The silence around Brazil’s newest state-owned company

. Dec 06, 2019
The "secret" state company being created in Brazil elections Ministers head to cabinet meeting. Photo: Marcos Corrêa/PR

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Good morning! We’re covering today the secrecy surrounding Jair Bolsonaro’s new state-owned company. The threat of deepfakes in 2020, when Brazil holds municipal elections. And the country’s new unicorn. (This newsletter is for platinum subscribers only. Become one now!)

The “secret” state company being created in Brazil

Last week, the Senate greenlit the creation of NAV Brasil, a

state-owned company set to absorb the air traffic controlling duties currently held by the near-bankrupt Infraero. With the creation of NAV Brasil, the government plans to privatize all airports still being run by the state. While the project was put forward by former President Michel Temer, the current administration backed the idea—despite Economy Minister Paulo Guedes&#8217; desire to do away with all of the country&#8217;s state-owned companies.</p> <p><strong>The problem?</strong> The government has been less than transparent about how NAV Brasil will operate. We requested information about NAV Brasil to several institutions, from the Economy and Defense Ministries to Infraero. Each one said they are not responsible for the new company—and don’t know who is.</p> <p><strong>Why it matters.</strong> NAV Brasil is set to inherit 2,000 employees from Infraero and could begin operations with a deficit. Infraero NAV, which currently handles air-traffic-control duties, is set to register BRL 240 million in losses this year.</p> <p>That would put the government at odds with two campaign promises of President Bolsonaro: (1) reducing the size of the state; (2) slashing the public deficit.</p> <script src="" type="text/javascript" charset="utf-8"></script> <hr class="wp-block-separator"/> <p><strong>Tug of war.</strong> The government&#8217;s economic team is adamantly against the creation of NAV Brasil, but the military wing defends it tooth-and-nail, claiming that sovereignty over national airspace is at stake.</p> <p><strong>Shortage. </strong>For the past decade, the Brazilian Association of Air Traffic Controllers has complained of a shortage of staff—while also denouncing poor work conditions. According to them, that puts Brazil under a constant threat of an accident—a situation also experienced in most countries.</p> <p style="text-align:right">— <em>with Brenno Grillo, from Brasília</em></p> <hr class="wp-block-separator"/> <h2>Deepfakes will be the threat to the 2020 elections</h2> <div class="wp-block-image"><figure class="aligncenter"><img loading="lazy" width="620" height="380" src="" alt="deepfake elections" class="wp-image-28647" srcset=" 620w, 300w, 610w" sizes="(max-width: 620px) 100vw, 620px" /><figcaption>Deepfakes the major threat to upcoming elections</figcaption></figure></div> <p>Elections, the share price of major businesses, and withdrawing money from one&#8217;s severance fund: all of these could be at risk due to the growing threat of deepfakes—that is, videos and images created through artificial intelligence-based technologies of which it is difficult to determine the authenticity. A report by cybersecurity giant McAfee points out deepfakes as one of the top threats for 2020.</p> <p><strong>Why it matters. </strong>Deepfakes are the next level of misinformation. And in a country where people spend on average two hours a day on social media (from which two-thirds of Brazilians get their news), they can have a dangerous effect on the outcome of the 2020 municipal elections.</p> <p><strong>Deepfake wizard. </strong>On October 30, we talked about the <a href="">growing threat of deepfakes</a>, and editor Euan Marshall talked with Bruno Sartori, a 30-year-old law student who mastered the art of deepfakes—and uses it for <a href=";feature=emb_title">comical face swaps</a> as a way of drawing attention to the dangers of this technology for the upcoming elections.</p> <p>“Today, I could easily come up with a video of Jair Bolsonaro saying he made up his stabbing [in reference to the incident in September 2018 when <a href="">Mr. Bolsonaro was stabbed in the abdomen</a> during a campaign rally]. Or I could do a video of Lula saying he was behind the stabbing,” said Mr. Sartori. “Once it’s out there, until you can disprove it, some people will already believe it.”</p> <hr class="wp-block-separator"/> <h2>Bolsonaro signs deals with Mercosur countries</h2> <p>As the Mercosur Summit in Southern Brazil came to an end, the four member countries signed deals to facilitate trade within the bloc—expected to generate savings of up to USD 500 million in tariffs on Brazilian products, according to one government source. Brazil also inked a deal to establish free trade on the auto sector with neighbors Paraguay, as of 2022.