Pension reform gets second nod from House

. Aug 07, 2019
pension reform roll call vote brazil

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Good morning! The pension reform has been approved in the second House roll call vote. Problems with Brazil’s antitrust authority. And Jair Bolsonaro’s decree to reduce red tape—and hurt the press. Enjoy your read!

Pension reform gets second nod from House

After over six hours of debate, the lower house approved

the pension reform bill in a second roll call vote. Today, congressmen will vote on proposals to amend the reform. House Speaker Rodrigo Maia, however, says that this part should be uneventful, as there is already a consensus around the most controversial points.</p> <p><strong>Why it matters.</strong> The pension reform is the core of the government&#8217;s economic agenda—and the first of several reforms investors hope to see Congress vote on. Unless it gets watered down, the reform allows for savings of BRL 933bn in ten years. By sending the bill to the Senate, the House can start focusing on a much-needed tax reform. Among several proposals, lawmakers have pushed forward one aiming at unifying taxes at the federal, state, and municipal levels of the public administration (our next episode of the <em>Explaining Brazil </em>episode, to be published this morning, brings an interview with one of the tax experts who drafted the bill).</p> <p><strong>Support.</strong> The pension reform was backed by 370 congressmen, way more than the minimum 308 needed. Still, it received fewer votes than in the first round, when 379 backed the proposal. Mr. Maia, however, downplayed it, saying that five supporters were absent and that the only abstention vote was from Alexandre Frota, a notorious supporter of the bill—his vote was due to his struggles within President Bolsonaro&#8217;s Social Liberal Party.</p> <div class="flourish-embed" data-src="visualisation/574622"></div><script src=""></script> <p><strong>Quid pro quo?</strong> Despite preaching the end of horse-trading politics, President Bolsonaro undeniably engaged in some give-and-take for the sake of the pension reform. He sent a request for Congress to raise the public debt by BRL 3bn, which would be used to finance projects sponsored by congressmen—usually in their own constituencies.</p> <ul><li><strong>Go deeper: </strong><a href="">The ins and outs of Brazil’s pension reform bill</a></li></ul> <hr class="wp-block-separator"/> <h2>Antitrust authority understaffing stalls M&amp;A deals</h2> <p>As we informed in yesterday&#8217;s <a href="">Daily Briefing</a>, President Bolsonaro is using seats on the board of Cade, Brazil&#8217;s antitrust authority, as a bargaining chip for political support. The problem is that negotiations are dragging on, and without four of its seven members, the board cannot rule on merger and acquisition deals. Rules require at least four members for any case to be analyzed.</p> <p><strong>Why it matters.</strong> Five deals worth a combined BRL 152bn are waiting for Cade&#8217;s board to move further. They include IBM&#8217;s purchase of software company Red Hat, and Natura&#8217;s takeover of Avon. Over 70 cases which have been approved—or at least approved with restrictions—have been frozen until Cade gets one more member. Two of them are global deals, such as Bayer&#8217;s purchase of Monsanto (worth BRL 249bn) and Disney&#8217;s acquisition of 21st Century Fox (BRL 206bn).</p> <p><strong>Disputes.</strong> Traditionally, Cade members are economists or lawyers—appointed by the ministries of Justice and of the Economy. Back in May, Justice Minister Sergio Moro and Economy Minister Paulo Guedes sent two picks for the Senate to confirm, but failed to consult with President Bolsonaro or Senate President Davi Alcolumbre beforehand. As a result, the Senate stalled confirmation hearings, forcing Mr. Bolsonaro to withdraw the names and decide to negotiate with Congress on Cade&#8217;s composition.</p> <hr class="wp-block-separator"/> <h2>Corporate earnings disclosure: the right move, for the wrong reasons</h2> <p>President Bolsonaro signed a provisional decree changing how publicly traded companies disclose their quarterly results. Until now, companies were forced to publish their earnings in a newspaper with national circulation (as well as in one publication of the region where they are based) and on the Federal Register. Now, they are only required to publish these documents on the websites of CVM, Brazil&#8217;s Securities and Exchange Commission, and B3, the São Paulo stock market operator.