The Week Ahead in Brazil #79

What is happening in Brazil?

1. Politics – The final report of the parliamentary inquiry committee (CPI) on the pandemic should be read on Wednesday (20), with the vote scheduled for next Tuesday (26).

Senators increased pressure for Senator Davi Alcolumbre (DEM-AP), president of the Constitution and Justice Commission (CCJ) of the Senate, to schedule the hearing of André Mendonça for the vacancy of Justice of the Supreme Court (STF). President Jair Bolsonaro (no party) criticised Alcolumbre’s posture, who reacted in a statement.

When he arrived to attend mass at the National Shrine of Aparecida, on Tuesday (12), President Bolsonaro was greeted with boos and applause from the public.

The House of Representatives approved a project that changes the collection of ICMS in fuels. The goal is to reduce price volatility. The proposal was criticised by governors and was sent to the Senate.

The president of the lower house, Arthur Lira (PP-AL) said that the Proposed Amendment to the Constitution (PEC) that regulates the payment of precatórios may be voted on this week by the Plenary. The PEC still needs to be voted before by the Special Committee, which is scheduled to occur on Tuesday (19).

The co-chairman of the board of directors of Itaú Unibanco, Roberto Setubal, said that the country needs a strong candidate for the presidency to counter the polarization between Bolsonaro and Lula.

PoderData survey shows a slight improvement in government approval ratings. The approval rate increased from 31% to 33%, and the disapproval rate fell from 63% to 58%.

2. Economy – The Minister of Economy, Paulo Guedes, stated that the country should grow 5.5% in 2021. The International Monetary Fund (IMF) reduced the GDP forecast for 2021 from 5.3% to 5.2%. The market median forecasts growth of 5.04%.

A report by the Getúlio Vargas Foundation (FGV) predicts an increase of 12.7% in federal tax collection in September 2021 compared to the same month in 2020.

The Secretariat of Economic Policy (SPE) of the Ministry of Economy released the Fiscal Prism report, which shows improvement in the primary deficit of the central government. For 2021, the expectation of the gross debt to GDP ratio retreated from 81.69% in September to 81.39% in October.

Here’s the report in Portuguese:

Bolsonaro said that energy prices will return to the normal flag from November and that he will make studies to privatise Petrobras. Guedes said the government could sell Petrobras shares to reduce poverty.

3. Public administration – Valor’s report indicates that the federal government’s budget execution is low. Out of R$ 178 billion released for the ministries until August, only R$ 151 billion were executed, representing a difference of R$ 27 billion. In 2020, in the same period, this amount was R$ 33 billion.

The Labour Justice determined the removal of the president of Fundação Palmares, Sérgio Camargo, from personnel management activities. Camargo was accused by the Public Ministry of Labor of moral harassment, ideological persecution and discrimination against employees. He is forbidden to appoint or remove servers from the institution.

On Wednesday (13), Brazil reached the milestone of 100 million people fully vaccinated against Covid-19, representing 47.11% of the population.

How to read it?

1. The political trend remains neutral. The week was shorter due to the holiday and brought no change in the metrics of institutional conflicts, despite the quarrel with Alcolumbre, or regarding the parliamentary coalition, which shows signs of stability. The main change was the small improvement in popular support for the government.

While last week’s Quaest poll showed a slight deterioration in the popular support for the government, this week’s poll may have captured an important change and one that may show a shift in the government’s approval trend. The PowerData poll does not show what might have caused this change, but I would guess that the economy and the absence of institutional conflict and controversial statements may have contributed to this improvement.

In any case, the reading of the CPI report scheduled for this week should cause political wear and tear on the government. If Bolsonaro’s reaction is within reason, it is possible that a more positive political scenario may be consolidated for the closing of the year. Still, the government seems to lack the capacity to create a political consensus around some neutral sectors. The response to the cut in funding for the Ministry of Science and Technology could create this opportunity.

2. The trend for the economy remains positive. Despite being high, inflation is being combated through monetary policy instruments, and fiscal issues are structurally being addressed, as can be seen in the Fiscal Prism report.

The progress in the precatórios issue may not be ideal from the economic point of view. For the political economy, however, it seems to be more adequate, because it enables an agreement to open fiscal space to meet both a political-electoral interest, but also serves to rescue the most vulnerable part of society, which is going through an extremely difficult period. One can relate this issue of precatórios with the idea of a default, no doubt, as well as it is important to examine other economic measures of the government, but it seems reasonable that the political and economic actors seek an immediate way to solve this problem.

The talk about Petrobras has not gone down well for the government. Experts say that there is little chance that anything will be changed at this point. There are more important economic issues that are easier to advance than talking about selling slices of Petrobras.

3. Public management continues in neutral mode. Despite room for improvement, the advance of vaccination against Covid-19 in Brazil deserves celebration. The public health system (SUS) can be more effective, but it is a well-structured network that provides good care to millions of people.

The problems of budget execution and the issue with the president of Palmares Foundation show that the federal public management has great opportunities for improvement.

As was the case in the past, Guedes is far more helpful when he talks about public policies within his reach. In other words, one of the public management metrics is the ability of the government to implement its agenda. The case of Petrobras and the energy prices seem to be a case in which the government has slim chances in implementing these ideas.

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