Investigation into President Bolsonaro’s son resumes—and could affect him

. Dec 19, 2019
President Jair Bolsonaro and his son, Flávio, behind. Photo: Wilson Dias/ABr President Jair Bolsonaro and his son, Flávio, behind. Photo: Wilson Dias/ABr

Good morning! We’re covering the continuing investigation into Senator Flávio Bolsonaro, the president’s eldest son. Economy Minister Paulo Guedes’ obsession with a new tax. And how the gig economy is destroying Brazilian unions. (This newsletter is for platinum subscribers only. Become one now!)


Bolsonaro in trouble over son investigation

Rio de Janeiro state prosecutors launched

a new stage of a probe into money-laundering schemes allegedly headed by Senator Flávio Bolsonaro, President Jair Bolsonaro&#8217;s eldest son. Search and seizure warrants were carried out in addresses linked to the senator—even including the house of one of the president&#8217;s ex-wives.</p> <p><strong>The scheme.</strong> During his years as a Rio state lawmaker, Flávio Bolsonaro is suspected of running a rudimentary—and frankly common—corruption scheme, in which his staffers were forced to surrender part of their salaries to Mr. Bolsonaro. In some cases, employees would hand in over 90 percent of their paychecks. The scheme would be operated by Fabrício Queiroz, a militia-linked ex-cop who served as Flávio Bolsonaro&#8217;s advisor</p> <div class="flourish-embed" data-src="visualisation/1121719"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <p><strong>Why it matters.</strong> This case could become bigger due to the several links between the people involved and the president himself. This is how Jair Bolsonaro is directly affected:</p> <ul><li>Before being Flávio Bolsonaro&#8217;s chief of staff, Fabricio Queiroz was an old friend of President Bolsonaro&#8217;s. There is simply no way to treat him merely as one of his son&#8217;s former aides;</li><li>Flávio Bolsonaro will be the vice president of the Alliance for Brazil, <a href="https://brazilian.report/power/2019/11/22/jair-bolsonaro-new-party-reshuffles-brazilian-politics/">the party launched by the president</a> in November. It will be hard to campaign on an anti-corruption banner when the party is born in scandal;</li><li>This case gives Mr. Queiroz even more leverage over the president and his family. Months ago, he leaked audio recordings to the press of him complaining to have been abandoned by the Bolsonaro family—a veiled threat by someone who knows the ins and outs of the Bolsonaro way of doing politics;</li><li>Let&#8217;s not forget that Mr. Queiroz deposited BRL 24,000 into the bank account of First Lady Michelle Bolsonaro. This deposit is not under investigation, but it keeps a cloud of suspicion over the presidential palace.</li></ul> <p><strong>Feud. </strong>People close to the president believe Wednesday&#8217;s investigation has the fingerprints of Rio de Janeiro Governor Wilson Witzel—a former ally of the president&#8217;s, who now has his own presidential aspirations and has evolved into a nemesis. Since October, when reports arose suggesting Mr. Bolsonaro could have links to the assassination of City Councilor Marielle Franco, the president accuses Rio&#8217;s governor of manipulating the police for political gain.</p> <hr class="wp-block-separator"/> <h2>Paulo Guedes&#8217; obsession for a financial transactions tax</h2> <p>Economy Minister Paulo Guedes is an avid defender of recreating a tax on financial transactions—despite critics saying it is inefficient and stimulates informality. During an event in Brasília to present the government&#8217;s economic agenda for 2020, Mr. Guedes once again talked about this tax, but disguised it as something new: a tax on &#8220;digital transactions.&#8221;</p> <p><strong>The idea.</strong> The Economy Minister wants to levy transactions made on mobile phones or over the internet, which account for 60 percent of all transactions made in Brazil. To compensate for the new tariff, Mr. Guedes promises to end payroll taxes, which he calls &#8220;the cruelest of them all,&#8221; saying it is a deterrent for employers to hire more staff. But there is no clearcut evidence that lower taxes stimulate hirings.</p> <p><strong>Why it matters.</strong> Mr. Guedes&#8217; new tax is similar to the now-defunct CPMF, a levy on financial transactions initially created as a temporary fix to the federal budget, but which ended up existing for 11 years and becoming a symbol of Brazil&#8217;s excessive tax burden. Former Tax Secretary Marcos Cintra lost his job after defending a return of the CPMF.</p> <hr class="wp-block-separator"/> <h2>Gig economy a hard blow for unions</h2> <p>Brazil&#8217;s unemployment rates are going down—but it is thanks to the growth of informal jobs and self-employment. Brazil&#8217;s official statistics agency shows that only 12 percent of the country&#8217;s workers were unionized—the lowest level since records began in 2012. Over the past six years, unions have lost 2.88 million members.</p> <div class="flourish-embed" data-src="visualisation/1121892"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <p><strong>Apps.