The Week Ahead in Brazil #104

1. Politics – President Jair Bolsonaro (PL) has filed a lawsuit with the Supreme Court (STF) against Justice Alexandre de Moraes for alleged abuse of authority. Moraes is the rapporteur of the enquiries on fake news and digital militias. After having the request rejected by Justice Dias Toffoli, Bolsonaro submitted the same request to the Attorney General’s Office (PGR). (Estadão)

The presidents of PSDB, MDB and Cidadania have nominated Senator Simone Tebet (MDB-MS) as their only candidate for the presidency. Surveys showed that Tebet would have greater growth potential than the former governor of São Paulo João Doria. The decision must be confirmed by the national executives of the three parties. (Estadão)

On Thursday (19), the alliance between the PT and PSD was finalised, with the definition to support the pre-candidacy of Alexandre Kalil (PSD-MG) for the government of Minas Gerais. (g1)

This week, the Exame/Ideia poll was published, interviewing 1,500 people by telephone between May 14 and 19. The poll showed that former president Luiz Inácio Lula da Silva (PT) leads voting intentions with 41% (-1 percentage point), followed by the current president, Jair Bolsonaro (PL), with 32% (-1pp).

Another poll released was Ipespe’s. It shows former president Lula (PT) with 44% of voting intentions in the first round of the presidential election. President Jair Bolsonaro (PL) has 32 percent. Lula and Bolsonaro maintained the same score in relation to the institute’s previous survey, released on May 13. Regarding the government’s evaluation, the disapproval rate stood at 61% (+1pp) and the approval rate at 35% (stable). For 52% (+1pp) the government is considered bad or terrible and 32% (stable) consider the government excellent or good.

Ipespe interviewed 1,000 people, between May 16th and 18th, 2022, by telephone.

Here’s a summary of the major electoral polls:

2. Economy – The consolidated public sector (central government, states, municipalities and state-owned companies, with the exception of Petrobras and Eletrobras) registered a surplus of R$ 4.312 billion in March, reported the Brazilian Central Bank. The result was better than estimated by the market. The gross government debt retreated from 79.2% in February to 78.5% of GDP in March. (Estadão)

According to the Macrofiscal Bulletin, the government’s estimate for inflation in 2022 rose from 6.55% to 7.9%. The Gross Domestic Product (GDP) projection was maintained at 1.5%.

3. Public management – Public management – The plenary of the Federal Audit Court (TCU) has approved on Wednesday (18) by 7 votes to 1 the continuity of the privatisation process of Eletrobras, the state-owned company that operates in the areas of generation and transmission of energy. (g1)

The federal government has published Decree Nº 11,075/2022, which regulates the carbon market in Brazil. The document is based on the National Policy on Climate Change and establishes the National System for Reducing Greenhouse Gas Emissions. (Brazil)

An analysis:

1. The political trend remains positive for the sixth consecutive week. Last week, the level of conflict between the Executive and the Legislative had cooled down, but tensions increased with Bolsonaro’s action against Moraes. The presidential coalition in Congress remains stable and high. The levels of approval and evaluation of the government remain unchanged. Electoral polls show Bolsonaro parked at 32%.

Quaest’s regional polls show Lula leading in Bahia (45% to 13%) and Minas Gerais (44% to 28%), but technically tied with Bolsonaro in Rio de Janeiro (23% to 25%) and São Paulo (25% to 22%). The important point here is that there is still a huge contingent of voters who have not yet chosen their candidate in RJ (47%) and SP (37%), large electoral centres. These voters may have at least four major destinies: they may decide to vote for Lula, or for Bolsonaro, or for Simone Tebet – in case she is confirmed by her parties as a third-way candidate – or they may cancel their vote. The effort of each of these candidates should be not to make mistakes, but also to make proposals that make sense for this part of the population.

In the coming week, the lower house is expected to put to a vote a bill proposal (PLP 18/22) that limits the ICMS (state tax) tax on energy, telecommunications and transport tariffs to 17%. The special commission to analyse changes in the entire Brazilian tax system shall also be installed.

2. The trend in the economy remains positive for the next week. There are no big surprises in monetary policy or fiscal policy. The level of public debt continues stable, and the public sector surplus was not expected by the market. The dollar continues to fall to R$ 4.85 at the minimum of the session, probably linked to the lower than expected cut in interest rates in China, removing fears of a fall in the global economy.

The GDP monitor of the Fundação Getúlio Vargas (FGV) shows a GDP growth of 1.5% in the first quarter compared to the end of 2021. Some economic analysts indicate that this is compatible with the forecast GDP of 1.5% in 2022, as also shown in the Macrofiscal Bulletin.

For next week, we are looking for the number of new jobs.

3. The trend in public management remains neutral for the coming week. The approval of the release of the privatisation of Eletrobras by the TCU was positive. It is also worth noting that the government has advanced the environmental agenda with the publication of the guidelines for the institution of the carbon market in Brazil. The model was criticised for being too vague, but it is an important decision that may be improved.

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