The Week Ahead in Brazil #108

1. Politics – The bill proposal (PLP 18/2022) that establishes a limit for ICMS (Value-Added Tax on Sales and Services) rates on fuels, energy, telecommunications and transportation was approved by the Senate on Monday (13) and by the lower house on Wednesday (14). The bill is now pending the presidential enactment. (Valor)

President Jair Bolsonaro (PL) said on Saturday (18) that allied deputies should ask next Monday (20) for the establishment of the Parliamentary Commission of Inquiry to investigate the current management of Petrobras, after the state-owned company announced a new adjustment in fuel prices. (CNN)

Still on Petrobras, the president of the Chamber of Deputies, Arthur Lira (PP-AL), made harsh criticism of the new increase announced by Petrobras. He also announced that he should meet the college of party leaders on Monday (20), to discuss how to double the company’s profit tax (CSLL) and alternatives to the company’s pricing policy. (Estadão)

The FSB/BTG survey, released on Monday (13), shows Luiz Inácio Lula da Silva (PT) leading the presidential elections with 44% (-2 percentage points) of voting intentions in the first round, and Jair Bolsonaro (PL) with 32% (stable). The government was evaluated as “bad or terrible” by 49% (-1pp) of those interviewed and as “great or good” by 29% (stable). The government is disapproved by 60% (stable) and approved by 36% (+1pp).

The survey was conducted by telephone with 2,000 voters from 10-12 June 2022.

Here’s a summary of the major electoral polls:

2. Economy – The Central Bank’s Monetary Policy Committee (Copom) decided on Wednesday (15) to raise the Selic rate from 12.75% per year to 13.25% per year – an increase of 0.5 percentage points. The Selic reaches the highest level since December 2016, when it was at 13.75% p.a. (g1)

The trade balance recorded a surplus of US$ 4.9 billion in May, a drop of 44.7% compared to the same month in 2021. In the first five months of the year, the balance accumulated a positive balance of US$ 25 billion, down 6.4% over the same period in 2021. (Valor)

Petrobras announced on Friday a 5.18% increase in the price of gasoline and a 14.26% readjustment in the value of diesel sold at its refineries. As a result, the average price of gasoline sold to distributors will increase from R$3.86 to R$4.06 per litre as of Saturday (18). The average price of diesel will go from R$ 4.91 to R$ 5.61 per litre. (Valor)

Senator Fernando Bezerra Coelho (MDB-PE), the rapporteur of the ICMS tax limit proposal, estimates that the proposals in progress if passed into law may cause a drop in the price of a litre of gasoline of R$ 1.65 and R$ 0.76 in the price of diesel. (Folha)

3. Public administration – President Jair Bolsonaro (PL) ruled out on Monday (13) the readjustment for federal servers. He said the government is studying a new measure via increased food allowance. (Poder360)

The Brazilian Institute of Environment and Renewable Natural Resources (Ibama) launched the Platform for Geospatial Analysis and Monitoring of Environmental Information (Pamgia). The platform provides large-scale geographic data that will support managers and technicians in the planning, prevention and fight against environmental crimes in the Legal Amazon, as well as looking after the country’s other biomes and waters. It integrates data from almost 70 bases, spread over five Ibama directorates (Brazil)

An analysis:

1. The political trend for the coming week remains positive. The level of institutional conflict remained reduced, the presidential coalition remains strong and there were no significant changes in the levels of support for the government. The electoral polls continue to show no major variations.

The quick approval in the Senate and House of Representatives of the PLP 18/2022 and the tone of Lira’s criticism of Petrobras’ price adjustment are two pieces of evidence of the positive political environment the government preserves in the Legislative. In the first case, the government managed to impose a political defeat on the governors: it reduced the cash available for salary increases for state employees and still passed on part of the problem of perception of the price of gasoline to them. In the second case, the joint offensive of Lira and Bolsonaro on Petrobras – one encouraging a CPI and the other wanting to find a way to force the state-owned company to reduce prices – should occupy much of the political debate this week.

2. The trend in the economy remains positive for the coming week. Monetary policy seems to be working, but it is uncertain what effect the increase in fuel prices and the reduction in taxes will have on inflation. The trade balance was good, but not spectacular.

3. The trend in public management has evolved to neutral. The tragic episode that resulted in the deaths of the British journalist Dom Phillips and the indigenous activist Bruno Pereira shows a failure in the control of the Amazon by all Brazilian governments. It is necessary to equate an effective public policy, both in the preservation of the environment and in the fight against organized crime in the region. The launch of Pamgia may not be perfect, but it is an important step forward in the fight against these environmental crimes and can generate good results. It is also necessary to put into perspective that, although the murder of Phillips and Pereira was a funereal and horrific episode, the crime was solved quickly by the authorities, in partnership with the indigenous people.

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