week, state lawmakers vote on whether to continue with impeachment proceedings against the suspended governor.[/restricted]
Categories
Power

Will the administrative reform pass in Congress?

This is Part 4 of The Brazilian Report’s special series on the Jair Bolsonaro administration’s proposal to reform public service in Brazil and its chances of passing in Congress. Read Part 1, Part 2, and Part 3. You can also download an eBook including all four parts at the end of this article.


Major reforms are, by nature, hard to pass in Congress. They must almost always come through amendments to the Constitution — which requires a 60-percent majority and two rounds of voting in each both the Lower House and Senate. But Jair Bolsonaro’s administrative reform has even more hurdles on its way to passing.[restricted]

For starters, the timing couldn’t be worse. The country is still trying to respond to the economic crisis inflicted by the pandemic — and there is little mood for unpopular measures. Moreover, the reform was presented just weeks before campaigns for the 2020 municipal elections are scheduled to kick-off, on September 26.

As our July 20 Weekly Report showed, one-quarter of Brazilian lawmakers face elections for municipal office. And even those who won’t run will have their eyes on local races, as they have to set up the alliances that are key for lawmakers’ re-election bids two years from now. Between September 26, when candidates are allowed to start campaigning, until November 29, when runoff elections will happen in major cities, nothing is expected to pass in Congress.

“We should return only on December 1,” says Congressman Júlio Delgado, from Minas Gerais. “And still, on December 16 we wrap up the year. There are too many things to be decided upon [regarding the reform] in just two weeks,” he adds.

Controversial reforms

As we previously explained in this series, the reform will enact the biggest changes in public service Brazil has seen since its return to democracy. Its core point is ending civil servants’ ironclad job stability, conditioning their permanence to periodic performance evaluations.

That is, however, precisely what is set to spark the fiercest debates in Congress, as the civil servant lobby is one of the strongest in Brasília. 

Another point of contention concerns a section which would enhance presidential powers over the government’s structure. The head of state would be free to alter the structure of any agency without congressional approval as long as it doesn’t raise public spending.

But as we explained in Part 1, it seems highly unlikely that Congress would waive its prerogative to approve or bring down presidential acts that reshape the government’s structure. Especially in a moment when tensions between the government and Congress are so high — to the point that House Speaker Rodrigo Maia declared that he no longer speaks to Economy Minister Paulo Guedes.

How the pandemic disrupts the reform’s calendar

Since March 20, Congress has worked remotely for the most part — and the work of various committees have been halted. However, no constitutional amendment can be voted on the floor unless it passes by multiple such committees.

While congressional leaders claim they want committees to return to action as soon as possible, it is unlikely anything will happen before the end of the municipal elections. Meaning that there is virtually no chance of the reform progressing this year.


You can download an eBook including all four parts of this series, here.[/restricted]

Categories
Brazil Daily

Congress horse-trades while Brazil expects “multiple death waves”

Today, we talk about the long-term impacts of the coronavirus pandemic. Power struggles in Congress. And 5G in Brazil.

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Government expects “multiple death waves” following coronavirus

Interim Health Minister Eduardo Pazuello said on Thursday [restricted]that Brazil is set to face four death waves related to the coronavirus pandemic. Besides the casualties directly caused by the virus, many others will die as a result of the economic impacts caused by the coronavirus crisis. To add to this disaster, millions of people have halted their treatments for other illnesses (like cancer or AIDS) as they avoided health units due to fears of Covid-19 contamination. Mr. Pazuello also said the government expects an uptake in suicides and cases of fatal domestic violence, as the mental health effects of the crisis also take their toll on Brazilians.

Why it matters. The coronavirus’ impacts on Brazil will outlast the pandemic in years and could fracture the social fabric of the country — which will emerge poorer and more unequal. Not to mention the trauma caused by the single deadliest event in Brazilian history (barring colonization and slavery, atrocities which took place over centuries).

Vaccines. The Brazilian government still hasn’t decided whether or not to join the COVAX Facility, a global Covid-19 vaccine allocation plan co-led by the World Health Organization. “If we opt for membership, Brazil could be the biggest contributor,” said Mr. Pazuello.

  • President Jair Bolsonaro is seemingly trying to spark an anti-vaccine movement in Brazil. Over the past few days, he has defended people’s freedom not to be vaccinated on multiple occasions. 
  • An Ipsos-Mori poll showed that 88 percent of Brazilians say they would take a coronavirus vaccine as soon as one is available — which could suggest an anti-vax movement has very limited reach in Brazil. But a study published in medical journal The Lancet just yesterday shows that confidence in vaccines may be waning in the country.

Civil service reform: quid pro quo

Last week, the Jair Bolsonaro administration presented Congress with its administrative reform proposal — an overhaul of civil service in the country, meant to streamline it and reduce the costs of salaries and pensions. But a reform of this magnitude is not an easy sell to make to lawmakers — especially in an election year. House Speaker Rodrigo Maia and Senate President Davi Alcolumbre know this, and will use the reform as a bargaining chip to advance their own political goals, Brasília correspondent Débora Álvares explains.

  • Messrs. Maia and Alcolumbre are pushing for a change in the Constitution that would grant both an additional two-year term leading their respective congressional chambers. They want the government to support a constitutional amendment allowing them to remain in office.

Why it matters. The House Speaker and the Senate President have significant powers to set the agenda for Brazil’s legislature, including deciding which projects get voted on. They can be a president’s best ally — or worst enemy. The Speaker also has the power to make or break presidents–– as the only person who can initiate impeachment proceedings against a president.

Emergency salary. The administrative reform is not the only bargaining chip in play: there is also the matter of the coronavirus emergency salary. Through a provisional decree, President Jair Bolsonaro halved the benefit from BRL 600 to 300 (USD 112 to 56). However, the decree needs to be confirmed by lawmakers within 120 days before it expires.

  • The administration actually wants the decree to expire, because it knows there is a major risk Congress will vote for keeping the benefit at BRL 600 — which is much more than the government can afford. Whether or not the matter goes to a vote depends on Messrs. Maia and Alcolumbre.
  • Besides the financial part of the issue, the decision on the emergency salary will have profound effects on Brazilians. As yesterday’s Daily Briefing showed, Brazil’s poorest 10 percent is expected to lose 44 percent of its current income after the 50-percent cut in payments. When the grant ends — which is expected to happen after December — it will drop to 77 percent.

Tug of war. One of the obstacles Mr. Maia faces for a fourth consecutive two-year term as Speaker is the sheer number of candidates trying to succeed him. The list includes Arthur Lira, from the Northeastern state of Alagoas, one of the leaders of the group known as the “Big Center,” a loose coalition of conservative parties which have recently become much closer to the government. Mr. Lira has the strong support of President Bolsonaro.

