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Bolsonaro’s new decree comes in for criticism

. Mar 23, 2020
Bolsonaro new decree comes in for criticism Photo: cesarvr/Shutterstock

As we explained in our March 20 Daily Briefing and March 23 Weekly Report, experts have grim forecasts for the Brazilian economy heading into a coronavirus-related recession. Estimates for post-outbreak Brazil range from 20 million people out of work to up to 40 million. Total unemployment currently stands at 11.9 million.

Let that sink in. Brazil could have 40 million unemployed workers

On Sunday evening, President Jair Bolsonaro signed a provisional decree (MP 927) that made workers’ conditions even more fragile, allowing companies to suspend workers’ contracts—with no pay—for up to four months.

The

move naturally generated a lot of <a href="https://brazilian.report/power/2020/03/20/will-the-coronavirus-be-jair-bolsonaro-kryptonite/">backlash</a>, with the term &#8220;Genocidal Bolsonaro&#8221; reaching the top of Twitter&#8217;s trending topics in Brazil—and number three worldwide. In response, the President said it would consider revoking that section of the decree.</p> <p>While the backpedaling is certainly good news for Brazilian workers, it highlights how lost the Bolsonaro administration seems to be. &#8220;They have no structured plan. It is like they are throwing things at the wall to see what sticks. The government seems to react according to people&#8217;s moods. What is the president&#8217;s end goal? It&#8217;s getting impossible for companies to prepare themselves for the upcoming crisis,&#8221; says economist Daniel Duque, of think tank Fundação Getulio Vargas.</p> <h2>Analyzing the controversial labor decree signed by Jair Bolsonaro</h2> <p>We break down the decree&#8217;s key points:</p> <ul><li>Contracts can be suspended for up to four months. While Brazil&#8217;s labor framework already authorized such a move (for an even longer period, for that matter), it can only be pulled after a collective bargaining agreement—and each employee must individually sign on it. Now, companies have all the leverage, thanks to a highly vague text, allowing them to suspend employment relationships after an agreement with the &#8220;group of employees.&#8221;</li><li>Firms can unilaterally place workers in remote, unpaid &#8220;qualification&#8221; periods.</li><li>Companies can place their employees on remote work regimes—with a minimum 48-hour notice.</li><li>As Brazil has been placed into a &#8220;<a href="https://brazilian.report/coronavirus-brazil-live-blog/2020/03/20/brazilian-senate-approves-state-of-calamity-against-covid-19/">state of calamity</a>,&#8221; companies in bankruptcy can enjoy special conditions to pay workers&#8217; severance. For traditional contracts, employers must pay a one-month salary for each year worked. For others, compensation might be 25-to-50 percent lower—and none for those in their first year at the job.</li><li>Health professionals can be called in to serve working days longer than the traditional 12-hour shifts, followed by 36-hour rest. This overtime can be compensated through days off in the future—or additional payments (one and a half years after the state of calamity has ended).</li><li>Workers with Covid-19 will only have access to compensation when it is proven that their infection is work-related.</li></ul> <p>The big miss, however, is a government promise to authorize companies to cut down working hours by up to 50 percent—with a wage reduction in the same proportion. So companies are bound by previous rules, capping wage and hours reduction at 25 percent.</p> <p>A provisional decree by the president is immediately enforced—but must be approved by Congress within 120 days before expiring.</p> <h2>Possible impacts of allowing companies to unilaterally suspend contracts</h2> <p>Before making a U-turn, Jair Bolsonaro argued on <a href="https://valor.globo.com/brasil/noticia/2020/03/23/mp-flexibiliza-regras-trabalhistas-e-permite-suspensao-de-contrato-por-ate-4-meses.ghtml">Twitter</a> that his decree will help save jobs. &#8220;Unlike what some are spreading, our decree protects employees. Instead of being fired, the government steps in to help for the next four months, until activities are back to normal, without people getting fired,&#8221; he wrote.</p> <p>Indeed, the decree aims at protecting companies—which may face a dreadful depression in the foreseeable future. &#8220;For businesses, one of the points is the temporary suspension of deposits into workers&#8217; severance funds (called FGTS). That will alleviate their expenses, without compromising the fund&#8217;s liquidity,&#8221; says Giovanni Beviláqua, a Ph.D. in economics and project manager at Sebrae, Brazil&#8217;s Service of Support for Micro and Small Enterprises.</p> <div id="buzzsprout-player-2981242"></div> <script src="https://www.buzzsprout.com/299876/2981242-99-is-recession-inescapable.js?container_id=buzzsprout-player-2981242&amp;player=small" type="text/javascript" charset="utf-8"></script> <hr class="wp-block-separator"/> <p>For economist Daniel Duque, of think tank Fundação Getulio Vargas, the decree could have &#8220;gigantic&#8221; impacts on people&#8217;s ability to make ends meet. &#8220;It is a situation of total vulnerability. People will have to support themselves with their savings or money from family members,&#8221; he says.</p> <p>And that is the main problem: Brazilians traditionally do not save much money. According to a 2018 International Monetary Fund report, Brazil has the second-worst rate of savings in South America. The GDP-invested resources ratio is 14.6 percent—only better than Venezuela, a country that has been facing a full-scale socioeconomic collapse for some time now.</p> <p>But that&#8217;s not because they are reckless, but rather because they often cannot afford to save. A survey by Anbima, an association of finance companies, showed last year that only 8 percent of economically active Brazilians were able to save anything in 2018.</p> <p>&#8220;The decree shows how uncoordinated this administration is, and its inability to establish any dialogue with Congress and the Brazilian people. The result of going through with something like that could be social chaos, as it would create an unregulated and completely unbalanced system of labor negotiations,&#8221; says economist Sandro Cabral, a professor at the São Paulo-based Insper Business School. &#8220;Moreover, it would mask unemployment figures, as people would be employed, but not getting any money,&#8221; he adds.</p> <p>For Rodrigo Shiromoto—a member of the fiscal board at Human Rights Watch Brazil—criticizes the move as another example of the government&#8217;s ultra-libertarian philosophy that is just not fit for a country as unequal as Brazil. &#8220;Why doesn&#8217;t the government put forward a rescue package adapted to our reality? We need to save small and medium-sized businesses that will perish if left to their own devices. What they have announced so far is not nearly enough.&#8221;

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Brenno Grillo

Brenno has worked as a journalist since 2012, specializing in coverage related to law and the justice system. He has worked for O Estado de S. Paulo, Portal Brasil, ConJur, and has experience in political campaigns.

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