</p> <p><strong>Why it matters.</strong> The move is great for companies—forcing them to publish their earnings in newspapers made sense only in a pre-internet world. What is questionable, however, is the president&#8217;s motivation for doing it. He called the decree &#8220;retribution&#8221; for the way he was treated by media outlets. &#8220;I hope <em>Valor Econômico</em> will survive this decree,&#8221; said Mr. Bolsonaro, smirking.</p> <p><strong>Checks and balances.</strong> House Speaker Rodrigo Maia suggested Congress could overturn the decision (provisional decrees must be approved within 120 days, or else they are shelved), saying that swiftly removing an important chunk of newspapers&#8217; revenue could be harmful to democracy.</p> <p><strong>Yes, but… </strong>Congressmen&#8217;s motivations for countering the president may also not be motivated by noble values. The move, after all, would hit small publications owned by politicians way harder than it would impact mainstream outlets.&nbsp;</p> <ul><li><strong>Go deeper: </strong><a href="">Worrying signs for press freedoms in Brazil</a></li></ul> <hr class="wp-block-separator"/> <h2>You should also know</h2> <p><strong>5G. </strong>Finnish telecom equipment maker Nokia <a href="">expects</a> Brazil&#8217;s upcoming auction of the 5G spectrum to be the largest in the world. Regulator Anatel is still deciding on the rules for the auction of four frequencies—scheduled for March 2020. Nokia began testing 5G technology in Brazil in February 2018 alongside TIM, the Brazilian subsidiary of Telecom Italia.</p> <p><strong>Trade war. </strong>International markets rebounded from Monday&#8217;s selloff, as China chose not to continue devaluing its currency after being labeled by Washington as a &#8220;currency manipulator.&#8221; The São Paulo stock exchange index followed the trend, closing the day 2.06% higher. With the pension reform&#8217;s approval in the House, the local scenario continues to be positive—but investors will keep monitoring international developments, as the trade war between the U.S. and China should drag on for some time.</p> <p><strong>Environment.</strong> Darcton Damião, the new interim boss of Brazil&#8217;s National Institute for Space Research (Inpe), which monitors deforestation, said he would inform President Bolsonaro before releasing &#8220;worrisome&#8221; data on the destruction of the Amazon (today, the institute sends its alerts directly to environmental agencies). Mr. Damião also said he is not fully convinced that human-made global warming is a scientific fact.</p> <p><strong>Cybersecurity.</strong> According to cybersecurity company Fortinet, there have been over 15bn cyber attacks in Brazil in the past three months alone. Because of a lack of updates to operational systems, the country remains vulnerable to old attacks, such as Wannacry (which created havoc in 2017). Another study, by Upstream, reveals that 10% of Brazilian smartphones are infected with malware and losses are in the billions of dollars.</p> <p><strong>Press.</strong> American lawyer and journalist Glenn Greenwald, owner of <em>The Intercept</em>, has requested a so-called &#8220;preventive habeas corpus&#8221; against what he called a looming &#8220;threat of prison or extradition&#8221; to his home country. Mr. Greenwald cites a recent decree by the Justice Ministry allowing the government to summarily extradite foreigners suspected of crimes. Mr. Greenwald has led massive leaks of private messages exchanged between Operation Car Wash prosecutors and current Justice Minister Sergio Moro (when he was still a federal judge)—who has called the leaks a byproduct of a crime.</p> <p><strong>Prosecutor general.</strong> Despite her intense lobbying for two more years as head of the Federal Prosecution Office, incumbent Prosecutor General Raquel Dodge is the dark horse to get the nod from President Bolsonaro. Prosecutor Augusto Aras, who has already met five times with the president, has the inside track. He is considered to be a hardcore conservative and politically aligned with the president. In past administrations, picking a prosecutor general so close to the president&#8217;s office proved detrimental to investigations, as they hold the power to investigate members of Congress and government officials.

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