The Week Ahead in Brazil #62

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 Pandemic CPI approved last week, several requests. Senators heard the former Secretary of Health of Amazonas, Marcellus Campelo, the former governor of Rio de Janeiro, Wilson Witzel, and health experts. This week should appear before the CPI, the federal deputy Osmar Terra (MDB-RS) on Tuesday (22), and the international advisor of the Presidency of the Republic Filipe Martins on Thursday (24). The rapporteur of the CPI, Senator Renan Calheiros (MDB-AL), announced the transformation of 14 witnesses into investigated. The list includes former Health Minister Eduardo Pazuello, the current holder of the portfolio, Marcelo Queiroga, among others.

On Wednesday (16), in Brasilia, centre parties held a meeting to assess the feasibility of converging projects for a third way in the 2022 presidential elections. The meeting occurred through the articulation of the former deputy and former Minister of Health, Luiz Henrique Mandetta, affiliated with the DEM. On the left-wing spectrum, the governor of Maranhão, Flávio Dino, announced his departure from PCdoB and decided to join PSB. Federal deputy Marcelo Freixo left PSOL and is also joining PSB.

The Senate approved, by 42 votes in favour and 37 against, the Provisional Measure (MP 1.031/2021) that enables the privatisation of Eletrobras. As the senators approved modifications to the text, the MP returned to the Lower House for a new vote. As the MP must be approved until the 22nd, when it loses validity, the House scheduled a deliberative session to analyse the matter for Monday (21), at 3 pm.

On Saturday (19), there were protests against President Jair Bolsonaro (no party) in about 400 cities in Brazil and abroad. The call for the acts was articulated by political parties, social movements, trade union centres, student bodies and other groups. Overall, they called for Bolsonaro’s impeachment, more vaccines and emergency aid. The adhesion to the protests increased.

2. Economy – President Jair Bolsonaro said that the average monthly value of the Bolsa Familia would be adjusted from R$190.00 (£27.00) to R$300.00 (£42.74)1. The announcement surprised technicians working with the forecast for the new value of up to R$250.00. Moreover, the extension of the emergency aid for another three months seems to have been defined.

The Monetary Policy Committee (Copom) announced a new 0.75 percentage point increase in the basic interest rate, as expectey by the market. It is the third consecutive increase by the Brazilian Central Bank, raising the Selic from 3.50% to 4.25%. The Central Bank stated that inflationary pressure is more significant than expected. Analysts say that the tendency to increase interest rates should occur in other Latin American countries.

The value of the dollar continues to fall, a movement caused by the excess of international liquidity, the performance of exports, the rise in interest rates and the improvement in the fiscal framework. The exchange rate appreciation is a factor that may mitigate the increase in food prices.

3. Public administration – The deforestation rate in federal conservation areas increased 312% between May 2020 and May this year. Possible causes include increased criminal activity in native areas, as well as the decrease in the number of employees of the Instituto Chico Mendes de Biodiversidade (ICMBio), the agency responsible for the supervision of protected forests.

The relationship between Bolsonaro and his vice-president, Hamilton Mourão, remains strained. Mourão gave an interview to Estadão on Sunday (20). He claims to be isolated, does not participate in ministerial meetings and does not know what happens in the presidential palace.

On Saturday, Brazil registered 500,000 deaths as a result of Covid-19. On Thursday (17), Brazil hit a record-high applying 2.2 million vaccine doses against Covid-19.

1 £1.00 = R$7.03

How to read it?

1. The political trend remains neutral. There were no significant changes in popular support nor in the presidential coalition, and the week was without records of major institutional conflicts.

The CPI of the Pandemic has advanced to a stage where it can cause problems for the government. In practice, those investigated could be denounced to the Public Ministry and, eventually, be prosecuted. Senators should increase the tone of criticism of the government with this week’s testimonies.

The best aspect of the political component is the presidential coalition, which remains solid and robust. The approval of the Eletrobras MP is a sign of its good functioning in Congress. It should not be affected by the incipient articulation of a third way or by Saturday’s protests, partially articulated by the opposition. The CPI has also not yet managed to undermine the strength of the coalition.

2. The economy remains on a positive trend. The increase in the Selic rate shows that the monetary authority takes the inflationary issue seriously, although there is criticism that the measures came with some delay. The appreciation of the Real against the dollar should continue for the coming weeks.

A point of attention should be the fiscal issue. Encouraged by the positive results and re-election in sight, Bolsonaro is eager to expand state spending. The increase of Bolsa Família, the extension of the emergency aid and the exclusion of public servants from the administrative reform are only three items on a long list of options that will be assessed in the coming months.

3. Public management remains on a negative trend. The dysfunctional relationship between Bolsonaro and Mourão is terrible for the administration. Even more so because Mourão has been a more moderate element, with good transit among foreign ambassadors. The issue with Pazuello and Salles was the factor that put a final distance between the president and the vice-president. The management at the Ministry of the Environment also continues to display poor management.

The CPI reveals that the government may have erred on two fronts in the management of the pandemic: it was slow in acquiring vaccines, fast in obtaining chloroquine, and negligent in communicating good practices to the population.

Finally, despite the great tragedy of the 500,000 deaths by Covid-19, it deserves to be celebrated that vaccination advances in Brazil, thanks to the SUS capacity.

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