The week ahead in Brazil #31

Short term trends

What is happening in Brazil?

1. Almost 148 million Brazilians will vote for mayors and city councils on Sunday (15) in more than 5,000 cities. Votes are cast electronically, and some results are likely to be known very fast. In 95 cities, where there are more than 200,000 voters, there might be a runoff for mayor on 29 November. It will be an important gauge of the support to the Bolsonaro administration.

The Brazilian President, Jair Bolsonaro, made several harsh declarations this week. First, on Tuesday (10), Mr Bolsonaro said it was “another win for Bolsonaro”, referring to the fact that the Brazilian Health Regulatory Agency – Anvisa suspended the Coronavac tests, because of the death of one person, but it had no relation to the vaccine and was registered as a suicide. Anvisa soon allowed the resumption of the tests, conducted by the state of São Paulo. Previously, Mr Bolsonaro announced that the Federal Government would not buy the “Chinese vaccine”, and any vaccination would not be mandatory. Second, Mr Bolsonaro said that “when saliva runs out, it requires gunpowder”, in an implicit reference on possible criticism of the US president-elect Joe Biden’s declarations about the Amazon region. He also mentioned that Brazil must stop being a “country of sissies”, regarding the response to Covid-19. Third, on Thursday (12), Mr Bolsonaro affirmed that anyone thinking to expropriate lands due to environmental crimes would be fired, unless it is not possible. He was referring to studies made under the Amazon Council, headed by the Vice-President, Hamilton Mourão. Lastly, Mr Mourão said that he understands, in a personal capacity, that Joe Biden won the US presidential election, and that the US-Brazil relationship is stable and positive. Mr Bolsonaro remains not acknowledging the performance of Mr Biden, causing another reaction of the president.

A recent poll showed a decrease in the government’s approval ratings. It has fallen to 45% from 52% in a month.

2. On Friday (13), a Central Bank survey revealed an increase in economic activity in Brazil. The Minister of Economy, Paulo Guedes, showed optimism with the creation of 300,000 formal jobs, and said the economy is set to a solid recovery, which will likely attract foreign investors. Brazilian stocks have drawn R$7.8bn (£1.1bn[1]) in foreign investment in November.

There are growing concerns over rising inflation, but Mr Guedes downplayed it as a temporary movement, affirming there is no risk of hyperinflation. However, he caused a stir by saying an extension of the emergency payments is certain if there is a second wave of Covid-19.

3. The Brazilian government is supporting the Clean Network, a US-led initiative to create a digital privacy and data protection alliance. One of its goals is to exclude China’s Huawei from the 5G network infrastructure in several countries. Brazil’s auction of its 5G network is set to happen next year.

The brief interruption of the Coronavac raised suspicions of political interference over Anvisa.

The president’s prohibition to discuss the study from the Legal Amazon National Council, headed by the VP Hamilton Mourão, is becoming a recurrent pattern in Mr Bolsonaro’s management style. Nonetheless, in October, deforestation rose in the Amazon region in comparison to 2019.

How to read it?

1. This was a week of political dismay. Mr Bolsonaro spearheaded political attacks in every speech he gave over the week. Some analysts attributed this sudden change to his previous behaviour to the victory of Joe Biden in the US elections, which he resists to acknowledge, while others say it is related to the corruption charges on his son, Senator Flavio Bolsonaro. It could be anything, as a matter of fact, including the fact that his political support to some municipal candidates is not having the same miraculous effect as it had in the 2018 elections. By increasing the conflict factor, Mr Bolsonaro is spending his political capital in issues that are not connected to the approval of reforms, solving the fiscal situation or improving measures to tackle the Covid-19 pandemic.

Apart from that, his presidential coalition is down a few points. Despite his positive approval ratings, the decrease is a reason for attention. Mr Bolsonaro will have to return to a low conflict mode and to engage politically to improve his legislative coalition. Until then, the current combination of factors creates an unfavourable political scenario, meaning that the government has now more difficulties in approving its agenda.

2. Following the report from last week, the economic activity continues to give positive signs of recovery. While that alone is not a sign of a solid trajectory, it is encouraging to observe that the fiscal challenge and the shortening of the public debt are at the centre of the government’s agenda. Additionally, the stock market is somehow booming, creating momentum for the Brazilian economy, but it is more related to the US election and the prospect of a vaccine. Despite all the fuzz, the fiscal aspect continues to require close watching. Monetary policy continues to perform consistently.

3. The persistent interference of Mr Bolsonaro in the policymaking process is a paradigm backlash. As said in previous reports, this is one of the worst metrics in the public management factor. The lack of situational awareness and explanatory models to the policymaking process makes evident a preference to group thinking and mirror imaging. In plain words, the Bolsonaro administration is not fostering the scrutiny of its decisions or the search for warning failures to reach maximum effectiveness. It is up to what he wants, instead of what it should be. Events might unfold accordingly to the adequacy of the situational awareness and the explanatory soundness, but the administration fails to look for negative or positive evidence in policymaking as it chooses to not estimate sound explanations for the decisions. Therefore, estimations of public management are negative now.

[1] £1.00 = R$7.20

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