The Week Ahead in Brazil #116

1. Politics – Febraban (Brazilian Federation of Banks) and CNF (National Confederation of Financial Institutions) asked President Jair Bolsonaro (PL) for stability and reduction of uncertainty. At the meeting, Bolsonaro criticized the manifestos in defence of democracy, former president Lula and the electoral system, but affirmed his commitment to democracy. (CNN)

The “Letter to Brazilians in Defence of the Democratic State of Law,” signed by more than 1 million people, was read at the University of São Paulo Law School on Thursday (11). (g1)

The deadline to register the names to run for the 2022 elections is Monday (15). So far, 12 names are running for President of Brazil, 164 for governor, 177 for senator, 8,921 for federal deputy, 13,903 for state deputy and 518 for district deputy. (TSE)

The Minister of Economy, Paulo Guedes, reported an episode in which he criticized a French minister to demand better treatment for Brazil. He said France would be becoming irrelevant to Brazil, citing the low level of bilateral trade. (Folha)

FSB/BTG research shows Luiz Inácio Lula da Silva (PT) ahead of voting intentions in the first round with 41% (-3pp), followed by Jair Bolsonaro (PL) with 34% (+3pp). The government is considered as “bad/worst” by 44% (-3pp) of the population and “great/good” by 33% (+2pp). The disapproval rate fell to 54% (-4pp) and the approval rate rose to 40% (+4pp). The poll was conducted by telephone with 2,000 voters from 5 to 7 August.

Here is the selection of electoral surveys:

2. Economy – The inflation measured by the Broad Consumer Price Index (IPCA) fell by 0.68% in July. It is the lowest monthly rate ever recorded in the historical series since 1980. The accumulated rate in 12 months reached 10.07% and is at 4.77% in 2022. (Valor)

This week, the government started the payment of the increase of the Auxílio Brasil cash transfer programme, now R$ 600.00, the gas voucher of R$ 110.00 and the truck driver scholarship of R$ 1,000.00. (g1)

Itaú Unibanco disclosed that it obtained a net profit of R$ 7.68 billion in the second quarter of 2022. The amount is 17.4% higher than the profit obtained in the same period of 2021. Banco do Brasil profited R$ 7.8 billion in the second quarter of 2022, a result 54.8% higher than the same period in 2021. (Estadão)

Regarding the 2022 GDP, Itaú Unibanco revised again its estimate, from 2% to 2.2%.

Petrobras announced a new reduction in the price of diesel. The diesel price dropped 4%, the equivalent to a cut of R$ 0.22 per litre of diesel (Folha)

The services sector increased by 0.7% in June, compared to May, according to the Brazilian Institute of Geography and Statistics (IBGE). Compared to June 2021, the increase was 6.3%. (g1)

3. Public Administration – The Federal Supreme Court (STF) has officially elected Justice Rosa Weber as the next president of the Court. She takes up the post on September 12 and will remain in office until 2024. Minister Luís Roberto Barroso will be the new vice-president. Weber is a career judge and has been in the judiciary for 46 years. (Valor)

The Superior Electoral Court (TSE) disqualified Colonel Ricardo Sant’anna from the group that oversees the electoral process. Sant’anna The decision was communicated to the Ministry of Defence after it was identified that the military officer disseminated misinformation on the Brazilian electoral system. (g1)

Brazil obtained US government approval for the acquisition of Javelin anti-tank missile launchers and other military equipment. (Estadão)

From August 2021 to July 2022, 8,590.33 km² of forest were cleared in the Amazon. The rate is the third highest in the recent history of Deter, a tool of Inpe (National Institute for Space Research) that measures deforestation practically in real-time. The new data is only behind 2019-2020 and 2020-2021, respectively the first and second years with the highest deforestation. (Folha)

 1. The political trend remains positive. There were no changes in the base of parliamentary support, which remains solid, even with the broad party alliance built by the PT candidacy. Despite the expectation of more institutional conflicts as a result of the demonstrations, the week passed without critical problems. Bolsonaro’s visit to Febraban served to transmit cooling messages. Bolsonaro may have accepted advice from more moderate allies, or he may have been happy with the electoral polls. Either way, the repercussion was positive, at least for now. The next predicted inflexion point will be on the eve of 7 September.

As predicted in the previous report, Bolsonaro has been scoring well in the electoral polls, a trend that should continue throughout August. The difference between Lula and him is at 7pp, the smallest in the survey’s historical series. These numbers are supported by the improvement in the level of popular support. Governments that reach a 40% approval rating historically sharply increase their chances of re-election, as shown in the survey. It can be stated that Bolsonaro is managing to transform economic measures into political results.

2. The economy continues in a favourable trend. The result of inflation, with deflation of 0.68% in July, encouraged the markets, which started to re-establish forecasts of improvement in the GDP and of the primary surplus for 2022. The new reduction in diesel prices should contribute even more to the drop in accumulated inflation. There are still divergences regarding the end of the monetary tightening cycle, whether it has ended at 13.75% or should reach 14%.

The results of the services sector were also positive, corroborating forecasts for a GDP growth of at least 2% this year.

3. The public administration follows a neutral trend, showing signs of normal functioning among institutions. Usually, final months of any given term, the public administration follows a more balanced course. Managers are far more integrated than they were back in 2020 or 2021, and some federal public policies are proving to be effective and positive. One example comes from the Ministry of Agriculture; another one, more recently, occurred in the Ministre of Mines and Energy, which evolved with the minister swap. Minister Adolfo Sachsida would have faced a more challenging scenario in previous months. Despite these advancements, other departments keep falling short of expectations, such as public policies related to the environment.

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