The Week Ahead in Brazil #119

1. Politics – This was a week of concentrated-joint effort in National Congress. Members of Congress approved more than 30 bill proposals, including six provisional measures by both houses.

The latest FSB/BTG electoral poll shows Luiz Inácio Lula da Silva (PT) leading the voting intentions in the first round with 43% (-2pp), followed by Jair Bolsonaro (PL) with 36% (stable). The government is considered as “bad/worst” by 45% (stable) of the population and “great/good” by 34% (stable). The disapproval rate is 55% (-1pp) and the approval rate is 40% (+2pp). The survey was conducted by telephone with 2,000 voters from 26 to 28 August.

The Ipec/Globo survey points out that Lula (PT) has 44% (stable) of voting intentions in the first round against Bolsonaro (PL), who has 32% (stable). The government is disapproved by 57% (stable) and approved by 38% (+1pp). The survey was conducted face-to-face with 2,000 voters between 26 and 28 August.

The Quaest/Genial poll shows Lula (PT) with 44% (-1pp) and Bolsonaro (PL) with 32% (-1pp). The poll heard 2,000 voters in person from 25 to 28 August. The disapproval rate was 40% (-1pp) while the approval rate was 30% (+1pp).

The Ipespe/XP survey indicated Lula (PT) with 43% (-1pp) and Bolsonaro with 35% (stable). 2,000 people were interviewed by telephone between the 26th and 29th of August. The government is considered “bad/worst” for 46% (-3pp) and “great/good” for 35% (+3pp). The disapproval rate is 57% (-2pp) and the approval rate is 39% (+3pp).

According to the PoderData survey, Lula (PT) has 44% (stable) and Bolsonaro 36% (-1pp). The poll interviewed 3,500 voters by phone between 28 and 30 August. The disapproval rate is 56% (stable) and the approval rate is 38% (-2pp).

Here is the selection of electoral polls and the monthly average:

 2. Economy – The Brazilian GDP (Gross Domestic Product) grew 1.2% in the second quarter of 2022, compared to the three months immediately before. The result was released on Thursday (1) by IBGE (Brazilian Institute of Geography and Statistics). (Folha)

The unemployment rate in Brazil was 9.1% in the quarter ended in July, down 1.4 percentage points compared to the previous quarter, the IBGE reported. It is the lowest index of the series since December 2015. The contingent of occupied people in the country broke a record of the historical series that began in 2012, adding 98.7 million people. (CNN)

According to the Caged (General Cadastre for Employed and Unemployed), Brazil registered a positive balance of 218.9 thousand formal jobs in July. (Valor)

The Brazilian National Treasury informed that the federal public debt fell 0.70% in July, to R$ 5.804 trillion. The average cost of the debt stock fell from 10.90% per year to 10.76% in July and the maturity of the bonds was slightly extended from 3.88 years to 3.90 years. (Folha)

Data released by the Brazilian Central Bank (BCB) shows that the federal government’s gross debt fell to 77.6% of the Gross Domestic Product (GDP). (EstadĂŁo)

BCB informed that the public sector registered a primary surplus of R$ 20.4bn in June, the record for the month since 2001, the year of the beginning of the series. (Valor)

Petrobras announced a 7,08% drop in gasoline prices. The value per litre came down from R$ 3.53 to R$ 3.28, a reduction of R$ 0,25 per litre.

3. Public Administration – The Superior Electoral Court (TSE) and the Ministry of Defence held a meeting with their technical areas for presentations on the electronic ballot boxes. The TSE statement said that “the success of the verification tests of the electronic ballot boxes was acknowledged” and that the technical areas will present the “possibility of a pilot project” as a complementary audit test. (TSE)

The federal government presented its 2023 budget, known as PLOA. The forecast is a primary deficit of R$ 63.7bn next year. This sum represents 0.6% of the GDP, and it is the lowest estimated percentage since 2012. (Brasil)

An analysis:

1. The political trend continues positive. The presidential coalition remains robust, as could be seen by the massive approval of bills supported by the Executive last week. The ratings of popular support slightly increased across August. The institutional conflicts decreased significantly during this month.

As predicted, August’s electoral surveys showed a political scene more favourable to Bolsonaro in comparison to July’s due to three reasons: Lula’s wear and tear, the economy and growth in the approval ratings. 

Lula began to fall in the voter’s preferences. The reasons for that are his unfulfilled performance in the debates, the recollection of his and PT’s corruption practices and the lack of sound and bold public policies. There were no innovative aspects as a way to attract indecisive voters: Lula announced his well-known formulas of overhauling housing programmes and public-led investments in infrastructure. 

Bolsonaro also was not able to put forward innovative proposals. However, he has in his favour good economic numbers, such as decreasing unemployment rates, declining inflation, and GDP growth. Another factor to be considered as an explanation for Bolsonaro’s growth in the electoral polls is that he has agreed to tone down his harsh remarks over the electronic ballots and the Judiciary. He avoided, for instance, excessively criticising Justice Alexandre de Moraes’ decision about the businessmen. Moraes was heavily criticised by a wide range of segments of society due to his top-heavy decision. Nonetheless, Bolsonaro’s big test is the September 7 independence celebrations: if he escapes from the temptation of making bold remarks against the electoral system and the Judiciary and prevents pro-coup manifestations of his supporters, Bolsonaro should reinforce his growth trajectory. As for the approval ratings, the survey average shows the support for the Bolsonaro administration is up to 40%, a level at which the re-election chances increase significantly.

In that way, the three pieces of this electoral puzzle are adherent to what is seen in the electoral polls. For September, despite the prospects of a dog-eat-dog campaign, the macropolitical environment should continue to favour Bolsonaro, putting pressure on Lula’s side. 

2. The economy continues on a positive trajectory. The GDP numbers were higher than expected by the market. Several financial institutions and BCB’s Focus Report revised the 2022 GDP forecast to 3%. Combined with record tax collection and lowering unemployment rates, the Brazilian economy is providing robust and consistent signs of growth.

A note about this report. This year, although some metrics were in neutral or negative numbers, the resultant of these metrics, the trend, was always positive, constituting a relevant aspect. Since December 6, the trend in the economy was consecutively positive. The difference between this report and other inspiring analyses is the attempt–somewhat useful and valid–to assess economic policies from the perspective of the Political Economy. Market analysts, fund managers and highly specialized professionals are correctly prone to assess one specific policy. Here, there is a will to assess the economy under an integrated framework, considering several sources of information with economic impact: official numbers, regulatory improvements, public policies with an influence on the business environment, interest groups, public speeches, seminars, reports and other relevant information that may come across. The analysis is completed with information from private and public actors, allowing for the formation of a baseline that enables consistent explanations for what is going on in the Brazilian economy. In other words, this report does not react alone to every single good or bad decision made by policymakers but weighs it against other political and economic factors.

3. The public administration remains on a positive trend, without significant changes.

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