Alternative. If a compromise with the government becomes impossible, Messrs. Maia and Alcolumbre could get their way in the Supreme Court — which is set to rule on the matter in the coming weeks or months.

  • The heads of Brazil’s legislature have been heralded as “the adults in the rooms” who tame President Bolsonaro’s wildest impulses. This argument has become in Brazil something of a carte blanche for them to bend the rules to their self-interest, providing the justification is to “counter Jair Bolsonaro.”

5G in “April or May 2021,” says government

Communications Minister Fábio Faria said during an interview that the auction of 5G frequencies in Brazil will “definitely happen between April and May 2021.” 

Why it matters. According to the U.S. Senate Republican Committee, “the country that leads the world in the adoption of 5G technology will have a distinct technological, economic, and national security advantage over other countries.” So far in Brazil, 5G technology has only been rolled out in limited areas and using spectrums of older technologies, such as 4G.

Huawei. About a possible ban of Chinese manufacturer Huawei in Brazil — accused by the U.S. of handing over customer data to the Chinese government — Mr. Faria said a decision on this matter would come only from President Jair Bolsonaro.

  • Brazil has shown increased hostility towards Beijing recently, and has adopted an unequivocal pro-U.S. stance in all trade matters. But a decision on Huawei has yet to be made.

Coverage. The pandemic has accelerated the expansion of internet coverage in Brazil. Operators have now set up 4G networks in 408 new municipalities, an 8.9 percent increase over the 12 months. Now, 4G is available in 4,997 of the country’s 5,570 municipalities.


What else you need to know today

  • Supreme Court. Luiz Fux took office as Brazil’s Chief Justice — a position he holds for the next two years. In his inaugural address, he defended Operation Car Wash and said a harmonious relationship with the other branches of government shouldn’t be mistaken for submission — taking a shot at his predecessor, Justice Dias Toffoli, who was accused of bending over backwards to please President Jair Bolsonaro. But Chief Justice Fux has failed to show a clear path forward to restore the court’s prestige, its reputation is currently at an all-time low due to its inconsistency in interpreting the law and constant overstepping of its boundaries.
  • Cannabidiols. The Health Minister said medicines based on cannabidiols could be included in the list of drugs provided by Brazil’s public healthcare system as early as February 2021. Interim Minister Eduardo Pazuello said the government will not oppose the move.
  • Aviation. A U.S. bankruptcy judge denied a USD 2.45-billion bankruptcy loan to Chilean-Brazilian carrier Latam Airlines, Latin America’s biggest airline. The proposal consisted of a USD 1.3-billion loan from asset management firm Oaktree Capital and a USD 900-million convertible loan from key shareholders. The court found the convertible loan would amount to “improper” treatment of other shareholders. The denial is a major setback to Latam, who is carrying USD 18-billion debt and desperately needs short-term liquidity.
  • IDB. Mexico and Argentina failed in their attempt to postpone the election of the new head of the Inter-American Development Bank. Florida-born attorney Mauricio Claver-Carone is expected to be elected over the weekend, breaking with the IDB tradition of always having a Latin American president. The U.S.’s decision to endorse Mr. Claver-Carone scuppered the Bolsonaro administration’s ambition to name the bank’s first Brazilian president. The move also comes as China cuts back on loans to Latin American countries. 
  • Investing. Brokerage firm XP Investimentos will launch a hedge fund today that will only invest in companies that have women in leadership positions. The initiative comes after research suggests firms with female leaders have a better overall stock price performance. According to XP, 20 percent of the revenue from management fees (0.5 percent a year) will fund the As Valquírias Institute, which provides education for women and teens living in extreme poverty.[/restricted]
Categories
Environment

New Sea Law could revolutionize protections in Brazil’s coastal areas

At over 8,000 kilometers long, Brazil has the second-largest coastline in Latin America. But its picturesque coastal landscapes are under threat from uncontrolled urban growth, pollution, deforestation, and a host of other problems. These factors, along with constantly creeping climate change, could profoundly change the way of life of the 42 million Brazilians who live in coastal regions.

It is in this troubling milieu that Brazil’s Congress is attempting to pass Bill 6,969 — the so-called ‘Sea Law‘ — which would establish the National Policy for the Conservation and Sustainable Use of the Brazilian Marine Biome (PNCMar). After stalling for six years, the bill is slated for approval in September, which would make it the first proposal of the ‘green agenda’ to make it to a floor vote in the House of Representatives this year.[restricted]

In fact, this month is set to see a series of these so-called ‘green votes,’ with bills related to the carbon credit market, climate change, and, above all, fighting deforestation. The latter is seen as the most important legislative proposal for environmentalists and agribusiness sectors. 

This move toward approving environmental legislation is Congress’ message to the Jair Bolsonaro administration and the mounting criticism it has received for its perceived neglect of the Amazon Basin. In June, House Speaker Rodrigo Maia set up a working group among lawmakers to discuss green proposals.

Between August 2019 and July 2020, deforestation in the Amazon grew 34 percent in relation to the previous 12 months, according to data from the National Institute of Space Research (Inpe).

As The Brazilian Report has covered in the past, the Brazilian government is accused of doing nothing to avoid damage to the environment, and even encouraging deforestation and other criminal activities in the Amazon.


Expanded protections

The rapporteur of the Sea Law, federal lawmaker Túlio Gadelha, says that the bill includes “important principles” which can innovate management and instates the system of “marine space planning,” he tells The Brazilian Report.

Mr. Gadelha also drew attention to the fact that the law is the result of the efforts of civil society, based on technical and scientific studies. “The main legal framework for coastal management is from 1988, it came with the Constitution, when the level of information available about the sea was very different,” he says.

The Sea Law covers the Brazilian Marine Biome, which is defined as the ensemble of marine ecosystems in coastal zones, the continental shelf, islands, and the deep sea. If approved, the legislation would have legal mechanisms to protect environments such as Brazil’s territorial waters and exclusive economic zone, estuaries, coastal lakes, rivers and channels, mangroves, tidal marshes, dunes, and other similar areas.

The proposal involves the creation of indicators of quality and environmental health, as well as the Marine Space Plan to distribute the activities of the population in the biome. This policy will be financed by way of public and private funds, as well as environmental compensation paid by undertakings that cause damages to the sea.

International agreements

The proposed new legislation was the subject of an online debate organized by the Environmentalist Parliamentary Front. The Sea Law intends to be in sync with international accords to preserve the ecosystem, such as the Sustainable Development Goals of the United Nations.

