The Week Ahead in Brazil #113

1. Politics – President Jair Bolsonaro (PL) held a meeting with foreign diplomats on Monday (18). The theme of the meeting was the Brazilian electoral system. Bolsonaro reaffirmed his theories that electronic ballot boxes would be problematic and cited ministers of the Federal Electoral Court (TSE), Edson Fachin and Alexandre de Moraes. There was a strong negative reaction from the press, public institutions, and politicians.

Several political parties held their national conventions this week. PDT endorsed Ciro Gomes as a presidential candidate, and the PT confirmed Luiz Inácio Lula da Silva as a candidate for the presidency. PL also confirmed Jair Bolsonaro as a presidential candidate.

The PoderData poll, released on Wednesday (20), shows Luiz Inácio Lula da Silva (PT) with 43% (-1 percentage point) of voting intentions in the first round, followed by Jair Bolsonaro (PL) with 37% (+1pp). The government’s disapproval rate was 55% and the approval rate was 41%. The poll was conducted by telephone with 3,000 voters from 17 to 19 July.

The Exame/Ideia poll shows Lula (PT) leading the voting intentions in the first round with 44% (-1pp), Bolsonaro (PL) with 33% (-3pp). The government is disapproved by 58% (-2pp) and approved by 36% (+1pp). The government is considered as “bad/worst” by 48% (+4pp) and as “great/good” by 29% (-4pp). The disapproval rate is 46% (stable), and the approval rate is 35% (-1pp). The survey was conducted by telephone with 1,500 voters between 15 and 20 July.

Here is the compilation of the poll selection:

2. Economy – Petrobras announced a 4.9% reduction in the price of gasoline, equivalent to R$ 0.20 per litre. The change reflects the reduction in the international oil quotation. The impact on inflation could be a decrease of 0.15 percentage points between July and August (Valor)

The increase in the value of the Auxílio Brasil social programme, from R$ 400.00 to R$ 600.00 per month, will begin to be paid in August and will last until the end of the year. (Estadão)

The National Treasury projected a ten-year drop in debt, from 80.3% of GDP in 2021 to 69.9% in 2031. In 2022, debt will be 78.3%. (Estadão)

Mercosur closed a free trade agreement between Mercosur and Singapore. Last year, the bloc’s exports reached US$ 5.9 billion, and imports totalled US$ 1.25 billion. (Valor)

Bloomin’ Brands, the owner of Outback and Abraccio restaurants, announced an investment of R$ 75 million in Brazil, with the opening of 17 new restaurants this year. (Estadão)

Federal tax collection totalled R$ 1 trillion in the first half of the year, an increase of 11% above inflation. The result is the best for the semester since the beginning of the historical series started in 1995. June was also a record for the month, with R$ 181 billion, an increase of 18% above inflation. (O Globo)

3. Public management – The government must promote budget adjustments to comply with the spending cap. Initial estimates point to a reduction of up to R$ 5 billion in the budget. (Valor)

President Jair Bolsonaro has sanctioned Law 14.421/2022, which extends the scope of Rural Product Notes (CPRs). Named Agro Law 2 (Lei do Agro 2), the text improves access to credit for rural production. (Valor)

1. The political trend remains positive, despite the institutional problems generated by Bolsonaro’s meeting with foreign ambassadors. The metric of institutional conflicts, of course, has worsened. The presidential coalition remains solid, election results show stability and levels of popular support show slight improvement.

There is some consensus among political analysts that Bolsonaro gained absolutely nothing from the meeting. Reports claim that even his campaign core tried to prevent the President from presenting his case and that foreign representatives had classified the presentation as “amateur”.

Bolsonaro, however, at the PL’s party convention on Sunday (24), seized the opportunity not to raise the temperature: he recalled critical government achievements, with praise for ministers, deputies and senators, and criticism of Lula and PT administrations. Although he made brief complaints about the STF and mentioned support for the incoming September 7 demonstrations, Bolsonaro did not spearhead attacks on the electronic ballot boxes nor mentioned Barroso, Fachin or Alexandre de Moraes. My assessment is that it was a chance well controlled by Bolsonaro.

Nobody knows who will win elections. One of the scenarios, as I have mentioned in previous posts, is that Bolsonaro could grow in the polls, closing the gap towards Lula and ensuring a well-balanced race in the run-off. There are two strong reasons for that: Lula should suffer wear and tear with the memories of corruption cases, and Bolsonaro should continue publicising the government’s achievements, especially in the economy. From an opposite perspective, to what extent can Bolsonaro afford to radicalise his discourse again? Should he opt for that way, his attacks could potentially throw undecided voters and those voting for other candidates into Lula’s lap. That is a massive number of votes. In this case, Lula’s chances of closing the race in the first round increase. Both scenarios are plausible.

2. The economy remains on a positive trajectory. The fall in fuel prices should improve the inflation results. For next week, it is important to watch the numbers on job creation (Thursday) and the unemployment rate (Friday). The expectation is for improvement. The balance of payments and fiscal data will also be released next week.

3. The public management follows a neutral trend, with no significant changes expected.

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