The Week Ahead in Brazil #111

1. Politics – The National Congress overturned 13 presidential vetoes on Tuesday (5) and kept the others. (House)

The president of the Senate, Rodrigo Pacheco (PSD-MG), created the CPI (Parliamentary Commission of Inquiry) to investigate the Ministry of Education (MEC). The CPI’s functioning, however, should only begin after this year’s elections. (Folha)

In the lower house, the vote on the proposal that expands benefits was scheduled for Thursday (7) but was postponed due to a low quorum. It is expected to be voted on Tuesday (12). (g1)

The PSD has announced its decision to support the candidacy of former minister Tarcísio de Freitas (Republicans) for the government of São Paulo. (Folha)

Foreign Minister Carlos França is expected to return to Brazil to talk to senators to reject the proposal allowing parliamentarians to take command of embassies without resigning their mandates. (Valor)

The Quaest/Genial survey, released on Wednesday (6), shows Luiz Inácio Lula da Silva (PT) leading the presidential elections with 45% (-1 percentage point) of voting intentions in the first round, and Jair Bolsonaro (PL) with 31% (+1 percentage point). The government is evaluated negatively by 47% (stable) of the population, and 26% (+1pp) consider the government positive. The poll was conducted face-to-face with 2,000 voters from 29 June to 2 July.

The PoderData survey interviewed 3,000 voters, from 3 to 5 July, by telephone. The poll shows Lula with 44% (stable) and Bolsonaro with 36% (+2pp) of voting intentions in the first round. The government is approved by 36% of respondents and disapproved by 55%.

Here is the compilation of the poll selection:

2. Economy – Fenabrave (National Federation of Auto Distributors) informed that the sale of new cars fell 15% in the 1st semester compared to the same period in 2021. The entity indicates that the lack of components and the high-interest rate were the main factors for the result. (Poder360)

Inflation measured by the government (IPCA) was 0.67% in June, after 0.47% in May. Even below market expectations, the result raised the accumulated figure in 12 months from 11.73% to 11.89%. (Valor)

The Focus Report indicates a reduction in the inflation forecast for 2022. In May, the market projected 8.27%, and now, 7.96%. For the GDP of 2022, the projection also improved from 1.20% to 1.51%. (Correio Braziliense)

The Ministry of Mines and Energy (MME) calculates that the tax reduction can reduce by R$1.55 per litre the average price of gasoline. (Folha)

CNI (National Confederation of Industry) raised the GDP growth projection for 2022 from 0.9% to 1.4%. (Folha)

The ministers of Economy, Paulo Guedes, and of Mines and Energy, Adolfo Sachsida, shall provide clarifications to the Commission of Economic Affairs (CAE) in a meeting scheduled for Tuesday (12) at 9 a.m. (Senate)

3. Public management – The Federal Government has issued a decree ordering all service stations to report prices in effect on June 22, 2022. The law that reduced the ICMS tax on fuel came into effect on June 23 (Brazil)

1. The political trend for the week is favourable. The government’s political issues were partially addressed during the week. Although the extension of the beginning of the work of the CPI of the MEC has been favourable to the government, some difficulties persisted, preventing the approval of PEC 1/2022. The trend is still that it will pass on Tuesday (12).

Bolsonaro kept the level of institutional conflict low and tried to take advantage of the positive agenda by the reduction in gasoline prices. It is possible that this movement has already been captured in the two electoral polls this week, which brought an increase of 1pp and 2pp in relation to previous polls. If the bill is effectively approved and with the period of parliamentary recess from 17th July to 1st August, the government should have two weeks of relative political calm to exploit these benefits.

2. The economy remains on a positive trajectory. Apart from the revisions made in the Focus bulletin, other market agents are already projecting lower inflation and a higher GDP for 2022. With the drop in gasoline and electricity prices, the effects of the drop in inflation should be detected in the next economic surveys. There is no indication of significant changes in the other metrics.

3. Public management follows a neutral trend. There were no significant changes this week. There is, however, the risk of approval of the bill proposal for parliamentarians to be nominated to the post of ambassador without losing their mandate. This is, in general, negative for public management. Diplomats are public servants with a structured and professionalised career. Making these positions of representation abroad available to parliamentarians is risky for the country and can bring substantial losses to the most diverse issues on Brazil’s international agenda.

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