The week ahead in Brazil #32

Short term trends

What is happening in Brazil?

1. The first round of elections for mayors and city councillors on Sunday (15). “Centrão” parties, such as PP, PSD and Republicanos, now control more cities than before, indicating a possible return of “old politics”, as many victories came from known and experienced candidates. In 57 cities, including Rio de Janeiro and São Paulo, there will have a second round on 29 November.

A black man was beaten and asphyxiated by security guards at a Carrefour supermarket in Porto Alegre. It was on the day before the national Black Consciousness Day, and witnesses recorded it. It generated a series of protests. Both the Brazilian President, Jair Bolsonaro, and the Vice-President, Hamilton Mourão,  said it was not a case of racism, generating massive criticism on social media, TV and newspapers.

Mr Bolsonaro travelled to the state of Amapá to assess the widespread electrical blackout, now lasting over 19 days. The President of the Senate, Davi Alcolumbre, who is from Amapá, travelled with the president. They announced that the Senate approved compensation to consumers on Thursday (19), but Lower House also has to approve it. Mr Bolsonaro also travelled to the state of Goiás to give more than 3,000 land ownership certificates to small farmers.

2. The funding of the Renda Cidadã social programme continues without definition. Adding to that, Mr Alcolumbre’s pressure for a form of financial aid to the inhabitants of his home state, Amapá, considering the electric blackout. Mr Guedes is in charge of finding a way.

The National Treasury Secretariat released the public debt scenarios up to 2029. In all of them, the settings are challenging. The Governor of the Brazilian Central Bank, Roberto Campos Neto, expressed his concerns over the public debt, in the same direction of Felipe Salto, director of the Independent Fiscal Institution, a Senate unit.

The Brazilian government extinguished two state-owned companies, Casemg and Cod­omar. The Ministry of Economy released a full report on 46 other companies, and officials say privatisations will speed up now.

3. The Ministry of Education executed 32% of the budget destined to resume classes in municipal schools. In another programme, to expand high-speed internet to classrooms, the execution reached 44%.

A federal judge suspended directors from the Brazilian Electricity Regulatory Agency (Aneel) and the Brazilian Electric Systems Operator (ONS). The suspension was set to last 30 days, attending a request from Senator Randolfe Rodrigues, to ensure an impartial investigation over the widespread electric blackout in the state of Amapá.

The state of São Paulo received on Thursday (19) the first lot of Covonavac, one of the Covid-19 vaccines. Hidden in an undisclosed location, the 120,000 doses are waiting for the approval of Anvisa, the Brazilian Health Regulatory Agency.

How to read it?

1. Mr Bolsonaro and his advisers are assessing the outcome of the municipal elections and to what extent it affects the government’s agenda. One possible way to read it is that Mr Bolsonaro, still without a party, will become more dependent on the presidential coalition. It could mean a more favourable scenario for the government’s agenda, but “Centrão” parties usually pursue more funds from the government, not less. They’ll pressure for more money to the cities they now control. Furthermore, it is more likely that they will try to expand their footprint in ministries and state-owned companies, rather than to support a smaller and liberal state, including the privatisation of big state-owned companies, such as Correios. However, some reforms might have a better chance now.

Still recovering from last week’s political conflicts, the government had a less conflicting week. Mr Bolsonaro and Mr Mourão could have addressed the death of a black man more constructively. Not only they denied the existence of racism in Brazil, as they did not mention his beating and death. However, this discourse resonates amongst their supporters. Moreover, there was no indication of changes in his popular support.

2. While the economic activity continues to provide signs of recovery, the government will have to decide over social programmes anytime soon. That is challenging with the current fiscal scenario, not to mention the shortening public debt. Besides that, the government is likely to sanction a form of compensation to inhabitants of Amapá. It is also worth noting that, if there is another Covid-19 wave, public spending will increase.

The government needs to find ways to spend less, to increase revenue and to attract foreign direct investment (FDI). The closing of the two companies is positive, not only because it is very difficult to end any form of public organisation, but because it also creates momentum and saves financial and management resources.

3. The paradigm of the Bolsonaro administration is not giving signs of improvement, as it overly relies on a more closed decision policymaking process. Last year, the government created a committee to revise public policies, but this initiative remains insufficient to improve the policymaking process.

Besides that, the low budget execution at the Ministry of Education is a reason for concern, and it is likely that many other government units are in a similar situation. In a ministries shuffle, political parties, such as the ones from the presidential coalition, could claim those with low performance and big budgets to themselves.

The Judiciary’s decision to suspend some directors from the electric regulatory agency is a serious problem for the overall public management. It creates institutional confusion and alarms foreign investors.

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