The Week Ahead in Brazil #81

What is happening in Brazil?

1. Politics – The final report of the parliamentary inquiry committee (CPI) on the pandemic was approved on Tuesday (26) by 7 votes to 4. The approved version contains the proposed indictment of 78 people, including parliamentarians, ministers and President Jair Bolsonaro (no party), and two companies. Nine crimes were attributed to Bolsonaro: prevarication, charlatanism, crimes against humanity and responsibility), epidemic, infringement of preventive health measures, incitement to crime, forgery of private documents and irregular use of public funds. Senators Marcos Rogério (DEM-RO) and Eduardo Girão (Podemos-CE) presented separate votes criticizing the report by Senator Renan Calheiros (MDB-AL). (Senate Agency and Folha)

Senators delivered copies of the final report to the Attorney General of the Republic, Augusto Aras, Justice Alexandre de Moraes, of the Federal Supreme Court (STF), and the president of the Federal Senate, Rodrigo Pacheco.

The speaker of the lower house, Arthur Lira (PP-AL), said the indictment of deputies by Covid is unacceptable and cause for great indignation. (Senate Agency and Power360)

The president of the Federal Senate, Rodrigo Pacheco, signed the affiliation form to PSD and made a speech as a presidential candidate. (Valor)

By unanimity, the Superior Electoral Court (TSE) has acquitted President Jair Bolsonaro and his vice, Hamilton Mourão, for mass messaging 2018. The court set a thesis to prevent possible abuses in the 2022 campaign. (Valor)

The vote on the PEC of Precatórios was postponed again. The forecast is that a new attempt will occur on Wednesday (3). The PEC is one of the options of the federal government to secure the amount of R$400.00 to Auxílio Brasil, the new government social programme. Given the difficulties, the government is studying to unlock the value through an extension of emergency aid, through extraordinary credit or decree of public calamity. (g1 and Valor)

PoderData survey shows stability in the Bolsonaro government’s approval ratings, with 58% disapproval and 33% approval. (Poder360)

2. Economy – The Central Bank’s Monetary Policy Committee (Copom) decided to raise the basic interest rate (Selic) by 1.5 percentage points, to 7.75% per year. It was the highest increase in a meeting since 2002. (Valor)

The IPCA for October reached 1.2%, the worst result for the month since 1995. (Estadão)

According to the Continuous National Household Sample Survey (Pnad Contínua), released on Wednesday (27) by the Brazilian Institute of Geography and Statistics (IBGE), the unemployment rate was 13.2% in the quarter ended in August. The rate fell 1.4 percentage points from the quarter ended in May (14.6%) and 1.3 p.p. against August 2020. (Infomoney)

The General Register for Employed and Unemployed (Caged) registered the creation of 314,000 formal jobs in September. In 2020, in the same month, 319,000 jobs were registered. (Estadão)

The federal tax collection rose 12.8% in September compared to the same month last year. With a collection of R$ 149 billion, a record for September, the accumulated from January to September reached R$1.348 trillion, up 22.3% over the same period in 2020 and also a historical record for the same period. (Folha)

The central government registered a primary surplus of R$303 million in September. The result was the first surplus for the month since 2012. Nevertheless, the accumulated deficit from January to September 2021 is R$82.4 billion, the fifth-worst result for the period since 1997, when the historical series began. (Valor and Folha)

Itaú revised its projections for 2022 GDP from 0.5% to -0.5%. Bradesco foresees growth of 1.6%, and the Central Bank’s Focus survey adjusted its forecast from 1.50% to 1.40%. (g1)

3. Public administration – The National Telecommunications Agency (Anatel) has received offers from 15 companies for 5G auctions. The auction is scheduled for November 4 and is estimated at R$50 billion. (Valor)

In a meeting with members of the Science and Technology Committee of the lower house, the Minister of Economy, Paulo Guedes, said there is no lack of money for the country, but mismanagement practices. Guedes called some of his government colleagues incompetent and referred to the Minister of Science and Technology, Marcos Pontes, as stupid. President Jair Bolsonaro had to call the two ministers to calm the situation. (Folha and O Globo)

Brazil emitted 2.16 billion tons of CO2 in 2020, a 9.5% increase over the previous year, going against the global trend, a 7% drop pulled by the pandemic economic crisis. The figures are from SEEG (Greenhouse Gas Emissions Estimating System), an independent project that brings together a coalition of NGOs, companies and academic institutions. (O Globo)

The presence of President Jair Bolsonaro (no party) at the G20 was marked by criticism for his limited and shy participation. According to reports, Bolsonaro was isolated at various times during meetings with other heads of state and did not attend some official events. Bolsonaro will not attend the COP26, in Glasgow, Scotland. (Folha and g1)

On Friday (29), the appointments of former Planning Minister Esteves Colnago as Special Secretary of Treasury and Budget of the Ministry of Economy and Paulo Valle as Secretary of the National Treasury of the portfolio were published. (Infomoney)

How to read it

1. The political trend remains neutral. The level of institutional conflict remains low, despite the release of the CPI’s report, which contributed to better metrics. The non-vote on the PEC dos Precatórios, however, showed some deterioration in the strength of the presidential coalition. Popular support for the government remains low but stable.

This week, the feasibility of the new social programme or the extension of emergency aid continues to be an important political thermometer. On the one hand, the increase in social spending could yield political dividends for the government and its allies. On the other hand, there is strong political opposition, both due to the fiscal risk brought by some of the options for making the increase viable, and due to the electoral power that the increase may confer to the government.

Part of the financial market has reverberated this political opposition to the government, through projections of a retraction in the economy by 2022.

2. The trend for the economy remains positive. Fiscal policy outcomes remain positive, although the risk of breaching the fiscal ceiling, as I explained last week, could cause damage to the government. The monetary policy gave a strong response to inflationary pressure with the adjustment of the Selic rate. The unemployment rate remains on a downward trajectory.

Despite these positive points, there are growing concerns about the fiscal aspect, with an appreciated dollar and a lot of volatility in the Ibovespa.

The tension to which the Minister of Economy, Paulo Guedes, has been subjected in recent weeks has been no small matter: his offshore companies, the breaching of the ceiling, the resignation of part of his team and the negative news about the economy. It is not justified, but, understandably, Guedes has complained about a colleague in less friendly terms than desirable.

3. Public management remains in neutral mode.

The new nominees of the Ministry of Economy may bring more credibility to management. More experienced names than their predecessors, Colnago and Valle bring the rare combination of technical qualification and political articulation. They may help Guedes in the dialogue with several internal and external actors, improving expectations. A significant enhancement in leadership and policymaking is likely to occur.

In the international dimension, the government seems to have been unable to project its preferences at the G20. According to almost unanimous reports, Bolsonaro was isolated in Rome. Furthermore, he will not participate in COP26. The expectation of the federal government’s participation at COP26 is low and state governors and civil society have sought to occupy spaces of dialogue with other actors in Scotland.

The 5G auction is an important milestone in improving management.

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