The week ahead in Brazil #36

Short term

What is happening in Brazil?

1. After Monday’s Electoral College confirmation of Joe Biden’s election, president Jair Bolsonaro congratulated the president-elect on Tuesday (15). Mr Bolsonaro was amongst leaders waiting for confirmation.

According to Ibope, the government’s approval ratings are down from 40% to 35%, but still higher than last year, when it was at 29%. The poll shows a lower rating from Datafolha’s 37% from the previous week.

On Thursday (17), Mr Bolsonaro criticized the Federal Supreme Court’s decision that the state (federal, state or municipal) can enforce restrictive measures on people that resist against being vaccinated for Covid-19.

Mr Bolsonaro accused the speaker of the house, deputy Rodrigo Maia, of being responsible for not allowing an extra payment to be made to the beneficiaries of the Bolsa Família social programme. On Friday (18), the Minister of Economy, Paulo Guedes, said it was not possible to make the extra payment. Later, Mr Maia called Mr Bolsonaro a liar and stressed he will be an opposition in the moral agenda.

This week, the Senate approved a bill that makes it easier for foreigners to buy rural areas in Brazil. The bill must be approved by the Lower House before the presidential sanction.

Mr Maia, announced an alliance for his succession with 11 parties, including left-wing parties, comprising 281 lawmakers. Deputy Arthur Lira, the candidate supported by the government and a representative of the so-called Centrão, has the declared support of 10 parties, representing a total of 203 members. To be elected, the new speaker of the Lower House needs to have a minimum of 275 votes.

2. Roberto Campos Neto, the governor of the Brazilian Central Bank, affirmed that a broad vaccination plan would be cheaper than extending the emergency aid payments, stressing the current fiscal situation. His full presentation to Eurasia’s GZero LatAm Forum 2020 is available here.

On Tuesday (15), the Lower House and the Senate approved a bill to promote budget-balancing to states. Known as “Plano Mansueto”, the bill proposes that states with federal debts can increase the debt maturity if they adhere to a set of practices, such as cutting off subsidies, selling public companies and implementing a pension reform. The full presentation from the Ministry of Economy is available here.

The Congress approved the 2021 Annual Budget on Wednesday (16). The Ministry of Economy increased from R$230bn (£33.6bn) to R$247bn (£36bn) the Brazilian budget deficit forecast for 2021. Before the pandemic, the MoE estimated the deficit at R$124bn (£18.1bn).

Mr Guedes, the Minister of Economy, gave an interview to Veja. He adopted an optimistic view of the economy for 2021 and affirmed an institutional plan to destabilise the government was dismantled.

3. The Ministry of Health made a series of announcements related to the vaccination plan against Covid-19. There is no precise date to begin the vaccination campaign, but estimates say it will begin in February 2021.

Vice-president Hamilton Mourão said he does not talk privately with Mr Bolsonaro for quite some time.

A study from the Independent Fiscal Institution (IFI), a Senate’s organisation, showed that, out of R$573bn (£83.65bn) authorised to be used in actions against the coronavirus, the government executed R$489bn (£71.39bn).

How to read it?

1. The year is closing in a positive trend for politics. The approval ratings and popular support remain reasonably high and stable. It is plausible to predict that the president’s support will decrease after the end of the emergency payments. What is uncertain is how many points will his popularity decrease and what effect it will have on the government’s agenda.

As for the institutional conflicts, Mr Bolsonaro will face challenging weeks ahead. Regarding the STF, the decisions over the mandatory vaccination and the suspension of the zeroing of tariffs on imported firearms ignited Mr Bolsonaro’s public criticisms, calling them as inappropriate interference. With respect to the Legislative, up to the election day (1 February), there will be intense political negotiations to provide a victory to deputy Artur Lira. However, as I’ve stressed before, there is a risk that the government is betting on the wrong horse. If that is the case, the government will have tough times ahead, as the soundness of the presidential coalition, and what it will be capable of achieving, depends on that.

2. The economy is giving consistent signs of recovery. While solving the fiscal problem remains crucial, much of the fuzz created by the debates over the extension of the emergency aid or the renovation of social programmes was a dead end. Moreover, the government is unlocking initiatives to attract foreign investment, despite much resistance.

3. The public management factor remains negative. A series of mismanagements, internal conflicts, lack of direction have shown that the government needs a tighter grip on several issues. The most salient are the public health, the environment and the 5G situation. Those are crucial areas in which the government misspent time and effort, massively underperforming. Most decisions are being made regardless of stakeholders or internal scrutiny, which is a poor indicator of the policymaking process.

[1] £1 = R$6.85

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