However, Leandra Gonçalves, researcher of the Oceanographic Institute of the University of São Paulo, highlights that the legislative proposal could be improved. “When the bill was discussed, the oil spill in the Northeast had not happened. We can learn something from this situation to make this law something more innovative, up to date, and legitimate to allow us to have coastal governance in Brazil.”

Marcia Hirota, executive director of environmentalist NGO SOS Mata Atlântica, adds that the involvement of states and municipalities is of utmost importance. “The country developed with its back to the sea. It’s not possible for us to fail to reconcile the agenda of conservation and the uses [of the biome], and above all, to make it so that the people who live in these regions or adore the sea may also work toward the development of the country in these regions.”[/restricted]

Categories
Brazil Daily

Brazil’s half-hearted plan to reform civil service

Today, we break down Bolsonaro’s administrative reform — and its shortcomings. Brazil’s industry recovers slightly. Embraer announces layoffs. And Brazil reaches 4 million coronavirus cases.

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Breaking down Brazil’s administrative reform proposal

In yesterday’s Daily Briefing, we anticipated that the government’s proposed administrative reform would be anything but bold. [restricted]Instead of a detailed plan to overhaul the rules of Brazil’s public service, the administration instead presented broad principles — trusting a Congress that is highly sensitive to the civil servants’ lobby to fill in the gaps and decide on the specifics.

  • More than that, it was underwhelming to see that a reform supposedly aimed at curbing spending on wages and pensions would not affect members of Congress, judges, prosecutors, or the military — the crème de la crème of Brazil’s public service.

What changes if the reform passes as is:

  • Rock-solid job stability for civil servants would be drastically reduced. Only “typical careers of state” would be entitled to this benefit, and only after a three-year probation period. Today, only a court order or strict disciplinary procedure can remove a public service worker from his/her post. Since 2003, just over 7,500 civil servants have lost their jobs, mainly due to involvement with corruption. 
  • The proposal also curbs many of the perks servants are allowed to incorporate into their salaries — adding up to what the Economy Ministry called “super salaries.”
  • The president would have enhanced powers over the government’s structure and wouldn’t need congressional approval to enact changes that don’t raise public spending. The head of state would be allowed to slash positions, reshuffle vacancies, and reorganize job descriptions.

Yes, but … In a move to make the reform more palatable to Congress, President Jair Bolsonaro stated that current servants won’t be affected. This means that the reform would only have a significant impact on public spending after around ten years. While the government claims it wants to trim spending on servants, it also changed a report restricting the recruitment of new ones.

  • By all means, some areas of the government do need more staffers, but the government’s lack of transparency and coordination makes one think that the right hand doesn’t know what the left is doing.

The size of the problem. According to a 2019 World Bank report, Brazil spends 15 percent of its GDP on wages and pensions. In some states, it takes up almost 80 percent of total revenue.


Brazilian industry improves, but loses worldwide importance

For the third consecutive month, Brazil’s industrial output rose in July, increasing 8 percent. Data suggests a widespread improvement, with 25 of 26 surveyed segments showing positive results. However, calling this a “recovery” would be a stretch, as output remains 6 percent below February levels, after dropping 9.3 and 19.5 percent in March and April, respectively.

Why it matters. Longer comparisons are negative for the Brazilian industry, but there is one major silver lining: the sector has initiated a recovery (albeit a slow and long one) before services companies and will help the country post better GDP results in Q3.

Yes, but … Brazilian industry has lost its importance in terms of worldwide output. In 2019, it accounted for 1.24 percent of global industrial production — a rate that dropped to 1.19 percent over the past year. Brazil is now the 16th-largest industry in the world — behind countries such as Mexico, Indonesia, Russia, Taiwan, Turkey, or Spain.

  • Brazil’s share of the global industrial output has declined since the mid-1990s, according to the National Confederation of Industry, a process that was intensified by the 2014-2016 recession.

Embraer announces massive layoffs

Brazilian jet-maker Embraer announced on Thursday that it will be cutting 2,500 jobs — 1,600 of which will happen through a voluntary redundancy program. The company claims the move is a direct consequence of the aviation crisis sparked by the coronavirus — as well as of the failure of a USD 4.2-billion merger deal with Boeing, the completion of which was also affected by the pandemic.

Why it matters. In Q2 2020, Embraer posted its worst financial results in 20 years, with BRL 1.6 billion in losses. In that period, the company delivered only four commercial planes and 13 executive jets, against 26 and 25, respectively, in Q2 2019.

Boeing. The São José dos Campos-based company spent BRL 485,000 toward integration with Boeing — money that was lost after the U.S. planemaker pulled out of the deal, claiming Embraer failed to meet requirements. The Brazilian manufacturer disputes that claim and has filed a lawsuit in the U.S., seeking compensation.

Labor issues. Unions initiated a strike after saying the decision was unexpected and uncalled for. However, layoffs have been on the cards for Embraer for years. In 2017, consultancy firm McKinsey drew up a restructuring plan to simplify the planemaker’s structure for better financial results. The plan was only partially followed at first, but should now be resumed.

  • Embraer was the sole major planemaker not to have announced major cuts. Boeing and Airbus, for instance, announced they will each slash over 15,000 jobs.

Gaslighting as Brazil reaches 4 million coronavirus infections

Brazil has become only the second country to surpass the mark of 4 million confirmed Covid-19 cases. Meanwhile, 124,614 people have died of the disease. Only the U.S. has worse tallies than Brazil — and even so, Brazil’s testing data is low and inaccurate, which has led most scientists to state that the true totals are much bigger. 

  • Still, President Jair Bolsonaro once again patted himself on the back, saying his response to the pandemic was “unparalleled.” He mentioned the use of hydroxychloroquine as a testament to his success in dealing with the coronavirus. The antimalarial drug, however, has no proven positive effect on Covid-19 patients.

Slowing down. Recent data suggest that the spread could be slowing down. It took Brazil 25 days to go from 3 to 4 million cases — two days longer than its transition from 2 to 3 million. Moreover, new deaths and infections saw a slight drop in August. While experts celebrate the positive numbers, they warn that the curves are still plateaued at a high level. 

Diplomatic defeat. Former Health Minister Nelson Teich was reportedly not selected as one of the Latin American representatives in the investigation into the World Health Organization’s response to the pandemic. Instead, Colombia and Mexico will represent the region.