</strong> The number of people working with vehicles—such as drivers for lift apps, taxi drivers and bus drivers—increased 29.2 percent in 2018 and reached 3.6 million, some 810,000 more people than in 2017. Meanwhile, the number of people working in-company has gradually decreased since 2015—with a pronounced 4-percent drop between 2017 and 2018. &#8220;This may indicate an increase in outsourcing in companies,&#8221; explained analyst Adriana Beringuy.</p> <p><strong>Diminishing. </strong>It&#8217;s not only the gig economy. The 2017 labor reform ended the mandatory payment of union dues. Until then, every registered worker contributed to the trade union of their profession with one day&#8217;s salary. With the end of the tax, unions lost 90 percent of their revenue in 2018—the first year after the change.</p> <p><strong>Why it matters.</strong> Work relations in Brazil remain heavily imbalanced, with the scales tipped heavily in favor of employers. Even if many trade unions have become cesspools of corruption, they are one of the only instruments of power many workers have.</p> <p><strong>More changes.</strong> On Tuesday, the House&#8217;s Constitution and Justice Committee approved a bill ending the unicity of trade unions—a rule saying that only one union per profession would be allowed in a given municipality. Those who defend the changes say competition will turn unions more representative, while critics say it will further pulverize labor representation, making each union weaker.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <p><strong>Trump.</strong> A source within the Economy Ministry told <strong>The Brazilian Report</strong>&#8216;s Brenno Grillo that the government is not worried about President Donald Trump carrying out his threat to slap higher taxes on Brazilian steel products. The source says the administration considered the threat &#8220;nothing more than a bluff,&#8221; as American industries depend on such products from Brazil.</p> <p><strong>Bolivia.</strong> Prosecutors in Bolivia have issued an arrest order against former President Evo Morales, who was <a href="https://brazilian.report/opinion/2019/11/13/evo-morales-bolivia-coup/">ousted by a coup</a> early in November. Interior Minister Arturo Murillo published the order on Twitter, and accused Mr. Morales of terrorism and sedition. In an interview with <em>The Guardian</em>, Mr. Murillo claimed Mr. Morales has orchestrated efforts to “strangle” Bolivian cities through roadblocks that would starve its residents of fuel and food.</p> <figure class="wp-block-embed-twitter wp-block-embed is-type-rich is-provider-twitter"><div class="wp-block-embed__wrapper"> <blockquote class="twitter-tweet" data-width="550" data-dnt="true"><p lang="es" dir="ltr">Sr. <a href="https://twitter.com/evoespueblo?ref_src=twsrc%5Etfw">@evoespueblo</a> para su conocimiento <a href="https://t.co/1KrAFcevjQ">pic.twitter.com/1KrAFcevjQ</a></p>&mdash; Arturo Murillo (@ArturoMurilloS) <a href="https://twitter.com/ArturoMurilloS/status/1207354063349800962?ref_src=twsrc%5Etfw">December 18, 2019</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script> </div></figure> <p><strong>Censorship.</strong> A House committee has invited a Netflix representative to answer questions about a satirical Christmas special called &#8220;The First Temptation of Christ,&#8221; by YouTube sketch troupe Porta dos Fundos. The film portrays Jesus as a gay man bringing home his presumed boyfriend Orlando to meet the Holy Family. A petition signed by two million people calls for the comedy to be removed from Netflix, and sparked anger among Congress&#8217; religious caucus.</p> <p><strong>Political ads.</strong> On Wednesday afternoon, the federal government launched the 2019 Positive Agenda—a BRL 40-million ad campaign to promote the government&#8217;s achievements over the first year of the Jair Bolsonaro administration. Four ad pieces will be made to broadcast nationwide, and another 45 for regional audiences, with the campaign slogan &#8220;This is Brazil.&#8221; Spots are set to air between December 18 and 30, and then from January 6 to 19.</p> <p><strong>M&amp;A.</strong> Italy&#8217;s Fiat Chrysler and France&#8217;s PSA group—controller of Peugeot and Citroën—announced a merger worth USD 50-billion. The deal creates a car maker behemoth with a combined turnover of EUR 170 billion and the capacity to produce 14 million vehicles per year. In Brazil, the new company to be created after the deal will control <a href="https://exame.abril.com.br/negocios/fiat-e-peugeot-anunciam-fusao-empresa-tera-14-do-mercado-brasileiro/">21 percent of the market</a>. While Fiat and Jeep are among the leaders in their respective categories in Brazil, Peugeot and Citroën are considered as &#8220;niche brands.&#8221;</p> <p><strong>Godwin&#8217;s Law?</strong> During an event on Wednesday, former President Lula compared the Bolsonaro administration to Nazi Germany, saying that, just like in the Third Reich, &#8220;they want to destroy Brazil starting off with [our] culture.&#8221; Events of the Workers&#8217; Party have obeyed a real-life version of Godwin&#8217;s Law, which states that as an online discussion grows longer, the probability of someone making a comparison involving the Nazis or Hitler approaches 1.

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