The Week Ahead in Brazil #128

What is happening in Brazil?

1. Politics – Politics – Candidate Luiz Inácio Lula da Silva (PT) won the most disputed presidential election since the end of the military rule. Lula was elected with 50.9% of the valid votes against 49.1% for Bolsonaro (PL). The 1.8pp gap represents 2.1 million votes. It was the first time a president failed to get re-elected, and the first time a presidential candidate was elected for the third time in Brazil. (Estadão)

Protests spread across Brazil, with hundreds of highway blockades and demonstrations in front of army barracks. The demonstrators protested against the election results, calling for military intervention to prevent Lula’s inauguration.

It took 48 hours for Bolsonaro to make a brief statement on the elections. He did not explicitly recognise Lula’s victory but said he would respect the Federal Constitution. Minister Ciro Nogueira (Chief of Staff) said he would coordinate the transition with the president-elect’s team.

Geraldo Alckmin, the vice-president-elect, was nominated by Lula to coordinate the transition team. He met with Mr Nogueira and then with President Jair Bolsonaro. Alckmin was formally appointed on Friday (4) to begin the process.

The Governor of Pará, Hélder Barbalho (MDB), invited President-elect Luiz Inácio Lula da Silva (PT) to join the entourage of the Consortium of Governors of the Legal Amazon that will participate in the United Nations Climate Change Conference 2022 (COP27). The climate summit began this Sunday (6). Lula is due to arrive at the event on 14 November, and there is a possibility that he will announce the new minister of the Environment. He is also expected to hold bilateral meetings with presidents of other countries. (CNN)

2. Economy – With the export growth, the trade balance registered a surplus of US$ 3.92 billion in October. The result represents a 90% increase in relation to last year and a 27.1% growth to September. This is the third-best performance for the month after October 2020 and October 2018. (Ministério da Economia)

Senator-elect Wellington Dias (PT-PI), appointed as coordinator of the transition team for budgetary issues, is studying a Proposal of Amendment to the Constitution (PEC) that relaxes the spending cap and ensures the payment of R$ 600.00 of Auxílio Brasil. In addition, Dias proposes increasing the minimum wage from R$ 1,302.00, as currently indicated in the budget, to R$ 1,320.00. (Exame)

3. Public Administration – The Federal Public Prosecutor’s Office (MPF) decided to investigate reports that the Federal Highway Police (PRF) multiplied up to nine times the number of buses inspected in the Northeastern states from the first to the second round of elections. (Estadão)

The Federal Supreme Court (STF) has ordered the current government to reactivate the Amazon Fund within 60 days. Created in 2008, President Jair Bolsonaro froze the Fund in 2019. Currently, the fund has R$3.5 billion awaiting use. (Valor)

An analysis:

1. The policy follows a neutral trend in this initial transition period. At the beginning of the week, there was a significant metric worsening in the metrics of institutional conflicts, but it was eased throughout the week. Bolsonaro’s parliamentary base is solid but suffered a setback. Except for members of Congress and senators vitally dependent on Bolsonaro, many sought to build bridges with Lula’s team to understand the essential priorities of the elected government. Popular support for the Bolsonaro government has not changed, maintaining stability even after the election.

As of Monday (7), with the formal start of the work of the president-elect’s transition team at the Centro Cultural Banco do Brasil (CCBB), a compound in Brasilia, the Bolsonaro administration loses influence in the Legislative, something usual in transition periods. The team led by Alckmin begins to exercise de facto power, but not yet de jure, sparking a change in the gravitational centre of power in Brasilia from Bolsonaro to Lula. In addition to the political parties that make up the coalition led by the PT, others negotiate space in the new government and make themselves up for grabs to make the new parliamentary base viable. For now, Gleisi Hoffman, Aluízio Mercadante and Carlos Siqueira are some of the leading names that are orbiting in the decision-making centre of the new government.

The final year of legislatures, such as 2018 and 2022, is generally the period in which fewer parliamentary propositions are presented than in relation to other years. In contrast, the first year of legislatures, such as 2015, 2019 and 2023, is the one in which more propositions are presented. Over the years, the rate of transformation of proposals into legal norms is reasonably constant in the first three years of legislatures, falling dramatically in the last year.

The Plenary of the Chamber of Deputies will hold deliberative sessions from Monday (7) to Thursday (10). In the Senate, the college of leaders will meet on Monday to decide on the week’s votes. The Economic Affairs Commission (CAE) must analyse, on Tuesday (8), at 9 am (BRT), the bill that regulates the Brazilian Market for Emissions Reduction (MBRE), which will aim to regulate the purchase and sale of carbon credits in Brazil (PL 412/2022).

The appointment of the other members of the transition team of the president-elect should occur throughout the week. The work begins on Monday (7) at the Centro Cultural Banco Brasil (CCBB) in Brasília, a few kilometres from the Planalto Palace.

2. The economy follows a positive trend. Temporary hiring at the end of the year should contribute to a decrease in unemployment. The financial market reacted well to Lula’s election, even with the decline in the stock price of state-owned companies.

The significant unknown factor is the fiscal policy of the new government. With expectations of a drop in federal revenues by 2023, it is necessary to carefully observe public policies that increase spendings, such as social programs or the expansion of personnel expenses. Fiscal adjustment will be essential for future interest rates to fall. The nomination of the economic team will signal the path the government intends to follow.

The October IPCA will be released on Thursday (10).

3. The public administration follows a neutral trend with no significant alterations.


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