The Week Ahead in Brazil #54

Short term trends

What is happening in Brazil?

1. Politics – On Tuesday (20), President Jair Bolsonaro met with business leaders from the Federation of Industries of the State of São Paulo (Fiesp). Mr Bolsonaro reinforced that vaccination is increasing and that the economy is moving forward. 

The president of the Senate, Rodrigo Pacheco (DEM-MG), scheduled the installation of the Covid CPI for Tuesday (27). The government is trying to block Senator Renan Calheiros (MDB-AL) as the rapporteur. 

The Minister of Health, Marcelo Queiroga, will attend a public hearing at the Senate. The meeting is scheduled for Monday (26), at 10:00am.

2. Economy – On Monday (19), a bill proposal (PLN 2/2021) was approved, removing expenses related to Covid-19 from the fiscal target and allowing the government to block discretionary spending in the 2021 Federal Budget. On Thursday (22), the Budget was sanctioned by Mr Bolsonaro with partial vetoes that totalled R$19.8bn.

The federal tax collection hit a record high in March, reaching R$137.9bn, an 18.5% increase compared to last March and the highest value since 1995. House Speaker Arthur Lira (PP-AL) will present the tax reform report on 3 May. The proposal aims at simplifying the tax system.

Economists attribute the persistence of currency devaluation to three factors: fiscal risk, political risk and pandemic management. The dollar reached the lowest quotation in 2 months, at R$5.45. 

3. Public administration – The University of Michigan published the book Coronavirus Politics: The Comparative Politics and Policy of COVID-19, which can be read for free on Kindle. In the chapter on Brazil, the research explains the health system in Brazil and the Brazilian context, criticizes Bolsonaro’s actions and praises the work of governors and mayors. 

On Thursday (22), Bolsonaro spoke at the Climate Summit. He stated that Brazil is a low emitter of greenhouse gases, indicated that he would increase resources for inspection actions and anticipated in ten years the goal to reach neutrality in carbon emissions. 

How to read it?

1. The political scenario remains turbulent, hindering the advancement of critical public policies. The level of conflict this week was lower than last week’s because the Covid CPI was not installed, and the situation with the Supreme Court cooled down. Moreover, Bolsonaro’s speech at the Climate Summit was positive, although there is concern regarding delivering on his promises. The negative point continues to be Bolsonaro’s attitudes and pronouncements that, although pleasing to his support base, generate criticism and resistance from more moderate groups and the main media outlets.

As for the political scenario in Congress, the government managed to delay by one week installing the Covid CPI, an important time to prepare a more consistent strategy and gather support. In addition, the government is trying to remove the rapporteur of Senator Renan Calheiros (MDB-AL), but the move is facing fierce resistance from senators. 

The government’s approval numbers have not changed significantly, with surveys showing approval rates between 25% and 30%. As mentioned in previous reports, there are positive factors to increase the government’s approval, but it is necessary to wait for the evolution of the CPI’s work and the damage it may cause.

2. The approval of the 2021 Federal Budget was positive for political economy experts and the market: the ceiling was legally preserved, the political agreement with Congress was maintained and the Minister of Economy now has a “feasible” budget. Market analysts corroborated this understanding by attributing the Real appreciation to the sanctioning of 2021 Budget. 

The fiscal risk remains relevant, but tax collection has been giving positive results. The prospect of voting on the tax reform favours economic growth, because it may bring tax collection gains for the country and improve the business environment.

3. Public management has not shown signs of effective improvement, but the capacity of the administration is not getting worse either. Despite some inaccurate data and demands for detailed actions such as deforestation targets, there was consensus that Bolsonaro’s participation in the Climate Summit was conciliatory and the reaction to the speech was positive on the part of the US government. The management of environmental policies will be under permanent scrutiny by the press, society and international organisms, which will demand a high level of accomplishing the commitments.

In other government areas, there was positive news in the Economy, Agriculture, Infrastructure. Particularly in Health, Minister Marcelo Queiroga has produced effective advances in the fight against Covid-19. Queiroga has appointed experienced Health technicians in command posts and he is in close connection with doctors and scientists, providing more legitimacy to the policymaking process. In addition, he has played an important role in interviews, such as clarifying the vaccination schedule and explaining that lockdown is a consequence of the failure to use masks and social distancing. Even though still high, there has been a drop in the number of cases and deaths resulting from Covid-19.

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