The Week Ahead in Brazil #59

The Week Ahead in Brazil #58 - Political trend stays neutral (Eletrobras vote, CPI, FHC and Lula). Economy advances (GDP, reforms advance). Management starts to suffer (Salles and Bolsonaro).

#politicapublica #analisisepolitica #gestaopublica #economiapolitica
Short term

What is happening in Brazil? 

1. PoliticsThe parliamentary inquiry committee to investigate the federal response to the pandemic (CPI) approved several requests last week, including the hearing of nine governors, former Health Minister Eduardo Pazuello and the current one, Marcelo Queiroga. This week, Nise Hitomi Yamaguchi is due to be heard on Tuesday (1), and other experts will provide medical clarifications on Wednesday (2).

The Minister of Economy, Paulo Guedes, is scheduled to appear on Monday (1) at the Covid-19 Temporary Committee to discuss the National Immunization Plan (NIP). On Tuesday (2), Mr Guedes is expected to attend a meeting of the Education Commission of the House of Representatives.

There were demonstrations against the government on Saturday (29) in several cities.

Senator Flavio Bolsonaro announced disaffiliation from the Republicans party on Wednesday (26).

2. Economy – The government is studying exempting motorbikes from tolls. The measure is criticised by technicians and federal highway concessionaires. The exemption, if implemented, will represent an increase in costs for other vehicle categories.

The month of April recorded 121,000 new jobs with signed employment contracts. The number is 9.6% lower than the number of new hirings compared to March, when the balance of hirings reached 184,000.

Estimates for GDP growth continue to rise, with forecasts ranging from 4.3% to 5%. New market projections assess that public debt in 2021 could be around 85% of GDP, way better from the 95% in previous forecasts.

With May’s current account results, the Brazilian Central Bank projects that the accumulated deficit, over 12 months, will be the lowest since 2008.

3. Public administration – General Eduardo Pazuello’s participation in the demonstration in support of President Bolsonaro last Sunday (23) prompted the opening of disciplinary proceedings in the Army. Active-duty military personnel are prohibited from participating in political events.

On Wednesday (26), the vice-president of the Republic, Hamilton Mourão, said it was “rude” for the Minister of Environment, Ricardo Salles, or any representative of the portfolio, to be absent from a meeting of the National Amazon Council. Salles has been avoiding public appearances since he was targeted in a Federal Police operation previous week on suspected corruption involving timber exports.

How to read it.

1. The political trend for the week remains neutral. The Pandemic CPI continues not to generate significant political impact contrary to the government. Last week, the issue that drew the most attention was the testimony of Dimas Tadeu Covas, director of the Butantan Institute, as he revealed delays by the federal government in deciding on a vaccine purchase in July 2020

The presidential coalition remains strong and some changes may occur. Senator Flavio Bolsonaro’s decision to leave the Republicans indicates intense political negotiation for Bolsonaro’s membership in some party willing to accommodate the president and his son. There has also been no increase in institutional conflicts and popular support for the president remains stable.

2. The trend for the economy remains positive. Forecasts made by the market continue to be revised and point to a more robust economic scenario. The 2021 GDP should show important growth compared to the estimates made at the beginning of the year. Equally important is the improvement in the public debt in relation to the GDP. As mentioned by Mansueto Almeida, chief economist at BTG Pactual, at the CEO Conference Brazil 2021 event last week, the Bolsonaro government should be the first to conclude its mandate with primary expenditure lower than that received from its predecessor since 1988. By any measure, it will be a major economic achievement, with impacts on the election itself.

3. Public management is on a negative trend. While there is consensus among military personnel that Pazuello has breached Army regulations, there is pressure from the government for the Army commander not to punish him. I have heard many versions about what would be behind Pazuello’s participation in the motorbike ride. Some analysts have explored the idea that it would be a Bolsonaro’s strategy to achieve, in practice, the politicization of the Armed Forces. I would not rule out this hypothesis, but it seems to me too conspiratorial to be true. In any case, it is a bad sign, both Pazuello’s participation and the pressure to spare him from punishment.

The situation of Minister Ricardo Salles is hindering the full development of environmental public policies in Brazil and damaging the country’s international outlook. He still enjoys broad support from parliamentarians and, unless some hard evidence against him emerges, Salles should not be removed from office for the time being. As mentioned in other TWAs from last year, the decision-making process on environmental issues is fragmented, confused and fails to make progress on public problems. The inclusion of the Amazon Council in this system, as expected, has not reversed this trend.



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