Trump keeps OECD promise to Bolsonaro

Trump keeps OECD promise to Bolsonaro Bolsonaro at the White House. Photo: Alan Santos/PR

Good morning! We’re covering today the most-recent twist in Brazil’s quest for OECD membership (and in Trump – Bolsonaro relations). The lack of internet connection is the main hurdle for the development of Brazil’s agribusiness. And Rio de Janeiro’s water crisis. (This newsletter is for premium subscribers only. Become one now!)

OECD: Trump comes through for Bolsonaro

The U.S. government has decided

to support Brazil&#8217;s bid to join the Organization for Economic Cooperation and Development (OECD), ahead of neighbors Argentina. The move is a win for President Jair Bolsonaro, who has sought closer ties with Washington as a validation to his own administration. U.S. President Donald Trump had promised support for Brazil in March 2019, but later chose to place <a href="">Buenos Aires and Romania ahead of the queue</a>.</p> <figure class="wp-block-embed-twitter aligncenter 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="pt" dir="ltr">Anúncio americano de prioridade ao Brasil para ingresso na OCDE comprova uma vez mais que estamos construindo uma parceria sólida com os EUA, capaz de gerar resultados de curto, médio e longo prazo, em benefício da transformação do Brasil na grande nação que sempre quisemos ser.</p>&mdash; Ernesto Araújo (@ernestofaraujo) <a href="">January 15, 2020</a></blockquote><script async src="" charset="utf-8"></script> </div></figure> <p><strong>Why it matters.</strong> The OECD has often been called a “<a href="">club of rich countries</a>” and membership essentially serves the purpose of a seal of good practices, improving reliability and trust for investors. According to Brazil’s former Central Bank President Ilan Goldfajn, it could even lead to the reduction of interest rates for loans contracted by the federal administration.</p> <p><strong>Context.</strong> Brazil has been going after OECD membership since the Michel Temer administration (2016-2018). While previous presidents focused on relations with developing nations, Messrs. Temer and Bolsonaro wanted to strengthen ties with the U.S. and Europe. As put by some analysts, instead of being the richest of the poor, Brazil wants to be the poorest of the rich.</p> <p><strong>Not immediate.</strong> According to Mr. Bolsonaro, the process of getting into the OECD would take up to a year and a half. Brazil would become the largest emerging economy and the third Latin American nation in the group. Mexico and Chile are already members—and Colombia has been in membership talks since 2013.</p> <hr class="wp-block-separator"/> <h2>Internet still a distant reality for Brazilian agro&nbsp;</h2> <p>Despite jumping 1,900 percent between 2006 and 2017, internet access remains one of the biggest challenges for Brazil&#8217;s agribusiness. According to the most-recently published Agricultural Census, over 70 percent of the country&#8217;s rural properties—or 3.64 million of them—remain off the grid. Leisure, military, or mining-driven properties are not counted.</p> <iframe title="Agro, unplugged ..." aria-label="Brazil municipalities choropleth map" id="datawrapper-chart-bwjc9" src="//" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="650"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",function(a){if(void 0!["datawrapper-height"])for(var e in["datawrapper-height"]){var t=document.getElementById("datawrapper-chart-"+e)||document.querySelector("iframe[src*='"+e+"']");t&&(["datawrapper-height"][e]+"px")}})}();</script> <p><strong>Why it matters.</strong> Besides increased access to information and technical assistance, the internet helps farmers enhance production (and profits) through new technologies. Agro-tech solutions are credited for helping them improve business models, reduce costs, and increase productivity.</p> <p><strong>Hurdles.</strong> Small- and medium-sized properties still face logistical hurdles to get a fixed-broadband connection—and usually can&#8217;t afford satellite link-ups. That technological disparity is expected to lead to a market-share concentration in the <a href="">medium- to long-term</a>.</p> <p><strong>Agro-tech.</strong> Companies offering agriculture-centered solutions form one of the most thriving sectors in the Brazilian startup scene, with over 1,100 such firms. They offer services in areas such as sustainable options for fertilizers, credit solutions, or production chain traceability. Many startups are beginning to offer connectivity alternatives in their portfolio.</p> <hr class="wp-block-separator"/> <h2>Why has the water in Rio gone brown?