</p> <p><strong>Why it matters.</strong> Mercosur has never fully blossomed into a true free trade zone, and these deals should help integration between parties. President Bolsonaro asked Mercosur to revise its common trade tariffs, which hasn&#8217;t happened in 25 years.</p> <p><strong>Heavy levies.</strong> A study by Brazil&#8217;s Institute for Applied Economic Research (Ipea) shows that tariffs on industrial goods cause Brazilians to pay, on average, 11.4 percent more for foreign items. Heavy import duties have traditionally been a way to protect local players from more competitive rivals. No segment benefited more than the auto industry, where imports are subjected to an average tariff of 29.5 percent.</p> <p><strong>Protectionism. </strong>Another instrument that hampers competition are <a href="">tax breaks</a>. Between 2010 and 2016, the country gave BRL 1.3 trillion in such incentives.&nbsp;</p> <script src="" type="text/javascript" charset="utf-8"></script> <hr class="wp-block-separator"/> <h2>A new, under-the-radar, unicorn</h2> <p>Gaming company Wildlife Studios has just become Brazil&#8217;s newest unicorn, being valued at USD 1.3 billion in a fundraising round led by San Francisco-based venture capital firm Benchmark—the biggest valuation by Benchmark in a first round of funding ever. Founded nine years ago by two brothers from São Paulo, it flew under the radar to build a mobile empire.</p> <p><strong>Why it matters.</strong> Wildlife has become Brazil&#8217;s most valuable tech company. Over 1 billion people have played one of their mobile games, which has over 2 billion downloads. For comparison&#8217;s sake, Chinese app TikTok has roughly 1.5 billion downloads worldwide.</p> <p><strong>Reach. </strong>The company is coy about its numbers but says it has been in the black since its first year, and that profits have grown 80 percent a year since 2014. Its user base is distributed 40 percent in the Americas, 30 percent in Europe, and 30 percent in the rest of the world.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <p><strong>Bolsonaro effect. </strong>A survey commanded by weekly magazine <em>Veja</em> says 59 percent of Brazilians believe democracy is always the best system. But 40 percent of Brazilians see a medium-to-great risk of Brazil&#8217;s democracy backsliding into an authoritarian system. Only 26 percent of voters are not concerned about this matter. In recent weeks, the president&#8217;s son and his Economy minister suggested the use of anti-democratic decrees used by the military dictatorship in the 1960s.</p> <p><strong>Center?</strong> Elected governor of São Paulo after jumping on the Jair Bolsonaro bandwagon, João Doria is now trying to portray himself as a more centrist politician—eyeing the 2022 presidential race. One of the recommendations from his advisors is to embrace democracy as a core value, but making sure he doesn&#8217;t sound &#8220;false.&#8221;</p> <p><strong>Banking.</strong> A hearings committee at São Paulo&#8217;s City Council has recommended the indictment of 97 directors of Itaú, Brazil&#8217;s biggest privately-owned bank. They are accused of running a scheme to illegally avoid municipal taxes. The bank registered operation centers in cities where taxes are lower, but the offices were actually located in São Paulo. In November, the city of São Paulo issued a BRL 3.8 billion fine against Itaú.</p> <p><strong>Venezuela.</strong> The Brazilian government approved over 21,000 refuge requests from Venezuelans all in one go. They will now join the 11,000 refugees currently legally settled in Brazil. In June, the Nacional Refugee Committee, which operates under the Justice Ministry, said Venezuela is a country experiencing &#8220;grave and generalized violation of human rights,&#8221; allowing requests to be analyzed more swiftly.</p> <p><strong>Argentina.</strong> In a move to further distance himself from President Bolsonaro, House Speaker Rodrigo Maia became the first Brazilian authority to have met with Argentina&#8217;s President-elect Alberto Fernández—who has been exchanging blows with Mr. Bolsonaro since winning the elections. On his end, Mr. Maia said that Argentina and Brazil would &#8220;be used as pawns by other nations&#8221; unless they stick together. Mr. Maia also promised that Brazil&#8217;s Congress will be represented at Mr. Fernández&#8217;s inauguration on December 10, which Mr. Bolsonaro won&#8217;t attend.

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