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Positive jobs report brings good news for Bolsonaro

Ana Ferraz
Sep 30, 2022 12:13 (Updated: Sep 30, 2022 12:14)

With two days to go until Election Day, President Jair Bolsonaro received a piece of great news from Brazil’s latest unemployment reading — showing that the country’s joblessness rate dropped to 8.9 percent in the quarter ending in August, hitting the lowest unemployment rate in seven years.

Brazil’s employed population now stands at a record 99 million, with 9.7 million people still looking for work. The numbers represent a 30-percent decrease in the number of unemployed people from a year ago. 

But there are plenty of sobering facts about the largely positive unemployment figures. Jobs are becoming more precarious: over 39 million workers are in informal or unregistered employment, which typically pay less and offer fewer labor protections, if at all.

Services, automotive retail, and public administration jobs were the main reasons for the drop in the unemployment rate. Together, they added over 1.2 million net jobs.

Average income for workers has grown for a second straight month and is now on par with levels from a year ago.

Adriana Beringuy, who oversees the survey at Brazil’s official statistics agency IBGE, credits the improvement in income to the expansion of formal employment — which has higher salaries — and, more importantly, to the easing of inflation.

Yesterday, the Labor Ministry reported that the Brazilian economy added almost 279,000 jobs in August. While the results came above market expectations, they were 25 percent lower than the same month last year.

Still, analysts surveyed by the Central Bank foresee Brazil growing by 1 percent, influenced by “the expected global slowdown and the cumulative impacts of domestic monetary policy.”

Brazil adds more jobs, but figures are underwhelming

Ana Ferraz
Sep 29, 2022 13:51 (Updated: Sep 30, 2022 11:57)

The Brazilian economy added almost 279,000 jobs in August, per official data released by the Labor Ministry. While the results came above market expectations, they were 25 percent lower than the same month last year.

Last month, job creation was pulled up once again by the services sector, with 141,113 posts created, and industry, with 52,760. Next came retail, civil construction, and agriculture, all with positive numbers. The bump in jobs was also registered in all 27 states, especially in the Southeast.

The average entry-level wage in August was BRL 1,950 (USD 362), 1.52 percent higher than last month. The Labor Ministry says the figures have been slowly improving in the second half of the year, after a poor performance at the start of 2022. However, they are still considerably low. 

Despite the slowdown, the numbers remain positive, with unemployment at the lowest level since Q4 2015. Along with formal job creation, it is seen as one of the main reasons for the Central Bank to calculate a lower “economic slack” — a term used to describe the amount of unused economic resources — than it had predicted three months ago.

As disclosed by the monetary authority in its quarterly inflation report earlier this month, “the output gap (a measure of economic slack) is estimated at -0.9 and -1.2 percent in this year’s second and third quarters, respectively.” In a prior report, the gap was -1.3 and -1.6 percent. 

From there, the Central Bank projects a negative gap of 1.6 percent in the final quarter of this year and -2.1 percent ending 2023, “initiating a narrowing trajectory.” In economic terms, the smaller the gap — that is, the closer the numbers of potential GDP and current GDP — the more balanced the economy is.

In the report, projections for this year’s economic growth rose from 1.7 to 2.7 percent. Growth of 1 percent is projected for 2023, influenced by “the expected global slowdown and the cumulative impacts of domestic monetary policy.”

Nevertheless, analysts surveyed by the Central Bank only foresee a 0.5-percent bump in the economy for next year.

In addition, the Central Bank also revised the inflation rate for 2022 and now projects the IPCA consumer price index to hit 5.8 percent for this year, down from the 8.8 percent forecast in its last report.

According to the institution, in June’s report, Congress had not yet approved measures to cap state-level taxes on fuel, electricity, and telecommunications, which have been largely responsible for deflation since July.

“It is estimated that the effects already felt until August explain most of the discrepancy between this scenario and what came to be. Fuels and energy were, by a large margin, the main contributions to the deviation from the projection,” highlights the document.

