The Week Ahead in Brazil #99

What is happening in Brazil?

1. Politics – MDB Senators met on Monday (11) with former president Luis Inácio Lula da Silva (PT). Lula is pursuing to rebuild its relationship with MDB for his candidacy for the presidency. (Estadão)

The national president of União Brasil, federal deputy Luciano Bivar (PE), is expected to be made the party’s official pre-candidate for the Presidency of the Republic. (Valor)

The President of the Chamber of Deputies, Arthur Lira (PP-AL), said that the parties have closed the agreements to appoint the presidents of the permanent committees. The Commission on Constitution and Justice (CCJ) should go to União Brasil. (Câmara)

A survey by PoderData shows former President Luiz Inácio Lula da Silva (PT) leading the presidential race, with 40% voting intentions, followed by President Jair Bolsonaro (PL) with 35%. With a 5 percentage points difference. It is the lowest gap ever recorded for this election. (Poder360)

2. Economy – Businessmen associated with the Instituto Unidos Brasil (IUB) presented three Proposals for Amendment to the Constitution (PEC) related to the business environment. The first one is related to a payroll tax reduction and the creation of a tax similar to the CPMF; the second proposes changes in the regulatory agencies; the third suggests more freedom for economic activities. (Estadão)

The 12-month accumulated inflation in the United States reached 8.5%, the highest rate since 1981. In the United Kingdom, the index reached 7%, the highest in 30 years.

The government will grant a 5% across-the-board readjustment for all federal employees starting in July, three months before the first round of the presidential election. As the percentage is lower than last year’s accumulated inflation, the measure does not contradict the Electoral Law. (Valor)

The minister of the Federal Audit Court (TCU), Aroldo Cedraz, has decided to take the privatisation process of Eletrobras to the plenary session on 20 July. He is expected to approve the company’s privatisation, but the judgment may be postponed by a request for examination to be made by Minister Vital do Rêgo. (Valor)

Moody’s affirmed the Government of Brazil’s long-term Ba2 ratings and stable outlook. (Moody’s)

3. Public administration – The Brazilian Central Bank employees decided to continue their strike indefinitely. They started the strike on April 1, seeking a 26.3% salary increase. Another six government institutions are on strike for wage recomposition. (Estadão)

Following the refusal to disclose the visits of Valdemar Costa Neto, president of the PL, to the Planalto Palace, the government refused to inform the data related to the visits of the pastors Ariton Moura and Gilmar Santos. The Cabinet of Institutional Security (GSI) refused the request based on the security of the president and the Brazilian General Law of Protection of Personal Data (LGPD). In the Legislative, the Chamber of Deputies released the information with the dates and destination of their visits. (O Globo)

An analysis:

1. The political outlook for next week remains positive. The shorter week due to the holiday may have contributed to keeping institutional conflicts down. Popular support indexes remain stable and electoral polls continue to show a narrowing of the gap between Lula and Bolsonaro. Furthermore, the parliamentary coalition continues to show signs of vigour.

A good example of this was the war of narratives about the opening of CPIs this week. The opposition tried to open a commission to investigate the influence of pastors and other issues related to the Ministry of Education. The government not only succeeded in emptying the necessary signatures but also managed to forward the request to open another CPI to investigate the Petista management in Education. Besides the stronger bench, the government leader in the Senate, Carlos Viana (PL-MG), has contributed to this consolidation of political articulation.

In relation to the elections, there still seems to be no room for an alternative candidacy outside the Lula-Bolsonaro polarisation. Mainly, because the very parties that are trying to follow this path have not closed their positions, as is the case of PSDB and MDB. Meanwhile, the Union is ahead with Bivar’s pre-candidacy, also helping to further fragment a third way.

2. The economy remains in a cautiously neutral trend for next week. Under a persistent and global inflationary effect, the Brazilian economy has not yet felt the positive effect of the falling dollar. Structurally, the issues seem to have been unchanged, but there is a lack of economic data released by the Central Bank, due to the servers’ strike.

The fiscal question was slightly shaken with the idea of a raise for public servants. The real impact of this measure, if officialized, should be limited. In relation to economic activity, retail showed good growth in February, but the service sector was a negative surprise.

With the lack of data from the Central Bank, due to the current public servant’s strike, the fiscal result of the public sector, the current account balance, the credit report, and the IBC-Br, all referring to February, have not yet been published.

Next week, on Monday, FGV will report the variation of the IGP-10 inflation index for April. The Minister of Economy, Paulo Guedes, and Roberto Campos Neto, the Governor of the Brazilian Central Bank, will take part in meetings at the World Bank and IMF, in Washington, from April 17 to 24. They will also have meetings with investors and banks.

3. The trend in public management remains neutral for the coming week. There were no major changes or initiatives that warranted a change in metrics. It is worth noting, however, that the lack of transparency in the official agendas is worrying, both by avoiding the disclosure of visitor records and issues of top government officials.

It is common to see that the publicised agendas do not reflect the reality of the meetings and gatherings of the authorities. Generally, they display “internal dispatches” or meetings between members of the government, but there is only partial or no information about meetings with external agents.

Since 2018, agencies of the Federal Executive Branch must follow Resolution No. 11/2017, together with the Conflict of Interest Law (Law No. 12,813/2013). They regulate what information must be disclosed and how. In a simplified way, all public agents occupying positions DAS 5 and 6, special positions and ministers of state, must disclose their agendas. The record must be classified between audience (meeting between a private individual and public agent), government meeting (between public agents), internal dispatch (between public agents of the same body), public event (congresses, conferences) and political-electoral events (participation of public agent as a citizen in party rallies or conventions).

Subject to exceptions, the appointments must inform “the name of the person requesting the governmental hearing or meeting and the organ or entity he represents, the description of the matters addressed, the place, date, time and list of participants”. This is an issue that requires more attention from the government.

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