The biggest stories in Brazil in 2019 … and what to expect from 2020

. Dec 20, 2019
2019 in review

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2019 is nearly in the books, and it will be remembered as a year of polarization for Brazil. The country saw the arrival of far-right leader Jair Bolsonaro to the presidency and former president Lula—the biggest political force on the left—was released from jail, promising to spark plenty of confrontations in the coming year. At the same time, Congress established itself as a major agenda-setting force, which had not been the case for many years. Important reforms were passed, and Brazil continued its slow—but steady—path towards economic recovery.

This last issue of the Daily Briefing in 2019 brings a recap of the year that has just gone by, and looks forward to the biggest issues facing Brazil in 2020. Happy holidays!

</p> <p><em>(This newsletter is for platinum subscribers only. </em><a href=""><em>Become one now</em></a><em>!)</em></p> <hr class="wp-block-separator"/> <h4>Important</h4> <p>This is the last <strong>Daily Briefing</strong> of 2019. Our newsletters will take a break between December 21 and January 5, 2020. But don&#8217;t worry, our website will continue to bring you exclusive content about Brazil—and if anything big happens in the next two weeks, we&#8217;ll be here to cover it.</p> <hr class="wp-block-separator"/> <h2>2019 in review</h2> <h4>President Jair Bolsonaro</h4> <p>On January 1, Jair Bolsonaro took office as president. He promised to bring an end to political correctness and the gigantism of the state under the center-left. On the economic front, Mr. Bolsonaro gave continuity to pro-market reforms pursued by his center-right predecessor Michel Temer, and passed important reforms, such as ah overhaul of Brazil&#8217;s pension system, a new regulatory framework for telecoms, and the opening up of the sanitation market to private firms—which could generate BRL 700 million in investments, and is pending a Senate vote.</p> <p>However, almost everything about Mr. Bolsonaro&#8217;s administration that does not concern the economy has drawn harsh criticism from all sides of the spectrum. From dismantling environmental agencies, adopting a position of total alignment with the U.S., to picking fights with neighboring countries, Mr. Bolsonaro&#8217;s comments are usually very controversial. Which explains why he has the lowest approval ratings of any elected president after just one year in office, boasting a worrying 35 percent.</p> <p>We have published a free eBook on Mr. Bolsonaro&#8217;s first year as president. <a href="">Download it here</a>.</p> <hr class="wp-block-separator"/> <h4>The economy improves—but more could have been done</h4> <p><strong>Glass half-empty. </strong>Markets were ecstatic by Mr. Bolsonaro electoral win, but gradually adjusted their expectations for 2019 with the economic agenda taking much longer to pass in Congress than planned. The consensus among investors is that much more could have been done, but most observers believe Brazil is at least on the right track.&nbsp;</p> <div class="flourish-embed" data-src="visualisation/1126394"></div><script src=""></script> <p><strong>Jobs. </strong>Unemployment is going down, but largely thanks to informal jobs and self-employment—which offer much less favorable conditions for workers. Also, in the 12 months leading up to October, of the 492,000 net jobs opened (deseasonalized data), 27 percent were positions of up to 20 hours a week. In some parts of the country, Brazil is becoming the very definition of a gig economy.</p> <p><strong>World. </strong>The global scenario didn&#8217;t help Brazil. With the top two world powers bickering with each other and staging a trade war, foreign investors were less keen on putting their money in emerging, riskier markets. Moreover, a lower benchmark interest rate in Brazil put pressure on the Brazilian currency, which plunged to historical nominal lows against the U.S. Dollar.</p> <p><strong>Glass half-full. </strong>There was some good news, too. Inflation went down, allowing the Central Bank to slash Brazil&#8217;s benchmark interest rates to the lowest they have ever been. Also, the São Paulo stock market enjoyed another bullish year, with its main index reaching record-setting levels.</p> <p><a href="">Go deeper</a>.