KC-390: Brazil’s brand new military plane

. Sep 04, 2019
kc-390 Brazil's brand new military plane

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The Brazilian Air Force has a new military plane, the KC-390. Jair Bolsonaro doubles down on his populist rhetoric. The pension reform could move along in Congress today. And Rio set to get BRL 2.5bn in royalties from new oil reserves. (This newsletter is for platinum subscribers only. Become one now!)

Brazil’s brand new military plane

The Brazilian Air Force will receive its

first Embraer KC-390 cargo plane aircraft today, to replace the Lockheed Martin C-130 Hercules used for decades. The KC-390 is faster, flies at a higher altitude, and can carry more cargo than its predecessor. Moreover, it can be refueled during flight and is easier to maintain. The aircraft was developed in partnership with the Air Force, which ordered 28 units—to be delivered by 2024.</p> <p><strong>Why it matters.</strong> Priced at around USD 87m apiece, the KC-390 has been considered a state-of-the-art aircraft, set to &#8220;revolutionize military air transportation,&#8221; according to Charles Atkeison, of <a href="https://www.avgeekery.com">Avgeekery Magazine</a>. It could make Embraer a top-notch competitor in a market dominated by American producers.</p> <p><strong>Production delays.</strong> The KC-390 comes with three years of delay, partially caused by the 2014–2016 recession—which made the Brazilian government hold back on its payments to finance the project—and an accident during the production stage.</p> <p><strong>Mission and goals.</strong> The KC-390 can transport up to 80 troops, three tanks, or one Black Hawk H-60 helicopter. Its production comes under Embraer&#8217;s defense division—which was not sold to Boeing. However, Embraer and Boeing will create a joint venture charged with selling the plane internationally. In June, Portugal became the first foreign country to strike a deal—purchasing five KC-390 planes and a flight simulator for EUR 827m.</p> <hr class="wp-block-separator"/> <h2>Populism wears green and yellow</h2> <p>Jair Bolsonaro reacted to <a href="https://brazilian.report/power/2019/09/02/jair-bolsonaro-popularity-burns-brazilian-left-chomsky/">recent negative poll numbers</a> by doubling down on his rhetoric. During an event on Tuesday, he defended the legacy of the military dictatorship, and asked Brazilians to wear green and yellow on September 7—Brazil&#8217;s independence day—in a display of support for the government and &#8220;in defense of the Amazon.&#8221; His administration also increased the budget for independence celebrations in Brasília by 15%, despite the current budgetary crisis which forced severe cuts in many areas of government.</p> <p><strong>Why it matters. </strong>Mr. Bolsonaro continues to opt for polarization as a tactic—which helps understand why he is the least popular among presidents in their first year in office. By using the national symbols as his own, Mr. Bolsonaro tries to associate his detractors to enemies of the state—which should only fuel political turmoil.</p> <p><strong>Bad precedent.</strong> Mr. Bolsonaro&#8217;s call to the streets has an unsuccessful precedent. In 1992, rattled by corruption allegations and low approval ratings, then-President Fernando Collor asked Brazilians to take to the streets in green and yellow to support him. Instead, people wore black, and called for his resignation. A month later, Mr. Collor resigned from the presidency. &#8220;That won&#8217;t be our case. Our case is about Brazil,&#8221; said President Bolsonaro.</p> <figure class="wp-block-image"><img loading="lazy" width="660" height="471" src="https://brazilian.report/wp-content/uploads/2019/09/collor-green-and-yellow-populism.jpg" alt="collor green and yellow populism" class="wp-image-23377" srcset="https://brazilian.report/wp-content/uploads/2019/09/collor-green-and-yellow-populism.jpg 660w, https://brazilian.report/wp-content/uploads/2019/09/collor-green-and-yellow-populism-300x214.jpg 300w, https://brazilian.report/wp-content/uploads/2019/09/collor-green-and-yellow-populism-610x435.jpg 610w" sizes="(max-width: 660px) 100vw, 660px" /><figcaption>The 1992 <em>&#8220;Caras pintadas&#8221;</em> (painted faces) movement</figcaption></figure> <p><strong>Patriotic sales.</strong> Another marketing action by the administration is the &#8220;Brazil Week,&#8221; a sort of patriotic Black Friday. Between September 6 and 15, over 3,000 retailers across the country (but mostly in São Paulo) will offer discounts. The government promises it will heat up sales, but didn&#8217;t offer many numbers to support the claim.</p> <hr class="wp-block-separator"/> <h2>Pension reform to move along in the Senate</h2> <p>The Senate&#8217;s Constitution and Justice Committee is expected to vote on the pension reform bill today—pushing it to the upper house floor, where it will need the support of two-thirds of senators. The bill was split into two by its rapporteur, Senator Tasso Jereissati. One proposal has the text approved by the lower house—and the other contains the changes senators want (such as the inclusion of state- and municipal-level servants in the new retirement rules).