What else you need to know today

  • Rio. After the Superior Court of Justice confirmed the suspension of Governor Wilson Witzel, his understudy, Cláudio Castro, has pleaded with the Economy Ministry for an extension of federal aid to the state. Rio was granted six additional months, during which the government will analyze the request. Until then, one should expect Mr. Castro to bend over backward to please Jair Bolsonaro’s political group in the state.
  • Economy. The Economic Activity Indicator by think tank Fundação Getulio Vargas (IAE-FGV) — an index that seeks to anticipate economic trends based on official data — suggests the Brazilian economy grew 1.4 percent in July. In the three-month period ending in June, IAE-FGV shows a 4.4-percent drop when compared to the three months ending in April. “Despite the numbers being very negative, they show improvement from the changes observed in June,” said the think tank, in a statement.
  • Impeachment. Rio de Janeiro Mayor Marcello Crivella managed to escape a fourth attempt to open impeachment proceedings against him. In a tight 25-23 vote, the City Council voted against the request, keeping the mayor’s job safe. Mr. Crivella is accused of hiring civil servants with the sole purpose of preventing journalists from exposing the city’s health crisis. These workers, nicknamed “Crivella’s Guardians,” have been shown to bully citizens who choose to speak with reporters.[/restricted]
Categories
Power

Bending the rules to counter rule-bending Bolsonaro

Jair Bolsonaro is an easy target for politicians and detractors. The Brazilian president is crass, uncultivated, and is usually seen defending the indefensible — such as supporting the rollback of environmental controls in the Amazon, shrugging at the deaths of over 100,000 people from the coronavirus, or threatening to launch a self-coup. Mr. Bolsonaro actively tries to undermine democratic institutions and his actions have given other political actors in Brazil something of carte blanche to bend the rules to their self-interest, providing the justification is to “counter Jair Bolsonaro.”

On the grounds of containing the president’s “penchant for authoritarianism,” the Supreme Court is about to allow House Speaker Rodrigo Maia and Senate President Davi Alcolumbre to circumvent the Constitution and pull off a highly controversial move to enable their own re-elections in 2021.[restricted]

In a letter sent to the court last week, Mr. Alcolumbre claimed that a 1997 constitutional amendment allowing presidents, governors, and mayors to serve a second consecutive term may also be applied to the heads of the Senate and House of Representatives. The law states that re-election rights are granted to the heads of federal, state, and municipal executive branches, and “those who have succeeded them.” In Mr. Alcolumbre’s view, the fact that the House Speaker and Senate President are number two and three in the presidential line of succession would allow them to extend their terms.

As The Brazilian Report has previously covered, the elections for the heads of each congressional house are highly consequential processes, as the Speaker and Senate President both have agenda-setting powers. Moreover, the Speaker is the sole person who can initiate impeachment proceedings against a sitting president. 

They can be a government’s best friend — or its worst enemy.


The rules of congressional elections

The rules for electing congressional leaders are complicated. Re-elections are not permitted — but there is a loophole. Lawmakers are elected to four-year terms — but each chamber’s directive board gets two-year terms. So, a Speaker could technically be re-elected if their two terms came in separate legislatures, i.e., after retaining their seat in a general election.

As the next general election is in 2022, that particular loophole will be sewn shut for 2021. But that isn’t stopping Messrs. Maia and Alcolumbre from angling for another two years in charge.

The former has excelled in his ‘creative interpretation’ of the congressional rulebook, cherry-picking which directives to follow, according to his political ambitions. 

He became Speaker in 2016, when disgraced former Congressman Eduardo Cunha — who occupied the chair at the time — was arrested for corruption and impeached. Rodrigo Maia was re-elected in 2017, claiming his first year didn’t really count due to the exceptional circumstances of his ascension. Then, in 2019, he was properly re-elected, using the aforementioned legislature loophole, and promising this term would be his last. Now, he appears to have changed his mind.

bolsonaro maia
Rodrigo Maia in 2017. Photo: Ag. Câmara

Bad practices with good (?) intentions

Aiming at preventing Messrs. Maia and Alcolumbre’s push for re-election, the right-wing Brazilian Labor Party (PTB) filed a lawsuit in the Supreme Court trying to reinforce the regulations that prevent mid-legislature re-elections for the heads of Congress. The move was aimed to please President Jair Bolsonaro — who has had his fair share of conflict with the duo — especially Rodrigo Maia.

But this could backfire and pave the way for a turning of the tables that could play in the favor of the Speaker and the Senate President, in which the Supreme Court could greenlight their re-election. In the words of one justice who spoke to The Brazilian Report, the court is leaning toward permitting re-election, due to “concerns about the president’s authoritarian impulses” and its willingness “to uphold democracy.”

Mr. Bolsonaro is already barely controlled by the existing democratic checks and balances, and insiders fear that having an ally in charge of the House and/or Senate could give him even more power. 

The problem with that reasoning is that political stakeholders are themselves engaging in the behavior they fear from President Bolsonaro. Last year, the Supreme Court launched a highly contested investigation into the spread of fake news against its members — a probe that evolved into something much broader — a case in which its justices are victims, judges, jurors, and executioners.

And in Congress, Messrs. Maia and Alcolumbre are tearing up the rulebook, under the excuse that they are acting as a “buffer” to Mr. Bolsonaro’s worst impulses.[/restricted]

Categories
Podcast

Explaining Brazil #123: Reducing business complexity in Brazil

This week’s episode, Reducing business complexity in Brazil, was supported by AMEC, the Brazilian Association of Investors in Capital Markets. AMEC brings together around 60 institutional investors from Brazil and abroad — which have a combined portfolio of over USD 130 billion.

It was also supported by AirYourVoice.com, a platform that offers an SEO Mastery course which will make your company’s website the top-ranked in your field, in no time at all. 


The Brazilian Institute of Geography and Statistics has just published Brazil’s second-quarter GDP numbers. The results were slightly worse than anticipated — and the bar was already set very low, to begin with. Brazil’s economy shrank by an eye-watering 9.7 percent, as a direct result of strict quarantine measures enforced in late March and April.

Still, there are some silver linings to take away from the results. But experts condition their optimism to the approval of structural reforms to reduce public spending, simplify regulations, and improve the business environment.

Listen and subscribe to our podcast from your mobile device:

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On this episode:

  • Rodrigo Zambon is the managing director of the TMF Group in Brazil, a service provider in administrative support for businesses looking to expand operations internationally. 

Background reading:

Do you have a suggestion for our next Explaining Brazil podcast? Drop us a line at podcast@brazilian.report

Don’t forget to follow us on Twitter and Facebook.

