The Week Ahead in Brazil #112

1. Politics – The PT presidential pre-candidate, Luiz Inácio Lula da Silva, met with the president of the Senate, Rodrigo Pacheco (PSD-MG), on Wednesday (13). Lula’s entourage was composed of 13 senators and other allies. They discussed the elections. (Estadão)

The lower house approved the Proposal of Amendment to the Constitution that expands financial benefits. The suggestions of changes, that would delay the process, were all rejected. In a session attended by President Jair Bolsonaro, Congress enacted this Constitutional Amendment on Thursday (14). The government must begin to pay the benefits from August 9 (Estadão).

Former Justice Minister and former judge Sergio Moro (União Brasil) announced he will run for the Senate as a candidate for Paraná. (Valor)

FSB/BTG research shows Luiz Inácio Lula da Silva (PT) leading the presidential election with 41% (-2pp) of voting intentions in the first round, followed by Jair Bolsonaro (PL) with 32% (-1pp). The government is disapproved by 58% (-2pp) and approved by 36% (+1pp). The government is considered as “bad/worst” by 47% (-3pp) and as “great/good” by 32% (+3pp). The poll was conducted by telephone with 2,000 voters from 8 to 10 July.

Here is the compilation of the poll selection:

2. Economy – The Ministry of Economy has raised the GDP growth projection for 2022 from 1.5% to 2%. Several financial institutions have already raised their estimates for GDP, mostly between 2% and 2.4%. The inflation estimate measured by IPCA was reduced from 7.9% to 7.2%. (Valor)

The government released the economic activity results for May. The result in services was 0.9% higher than the one registered in April, surpassing the median of 0.2% foreseen by the market, and the retail market grew 0.1%. (Estadão)

The Minister of Mines and Energy, Adolfo Sachsida, affirmed that the legislative measures approved by Congress have reduced, on average, 21% of the price of gasoline. (Senado)

The National Agency of Electrical Energy (Aneel) determined the reduction of up to 5.26% in the value of the energy tariffs in eight States. The decision is based on the law that established the devolution of PIS/Cofins tax credits to consumers (Estadão)

3. Public management – The Armed Forces presented, in the Senate, a proposal for parallel voting on election day, with paper ballots, to increase the security of electronic ballot boxes. The Federal Audit Court (TCU) issued a statement in which it assessed that the Superior Electoral Court has adequate risk management mechanisms to guarantee the elections. (Valor)

1. The political trend for the coming weeks remains positive. The closing of the legislative session, with the approval and enactment of the PEC of aid, marks a period of convergence between the Executive and the Legislative branches. This can mean two important things: either that most parliamentarians believe in Bolsonaro’s re-election, or that they are trying to extract the maximum concessions from the government for the elections for deputies, senators and governors. The fact is that the parliamentary opposition to the government became even more reduced and inexpressive throughout the semester, unable to impose its legislative agenda or cause substantive damage to the Executive.

The main political issue during the parliamentary recess will be the conclusion of political alliances for the start of the party conventions. They are a legal procedure for the parties to choose candidates for president and vice-president of the Republic, governor and vice-governor, senator and their alternates, and federal, state and district deputies, and can take place between 20 July and 5 August. The issue of electronic ballot boxes may also be in the spotlight during this period. On Monday (18), Bolsonaro invited foreign ambassadors to present his concerns on the electronic ballot boxes, which may cause some negative noise.

Bolsonaro did not get into unnecessary polemics in this period in which the government was hit by several negative episodes (Milton Ribeiro, Pedro Guimarães, murders in the Amazon and Paraná). This contributed to the improvement of the institutional environment. He seems to have transferred the weariness over the electronic ballot boxes to the Ministry of Defence, but he must return to criticise the TSE at some point.

This good moment for the government seems to be corroborated by the polls, especially in the government’s approval ratings. Although they are still low, numbers have improved within the margin of error. In average voting intentions, Lula seems unable to break the 45% ceiling, while Bolsonaro shows resilience by not falling below 30%, but he has also failed to advance beyond 35%. Why is this important? Because Lula may have reached a peak in voting intentions, as he has not yet suffered the campaign attrition that his opponents are preparing to unleash and has failed to consolidate in the polls with a solid 45%. Bolsonaro, however, may still improve his performance based on the latest episodes of curbing inflation. The performance and upcoming decisions related to the candidacies of Ciro Gomes and Simone Tebet may also change this equation. It is still uncertain the effect of the PEC on voting intentions.

2. The economy continues on a positive path in the coming weeks. The approval of the PEC and the reduction of fuel prices should bring some relief to the beneficiaries of government programs. The recent drops in the price of oil barrels could also contribute to lowering inflation.

3. Public management continues in a neutral trend, with no significant changes expected.

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