</p> <p><strong>Why it matters. </strong>The reform is a constitutional amendment—and it takes a complicated legislative process to approve it. Any changes in the Senate would take the bill back to the House, further delaying its approval. With the division into two pieces of legislation, the core of the reform could pass as early as November.</p> <p><strong>Yes, but. </strong>Many disagreements remain, however. Senators proposed 484 changes to the bill—which Mr. Jereissati should reject, without exception.&nbsp;</p> <hr class="wp-block-separator"/> <h2>Rio to get BRL 2.5bn in royalties from new oil reserves</h2> <p>The nearly-bankrupt state of Rio de Janeiro will receive roughly BRL 2.5bn from the money raised by the government in the auction of Petrobras&#8217; so-called &#8220;transfer of rights&#8221; oil reserves—scheduled for November 6. The state&#8217;s municipalities, meanwhile, will get around BRL 332m.&nbsp;</p> <p><strong>Why it matters.</strong> A previous bill allocated only BRL 326m of the BRL 106bn the government expects to raise from the massive oil reserves. The push—lobbied for by House Speaker Rodrigo Maia, a politician from Rio—is a welcome inflow of cash for a state which has struggled to pay its public servants and declared a state of financial calamity a couple of years ago.&nbsp;</p> <p><strong>Transfer of rights. </strong>The reserve is an imbroglio dating back to 2010, when Petrobras paid BRL 75bn to exploit 5bn oil barrels on the pre-salt layer. But the area has between 6–15bn barrels more. WIthout a settlement from Congress in almost a decade, the government gave up and will leave the involved parties to negotiate directly.</p> <p><strong>Obstacles.</strong> Despite being scheduled for November 6, the auction must be approved by the Federal Accounts Court, an audit tribunal that monitors public spending. For the auction to be possible without delays, the court must give its green light by Sunday.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <p><strong>Deforestation.</strong> Yesterday, the House approved a bill creating incentives for landowners to preserve natural vegetation on their properties. The compensation may be financial, or by way of investments in the local community. The bill was a rare case of both the rural and the environmentalist caucuses rallying around a piece of legislation—an alliance that House Speaker Rodrigo Maia defended as a &#8220;way to guarantee buying markets for Brazil&#8217;s agribusiness.&#8221;</p> <p><strong>Truckers.</strong> Tensions among truck drivers continue to rise. After the Supreme Court suspended a trial around minimum freight tables, scheduled for today, groups of truckers want a strike in the molds of last year&#8217;s stoppage—which nearly halted the entire country for ten days. But the move is far from a consensus, with more experienced leaders defending dialogue with the government.</p> <p><strong>Venezuela. </strong>President Nicolás Maduro has called for military exercises along the Colombian border, accusing Bogota of plotting an attack against Venezuela. In the latest salvo between the Venezuelan dictator and Colombia&#8217;s right-wing President Ivan Duque, Mr. Maduro said Colombia &#8220;wants war.&#8221; Tensions have risen since last week, when a former leader of the Farc (Revolutionary Armed Forces of Colombia) announced he would take up arms again. Bogota accuses Mr. Maduro of harboring Farc fighters in Venezuelan territory.</p> <p><strong>Auto industry.</strong> Brazilian automaker Caoa has reached a deal to purchase Ford&#8217;s plant in Greater São Paulo—a negotiation that has been in progress since February. However, unions say 1,300 of the plant&#8217;s 3,000 jobs could disappear; moreover, Caoa plans to pay those it hires from Ford up to 80% of their current salaries. Governor João Doria said that the automarker would only get tax breaks if all jobs were preserved.</p> <p><strong>Stocks. </strong>Since going public on Nasdaq, <a href="https://brazilian.report/newsletters/daily-briefing/2019/07/17/supreme-court-blocks-investigation-president-son/">medical education platform Afya</a> (AFYA) has been a stock of hyperbolic numbers. On the day of its initial public offering, just over a month ago, Afya jumped 27%—and has accumulated a 70% rise since. Since last Thursday, though, the company has lost 20% of market value after a disappointing Q2 earnings report. The discrepancy between expectations and results, analysts say, has more to do with markets&#8217; difficulty in understanding Afya&#8217;s business than with problems with the company.</p> <p><strong>Rio de Janeiro.</strong> Yesterday, former Rio de Janeiro governors Anthony Garotinho and Rosinha Matheus (who are a married couple) were arrested for corruption. This is Mr. Garotinho&#8217;s fourth arrest—and his wife&#8217;s second. Now, <em>all</em> governors elected in Rio de Janeiro between 1998 and 2014 are behind bars (Sérgio Cabral and Luiz Fernando Pezão are also in jail).

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