The Week Ahead in Brazil #64

What is happening in Brazil? 

1. Politics – Deputy Luis Miranda (DEM-DF) revealed, on Tuesday (29), who received offers of bribes not to hinder the negotiations of Covaxin. He claims that the government leader in the House of Representatives, Ricardo Barros (PP-PR), was present during one of the meetings to address the issue.

The parliamentary inquiry committee (CPI) heard Carlos Wizard on Wednesday (30). Supported by habeas corpus, he did not answer questions from senators. Luiz Paulo Dominguetti Pereira, a representative of Davati Medical Supply, a drug company, testified to the CPI on Thursday (1). He reaffirmed that the director of Logistics at the Ministry of Health, Roberto Ferreira Dias, asked for a US$1.00 bribe per dose of the AstraZeneca vaccine to be purchased by the ministry. Dominguetti also showed audio in which, allegedly, Deputy Luis Miranda would be trying to broker the purchase of vaccines from Daviti. Miranda said the audio was about the purchase of gloves, not vaccines.

An impeachment super petition against President Jair Bolsonaro was filed on Wednesday (30). The request, which several parties and movements filed, brings together 23 charges against the President. There are 124 other impeachment requests awaiting deliberation by the speaker of the Lower House, Arthur Lira.

Minister Rosa Weber of the Supreme Court (STF) authorised the opening of an enquiry to investigate President Jair Bolsonaro (no party) for the crime of prevarication. The case is related to the case presented by the Miranda brothers in the CPI of Pandemic.

On Saturday (3), there were demonstrations against President Jair Bolsonaro (no party). The acts occurred in more than 300 cities in Brazil and 35 abroad. In June, the acts were smaller, having occurred in 210 Brazilian cities and 14 abroad.

In the Federal Senate, there will be concentrated effort, starting Monday (5), to vote on authorities.

2. Economy – The Institute for Applied Economic Research (Ipea) released a new forecast for the GDP in 2021. The new estimate raises the GDP from 3% to 4.8%.

The ratio of public debt to GDP continues to decline. Data for May shows a drop in gross debt for the third consecutive month, dropping to 84.5% of the GDP.

The National Electrical Energy Agency (Aneel) authorised a 52% increase in the value of the red flag 2 on the electricity bill.

On Monday (5), the government should publish the extension of emergency aid for another three months.

Brazil registered the creation of 281 thousand formal jobs in May, surpassing specialists’ projections.

3. Public administration – Data from Inpe (National Institute for Space Research) reveal that the Amazon region had the highest number of forest fires since 2007. A total of 2,308 fires were registered.

William J. Burns, head of the CIA, the US intelligence agency, was in Brazil for meetings with ministers. The subjects discussed were not officially announced, but there were reports that regional security and China may have been subjects of the meetings.

How to read it?

1. The political trend remains negative. The Pandemic CPI was slow to bring trouble to the government, but the scenario where it wreaks havoc on the government is more plausible than ever. This development seems to have a negative effect on the coalition. There has been no significant change in the government’s approval or rejection ratings. Bolsonaro has avoided conflict this week.

The Pandemic CPI has reached a point where it causes damage to the government. The narrative that corruption exists in the government – regardless of whether it is accurate or not – is a fait accompli, at least for now. No wonder that this week two of those involved in the Covaxin and Davati cases will be heard. In other words, the forecast for the week is that the corruption narrative will continue to wear down the government. Meanwhile, the government leader in the House of Representatives, Ricardo Barros, is trying to be heard in the CPI, but senators are delaying his hearing.

Although it still has favourable conditions in Congress, especially in the Chamber of Deputies, the government feels this pressure. The opening of the investigation against Bolsonaro, the super request for impeachment and the increase in demonstrations add political problems to the government. Some government parliamentarians may be seen to be less willing to defend a weakened government. This negative aspect, as stated above, is mitigated, in part, by the growth in the economy and the expansion of vaccination.

2. The economy remains on a positive trend. The forecasts for GDP growth, the decrease in public debt, the reduction in the primary deficit and new hiring favour the economic environment. Nevertheless, the fiscal risk is still present, and inflationary pressure generates concerns.

There may be a correlation between the advance of vaccination and GDP growth projections. July and August will be months in which vaccination will advance significantly in Brazil, which is a positive factor. However, the intense pressure for increased spending, both those related to the pandemic and those aimed at boosting government approval, may bring fiscal difficulties. In addition, the increase in electricity will increase the inflation rate.

3. Public management remains neutral. Three points deserve analysis. First, in the environment, there are still no indications that governance has improved. However, this is expected – because the transition takes time to generate effects, both practical and in terms of image -, the news of the increase of forest fires in the Amazon is terrible. Second, the health management may have had some advantage with the testimony of the public servant Luis Ricardo Miranda in the CPI of the Pandemic. It may be that managers will decide more by technical criteria and less by Bolsonaro’s decision, improving our metric of administration paradigms. Third, the CIA chief’s interlocution with government members is a potentially positive aspect, especially in counter-terrorism, drug trafficking and cybersecurity. Issues related to preventing Chinese participation in the 5G auction, should they have been on the agenda of the meeting as reported in some media outlets, could be detrimental to Brazil regarding cost and speed of implementation.

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