The week ahead in Brazil #20

What is happening in Brazil?

1. On Sunday (23), during a visit to the Cathedral of Brasília, President Bolsonaro said to a reporter that he would like to “smash your face in”. Mr Bolsonaro was responding to a question about deposits made by Mr Fabrício Queiroz, a former aide of the Bolsonaros, in the bank account of the first lady, Michele Bolsonaro. He is being charged with handling kickbacks from the staff of the then state lawmaker Flávio Bolsonaro. On Monday (24), Mr Bolsonaro made rude remarks against reporters, calling them “wimps”, referring that they would not recover as fast as him from Covid-19.

The National Congress promulgated the Constitutional Amendment nº 108, on Wednesday (26), making Fundeb, permanent. It will fund basic education, with growing participation of the federal government, from the current 10% to 23% in 2026. Mr Paulo Guedes, the Minister of Economy, will talk on Tuesday (1) about policies related to the pandemic at a National Congress joint committee.

The Senate approved on Tuesday (25) an invitation to Mr Guedes to explain his remarks from the previous week. The minister said the Senate committed a “crime against the country” by overturning Mr Bolsonaro’s veto on the increase in some public servant’s pay. On Wednesday (26), senators decided that the Brazilian General Data Protection Law will be enacted now, upon the presidential sanction, instead of postponing it to 31 December 2020.

After six years of debate, the Lower House may vote on Tuesday (1) the new natural gas framework (PL 6407/13). It aims to modernise and expand the sector.

2. Mr Bolsonaro is pursuing ways to promote an extension of the emergency payments due to the Covid-19 pandemic at R$300 (£42). The current value is at R$600 (£84), totalling R$50bn (£6.9bn) a month. The Minister of Economy is presenting options at R$250 (£33), but Mr Bolsonaro insists on having it his way. The result is likely to be disclosed on Tuesday (1).

The government continues to work on the draft of “Renda Brasil”, the new social programme to replace the “Bolsa Família”, from the PT-era. Mr Bolsonaro’s idea is to widen the number of beneficiaries and to increase the monthly value of the benefits. On Tuesday (25), the government announced his new housing project, “Casa Verde e Amarela”, also to replace the “Minha Casa, Minha Vida”, the previous programme. 

The US announced a cut to the steel import quota from Brazil. The 2020 forecast of the public debt is at 100% of the GDP.

3. The Minister of Environment, Ricardo Salles, announced the suspension in fighting the fires in the Amazon as a consequence of a budget cut. Later, the Vice-President Mourão said Mr Salles misinterpreted a spreadsheet and expected him to think better next time. After three hours, they say the funds were released.  NASA’s Earth Observatory created a new system to detect and identify the origin of fires in the Amazon. They claim the Brazilian government’s prohibition of new burnings is ineffective.

How to read it?

1. The political trend remains positive. Despite Mr Bolsonaro’s remarks against reporters, partly reigniting his usual mood, he is not back to his previous mode. That is because of the lack of attacks against the Judiciary and the Legislative branches. Besides that, the coalition with “Centrão” and the popular support continues to be solid. 

This set of factors could potentially provide a smooth track to approve the structural reforms. The main objective is to cut public spending, either in the form of selling public companies or spending less on jobs or social programmes. The affair with “Centrão”, however, does not seem to contemplate such arrangements, neither Mr Bolsonaro is trying to discuss so soon the terms of their relationship.

2. The economic trend remains neutral but closer to negative. The monetary policy and trade results continue to be the same, despite recent news. While the pressure to spend more public money is becoming more evident, this is not new, and Mr Guedes continues committed to cut spending. It is also old news that Mr Bolsonaro wants to keep his popular support by spending more on social programmes. It is music to his ears that he can get into PT’s political territories, regions North and Northeast. 

Mr Guedes will face tough questions on Tuesday (1), but he has good chances of doing well. Also, an opportunity to further explain critical economic measures, and soften his remarks about the senators. 

3. The public management trend continues to be negative. Besides the low budgetary execution and unclear allocation of resources, the rift over the environment issue allows to assess coordination and policy impact as not good at all. The distance between what the government says and what it delivers is as far as ever before. 


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