Oil spills on Brazilian coast from Venezuela, says Petrobras

. Oct 08, 2019
petrobras oil spill

This newsletter is for PREMIUM subscribers only. Become one now!

Good morning! We’re covering Petrobras’ findings on the origin of a mysterious 100-ton oil spill on Brazil’s Northeast coast. Plus, a new bill from the Central Bank proposes to shake up the country’s foreign currency exchange laws, and there’s the latest on the government’s privatization plans for 2019. (This newsletter is for platinum subscribers only. Become one now!)

Oil spills on Brazilian coast from Venezuela, says Petrobras

Analyses carried out by Brazil’s state-owned oil company Petrobras

have shown that the mysterious oil stains which have appeared on the country&#8217;s Northeast coast are likely to have come from Venezuela. Comparative analysis was carried out on samples of the spilled substance, and a confidential <a href="https://www1.folha.uol.com.br/ambiente/2019/10/bolsonaro-diz-que-tem-no-radar-o-pais-de-onde-pode-ter-vindo-oleo-do-nordeste.shtml">report</a> was sent to the Brazilian Environmental Protection Agency (Ibama).</p> <p><strong>Why it matters.</strong> Ibama reports that oil stains have reached at least 133 separate points across Brazil&#8217;s northeastern coastline, affecting 61 municipalities and nine states. On Saturday, the state government of Sergipe declared a state of emergency.&nbsp;</p> <p>“It is complex, we have one country on our radar which could be the origin of the oil, and we are working hard to give satisfaction to society and collaborate with the environmental issue,&#8221; said a coy Jair Bolsonaro on Monday, refusing to mention the Venezuela suspicions. The president took part in a meeting with the Ministry of Defense yesterday afternoon to deal with the matter.</p> <p><strong>Clean-up.</strong> Environment Minister Ricardo Salles stated that around 100 tons of oil have been collected from the northeastern coast as part of the cleanup operations. Mr. Salles arrived in Sergipe&#8217;s state capital of Aracaju yesterday, and flew over the coast in a helicopter for roughly 30 minutes.</p> <p><strong>Tourism.</strong> Affected cities are fearing a drop in tourism, which is one of the main sources of income for towns on Brazil&#8217;s idyllic Northeast coast. Some restaurants and hotels say they have registered a drop in customers of up to 70 percent since the first stains were spotted.&nbsp;</p> <p><strong>Hypothesis. </strong>Besides the origins of the oil—identified as a product which is not made in Brazil—the most likely explanation for the spill is that the oil came from a ship which cleaned its tank in the Atlantic ocean, and the substances were swept to the Northeast coast by currents.</p> <hr class="wp-block-separator"/> <h2>Central Bank proposes overhaul to currency exchange law</h2> <p>Brazil&#8217;s Central Bank has submitted a bill to Congress to dramatically simplify the country&#8217;s legislation on foreign currency exchange. Among other changes, the Bank intends to facilitate the opening of accounts in dollars in Brazilian financial institutions and increase efficiency for foreign investors operating on the Brazilian financial market.</p> <p><strong>Why it matters. </strong>The bill opens up space for fintechs to enter the market of international money transfers, a segment which was previously reserved for 187 authorized banks. The Central Bank noted that fintechs work in this market in other countries, helping to make the service cheaper.</p> <p>Banks enjoy significant profit margins in the foreign currency-exchange sector, which could now be trimmed with the impending entry of fintechs. A Central Bank study showed that traditional financial institutions have an average spread of 0.9 percent on these currency transactions.</p> <div class="flourish-embed" data-src="visualisation/750217"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <p><strong>Simplify.</strong> The overhaul proposal involves taking over 40 laws, with some dating back to as far as 1920, and consolidating their hundreds of articles into a single piece of legislation with just 26 articles. &#8220;Current legislation is disperse,&#8221; said the Central Bank&#8217;s regulation director Otávio Damaso. &#8220;This often brings a lack of legal security for the market&#8217;s varied players.&#8221;</p> <p><strong>Accounts in USD. </strong>As things stand, only currency-exchange agents, tourism companies, and credit card firms offering international cards are allowed to hold accounts in USD in Brazilian banks. The Central Bank proposal intends to open this permission up to other legal entities and individuals in a gradual manner.