</p> <hr class="wp-block-separator"/> <h4>Blockbuster trade deal</h4> <p>In June, Mercosur (South America&#8217;s trade union) signed a mega-deal with the European Union, creating what will be one of the biggest free-trade zones in the world. According to the government&#8217;s estimates, the deal is set to generate an extra USD 87.5 billion for Brazil’s GDP over the next 15 years. It also expects a further USD 113 billion in investments to pour in, and USD 100 billion in gains originated from Brazilian exports to the EU until 2035.</p> <p><strong>History.</strong> Talks had begun in 1999. They were put on standby between 2004 and 2010, as the Lula and Dilma Rousseff administrations opted for a strategy more centered around the Doha Development Round and the World Trade Organization. They were resumed in 2017, as Brazil and Argentina—Mercosur&#8217;s top dogs—changed leadership in favor of right-wing leaders who championed free trade.</p> <p><a href="">Go deeper</a>.</p> <hr class="wp-block-separator"/> <h4>Environmental disasters</h4> <p>2019 was terrible for environmentalists, with three major events (all negative) defining the year:</p> <ul><li><strong>Brumadinho.</strong> On January 25, a tailings dam owned by mining giant Vale collapsed, killing over 250 people. Investigators claim the incident happened due to structural issues with the dam, which wasn&#8217;t safe enough and didn&#8217;t receive proper maintenance. For prosecutors, Vale gambled on the possibility of a collapse. No one has been held accountable for the tragedy so far. <a href="">Go deeper</a>.</li><li><strong>Amazon crisis.</strong> Mr. Bolsonaro has adopted a laissez-faire stance when it comes to the environment, which led to a spectacular rise in Amazon deforestation levels. The crisis made international headlines, turning Brazil into the world&#8217;s bogeyman. <a href="">Go deeper</a>.</li><li><strong>Oil spill. </strong>A mysterious crude oil spill has hit over 900 coastal locations in Brazil since September. Different government agencies have different theories about the origin of the spill, and no conclusion has been reached. Meanwhile, the fishing economy of the Northeast has been destroyed. <a href="">Go deeper</a>.</li></ul> <hr class="wp-block-separator"/> <h4>Lula is back</h4> <p>580 days after being arrested for corruption and money laundering, former Brazilian President Lula is out of prison. He benefited from a Supreme Court ruling to prevent prison sentences from being enforced before all appeal routes are exhausted. Out of jail, Lula plans to revive the opposition against Mr. Bolsonaro, lead his party in the 2020 municipal elections, and pass the torch to someone in his party to run in 2022. Despite being at liberty, Lula still has an appeals court conviction against his name, making him ineligible for public office. <a href="">Go deeper</a>.</p> <hr class="wp-block-separator"/> <h2>What to look out for in 2020</h2> <p>Congress will have a busy agenda next year. Here are the main things to be aware of:</p> <ul><li><strong>Tax reform.</strong> Congress has started to analyze a proposal to simplify Brazil&#8217;s confusing tax system—but the government wants to present its own inputs. This reform should be Congress&#8217; top priority in 2020. <a href="">Go deeper</a>.</li><li><strong>Public service reform. </strong>Economy Minister Paulo Guedes is keen on slashing the many perks federal public servants enjoy in Brazil—despite their low levels of productivity. The government decided to hold off on the bill this year, fearing popular unrest. Next year could be even worse, as municipal elections could kill momentum. <a href="">Go deeper</a>.</li><li><strong>&#8220;More Brazil&#8221; plan. </strong>Mr. Guedes also proposed a set of reforms that would completely reshape the state—called the &#8220;More Brazil&#8221; plan. It includes merging small municipalities with difficult to finance themselves, and it will certainly face opposition in an electoral year. <a href="">Go deeper</a>.</li><li><strong>Prisons.</strong> After the Supreme Court ruling that set Lula free, conservatives in Congress are aiming at changing the Constitution and allowing defendants to serve time after a failed appeal. The Brazilian press focuses on the <a href="">obvious</a> consequence: putting Lula back in prison, but such a change would have repercussions on companies in litigation. <a href="">Go deeper</a>.

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