Categories
Power

Sex, drugs, and gospel music: Brazil’s madcap soap opera politics

This week, Brazil has been engrossed by a true crime soap opera that would make Game of Thrones screenwriters blush. Flordelis de Souza, a federal lawmaker and former gospel singer, has been implicated in the assassination of Evangelical pastor Anderson do Carmo, her adopted son-turned-son-in-law-turned-husband. Nine of Ms. Souza’s 55 children — of which 51 are adopted — were arrested this week, and she only remains at liberty thanks to her parliamentary immunity.

Besides the sordid details of the case, including a bizarre number of failed assassination attempts and the morbidly on-the-nose Google searches of one of Ms. Souza’s children — including “assassin where to find,” “poison to kill a person that is lethal and easy to buy” — the affair is an illuminating look into the bonkers aspect of Brazilian politics.[restricted]

As it happens, this particular case might not even make it into the top ten of scandals involving sitting members of Congress.

Brazil’s lower house — where Flordelis de Souza sits — has seen its fair share of convicted criminals, scam artists, murderers, alleged drug traffickers, and all conceivable types of scandalous individuals who make full use of their parliamentary immunity. 

Infamously, former Senator Arnon de Mello — whose son Fernando Collor de Mello went on to become president — shot a colleague on the Senate floor in 1962. He was never prosecuted and was re-elected twice before his death in 1983.

In the late 1990s, it was revealed that federal representative Hildebrando Pascoal was a high-ranking drug dealer in his home state of Acre, and that he also led a brutal death squad. The grisly torture methods he used on rival drug dealers earned him the nickname “Congressman Chainsaw.”

Brazilian politics has long surpassed the country’s famous telenovelas in terms of sheer sleaze and intrigue, but there is a reason that Congress attracts such a large amount of rogues and mavericks, and it lies in the design of Brazil’s political system and the notoriously weak political parties it has generated.

Demented soap opera politics

Brazil has an open proportional system with no effective mechanism for party representation in the legislature based upon large electoral districts. The political system, as a result, is permanently trapped in a swamp of weak fragmented parties sometimes characterized as “coalition presidentialism” — meaning that the president must cobble together a coalition that is not party-based in order to pass anything through Congress. 

This system encourages voters to support candidates based on their personal qualities, and makes it more advantageous for politicians to cultivate direct relationships with the electorate, rather than through a party. 

A grand total of 30 parties hold at least one seat in Brazil’s Congress. Another three have no representatives, and several others are vying for approval from electoral courts. The vast majority of these parties lack any discernible political identity, and have become notorious for having potentially the most misleading names in world politics.

Flordelis de Souza, for instance, holds a seat for the non-socially democratic Social Democratic Party (PSD). In fact, upon its creation, the party’s chairman famously said the PSD was “neither on the left, or the right, or in the center.”


Brazilians, in turn, have little party loyalty — with few exceptions — and are generally conditioned to approach voting with a certain degree of cynicism. Name recognition can be enough to gain you a seat in the Congress. The lack of faith in the political system also turns voters on to what they see as “protest votes,” that is, picking joke candidates as a way to flip off traditional leaders.

In 1959, Rio de Janeiro cast over 100,000 votes for Cacareco, a female rhinoceros living in the city’s zoo. She ended up winning the race, though unfortunately non-humans are not allowed to take office in Brazil.

Fifty years later, São Paulo elected famous clown Tiririca to Congress with over 1.3 million votes. His campaign consisted of running comedy sketches in the place of party ads, with a slogan saying that things simply “couldn’t get any worse.”

But that kind of statement backfires, due to the country’s proportional system — in which the number of seats a party gets depends on its share of the overall votes.

Given the widespread disillusionment with politics and politicians in the country in the wake of what now seems to be a permanent political crisis in Brazil, the tradition of demented soap opera politics is more or less an institutional part of politics in Brazil.[/restricted]

Categories
Coronavirus

Pro-Bolsonaro congresswoman hospitalized with Covid-19

Conservative Congresswoman Carla Zambelli has been admitted to a private hospital in Brasília, six days after announcing she had tested positive for coronavirus. A loyal supporter of President Jair Bolsonaro, Ms. Zambelli, upon announcing her diagnosis to her followers last Tuesday, said she was symptomless and had begun taking hydroxychloroquine. The anti-malarial drug has no proven effectiveness in treating Covid-19 but has repeatedly been touted by Mr. Bolsonaro as a potential cure for the disease.

Later in the week, however, the representative claimed she was suffering from severe body aches and had trouble sleeping. The DF Star hospital in Brasilia issued a statement saying Ms. Zambelli is in a stable condition.


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Categories
Opinion

The role of religion in Brazilian politics

In Brazilian electoral politics, there are rules to try and even the playing field, punishing candidates who win their races thanks to the unfair use of money — labeled an “abuse of economic power” — with impeachment. This week, the country’s Superior Electoral Court tried a case which would decide the level of scrutiny religious leaders would face when running for office. They would decide whether or not to create the crime of “abuse of religious power,” and if it should be an impeachable offense. The case was brought up by Supreme Court Justice Edson Fachin, who believes that religious leaders are overstepping their roles and using faith as a vote-whipping tool.

Justice Fachin, however, lost in a 6-1 vote. 

His peers say that the current rules, as they are, already regulate such transgressions. Moreover, Justice Alexandre de Moraes, who voted with the majority, said “one cannot transform religion in absolutely neutral movements without political participation and legitimate political interests.” His words echo those of South African Archbishop Desmond Tutu, who once said he was confused about which Bible people were reading when they said that religion and politics do not mix.[restricted]

But the discussion has become a hot-button issue in Brazil, especially since the rise of Evangelical churches as major power brokers in Congress and — with the ascension of Jair Bolsonaro to the presidency — in the federal government.

In fairness, religion has always been a part of politics in Brazil, from slave revolts led by Muslims in 19th-century Bahia, to the role of liberation theology in the resistance to the military dictatorship. According to a recent Pew Research Center survey, 84 percent of Brazilians believe that faith in God is necessary in order to have moral values, meaning that religion and religious values play a key role in how Brazilians make political decisions.

It is necessary to go beyond the surface level in analyzing the current role of religion in Brazilians politics. The Brazilian Report dug into the research and spoke to leading experts in the field to break down the role of religion in politics.

Religion in Congress: the “Bible caucus”

For decades, Brazil held the title of being the “world’s largest Catholic country.” Being Brazilian was almost synonymous with being Catholic, even for those who did not attend mass. There was even a name for these non-practicing not-so-devotees: Census-only Catholics.

Since the 1950s, however, Brazil has been experiencing a rapid demographic change. The country’s urbanization process was followed by another phenomenon: the surge of Evangelical Christianity. Brazil’s Evangelical population exploded from just four percent 40 years ago to nearly one-quarter of the population. It would not be surprising if next year’s census shows Evangelical Christians as comprising over 30 percent of Brazilians.

