Today: Volkswagen reckons with its past. The impeachment of Rio de Janeiro’s governor. A massive merger that will challenge antitrust authorities. And the progression of the coronavirus in the country.[sc name=”shortcode_daily”]
Volkswagen apologizes for role during dictatorship
German automaker Volkswagen will pay BRL 36 million (USD 6.44 million) in [restricted]reparations and donations to the families of victims of the Brazilian dictatorship — as well as to human rights initiatives. The payments are part of a settlement that will end three criminal investigations into the company’s role in assisting the Department of Social and Political Order (DOPS) — Brazil’s former political police — which kidnapped, tortured, and killed hundreds of people.
- In a 2017 report led by Volkswagen, historian Christopher Kopper determined that the company’s security crew spied on its staff and told DOPS of any “suspect” activity. Over 100 people were directly impacted by Volkswagen’s relationship with the military.
- In 2015, Volkswagen became the first company to negotiate paying compensation for its role during that period. And, according to Mr. Kopper, “the first time that a German company accepts responsibility for human rights violations against its own workers for events that happened after the end of National Socialism.”
Why it matters. According to Brazil’s Truth Commission, created to set the record straight on human rights abuses during the dictatorship (1964-1985), over 80 companies helped turn in their own employees associated with union movements and considered to be “potential subversive agents” — including Ford, Toyota, and Mercedes-Benz.
Memory. The documents dug up by the commission, however, do not provide a complete record of state repression during the dictatorship — nor the full extent of private firms’ involvement. Many documents of the time were burned by the military or have otherwise vanished.
Rio governor’s impeachment moves forward
Rio de Janeiro’s State Congress voted in favor of submitting Governor Wilson Witzel to an impeachment trial. As with previous votes in the process, lawmakers unanimously voted against the politician, who is accused of embezzling funds intended for use in the coronavirus effort.
- Now, a committee of five lawmakers and five state judges will trial the case. Mr. Witzel’s recent political defeats suggest that the chances of him escaping the ousting are slim to none.
Why it matters. Mr. Witzel’s downfall epitomizes Rio’s political collapse. The state is living in a position of financial calamity and five former governors have been arrested since 2016.
Trivializing impeachment. By definition, impeachments should be exceptional measures but have become part of the political landscape since 2016, when Dilma Rousseff became the second president to be impeached since Brazil’s return to democracy in 1985.
- Before 2016, only two state governors had faced impeachment proceedings over the last 60 years. After Ms. Rousseff’s ousting, five governors saw themselves in that situation — three in the past few months.
- According to João Villaverde, a consultant and researcher at Fundação Getulio Vargas, “the political costs of impeachment for lawmakers has disappeared.”
What comes next. Barring a shocking twist, Rio shall continue to be governed by Cláudio Castro, a fervently religious politician who has become close to the Bolsonaro family — and is himself under investigation for corruption.
Merger in car rental sector a regulatory pickle
Localiza and Unidas, the two biggest car rental companies operating in Brazil, announced on Wednesday their intention to merge. If the deal goes through, it would create a massive BRL 48-billion firm with a fleet of over 468,000 vehicles and a footprint in 404 cities, as well as six South American countries.
- However, the merger will be a tough sell to antitrust watchdog Cade — as the two companies combine for a 47-percent market share of car rentals and fleet management, which could skew the market in their favor. Analysts say there is little chance of the deal being approved without restrictions.
- Still, markets received the news positively, with shares of Localiza rising 14 percent, and Unidas stock going up by 17 percent.
Why it matters. The car rental market boomed in Brazil as millions of people sought job opportunities working for logistics apps. But the sector was severely hit by the pandemic. Localiza’s Q2 profits dropped 53 percent, while Unidas’ net recurring profits were nearly wiped out. Together, the companies would be better positioned for a recovery.
8 percent of Brazilians have taken coronavirus tests
According to the Brazilian Institute of Geography and Statistics, 17.9 million Brazilians (or 8.5 percent of the total population) had taken a coronavirus test by the end of August. Considering that the country had 3.9 million confirmed infections during the same period, Brazil had a positive rate of approximately 21 percent — one of the highest in the world.
Why it matters. The rate of positive results is a good measure of how adequately countries are testing, as it indicates the level of screening relative to the size of the outbreak.
Lack of data. As we at The Brazilian Report have pointed out on numerous occasions, Brazil doesn’t test nearly enough people to have an accurate understanding of how the pandemic has progressed in the country.
Deceleration. In seven Brazilian states, the 7-day rolling average of new daily deaths rose by more than 10 percent between September 8 and 22. In 14 states, it decreased by more than 10 percent.
What else you need to know today
- Diplomacy. Foreign Minister Ernesto Araújo will attend the Senate’s Foreign Affairs Committee to explain the visit of U.S. Secretary of State Mike Pompeo to the Venezuelan border last week — during which Mr. Pompeo called Venezuelan President Nicolás Maduro a “drug trafficker.” The move, just 46 days before the U.S. election, was considered by lawmakers an “affront to Brazil’s diplomatic tradition” of neutrality and good relations with neighboring nations.
- Trade. The government announced trade deals with Mexico and Paraguay to boost sales of vehicles and auto parts with the two Latin American countries. According to ordinances published on Brazil’s Federal Register, the idea is to progressively reduce tariffs before scrapping them altogether in 2022.
- Environment. The Federal Prosecution Service has requested that a federal court in Brasília promptly analyze a request to remove Environment Minister Ricardo Salles from office. Signed by 12 federal prosecutors in July, the complaint accuses the minister of “purposely depleting Brazil’s environmental protection structures and policies.” During an April 22 cabinet meeting, Mr. Salles said the government should take advantage of the undivided attention of the press on the Covid-19 pandemic to “run the cattle herd” through the Amazon, “changing all of the rules and simplifying standards.”
- Inflation. The IPCA-15 price index, a predictor of the official inflation rate, rose 0.45 percent in September — the biggest bump for the month since 2012. Food products were the main culprits, continuing a trend that has been observed for the past few months — and has already worried the government about possible effects on poor populations.[/restricted]