</h2> <figure class="wp-block-image"><img src="" alt="water rio de janeiro" class="wp-image-30254" srcset=" 768w, 300w, 610w, 560w" sizes="(max-width: 768px) 100vw, 768px" /><figcaption>Shot from Globo&#8217;s RJTV</figcaption></figure> <p>Over the past couple of weeks, residents of at least 20—mostly low-income—Rio de Janeiro neighborhoods have complained about the state of the water coming out of their taps. Pictures on social media show discolored, cloudy water, which the locals say has an earthy flavor. In several areas, cases of diarrhea, stomach flu, and vomiting have spiked, but state water company Cedae guarantees there is no contamination and that the health cases can&#8217;t be linked to water consumption. At one point, Cedae said the strange color and flavor of the water were due to a presence of organic compound geosmin.</p> <p><strong>What experts say.</strong> Scientists have called out the government&#8217;s version of events, saying <a href="">geosmin wouldn&#8217;t change the color of the water</a>. The probable cause, according to microbiologists, is the excessive pollution of water reservoirs. Roughly 8 million people in the Greater Rio Area depend on the Guandu River for their water supply—and industrial sewage is dumped directly into its tributaries.</p> <p><strong>Why it matters.</strong> While the matter is under the scope of the state administration, problems with the water supply is yet another reason for disgruntlement in Rio leading up to municipal elections. Voters have faced economic problems and a health crisis in recent months—not to mention safety issues. That is a recipe for an explosive campaign.</p> <p><strong>Heading to a collapse.</strong> Rio has been in a water crisis for years. According to Cedae, 30 percent of collected water is wasted—with causes ranging from illegal connections to faulty hydrometers. At that pace, the state could face a &#8220;water collapse&#8221; within 15 years.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <p><strong>Privatization.</strong> Jair Bolsonaro has been eager to privatize Correios, Brazil&#8217;s state-owned postal service, but the project to do so will not be presented before late 2021. There are several problems, including a BRL 11-billion hole in the workers&#8217; pension fund, left by previous administrations, and the immense payroll of over 100,000 employees—making this privatization more complex than initially thought.</p> <p><strong>Antarctica.</strong> The government postponed the inauguration of Brazil&#8217;s new Antarctic research base, as a flight from Chile&#8217;s southern tip to King George Island was grounded due to bad weather. The Navy says the ceremony will happen today—but hasn&#8217;t yet pinpointed a time. Read <a href="">Iara Lemos&#8217; report for <strong>The Brazilian Report</strong>, from the South Pole</a>.</p> <p><strong>Optimism.</strong> The Economy Ministry published its GDP prediction for 2020, forecasting 2.4-percent growth—up from 2.32 percent in October. However, this is not the first time the year starts with optimism—in 2019, the government expected 2.5-percent growth—but the official data, yet to be released, will hover around 1.1 percent.</p> <p><strong>Wages.</strong> As we anticipated in <a href="">yesterday&#8217;s Daily Briefing</a>, the government has decided to give a BRL 6.00 bump to the minimum wage, in order to match 2019&#8217;s official inflation rate. While Congress was already set to make the change, President Jair Bolsonaro didn&#8217;t want lawmakers to get all the credit for higher wages, especially in an electoral year. The new BRL 1,045 (USD 252.85) minimum wage will cost the government an extra BRL 2 billion.</p> <p><strong>Deforestation.</strong> New data from the National Institute for Space Research (Inpe) shows that the area with deforestation alerts in the Amazon rainforest jumped by 85 percent between 2018 and 2019—from 4,946 to 9,165 square kilometers. At the same time, the issuance of <a href="">environmental fines</a> dropped across the entire country. NGO Human Rights Watch accused President Bolsonaro of giving carte blanche to loggers and ranchers—but it is important to point out that both trends of increasing deforestation and less oversight started before Mr. Bolsonaro&#8217;s rise to power.</p> <div class="flourish-embed" data-src="visualisation/1235340"></div><script src=""></script> <p><strong>Tourism.</strong> The U.S. Department of State has raised the alert level for <a href="">tourists coming to Brazil</a>. The entire country is listed as a Level 2 destination, on a scale that goes up to four, but border regions, favelas, and Brasília&#8217;s satellite cities were slapped with a Level 4 rating. The Foz do Iguaçu National Park is the only area within 100 miles of a Brazilian border the department says is clear for American tourists.

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