And while Mr. Bolsonaro is a Catholic, he often professes his faith in evangelical churches. In 2016, he was baptized into the Assembly of God Church by a preacher who is also the leader of the Social Christian Party. His electoral win placed religious activists in the cabinet in a way never seen before in Brazil. Damares Alves, a former secretary within the congressional evangelical caucus, is now Family, Women, and Human Rights Minister — the ‘Family’ element was shoehorned in as a concession to the evangelical community. But religious leaders were also placed in key positions related to policies targeting indigenous groups, populations which many churches seek to convert. 

Earlier this year, Ricardo Lopes Dias, another Evangelical Christian pastor, was appointed as head of Brazil’s indigenous affairs agency Funai — and missionaries were granted special permission to enter indigenous territories, despite there being a raging pandemic that is killing an average of over 1,000 Brazilians every day.

In Congress, Evangelical Christian candidates went from winning 12 of the House’s 513 seats in 1982 to snatching up 82 seats in 2018. Alongside the rural caucus and the so-called “bullet caucus” — made up of pro-gun and public security lawmakers — the Evangelical bench is one of the top three most powerful interest groups represented in Congress. 

And while that growing influence is linked to the growth of their religion, it is also true that Evangelicals were also empowered by the dictatorship — which saw them as a useful buffer against communists and left-wing elements within the Catholic Church.

The Evangelical caucus not only has its own distinct social agenda — anti-abortion, anti-LGBTQ rights, anti-secular education — but is also a well-organized group with a strong political strategy. And they know how to pick a winner. 

As sociologist Liz McKenna told The Brazilian Report, “the majoritarian evangelical bloc has never been on the losing side of a presidential campaign in Brazil since the end of the dictatorship. From Fernando Collor, in 1989, to Jair Bolsonaro, they always chose the candidate who ended up winning.” In 2018, big-name televangelists began endorsing Mr. Bolsonaro late in September, helping push his poll numbers from 33 to 48 percent.

It is wrong, however, to assume Evangelicals are a homogeneous group, either in terms of demographics or politics. 

While it might seem like Evangelicals would be natural allies of Brazil’s right-wing political parties, they served for over a decade as some of the left-wing Workers’ Party’s most reliable allies. In 2002, Evangelical leaders held a campaign barbecue in Rio de Janeiro to show support for Luiz Inácio Lula da Silva, who heads a party associated with more progressive politics, such as LGBTQ- and abortion rights.


There is no such thing as a free barbecue, however, and the support of the Evangelical caucus came at a price. The Workers’ Party gave their churches freedom to expand without having to worry about the taxman. As The Brazilian Report showed last week, the Workers’ Party government also promoted the expansion of Brazilian churches in Africa.

More importantly, churches were granted the opportunity to take responsibility for distributing welfare on behalf of the government in poor communities. “At least in the city of São Paulo, public health and social assistance policies created during the Lula administration were being managed by social organizations controlled by Evangelical churches,” Ruy Braga, a sociologist at the University of São Paulo, tells The Brazilian Report. “For the recipients of these public policies, Evangelical churches were more often associated with the Bolsa Família program or even with the role of community health agents than with the distant federal government.”

That arrangement was more of a benefit to Evangelical churches than the state vis-à-vis public opinion. Religious groups became seen as their benefactors, rather than the federal government. 

Now, the Evangelical caucus is trying to leverage its political power into taking over institutions such as public education and welfare distribution, along with getting tax breaks and support for their media ventures. 

The politics of the base

Low-income areas were once seen as the domain of groups belonging to Catholic Liberation Theology. Radical priests would deliver the social gospel to the poor and build a base for social change. This strategy operated in conjunction with trade unions and other civic organizations. Social gospel and the organizing work of Liberation Theology were key to the formation of the Workers’ Party. 

Now, however, Evangelical churches in these same communities push forward their own version of the prosperity gospel — according to which wealth is a sign of God’s favor. Moreover, preachers say donations to the church and the community result in wealth coming back to people.

One of the ways to understand the rise of the Evangelical churches, particularly on the periphery of Brazil’s major cities, is to see them as rising in response to declines in other forms of civic association and organizations — in particular trade unions.

Brazil’s trade unions are a pale shadow of their former selves, they no longer strike fear into the hearts of governments and big business. Though the union-founded Workers’ Party won four successive elections, Brazil’s trade unions were already in a state of demobilization and steady decline. And, after the 2017 labor reform, compulsory union dues were done away with, robbing these groups from their main revenue source.

The country’s largest trade union federation — the Central Union of Workers (CUT) — went from collecting BRL 60 million per year from its members to just BRL 3 million. 

Meanwhile, Brazil’s Evangelical churches rake in an estimated BRL 88 million per day. Moreover, the congregants are loyal and dedicated to their beliefs. As Liz McKenna points out, 89 percent of Evangelical Christians contribute regularly to their church through tithes.

Part of this shift can be explained by the social trends during the boom years of the 2000s while Lula was in office. The millions that gained access to higher education for the first time or could finally afford a television or fridge saw this as a result of their own individual success and godliness, rather than government policy. The Workers’ Party increasingly promoted the idea of a rising middle class rather than building workers’ power. Prosperity gospel, which preaches that material success is connected to spiritual virtue, found appeal among many of those who believed they had finally moved into the middle class.

Formerly with Lula, now with Bolsonaro

Once organized communities loyal to the Workers’ Party with an active trade union presence, were no longer the focus of base building or political organization. That left a civic vacuum that evangelical churches increasingly filled. The labor market in Brazil has increasingly shifted to forms of informal employment: the typical worker in 2020 risks their lives riding their motorbike for a delivery app or works in a call center, and they are not unionized. 

As Ruy Braga tells The Brazilian Report, “Evangelical churches are social hubs, where people make friends and take part in cultural activities, at least as much as they are places of worship. This is especially the case for poor black and multiracial women who are generally deprived of such spaces, many of whom are the mothers of young men victimized by gang and police violence.”

Religious spaces in Brazil are syncretic, members are not particularly loyal to the social agenda of the Bible bloc and move between different denominations and spiritual beliefs. They are also the sites of welfare distribution and social services. As a result, these social spaces and those that occupy them often join radical leftist social movements rather than right-wing middle-class social movements. Evangelicals, for instance, form a key part of the base of the two largest movements in Brazil: the Homeless Workers Movement (MTST) and the Landless Workers Movement (MST). 

