The Week Ahead in Brazil #68


What is happening in Brazil?

1. Politics – President Jair Bolsonaro (no party) has indicated he intends to reduce the electoral fund from R$5.7 billion to R$4 billion. He said his goal is to veto the excess. In the 2018 general elections, the value of the fund was R $ 1.7 billion.

On Tuesday (27), expectations about the ministerial reform were confirmed. Senator Ciro Nogueira (PP-PI) is the new Chief Minister of the Civil House, Luis Eduardo Ramos is the new Secretary-General of the Presidency of the Republic, and Onyx Lorenzoni was appointed Minister of Labour and Social Security. Ciro’s swearing-in ceremony will be held on Wednesday (4).

With the return of the parliamentary recess scheduled for Monday (2), the presidents of the House of Representatives, Arthur Lira (PP-AL), and the Senate, Rodrigo Pacheco (DEM-MG), advanced what their priorities will be. Lira said he hopes to vote on tax reform (PL 2337/21), political (PEC 125/11) and administrative (PEC 32/20), as well as conclude the privatisation of the Post Office (PL 591/21). In the Senate, Pacheco announced that he wants to move forward with the broader tax reform (PEC 110/19), contemplating two taxes on consumption: the Contribution on Goods and Services (CBS), unifying PIS and Cofins, and the Tax on Goods and Consumption (IBS), uniting state and municipal taxes.

The parliamentary inquiry committee (CPI) will resume work on Tuesday (3), with the deliberation of several requests and the testimony of the Reverend Amilton Gomes de Paula, involved in the case of Davati Medical Supply. The owner of Precisa Medicamentos, Francisco Maximiano, requested postponement of his testimony, which was initially scheduled for Wednesday (4).

On Monday (2), it is expected that the president of the Supreme Court (STF), Minister Luis Fux, will make a statement in defence of democracy in the return of judicial activities. Fux should address the alleged threat of Defence Minister Braga Netto, as well as Bolsonaro’s attacks against Minister Luis Roberto Barroso and the electronic ballot box.

On Thursday (29), Bolsonaro again criticized the electronic ballot box system in his live broadcast. He admitted that he has no proof of fraud in the electronic ballot box but that there are suspicions of irregularities. In the live, Bolsonaro also criticized the PT and the president of the Superior Electoral Court (TSE), Luis Roberto Barroso. The TSE released, in real-time, information rebutting the information released by Bolsonaro. On Sunday (1), Bolsonaro supporters held pro-printed voter acts in several cities.

2. Economy – The result of current transactions was positive at US$ 2.8 billion for June, the best performance for the month since 1995.

The National Treasury informed that the government accounts closed the semester with a R$ 53.6 billion deficit. The result was influenced by extraordinary expenses to fight Covid-19, but ordinary expenses follow a declining trajectory.

Caged, a unit from the Ministry of Economy, announced that the country generated 1.5 million jobs in the first semester. In June, 309,000 new jobs were opened. The Brazilian Institute of Geography and Statistics (IBGE) informed that the unemployment rate was 14.6% in the quarter ending in May.

This week, the Central Bank’s Monetary Policy Committee (Copom) is expected to adjust to the basic interest rate, the Selic. The market indicates a tendency to raise the rate by one percentage point to 5.25% per annum.

3. Public administration – On Tuesday (27), the federal government altered the Rouanet Law to emphasize fine arts and sacred art proposals. Cultural activists claim that the government will expand control and targeting on approved proposals.

On Wednesday (28), the government made a post on Twitter post to celebrate Farmer’s Day. The publication featured a photo of a farmer with a rifle on his shoulder. The post generated intense criticism from agribusiness representatives, media and politicians, and it was deleted soon after, on the same day.

A fire in a shed at the Cinemateca Brasileira, in São Paulo, destroyed part of the collection composed of films and historical documents. Cinemateca is managed by the National Audiovisual Secretariat of the Special Secretariat of Culture. In 2016, there was another fire at Cinemateca that destroyed more than a thousand rolls of film. In 2021, former Cinemateca employees published a manifesto warning about the risk of fire in the facility.

How to read it?

1. The political trend remains neutral. The expectation of Ciro’s entrance into the heart of the government is high. It may produce positive results already in August, especially in the CPI and in advance of the government’s plan. The level of institutional conflict is high and may increase this week. There was no significant variation in the government’s approval ratings.

Many analyses were made on the ministerial reform. Most of them were negative, analysing that Bolsonaro had surrendered to the old politics, betraying his supporters; that Guedes had lost what remaining prestige he still had; that Onyx Lorenzoni and Luis Eduardo Ramos were expendable actors; and that the politicians had finally managed to remove the military’s influence in the government. I can’t entirely agree with all of them. They all agree that now the chance of approval of impeachment requests is zero. However, there are still doubts about Ciro’s effect on the CPI and the approval of other essential government agendas. Overall, the reform brings many optimistic promises, but it is still necessary to wait to see what will happen. Ciro is good and will improve the political dialogue with the other powers. He won’t work miracles: Bolsonaro will continue to give the final word and create institutional conflicts, perhaps even more so now, in symbiosis with Ciro and the parties that form the Centrão.

2. The trend for the economy remains positive. Inflation continues to demand attention, and the Copom meeting should demonstrate this concern. Suppose the Selic rate rises 1 percentage point. In that case, Copom’s decision will be in line with the market, and the evaluation will continue to be that monetary policy has performed its function well. The government plans a new increase in cash transfers has investors worried, increasing the risk on the fiscal side. It was mainly this that caused a reaction in the Real value and the Ibovespa. If the government does indeed increase spending, it is still necessary to wait and see the real impact of this decision, which tends to be within the fiscal ceiling, and especially what effect it would have on the trajectory of spending. For now, the analysis remains positive.

3. The trend in public management is neutral. First, because the ministerial reform ends up changing a little the management of the machine as a whole and there are reasonable explanations, both optimistic (Civil House with Ciro) and harmful (greater executive fragmentation). Second, the high budget availability may create good political opportunities, but not necessarily the execution of public policies with a real impact on society. Finally, the more significant presence of politicians in government tends to be positive – contrary to a perception in society that leadership should be exercised only by technicians – because it brings a greater willingness to dialogue and builds consensus, improving, in theory, the quality of public policies. I had already said this when Flávia Arruda was appointed to the Secretariat of Government. Nevertheless, due to recent history, the greater participation of politicians in leadership positions also brings the risk, also in theory, of increasing corrupt practices in government.


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