Embraer delivers first units of new-generation radar to the Brazilian Army

Ana Ferraz
Sep 29, 2022 9:18

Brazilian planemaker Embraer on Tuesday announced that it had delivered the first two units of the 2.0 version of its SABER M60 radars to the Brazilian Army. The radars will be used in the Army’s anti-aircraft artillery units.

According to a statement from the company, this model is “a search radar that integrates a low-height air defense system aimed at protecting sensitive points and areas such as government facilities and strategic infrastructures.”

The radar uses 3D technology and has a range of 60 kilometers and up to 16,400 feet in altitude, which allows it to track up to 60 targets simultaneously, detecting and classifying them automatically. Embraer also states that the equipment has LPI (Low Probability Interception) technology, which gives it the ability to pinpoint targets without being easily identified.

In addition, “the SABER M60 can be integrated with missile-based or anti-aircraft gun systems, as well as having provision for integration with other air defense systems, such as the Brazilian Aerospace Defense System (SISDABRA),” the statement reads.

The acquisition of SABER M60 radars is outlined in the Brazilian Army’s 2020-2023 Strategic Plan and expands the operational capacity of the Army’s ground force. Embraer revealed information in April about a contract for four additional radars of the same model.

Lower fuel prices will continue to push Brazilian inflation down

Ana Ferraz and Gustavo Ribeiro
Sep 27, 2022 11:03

Inflation is expected to continue to drop in Brazil in September — still largely thanks to lower fuel prices. The IPCA-15 mid-month consumer price index, considered to be a reliable predictor of official inflation, was down by 0.37 percent in September.

It was the second straight drop and the lowest figure for the month of September since 1998.

Still, only three out of nine segments saw lower prices over the past month, with transportation seeing the biggest drop, by 2.53 percent. Ethanol, gasoline, and diesel were up to 10 percent cheaper, according to IBGE, Brazil’s official statistics bureau. Airfares were an outlier, going up by over 8 percent in September.

The government has consistently talked about how it has intervened in the economy to lower inflation — frequently using lower gas prices as argument. But inflation remains high and widespread, with the prices of essential goods still hurting families’ budgets.

Food products, which weigh disproportionately on the poor, saw a slim 0.47-percent drop, thanks in large part to a reduction in milk prices. Milk and dairy products have been a symbol of how high food inflation has been in the country in recent months, with a 39-percent price rise in 12 months.

For the past 13 weeks, top-rated investment firms surveyed by the Central Bank have lowered their year-end inflation forecasts, with the median projection now at 5.88 percent (down from 6.7 percent four weeks ago).

Still, the Central Bank says “the inflationary environment remains challenging,” in the minutes of its latest policy meeting, released on Tuesday morning. 

While acknowledging the recent reduction in prices, the bank notes that “inflation of the components more sensitive to the economic cycle and monetary policy, which present greater inflationary inertia, remain above the range compatible with meeting the inflation target.”

“The [Central Bank’s Monetary Policy] Committee assesses that a more tightening global monetary policy stance would have a disinflationary impact in Brazil in the medium term, as it leads to a widening of the global gap and less pressure on the prices of commodity and goods in general. However, it points out that the possible impacts of such repricing on assets in the short term add uncertainty about the effect on Brazilian inflation,” the bank states.

Police operations cause a series of shootings in Rio

Euan Marshall
Sep 26, 2022 17:54

The Complexo da Maré, in the north of Rio de Janeiro, was put under siege by local police on Monday morning, leading to drawn-out gun battles that have left at least five suspects dead and 26 arrested.

The state’s military police closed the city’s Linha Amarela and Linha Vermelha expressways to carry out an operation to quell “the assault of one organized crime group against another.” The Complexo da Maré is largely controlled by the Comando Vermelho (CV) crime gang, but it has lost two pieces of local territory to rival organization Terceiro Comando Puro (TCP). 

On Twitter, Rio de Janeiro Governor Claudio Castro hailed the police for what he called a “surgical” operation. “Today, our civil and military police stopped heavily armed drug dealers from invading another favela. (…) The criminals’ reaction was immediate and unfortunately resulted in the scenes we saw on the Linha Vermelha, which was temporarily closed to protect those passing by.”