Guilherme Boulos, the MTST leader and the radical leftist candidate in the 2018 elections, points out that ‘the largest part of our base, of the MTST, is by far, [made up of] Pentecostal Evangelicals. It’s wrong to think that all Pentecostals are conservative. (…) The phenomenon underneath is much more complex.” The average member of this radical social movement is a black woman in her 70s who regularly attends a Pentecostal church.

Religion in Brazil is a complex phenomenon. It is a mistake to generalize or reduce it either to its most radical or venal exponents. Religion can never be divorced from politics, in the sense that its idioms and expression are key not only to how people view and interact with the world, but how people organize to change it both for the better and the worse.

While the Electoral Court may have struck down the move to render the abuse of religious power during elections a crime, Brazilians and Brazil-watchers should pay close attention to the political maneuvering of Evangelicals. Mr. Bolsonaro is currently enjoying his best polling yet since he took office and Evangelicals form perhaps the strongest and most organized section of his base. 

People turn to religion during times of uncertainty, suffering, and crisis, like the terrible pandemic we are living through currently. As The Brazilian Report has shown, the state has abandoned poor Brazilians who are both those most likely to die from Covid-19 and are bearing the worst of its economic consequences. As a result, these people are turning to religion for solace. 

It seems highly likely given that churches provide not only community and social services, and that the Evangelical churches are the ones that predominate in much of the periphery, that their reach and power will almost certainly increase as a result.[/restricted]

Categories
Brazil Daily

Senators unfreeze civil servants’ pay. Guedes calls it a “crime”

We’re covering a Senate decision on civil servant salaries that is set to affect the government’s austerity platform. Projections for Brazil’s economy improve, but the population is still pessimistic. And the government threatens to postpone the census for another year.

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Senate unfreezes civil servant salaries in bad omen for government’s cost-cutting plan

The Brazilian Senate struck down[restricted] a presidential veto that blocked pay raises for civil servants in 2020 and 2021. The move broke with a deal struck between Congress and the government back in April: lawmakers agreed to freeze public servants’ salaries in exchange for a BRL 125-billion plan of financial aid for state and municipal governments.

Why it matters. Unfreezing salaries would generate extra costs of BRL 98 billion according to government experts. And it spells a bad omen, as Congress is prepared to vote on other presidential vetoes that, if struck down, will create a major fiscal impact to an already cash-strapped administration.

Senate President Davi Alcolumbre and Economy Minister Paulo Guedes. Photo: Pedro França/Ag.Senado
Senate President Davi Alcolumbre and Economy Minister Paulo Guedes. Photo: Pedro França/Ag.Senado

How it happened in the Senate. We explain how this entire process unfolded:

  • At odds with the speaker of the lower house, Rodrigo Maia, Economy Minister Paulo Guedes made sure the agreement over a bailout to states and cities would be drafted in the Senate. But without the backing of the speaker, the sole condition for the aid — freezing public servants’ pay — was met with resistance when it reached the House.
  • At that point, government whip Major Vitor Hugo proposed an amendment creating several exceptions to the freeze. President Bolsonaro, however, vetoed that change and the bill was approved as Mr. Guedes had intended.
  • On Wednesday, the government was “blindsided” by the Senate, in a move a furious Mr. Guedes called a “crime against the people.”
  • “Let’s hope the House saves the day,” said the Economy Minister — who now depends on the efforts of Speaker Rodrigo Maia, the very man he tried to undermine in April.

Bottom line. From start to finish, this episode is a textbook example of how the government is incapable of pushing its own agenda in Congress, despite Jair Bolsonaro having recently applied a heavy dose of horse-trading in his administration. Moreover, it shows that the massive administrative reform Paulo Guedes defends is a dream distant from reality. 


Investors are growing more optimistic about the economy. Workers are not

As we showed in yesterday’s Daily Briefing, Brazilians are growing more optimistic about the pandemic, with more people saying they believe the coronavirus spread is improving rather than getting worse. However, this optimism has yet to spread to the economy. 

By the numbers. According to pollster Datafolha, 4 in 10 Brazilians believe the country’s economic scenario will get worse in the near future, expecting a rise in unemployment, inflation rates, and a steep loss in purchasing power. 

  • Only 29 percent believe in an improvement of economic conditions. In December 2019, that rate was at 43 percent.
  • Pessimism is more common among populations with more precarious positions in the job market: women (46%), 16-to-24-year-olds (45%), low-income workers (42%) — but also among those with a college education (46%).

Meanwhile … Investors and market analysts are improving their forecasts for Brazil. The Central Bank’s Focus Report — a weekly survey among top-rated investment firms — showed an improvement in GDP growth predictions for the seventh straight week: from -6.54 percent late in June to -5.52 percent now.

  • Credit Suisse changed its projection for Brazil, forecasting a -5.2 percent growth rate for 2020 (previously at -6.5 percent). “We have argued that economic activity might be positively surprising thanks to the high level of fiscal and monetary stimuli and the flexibilization of social distancing measures,” wrote economists Leonardo Fonseca and Lucas Vilela.
  • Consultancy Capital Economics also revised its projections upward for Brazil, from -7 to -5 percent in 2020. It projects a 10-percent retraction for Q2, followed by a 7-percent expansion in Q3 to offset some of the losses. “Recent data — such as surveys and energy generation numbers — suggest the recovery continued in July and August,” wrote William Jackson, the consultancy’s chief economist for emerging markets.

Government’s plan makes no census

The pandemic has made the 2020 census impossible — and it was pushed back to 2021. Now, however, the federal administration is willing to postpone for yet another year and use the money (around BRL 2.3 billion — USD 414,000) to beef up Brazil’s defense budget.

Why it matters. The census is much more than just a headcount. It represents the best source of data to assess how Brazilians live, being particularly important to municipalities, which rely on the data for everything from health planning to districting — and determining the allocation of federal funding.

  • It is also used by investors and international agencies to assess Brazil in comparison to other countries.

What they are saying. The government is using the pandemic card to call for the postponement, an argument that does hold water. Data collection relies almost entirely on in-person interviews, with 180,000-plus pollsters expected to visit 71 million households.

Yes, but … Members of the Brazilian Institute of Geography and Statistics warn that the move would waste the money that has already been spent in preparation for the upcoming census. Temporary workers who have already been trained will have to be demobilized and the database of addresses to be visited will have to be updated again.

  • More importantly, though, is the fact that this postponement would leave Brazil relying on outdated numbers from 2010 to draft public policies.

Problems. The next census has already been surrounded by controversy, after the government decided to trim down the questionnaire in order to make it more cost-effective.