</p> <p>However, allowing Brazilians to hold bank accounts in the American currency holds a risk of increased dollarization of the domestic economy. The ability to open accounts in USD exists in some emerging markets, as is the example of Argentina, where the greenback is regarded as a more favorable investment than the local currency.</p> <hr class="wp-block-separator"/> <h2>Mapping Brazil&#8217;s privatization plan&nbsp;</h2> <p>A survey from news website <em>G1</em> has broken down the extent of the Brazilian government&#8217;s privatization plans for Jair Bolsonaro&#8217;s four-year term, highlighting what has been carried out already, and what is to be expected by the end of 2019.</p> <p><strong>Why it matters. </strong>Out of a total of 119 divestment and privatization projects, the administration has already carried out 29 auctions in its first nine months in office. These have been largely focused on infrastructure, with 12 airports and 13 port terminals having been sold off already in 2019. The plan is to conclude another 22 before the end of the year.</p> <div class="flourish-embed" data-src="visualisation/750175"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <p><strong>Sectors. </strong>Of the total portfolio of projects proposed, the majority comprise transport infrastructure, with airports, ports, roadways and railways making up almost 60 percent of the full number. The government foresees a total of BRL 1.3 trillion of investment across all such projects.</p> <p><strong>Transfer of Rights. </strong>The apple of the government&#8217;s eye, however, has yet to have been concluded. On November 3, the administration is set to hold a mega-auction on the surplus oil in pre-salt areas, tipped to be the biggest auction of its kind in Brazil&#8217;s history. The government is expecting to receive BRL 106 billion from this sale, over ten times the total amount raised in 2019 through privatizations.</p> <hr class="wp-block-separator"/> <h2>What else you should know</h2> <p><strong>Amazon Synod. </strong>At the opening of the Synod of Bishops for the Pan-Amazon Region yesterday, Pope Francis spoke of the need to respect the &#8220;entity, wisdom, and consciousness&#8221; of Amazonian peoples, warning that &#8220;ideological colonization&#8221; has reduced the dimension of these indigenous communities. The decision to hold this year&#8217;s synod on the Amazon has concerned members of the Brazilian government and the Armed Forces, which have <a href="https://brazilian.report/podcast/2019/04/17/brazilian-government-spying-catholic-priests/">a history of conflict with the Catholic Church </a>in the region.</p> <p><strong>Dummy candidates. </strong>After indicting Tourism Minister Marcelo Álvaro Antônio under suspicion of involvement in a dummy candidate scheme within President Jair Bolsonaro&#8217;s political party, the Federal Police are now zeroing in on allegations of illegal campaign funding involving the cabinet minister. According to one party executive, on one occasion, Mr. Álvaro Antônio&#8217;s campaign expenses were paid in cash, inside a &#8220;white Lacoste box,&#8221; just two days before the 2018 election.</p> <p><strong>GDP growth. </strong>Projections for Brazil&#8217;s GDP growth in 2019 remained stable at 0.87 percent, according to the median predictions of the Central Bank&#8217;s weekly Focus Report, which polls analysts of major financial institutions. Projections for 2020 remained the same, at 2 percent, while predicted inflation saw its ninth successive week of decrease, falling to 3.42 percent.</p> <p><strong>Vehicles. </strong>The association of automobile manufacturers (Anfavea) has reduced its estimation of production growth for 2019 from 9.02 percent all the way down to 2.1 percent. This goes along with a significant drop in projections for vehicle exports. Anfavea had previously predicted a fall of 6.2 percent this year, now the association believes the downturn will reach 33.2 percent. These altered projections have largely been put down to the crisis in Argentina, one of the key markets for Brazilian vehicles.</p> <p><strong>Job creation. </strong>A study from consultancy firm Tendências has shown that 14 of Brazil&#8217;s state capitals have successfully been able to increase their number of formal employment positions. Struggles are still seen in the Northeast of Brazil, where eight out of nine state capitals lost more jobs than they created in the first eight months of the year, as was the case in cash-strapped Rio de Janeiro and Porto Alegre.

Our content is protected by copyright. Want to republish The Brazilian Report? Email us at contact@brazilian.report