The week ahead in Brazil #37

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What is happening in Brazil?

1. The mayor of the city of Rio de Janeiro, Marcelo Crivella (Republicanos-RJ), was arrested on Wednesday (23) on corruption charges. Later, he was put under house arrest. Mr Crivella tried reelection, and counted with the support of president Jair Bolsonaro, but was defeated by Eduardo Paes in the 2021 municipal elections.

The election for speaker of the Lower House had a new development this week, with the announcement of deputy Baleia Rossi (MDB-SP) as a contender. Mr Rossi is backed by the group coordinated by the current speaker of the house, deputy Rodrigo Maia, with the support of 11 parties. There were no major changes in the election for the Senate this week.

Mr Bolsonaro announced he is likely to veto the bill approved by the Senate that makes it easier for foreigners to buy rural areas in Brazil. He said if the Lower House approves the bill, he will veto it.

2. Tax revenue in November hit a record-high for the last six years. The Brazilian Tax Authority informed a 7.31% rise year to year, but a decrease of 7.95% in 2021 so far.

Employment figures were unexpectedly high in November, when 414,000 new formal jobs were registered. It represents a record since 1992.

3. According to a report, the Minister of Health, Eduardo Pazuello, and the president had eight meetings together since May, when Mr Pazuello acting minister, and only three one-on-one. The counting excludes public events.

Mr Bolsonaro said he has hurry to begin the vaccination campaign.

The federal government created NAV Brazil Aerial Navigation Services, the first new public-owned company since 2013.

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How to read it?

1. Apart from some remarks over vaccines, Mr Bolsonaro refrained himself from further institutional conflicts this week, and there was no change in his popular support. As the Legislative enters a period of recess, there will be no movement of bills or any formal advancement of the structural reforms up to 1 February, when the elections of the heads of both houses will occur.

The main point in politics for the upcoming weeks is the succession of both houses and to the extent to which it affects the government’s agenda. On the one hand, most political analyses enhance that a victory from the government-backed group led by deputy Artur Lira is more prone to approve the structural reforms and possible to ease the privatisation process. On the other hand, if deputy Baleia Rossi is elected, the tax reform could advance more quickly, not the structural reforms nor the privatisation process.

I tend to see those assessments with caution. Clear-cut analysis to complex processes, such as these, are rarely fulfilled, and there are numerous variables to take into account. First, Mr Lira’s group is expert in clientelistic practices, meaning that there will be pressure for politically appointed jobs in the administration and public companies in case of success. They are not beacons of downsizing public structures or making the government spend less, quite the contrary. Second, Mr Lira and the political agreement to support his candidacy is not set in stone, and commitments change all the time, meaning that the government is not getting a homogenous package and political dealings are likely to happen on retail, not on wholesale. Third, there is a question of who will cave in first, the government or the Congress. As for Mr Maia’s group, it is not much less clientelist either, but it tends to remain in opposition to the government. It is also no less heterogeneous, ranging from the far left to the far right, meaning it is not a solid block one can easily command.

Lastly, for the next two years, congress members (the whole Lower House and 1/3 of the Senate) will be laser-focused on being reelected in 2022, meaning political negotiations are set to enhance that. Structural reforms represent tectonic changes in long-established interests that have supported current congress members. In such a scenario, a valid reflection is: how many of these legislative members are willing to promote change and risk their reelections? In this context, my perception is that the 2021 and 2022 will bring a challenging time for the reforms to be promoted by the current government, regardless of who becomes the next speaker of the house.

2. The economy continues to give signs of recovery. November was a good month in tax revenue and job creation, and December is expected to follow the same positive trend. There is no reason not to celebrate that.

3. On the management side, however, metrics have not been positive most of the time, and this week was no exception. The government is unable to provide confidence to the population that its policymaking processes are adequate. With few exceptions, such as Agriculture and Infrastructure, and the Economy – to a lesser extent, most ministries seemed lost in a bubble of inefficiency. In my assessment, the Ministry of Environment and the Ministry of Health were unable to set a positive course in their respective responsibility areas.

Overall, out of the three factors I analyse in these “The Week Ahead in Brazil” reports, public management is the realm where the government has shown more control. Therefore, one cannot stop wondering why the government is choosing poor management instead of improving public policies.

I wish you all a Happy New Year!

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