What else you need to know today

  • Oil and gas 1. In July, deepwater pre-salt oil reserves accounted for over 70 percent of Brazil’s overall oil and gas production for the first time ever. Per the country’s National Petroleum Agency (ANP), Brazil produced 3.89 million barrels per day.
  • Oil and gas 2. Brazil’s Securities Commission will decide on a case next week involving state-controlled giant Petrobras, dating back to 2016. Former President Dilma Rousseff, her then-Finance Minister Guido Mantega, and several other board members are accused of not observing their fiduciary duties with investors in their handling of the Abreu e Lima oil refinery. Due to incompetence and corruption, it ended up costing the company eight times more than its initial USD 2.3 billion budget.
  • Labor. The government is expected to issue a decree extending the possibility of companies suspending workers’ contracts or slashing their hours and salaries for another two months. The rule aims at reducing layoffs and preserving some form of stability in the job market. According to the Economy Ministry, 16.2 million settlements between professionals and companies have been reached.
  • Layoffs. Volkswagen plans to cut 35 percent of its workforce in Brazil, amounting to layoffs of 5,000 people, including workers on production lines and in administrative offices.
  • Stimulus. The government has issued a three-month extension to an aid program to help small companies to weather the crisis, and President Jair Bolsonaro has signed a law earmarking an extra BRL 12 billion for it.
  • Diplomacy. Argentinian Ambassador to Brazil Daniel Scioli said that his boss, President Alberto Fernández, is ready to bury the hatchet with his Brazilian counterpart Jair Bolsonaro. The two have not seen eye to eye in many issues, and have exchanged harsh words in the press in the past. Mr. Scioli says Buenos Aires wants a direct line with the Brazilian government in order to push for a common agenda in infrastructure and winemaking regulations.
  • (No) Transparency. Just two days after recording the highest amount of new daily coronavirus deaths, the government of Brasília has decided to change its data disclosure proceedings. Authorities say that, in order to “avoid uneasiness” among citizens, their daily reports will only include the number of deaths that occurred over the previous 24 hours — not the entire count of deaths confirmed on a given day, including those that occurred before. This is expected to significantly skew the data, artificially lowering death tolls. The federal government tried to pull the same move in June, but the Supreme Court forced it into making all data public.[/restricted]
Categories
Power

Brazil’s 2021 budget: can the belt get any tighter?

The Jair Bolsonaro administration is expected to present its 2021 budget proposal to Congress by the end of August. After the major increase in public spending and plunge in economic activity due to the Covid-19 pandemic, there are more pressing needs on the government’s plate than there are resources available to fulfill them. With behind-the-scenes squabbles underway in Congress over next year’s budget, early drafts suggest that education and health will lose out, while defense is set to be the big winner.

The budget plan obtained by O Estado de S.Paulo newspaper shows that the Defense Ministry is expected to have a 48.8 percent increase in its budget, reaching BRL 108.56 billion in 2020. If confirmed, that would top the BRL 102.9 billion earmarked for the Education Ministry — being the first time Defense received more money than the education system in a decade.[restricted]

The Health Ministry — with an increased budget of BRL 174.84 billion in 2020 to fight off the pandemic — should be left with just BRL 127.75 billion to spend as of January 1, even with the risk of the coronavirus crisis running on into 2021.

The report points out that the amounts suggested are preliminary figures and may be adjusted by the government until August 31, the deadline to deliver proposals to Congress.

Budget constraints

The room to grow the federal budget is limited by Brazil’s forced spending cap, a fiscal rule that means increases in government expenses and investments are restricted to the rate of inflation. When 2020’s budget was approved, the consumer inflation index was expected to reach 3.53 percent; in the 12 months ended in July, it reached 2.31 percent, according to national statistics bureau IBGE.

As we reported in our August 10 story, there is mounting pressure to ignore the spending ceiling rule — an impeachable offense — inside and outside the government, which would be a clear change from the Economy Ministry’s reformist liberal agenda. Factions of the administration are pushing for a breach in fiscal rules in order to progress infrastructure investments which, as reporter José Roberto Castro explained, could facilitate President Bolsonaro’s reelection in 2022.  

The government is now looking for alternatives to increase spending without bursting through the federal ceiling. Among them, emergency budget credits are being analyzed, especially a BRL 5 billion grant for infrastructure projects that could reactivate the economy.

However, these are exceptional credits released to cover unexpected expenses, in public calamity situations such as wars or pandemics. It is also true that, in recent years, such credits have also been used for non-emergency needs. 

Plus, strategies such as including Bolsa Família beneficiaries in the government’s emergency coronavirus salary program — paid for through emergency credits permitted by the so-called “War Budget” — left the BRL 29.5 billion previously directed to the cash transfer program free for allocation.

Another pressing issue is that, besides dealing with regular budgetary needs in 2021, Brazil will be faced with an enormous Covid-19 bill to be paid. According to the latest bulletin by the Economic Policy Department of the Health Ministry, BRL 505.4 billion has been spent on the Covid-19 fight — 7.3 percent of the expected GDP for 2020. This will push the federal government’s primary deficit to a record BRL 800 billion, an astonishing 11 percent of forecasted GDP for the year.

Shockwaves through the market

As we mentioned in our August 18 Daily Briefing, the tug-of-war concerning the budget is causing volatility in markets, as investors fear Economy Minister Paulo Guedes could protest calls to increase spending and resign. Among the financial class, Mr. Guedes’ liberal agenda is seen as a cornerstone of the government, and rumors of his departure caused benchmark stock index Ibovespa to plunge on Monday.

Both Mr. Guedes and President Bolsonaro moved to extinguish the flames: the former reaffirmed his trust in the president and the latter assured Mr. Guedes would stay put. The remarks propelled Ibovespa’s 2-percent jump on Tuesday, also helped by the strong performance of retail stocks, rising above 100,000 base points.

But the real problem, as O Globo newspaper reports, lies in public bonds and the management of sovereign debt. As the fiscal situation worsens, investors are demanding higher premiums for Brazilian bonds, forcing the National Treasury to issue bonds with a shorter expiration date. 

As a result, internal debt increased to BRL 4.15 trillion in July 2020, with an average of 3.6 years to pay. One year before, Brazil had an average of 4.06 years to repay debt of BRL 3.82 trillion. 

It is important to remember that Brazil is currently living in an environment of low inflation and interest rates, which helps hold debt down. However, in the market, the spread in the bond’s yield curve is widening significantly: while bonds due January 2021 offer a 1.8 percent yield, those that mature in January 2030 charge a 7.5 percent yield. 

Naturally, long-term bonds demand higher premiums than short-term maturities, but such a distance in yields suggests expectations of steep hikes in interest rates — and, therefore, a higher public debt in the future.[/restricted]