The week ahead in Brazil #21

Short term trends

What is happening in Brazil?

1. The government presented a Constitutional Amendment Proposal to reform the public service on Thursday (3), the so-called “administrative reform”. It sets a lower salary for future public servants from the Executive branch, but some government careers were left out of the proposal. Moreover, if approved, statutory personnel will be subject to dismissal, and the president will have more power, including the possibility to shut down public units by decree, instead of requiring legislative approval.

Rodrigo Maia, the speaker of the Lower House, said on Thursday (3) that his connection with the government is Luiz Eduardo Ramos, Minister of Government. The statement was made after Paulo Guedes, Minister of Economy, prohibited his secretaries to attend meetings with Mr Maia.

The Lower House approved the new regulatory framework for natural gas (PL 6407/13). Now it needs to be approved by the Senate.

2. The government’s budget for 2021 was sent to Congress on Monday (31). It sets lower budgets for education and health, and higher ones for defence and economy, for example. 

The government extended the emergency payments in four instalments of R$300 (£42), half of the current value of R$600. 

The second quarter of 2020 revealed a retraction of 9.7% of the GDP. Reports say the economy is now what it was back in 2009. In 2008, the retraction was 3.8%. 

The administrative reform was sent without mentioning the fiscal impact. The government says it is because lawmakers will probably make changes to the proposal. 

3. The Ministry of Health appointed a veterinarian as the head of the national vaccine programme. Eduardo Pazuello, a general, continues as acting minister.

Hamilton Mourão, the Vice-President, said the Army is helping to fight environmental crimes in the Amazon region because the environmental units do not have the capacity. Mr Mourão acknowledged that the government did not act as fast as it should have done. Another report draws attention to other environmental problems in the region, such as illegal mining. Ricardo Salles, the Minister of Environment, is searching for political support, after protesting publicly against a budgetary decrease.

Deltan Dallagnol, the lead prosecutor of the “Lava Jato” operation, resigned from his post. He is under scrutiny for his actions from Augusto Aras, the attorney-general, and he is facing growing political opposition. Following his resignation, other prosecutors have resigned as well.

How to read it?

1. Mr Bolsonaro has managed to sustain the popular support, with the extension of the emergency payments. And he managed to impose a symbolic round value, instead of a more technical proposal, which is politically significant. The harsh remarks against reporters were tuned down. The political coalition with Centrão”, the bloc of centre-right parties, seems to be functioning as well, and the government is not in open conflict with the Legislative and the Judiciary. 

At the Legislative, the political friction between Mr Maia and Mr Guedes has not transformed into a conflict against the government, but it needs attention. The fiscal and administrative reforms are at the National Congress, and new developments in the next couple of weeks will show how the government can conduct political negotiations. 

2. The economic trend remains neutral. Mr Guedes seems unlikely to departure for the time being. While he did not manage to keep a lower value for the emergency payments, it was predicted in previous weeks. Some analysts say the economy is not worse because of these payments. Besides that, not only the presentation of Mr Guedes was well conducted last week at the joint committee, as was he delivered the administrative reform, another promise he was able to fulfil.

What might trigger the trend to negative is whether the government decides to smash the ceiling of expending or trying some exotic manoeuvre. Remains unknown how Mr Guedes will address the selling of the public companies in the next weeks.  

3. As the Ministry of Economy is trying to pass an administrative reform, it is unlikely to improve the public service in the short term. The other two areas of concern, the environment and the public health, continue to underperform, with unclear directions or strategies.

The general resignation of public prosecutors from the Car Wash operation is not good news to the public sector in the way that it signals that the fight against corruption may suffer a setback. But, from another perspective, if the operation continues to deliver results, it may show that the fight against corruption is an institutional task, not an individual crusade.


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