What is happening in Brazil?
1. Politics – Senators are articulating the installation of a Parliamentary Commission of Inquiry (CPI) to investigate the Ministry of Education (MEC) regarding the episode of pastors influencing the ministry and the bidding of rural buses. They claim to have reached the necessary 27 signatures. (Valor)
The vote on the tax reform was postponed again by the Senate. The trend is that it will no longer be appreciated in 2022. Resistance comes from the North, Northeast and Midwest regions, with the risk of losses in tax collection for states and municipalities in these regions. (Estadão)
The presidents of MDB, PSDB, União Brasil e Cidadania signed an agreement to launch a single presidential candidate. So far, Senator Simone Tebet (MDB-RS) is the most likely to head the slate. The name should be announced on 18 May. (Estadão)
On Friday (8), PSB formalized the nomination of former governor Geraldo Alckmin (PSB) to be part of the slate with former president Lula (PT) as vice-presidential candidate. (Folha)
Quaest’s latest survey shows that 47% of Brazilians consider the government as negative and 26% as positive.
Another survey, carried out by Ipespe, shows that 54% consider the government as bad or terrible and 29% as excellent or good. The approval rate is at 33%, an increase of two percentage points.
The two surveys also looked at the electoral scenario. For Quaest, former president Luiz Inácio Lula da Silva (PT) leads voting intentions with 44% (stable), followed by president Jair Bolsonaro (PL) with 29% (+3pp). Quaest interviewed, in person, 2,000 people, from 1 to 3 April. Ipespe shows the former president with 44% (stable) of voting intentions and Bolsonaro with 30% (+4pp). Ipespe interviewed 1,000 people, between April 2 and 5, by phone.
Here is the compilation of the electoral surveys:
2. Economy – Inflation measured by the IPCA rose 1.62% in March. It is the highest value for the month since 1994 before the Real Plan was implemented. Over the last 12 months, the IPCA stood at 11.3% in March. The biggest increases were in transport and food. (Valor)
The government announced that, as of April 16, the energy tariff will be framed in the so-called “green flag”. This means the end of the water scarcity tariffs. The Ministry of Mines and Energy disclosed that the reduction in the electricity bill will be 20%. (Valor)
Petrobras said it will reduce the prices of cooking gas (LPG) by 5.58%. The company said the reduction follows the international prices and the exchange rate. (Valor)
Between July 2021 and March this year, the Banco do Brasil (BB) allocated R$ 114 billion for the Plano Safra 21/22. Initially, R$ 135 billion were foreseen for the crop funding, but there was an extra contribution of R$ 10 billion due to unforeseen events caused by rain or drought. (Agência Brasil)
Nissan announced it will invest up to R$ 1.3 billion in the Resende auto factory (RJ) between 2022 and 2025. From 2021 to 2022, the automaker invested R$ 1.1 billion. The company expects to produce 86,000 cars this year, with 80% more growth compared to 2021. (Estadão)
Itaú Unibanco, the largest Brazilian bank, raised the GDP and inflation forecasts and projected an appreciation of its nominal currency exchange. The new assessment revised the 2022 GDP from +0.2% to +1%. Last October, Itaú estimated a contraction of 0.5% in the economy. As for the 2022 inflation (IPCA), a revision from 6.75% to 7.75%, and the currency exchange at US$1.00 = R$5.25. (Estadão)
3. Public management – The government appointed José Mauro Ferreira Coelho as president of Petrobras. Marcio Andrade Weber was indicated to chair the administrative council. The nominations come after the resignations of Adriano Pires and Rodolfo Landim due to conflicts of interest. (Estadão)
The government kept the visits of Valdemar Costa Neto, president of the PL, to the Planalto Palace confidential. Estadão’ requested the records, but it was denied under the allegation of risk to the president’s security. (Estadão)
Bidding of the National Fund for Education Development (FNDE), which started on Tuesday (5), to acquire 3,850 school vehicles had the homologation phase suspended by the order of the Court of Audit (TCU). The suspicion is of overpricing in the estimates of values. (Brazil)
An analysis:
1. The political outlook for the coming week remains positive. Popular support metrics have improved slightly, as also have election polls. Institutional conflicts have been reduced, and parliamentary support is solid. According to the latest numbers, PL, Bolsonaro’s party, has now 78 federal deputies, far more than anticipated.
The government has been managing to reduce the gap between support and rejection ratings. It is nothing very different from how the government was evaluated in the past, but it shows an important recovery in an election year. Bolsonaro has also reduced the tone of his criticism of the Judiciary and may continue to do so this week.
Regarding the elections, Bolsonaro’s growth in the polls shows that he was, initially, the great beneficiary of Moro’s withdrawal from the presidential race, reaching approximately 30% of voting intentions. Lula continues to stagnate at around 45%. On the one hand, in an optimistic analysis, the alliance with Alckmin could unlock this growth or, on the other hand, more pessimistically, it could slow the fall that the PT candidate could suffer when the campaign really starts and the news of corruption from previous administrations begins to be aired.
Lula is an excellent political strategist and knows the value that the choice of vice-president has in an election. He takes into account at least three factors to broaden his base of potential voters and amass political power: geographical region, ideological spectrum and social sector. Traditionally consolidated in the Northeast, from his 2002 election up to Dilma’s last term, Lula determined compositions with politicians from the Southeast, which has more weight in the election. First, with José Alencar, his vice-president, and later with Michel Temer, Dilma’s vice-president, both from the Southeast region. Second, both were centre-right politicians, broadening the dialogue with productive and social sectors. With Alckmin, the logic is the same: he brings with him a good part of São Paulo and Minas Gerais, with an important dialogue with the Brazilian heavyweight business community and signals the prospect of a moderate government, perhaps less interventionist in the economy and more conservative in a way. Again, the effect of all this is yet to be known, but, based on the strategy of previous elections, the alliance may bring some surprises.
This reasoning is not new to Bolsonaro and leaders of the PL, PP and Republicans. The past election, however, was unusual regarding the choice of the vice-president, because it did not fill any of those attributes mentioned above. Bolsonaro and Mourão occupy political spaces that are more similar than complementary: military-military, middle-class-middle-class, Southeast-South, right-right.
Bolsonaro wants to repeat the formula that made him president with former minister Braga Neto as vice-president, but it is necessary to wait for Alckmin’s effect before making this decision. If the former governor of SP unlocks Lula’s growth, Bolsonaro should be more inclined to give in and include a politician from the Northeast as vice president.
2. The economy remains on a positive trend for next week. The rise and persistence of March inflation were expected by the monetary authority. The variation in fuel and food prices pressured prices in March. In April, however, according to market projections, the IPCA should remain below 0.8% and near 0% in May.
The fiscal issue continues to be solved, although there are occasional discussions regarding increases for public servants or new subsidies. The government is still studying an additional reduction in the Tax on Industrial Products (IPI) and adjustments in the income tax brackets for individuals. The pressure has increased for a general increase in salaries, but the government is still resisting and is offering partial recompositions to some specific categories or adjustments well below expectations.
3. The trend in public management remains neutral for the coming week. After the initial fiasco of the indications for Petrobras, the government managed to get the right technical names that were well received by the market. In paradigm terms, the refusal to disclose the presence of the president of the PL in the Planalto is a negative sign, showing, once again, little transparency in matters that should be normal.
Arthur Wittenberg 