With new freight table, Bolsonaro hopes to appease truckers

Good morning! We’re covering the new reference table for freight prices, which the government hopes will be able to avoid a new truckers’ strike. The low levels of Brazil’s hydropower reservoirs. And the new powers of the Solicitor General. (This newsletter is for premium subscribers only. Become one now!)

a <a href="http://www.in.gov.br/en/web/dou/-/resolucao-n-5.867-de-14-de-janeiro-de-2020-238315084">new reference table for freight prices</a>, increasing minimum rates by 11 to 15 percent. With the new table—set to be enforced as of Monday—the government hopes to appease disgruntlement among truckers, one month after they threatened to go on strike. The new rules establish that profit margins should include truck drivers’ expenses with food, lodging, and road tolls. It also says that minimum prices must be updated when fluctuations in diesel prices exceed 10 percent, up or down.</p> <p><strong>Why it matters.</strong> Truckers hold immense power in Brazil, as over 60 percent of all cargo transportation in Brazil is done by road—<a href="https://brazilian.report/business/2018/05/25/truckers-protests-brazil-fuels/">90 percent if we exclude crude oil and iron ore</a>.</p> <div class="flourish-embed" data-src="visualisation/1226768"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <p><strong>Context.</strong> The minimum freight price table was created in 2018 by the Michel Temer administration, following an 11-day truckers’ strike that created food shortages and massive financial losses across the country. In June 2019, the Bolsonaro administration tried to update the rules, but the move was widely rejected by truckers, as the new table didn’t account for their profit margins. Fearing industrial action, the government backpedaled.</p> <p><strong>Controversy. </strong>Agro producers and industrialists are against the reference table and have questioned its legality in the Supreme Court. A trial date has not been settled as the case’s rapporteur, Justice Luiz Fux, was waiting for a “definitive solution” between the government and truckers before starting to judge the merit of the rules.</p> <p><strong>Fuels.</strong> President Jair Bolsonaro said on Thursday that ethanol producers should be allowed to sell fuel directly to gas stations—currently, they are obligated to go through distributors. Mr. Bolsonaro says the move would make ethanol prices go down BRL 0.20 per liter—but many believe fuel quality will drop, as inspections become harder to perform.</p> <hr class="wp-block-separator"/> <h2>Water reservoirs at lowest level in five years</h2> <p>Official government data shows that water reservoirs in hydropower plants in the Southeast and Center-West regions are at their lowest levels since 2015—the year in which the state of São Paulo, the country’s main power consumer, faced its worst hydric crisis in 80 years. This week, reservoirs are at 21 percent of their capacity—7 percentage points below January 2019.</p> <div class="flourish-embed" data-src="visualisation/1246536"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <p><strong>Why it matters.</strong> The Southeast and Center-West regions are responsible for the bulk of electricity generation in Brazil. When their production capacity is reduced, the government uses coal plants instead. These are more expensive—thus driving up electricity bills—and bear more severe environmental impacts.</p> <p><strong>Half full.</strong> Despite the low January levels, reservoirs are 1 percentage point above last month, which recorded the worst December for the region’s water since 2014. The government says there is no risk of an energy shortage in Brazil, highlighting that the rainy season has been dislocated over recent years—and expects reservoirs to reach 33 to 55 percent of their capacity by the end of the rainy season.</p> <hr class="wp-block-separator"/> <h2>Empowering the Solicitor General</h2> <p>A <a href="http://www.in.gov.br/en/web/dou/-/decreto-n-10.201-de-15-de-janeiro-de-2020-238315487">decree</a> signed by President Jair Bolsonaro has given more autonomy to the Solicitor General’s Office—as well as CEOs of state-owned companies—to sign deals with individuals or companies in the name of the federal government. Since 1997, the Solicitor General could only ink agreements worth up to BRL 50,000—now, the bar has been raised to BRL 50 million. The office could work on deals above that threshold, as long as it has the green light from the ministry which concerns the dispute.</p> <p><strong>Why it matters.</strong> The move empowers Solicitor General André Mendonça—one of President Bolsonaro’s most influential legal advisors. Mr. Mendonça, an Evangelical preacher, is one of the frontrunners for the Supreme Court seat that will be vacated later this year, with the retirement of Justice Celso de Mello. Mr. Bolsonaro has said he wants someone “extremely Evangelical” for the court.</p> <p><strong>Caveat.</strong> The decree does not concern state-owned companies that are not dependent on the National Treasury Department to finance their operations—such as oil and gas giant Petrobras, or banks Caixa and Banco do Brasil.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <p><strong>Investments.</strong> According to Brazil’s Institute of Applied Economic Research, investments were down 1 percent in November 2019 when compared to the previous month. The index was also down 1.8 percent from the previous year. The drop is one of many negative indicators that suggest a slowdown in the Brazilian economy during Q4 2019—which might impact growth at the beginning of this year. Still, researchers say the numbers don’t change their prediction that investments should jump 6 percent in 2020—thanks to cheaper credit and an improvement in business owners’ confidence in the economy.</p> <div class="flourish-embed" data-src="visualisation/1246308"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <p><strong>Growth.</strong> The UN forecasts a 1.7-percent growth for the Brazilian economy in 2020—way below market expectations. According to the Central Bank’s Focus Report, a weekly survey with top-rated investment firms, the median prediction among analysts is 2.3 percent. The UN is even less optimistic for Latin America as a whole—citing falling commodity prices and political instability as hurdles for growth. </p> <p><strong>Poisoning. </strong>After at least four people died from kidney failure—and another 18 were admitted to hospitals with severe intoxication—after drinking craft beer labels produced by the same company, the Agriculture Ministry identified the presence of two toxic substances, Diethylene glycol and Monoethylene glycol, in 21 batches produced by Backer, a Minas Gerais-based brewery. The company has recalled all of its bottles produced since October, and claims it doesn’t know what may have occurred, as neither substance is part of its production process.</p> <p><strong>Aviation 1.</strong> Azul Airlines will offer direct daily flights to New York’s JFK Airport, starting in June. This will be the company’s fifth long-haul destination, after already flying to Fort Lauderdale, Orlando, Lisbon, and Porto. Azul sees the demand for international flights rising, despite the current exchange rate of BRL 4.20 to the dollar. International flights currently make up 20 percent of the airline’s revenue.</p> <p><strong>Aviation 2.</strong> On Thursday, Azul announced the purchase of 75 planes from Embraer. One day before, it closed a deal worth BRL 123 million to purchase TwoFlex—a company that offers regular passenger and cargo transportation flights to 39 domestic destinations, most of which Azul does not currently fly to.

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With new freight prices, government hopes to avoid truckers’ strike