The Week Ahead in Brazil #131


What is happening in Brazil?

1. Politics – President-elect Luiz Inácio Lula da Silva (PT) underwent a medical procedure on his larynx on Sunday (19). There was some speculation about his 2011 cancer comeback, but doctors say the surgery was only to remove a few lesions. Lula should resume his political activities on Monday (28). Lula is likely to go to Brasilia to resume political negotiations over the names of his administration, as well as the leadership positions in Congress and the so-called Transition Constitution Amendment Proposal (PEC).

The president of the PL, Valdemar da Costa Neto, asked for the nullification of the votes in 279,336 electronic ballots in the second round of the presidential election and said President Jair Bolsonaro (PL) should have won the race. The Superior Electoral Court (TSE) replied that PL should amend the claim to include the votes in the first electoral round. As PL did not rectify the document, TSE rebuffed the lawsuit, issued a R$ 23 million fine and froze the electoral funds of the party coalition. Soon after, TSE accepted a request to exclude PP and Republicanos from the judicial measures. 

2. Economy – According to the Brazilian Geography and Statistic Institute (IBGE), the inflation forecast indicates a rise of 0.53% in November. The accumulated in 12 months is 6.17%, and in the year, 5.35%. 

Gasoline prices to consumers are up 5.4% since October, the sixth consecutive rise, according to Brazil’s Petrol, Natural Gas and Biofuels (ANP). Petrobras has frozen the prices since September. The increase is primarily because of the rise in ethanol prices, which composes 27% of Brazilian gasoline.  

Fernando Haddad (PT) was put to the test with the Brazilian Federation of Banks as a possible Minister of the Economy on Friday (25). The Ibovespa index fell 2.55%, and the dollar was up 1.89% after his speech.

The Brazilian Electricity Regulatory Agency (Aneel) forecasts a rise of 5.6% in energy prices in 2023.

According to the Brazilian Central Bank (BC), Foreign Direct Investment (IDP) accumulated US$ 5.541 billion in October. In last year’s same period, it registered US$ 3,375 billion. 

3. Public Administration – The elected vice-president, Geraldo Alckmin, asked Sebrae, the Brazilian Micro and Small Business Support Service, to postpone a scheduled board meeting to appoint directors of the institution. The request is likely to be ignored, as set by Sebrae’s internal norms. 

The government announced the allocation of R$ 37,4 million to the Federal Police to resume issuing passports. The service was suspended on 19 November.

An analysis:

1. The political trend remains neutral. Last week, the institutional conflict was low, primarily because of the complete silence from Bolsonaro and Lula. The latter can attribute it to his surgery and should talk extensively this week, but the former continues in absolute silence, mesmerising politicians, allies, and supporters. Apart from unshakable Bolsonaro supporters, the parliamentary base continues to seek ways to migrate to the new government

The PL’s stunt over the electronic ballots had political consequences. On the negative side, apart from the financial pain, it caused PL’s self-isolation, distancing PP and Republicanos from itself. Now, it means that Bolsonaro’s party is set to fight its unusual battles alone. On the more positive side, the decision to put forward a judicial claim fulfils Bolsonaro’s wishes and keeps rank and file within the party. In the long run, the lawsuit provides a narrative to unite part of the opposition and entices popular support to sustain protests here and there. 

As Lula arrives in Brasilia for political discussions, there is some expectation that he could announce the new Minister of Economy, but no one knows for sure. The market was not happy with Haddad’s performance. Moreover, Lula’s main task of the week seems to be the budget situation for next year, finding a way to secure investments and funding for welfare programs. 

2. The economic trend continues to be positive. So far, the monetary policy is controlling inflation as much as possible. Also, as for the fiscal perspective, there was no indication of any measures to deteriorate the fundamentals. There is excessive noise over the Transition PEC. A more apparent sign is expected this week on the format to accommodate the federal budget and should provide a better assessment. 

On Tuesday (29), the government will release formal employment numbers and tax revenue for October; on Wednesday (30), the unemployment rate; and on Thursday (1), the third-quarter GDP.

3. Public Administration continues in a negative trajectory. There is a rise in hectic decisions across the Administration, mostly because chairs are shifting, and the transition government is trying to signal its preferences to public servants. 

Not only are some decisions being pushed to be postponed, such as the case of the appointment of ambassadors and other authorities, but there is an expectation that Lula will seek ways to reverse some of Bolsonaro’s decisions as gun control measures or environmental norms. 

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