Mr. Castro was elected as lieutenant governor in 2018, but took the office after the impeachment of Wilson Witzel in May 2021. He is running for election this weekend, with a platform largely focused on public security. Current polls suggest he leads the vote by around ten percentage points.

Brazilian stocks and currency feel the pain of global stress scenario

Ana Ferraz
Sep 26, 2022 16:29 (Updated: Sep 26, 2022 17:20)

Ibovespa, Brazil’s benchmark stock index, on Monday picked up where it had left off on Friday — going down amid a scenario of global stress, as investors see an increased risk of a deep global recession. 

By mid-afternoon, the index had dipped by approximately 2 percent. Outside Brazil, Asian, European, and North American indexes are all having a troubled day — albeit not as bad as the Ibovespa performance.  

International markets remain jittery as central banks across the globe raise interest rates, Mário Sérgio Lima, an analyst at Medley Global Advisors, tells The Brazilian Report. “In a general way, I would say this is a week in which investors are going to be more cautious.”

The U.S. Federal Reserve’s determination to put a lid on inflation is inflicting a lot of pain on countries around the world. The Pound Sterling today hit a record low against the greenback as investors reacted poorly to Britain’s largest package of tax cuts in 50 years. 

The Brazilian Real is also losing value, plummeting by almost 3 percent on Monday so far. The foreign exchange rate reached USD 1 : BRL 5.40 — the highest since late July. “Global factors help maintain a feeling of risk aversion that affects emerging markets,” Mr. Lima explains. Among a basket of 33 currencies, the Real was the worst-performing of the day.

As we showed in our latest Brazil Weekly newsletter, presidential elections tend to cause less volatility than they are reputed for. Perhaps the adage relating stock markets to the election comes from the nosedive that happened in 2002, when investors were afraid of a win by Luiz Inácio Lula da Silva.

Twenty years later, Lula is again poised to win the presidency — but this time around, market woes are not on him.

Brazilian markets follow global rout, Petrobras crashes

TBR Newsroom
Sep 23, 2022 17:01

The Brazilian Ibovespa benchmark stock index slipped on Friday, reflecting a global fall caused by international investors’ worries about inflation, soaring interest rates, and a possible recession on the horizon.

The Ibovespa has traded down by 2.4 percent. International indexes such as the S&P 500, Dow, Nasdaq, and Europe’s Stoxx 600 fell by more than 2 percent. 

The trading session has been particularly unfavorable to stock prices of oil companies, such as Petrobras, PetroRio, and 3R Petroleum. Oil prices went down by over 5 percent abroad, on the back of heightened concerns about slowing economic growth.

At around 4:30 pm, ordinary shares of Petrobras were trading down by 7.23 percent. That is enough to slash the state-controlled company’s market value by BRL 30 billion (USD 5.7 billion).

Petrobras was singled out as the company that most remunerates investors with earnings, according to a report by asset management consultancy Janus Henderson. 

Higher energy commodity prices helped boost the earnings of companies in emerging markets, where the oil and gas sector typically accounts for a large portion of total corporate earnings.

City governments ordered to offer daycare for all children up to 5

Cedê Silva
Sep 23, 2022 16:15 (Updated: Sep 23, 2022 16:47)

The Brazilian Supreme Court ruled on Thursday that city governments must offer daycare centers and pre-school facilities to all children aged 5 or lower.

The right is already enshrined in the Brazilian Constitution, which says all workers are entitled to “assistance for children and dependents of up to five years of age, in day-care centers and pre-school facilities.”

The southern city of Criciúma argued at the Supreme Court that the courts can’t impose obligations that incur expenses not included in the budget.

Justices ruled that the constitutional right to daycare centers and pre-school facilities does not require further laws or regulations. They also ruled that admissions can be claimed in courts with individual lawsuits.

According to the Supreme Court, over 28,800 similar lawsuits in Brazil are awaiting a final ruling.

Recent data from standardized tests conducted by the Education Ministry shows that reading and math skills of Brazilian schoolchildren dropped at the beginning of the pandemic, especially among younger kids.