The Week Ahead in Brazil #61

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. Politics – The parliamentary inquiry committee (CPI) held four meetings last week. The Minister of Health, Marcelo Queiroga, the former Deputy Minister of Health, Antonio Elcio Franco Filho, and scientists Natalia Pasternak and Claudio Maierovitch were heard. The governor of the state of Amazonas, Wilson Lima, was scheduled to be heard, but his appearance was prevented due to a writ of habeas corpus. In addition, several requests for new convocations and communications data of several people were approved, including information from Ernesto Araujo, Eduardo Pazuello and Filipe Martins.

On Friday (11), President Jair Bolsonaro sneaked into a commercial aircraft at Vitória, the capital of the state of Espírito Santo. Passengers inside the aircraft expressed support and offences regarding Bolsonaro. On Saturday (12), President Jair Bolsonaro attended an event with motorcyclists in São Paulo. The demonstration gathered thousands of people, along with several politicians and ministers, including Ricardo Salles, the Minister of Environment. The São Paulo government fined Bolsonaro and other members R$552.71 for not wearing masks.

XP/Ipespe poll reveals that 50% of voters consider the government as bad or terrible. This is a record-high and was only reached in May 2020. For 25%, the government is good or great, and 22% consider the administration as regular. Without the option “regular”, disapproval rises to 60% and approval to 34%.

On Tuesday (8), Senator Fernando Bezerra (MDB-PE), government leader in the Senate, was indicted by the Federal Police for receiving bribes.

2. Economy – Studies by the Center for Public Leadership (CLP) show that the inclusion of military personnel, parliamentarians, judges and prosecutors in the administrative reform could generate savings of R$31.4bn (£4.35bn)1 in ten years. These categories were not considered by the government in the reform proposal.

The Minister of Economy, Paulo Guedes, confirmed that the government decided to extend the emergency aid for another 2 or 3 months. Details were not disclosed. 

The Secretary of the National Treasury, Jeferson Bettencourt, said that the improvement in the fiscal framework is the result of consistent government work, that the public debt/GDP ratio should end 2021 at around 84% and that there could be a primary surplus as early as 2024.

Inflation in May, at 0.83%, exceeded market expectations and reached the highest level for the month in 25 years. In the last 12 months, the accumulated rate stood at 8.06%, above the median projection of 7.92%. The cost of gasoline and the electricity bill pushed the index. Adolfo Sachsida, the Economic Policy Secretary at the Ministry of Economy, says the high is temporary and inflation will end the year within the inflation target.

3. Public administration – The Army has classified as secret for up to 100 years the administrative process to investigate the participation of General Eduardo Pazuello in the demonstration in Rio de Janeiro on May 23. The Army claims that the process contains personal data and that, therefore, the secrecy is legal. Pazuello argued that the event was not political, and the Army dismissed the case.

The former mayor of Rio de Janeiro, Marcelo Crivella (Republicanos-RJ), was invited by President Jair Bolsonaro to be Brazil’s ambassador to South Africa. According to several newspapers, the government has already requested agrément from the African country. If South Africa grants the agrément, Crivela still needs to be approved by the Senate.

The Federal Audit Court (TCU) suspended for 60 days the official who prepared a report underestimating the deaths by Covid-19. The text was cited by President Bolsonaro. The case was sent to the Federal Police for investigation.

President Jair Bolsonaro said he had asked the Ministry of Health for an opinion on the possibility of exempting people already vaccinated or already infected from wearing masks in the country. After criticism, Bolsonaro said the decision on the requirement is up to mayors and governors.

1 £1.00 = R$7.21

How to read it?

1. The impact of politics on the policy-making process remains neutral. The parliamentary inquiry committee (CPI) continues to dominate the national news agenda but has yet to have any real impact. Popular support for President Bolsonaro remains solid, as does the political coalition that provides support to his administration in the House and Senate, and institutional conflicts are low.

The breach of secrecy approved by the CPI may cause political attrition for the government, a possibility that must be carefully observed. Advisors to senators evaluate that the information obtained should contribute to the construction of a timeline that shows, especially, the relationship between the so-called “members of the parallel cabinet” and the events that occurred in relation to Covid-19, such as the purchase of vaccines. In addition, there is a risk that they will bring negative political surprises for Bolsonaro’s allies.

Both Bolsonaro’s appearance in the aircraft and Saturday’s “motorbike ride” are important thermometers of the president’s popularity. In the first case, in an environment where it can be considered as a sample of the Brazilian middle class, the political division in Brazil is evident, with more or less half of the passengers supporting or criticising Bolsonaro. In the second case, an event to show support, it is also possible to conclude that his support base is solid, engaged and numerous.

The voting agenda in the Senate and the House continues to signal that the presidential coalition has worked reasonably well, especially in the House. There has been a strong rumour that senators are pressing President Bolsonaro to expand his space in the Executive.

2. The economy remains on a positive trend. Although the high inflation in May is unfavourable for the economy as a whole, the statement that it is temporary and should converge towards the target by the end of the year makes sense. Inflation should continue to pressure the Selic rate and contribute toward the appreciation of the Real against the dollar.

The lower fiscal risk, international liquidity and trade results are factors that contribute positively to the advance of the economy. This perception is confirmed, for example, by the decline in the perception of Brazil’s risk at the international level, which also contributes to the appreciation of the local currency.

3. Public management continues in a negative trend. Part of this is due to Bolsonaro’s excessive interference in technical issues, especially those related to fighting the pandemic. His comments on the use of masks and medications create confusion in the population, weaken the efforts of health professionals, reduce the leadership of the Minister of Health and ultimately increases healthcare costs. All in all, it does not help.

Two other issues weighed on the leadership and paradigm factors. First is Crivella’s appointment to the Brazilian embassy in South Africa, motivated primarily as a signal to secure the support of the evangelical caucus. Analysts warn that this discourages Itamaraty’s professional staff and could represent a conflict of interest. In addition, there are legal proceedings against Crivella that, despite his good political transit in the Senate, could weigh against him at the time of voting.

The presence of Salles in Saturday’s event next to the President is also a bad sign for the management. The Minister of the Environment is being investigated by the Federal Police for having contradicted, in a broad sense, several technical and legal norms. He seems, if found guilty, to have forced his will over technical decisions. By rewarding him with public demonstrations of support, Bolsonaro signals to the administration that his decision is the one that counts, regardless of the evidence that supports decision-making in public policy.

Finally, in most cases in which the evaluation of the administration’s trend becomes negative, this occurs mainly due to two factors: Bolsonaro’s excessive interference in public policymaking – a marked trait of former president Dilma Rousseff – and the exaggerated support for problematic figures for public administration – as has been the case with Pazuello and Salles. Federal civil servants, in their vast majority, are very well qualified and prepared for the formulation and management of public policies, and the picture would be worse if it were not for the counterpoint they make in the administration.

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