The Week Ahead in Brazil #76

What is happening in Brazil?

1. Politics – President Jair Bolsonaro’s speech at the United Nations General Assembly was largely criticised by the press. In addition, the trip to the United States was marked by controversies, such as the New York mayor’s criticism of Bolsonaro for not having taken the Covid-19 vaccine and the reaction of ministers to protests against the President.

Bolsonaro, in a moderate tone, gave an interview to Veja magazine, dealing with various political, social and economic issues.

The rapporteur of the parliamentary inquiry committee (CPI) on the pandemic, Renan Calheiros (MDB-AL) postponed the presentation of his final report. On Tuesday (21), in testimony to the CPI, the Minister of the Comptroller General of the Union (CGU), Wagner Rosário, rebutted the questions of Senator Simone Tebet (MDB-MS) suggesting she should read the process again. Under strong protests from the senator, he called her “out of control”. Rosario’s speech was classified as sexist by senators and the press.

The Special Commission of the House of Representatives approved the basic text of the administrative reform (PEC 32/2020). The proposal follows for deliberation in the Plenary, but there is no date to be analysed.

On Wednesday (22), the Senate approved the report of Senator Simone Tebet (MDB-MS) on the proposed amendment to the Constitution of the electoral reform (PEC 28/2021). The approved text excluded the return of party coalitions. As Senator Tebet only removed articles of the PEC, the proposal does not need to be reassessed by the House and goes to enactment. Proposals to amend the Constitution are not sanctioned or vetoed by the President of the Republic.

The president of the National Congress, Rodrigo Pacheco, called a semi-presidential session for Monday (27), for the analysis of 36 presidential vetoes and three bills authored by the Executive Branch.

The latest Ipec survey indicates that 53% of Brazilians consider the government as bad or terrible. Disapproval reached 68%. The numbers worsened in relation to the previous Ipec survey, from June 2021, and are consistent with other surveys.

2. Economy – The Central Bank’s Monetary Policy Committee (Copom) raised the basic interest rate (Selic) by one percentage point, from 5.25% to 6.25% per year. It is the fifth consecutive increase, as expected by financial markets, and another hike is forecast for October.

Federal tax collections reached R$ 146.63 billion (US$ 27.45bn) in August. It is the highest amount collected for the month, representing a real increase of 7.25% compared to August 2020. In the accumulated for the year, also breaking the historical record, the collection reached R$ 1.199 trillion (US$ 224.53bn), 23.53% more than the same period in 2020.

The Central Bank informed that the result of Brazil’s current transactions was positive by US$1,684 billion in August. It was the second-highest surplus for August since 1995.

The trade balance registered a US$ 376m surplus in the third week of September, with a result for the month of US$ 2.41bn. In the year, the accumulated is US$ 54.52bn, a high of 40.3% in the daily average in relation to the same period of 2020.

The inflation forecast calculated by the National Wide Consumer Price Index (IPCA-15) showed an increase of 1.14%. The data was calculated for the period between 14 August and 14 September. It was the highest increase for September since 1994.

The International Monetary Fund (IMF) praised the performance of the Brazilian economy during the pandemic. See the infographic:

3. Public administration – The Ministry of Health reassessed the decision to stop vaccinating adolescents with Pfizer’s vaccine.

The National Telecommunications Agency (Anatel) approved the public notice for the 5G auction, which was scheduled for November 4. The Science and Technology Commission (CCT) of the Senate approved on Thursday (23) a work plan to evaluate public policies regarding the implementation of 5G in Brazil.

Three top members of the government are with Covid-19: Marcelo Queiroga, Minister of Health, Tereza Cristina, Minister of Agriculture, and Bruno Bianco, the Attorney-General of the Union.

How to read it?

1. The political trend has improved from negative to neutral. The main factor for the change was the decrease in institutional conflicts. There were no changes in the coalition, and approval and disapproval ratings remain stable, at an unfavourable level.

Although the week was turbulent with Bolsonaro’s speech at the UN, the president managed to avoid unnecessary conflicts. His interview with Veja was productive, despite being criticised by several political analysts. The interview can be understood as another demonstration of the commitment to appease institutional relations, assumed after September 7 with the help of former president Michel Temer. This should not be disregarded, because it represents another step in the normalization of relations with the other branches of government. It is not known how long this will last, but it is a positive aspect.

Although the CPI had conflicts this week, especially during Rosário’s testimony and the discussion between senators Renan Calheiros and Jorginho Mello, the tension that the delivery of the report would cause was postponed.

Despite these advances, which are corroborated by the advance of the government’s legislative agenda, the government still cannot resolve some critical issues, such as the nomination of André Mendonça to the STF and the issue of precatórios (court-ordered public debt payments).

2. The economy has also improved and is on a positive trend. It is a fact that inflation is high, but the monetary policy seems aligned with the market and economists’ expectations. Moreover, net interest rates, for example, remain below the 2018 level. On Wednesday (29), the IGP-M for September will be released.

On the fiscal side, successive increases in tax collections are being combined with lower government spending. New fiscal results will be released between Tuesday (28) and Wednesday (29), as well as the numbers of new jobs. Nevertheless, there is a risk arising from the issue of precatórios, whose solution remains unclear, and the increase in spending on social programs.

3. Public management is in neutral mode. Despite the fact that a large number of members of the first level of government were tested positive for Covid-19, thus, reducing our leadership metric, the government managed to reassess an apparently mistaken decision. This is important because it reveals that the administration may be more flexible in quickly recognising its mistakes and correcting them. The other factor that contributed to the indicator’s improvement was the progress of the 5G auction.

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