Brazilian producers feeling first symptoms of coronavirus outbreak

. Feb 07, 2020
coronavirus risks industry economic blow Image: Pavlovska Yevheniia

We’re covering today how the coronavirus outbreak in China has infected Brazilian industries. The 5G auction process kicks off. A surprise firing in Jair Bolsonaro’s cabinet.

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The “China Effect”: coronavirus menaces Brazilian industry

While Brazil has yet to have a confirmed coronavirus infection,

the economic effects of the outbreak are already being felt. Fears of infections have led a big chunk of China’s workforce to stay at home—either by choice or government imposition, as 50 million people have been quarantined. That has affected supply chains of many Brazilian factories: electronic manufacturers are reporting problems in receiving components, while automakers and pharmaceutical groups are reportedly on “shortage watch” 24/7.&nbsp;</p> <p><strong>Dependence. </strong>A study by consultancy Oxford Economics places Brazil as one of the countries facing a greater risk of supply shortages due to factory stoppages in China related to the coronavirus outbreak. Of all imported inputs used by Brazilian industries, 20 percent come from the Asian giant.&nbsp;</p> <div class="flourish-embed" data-src="visualisation/1353140"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Why it matters. </strong>Earlier this week, we reported <a href="https://brazilian.report/newsletters/brazil-daily/2020/02/05/industry-numbers-spark-early-2020-pessimism-brazil-orban-5g/">terrible numbers for the Brazilian industry in 2019</a>. And it appears that Q1 2020 is already compromised.</p> <p><strong>Forced vacations.</strong> A survey by an association of electric and electronics producers reports that 52 percent of companies have already faced problems with supply from China. If the situation continues for the next few weeks, 22 percent will have to shut down their production lines, as the average stocks can last for just 15 days.</p> <p><strong>Caused by the coronavirus.</strong> Calçados Bibi, a leader in the kids’ shoe sector also present in Bolivia and Peru, has already paralyzed one of its 49 lines.</p> <div id="buzzsprout-player-2608606"></div> <script src="https://www.buzzsprout.com/299876/2608606-93-coronavirus-the-real-risks-for-brazil.js?container_id=buzzsprout-player-2608606&amp;player=small" type="text/javascript" charset="utf-8"></script> <hr class="wp-block-separator"/> <h2>Brazil’s 5G auction process moves forward</h2> <p>The National Telecoms Agency (Anatel) approved the invitation for bids for the auction of 5G frequencies in Brazil. The document will now be submitted to a 45-day period for public consultation—and a final vote by the agency—before being published. Government officials say the 5G auction could happen in 2020, but it is more likely to be delayed until 2021.</p> <p><strong>Why it matters.</strong> This is the first step to make 5G a reality in Brazil after a series of postponements. The auction was originally scheduled for March, but was pushed back due to concerns about frequency interference and uncertainties around the rules of the bidding process itself.</p> <p><strong>Need to hurry.</strong> “The [Brazilian] economy could become less competitive in the medium term if the auction is once again delayed,” Carlos Roseiro, an executive at Chinese telecom giant Huawei, told <em>Reuters</em>. A study by Sweden’s Ericsson agrees, predicting a BRL 20-billion loss in tax revenue until 2025 in case of a new delay. While neither telecom group is an uninterested party in the 5G conversation, Brazil does need to make the implementation of the new frequency a strategic priority.</p> <hr class="wp-block-separator"/> <h2>‘Surprise firing’ in Bolsonaro’s cabinet</h2> <p>Without warning even his allies, President Jair Bolsonaro fired Gustavo Canuto from the Regional Development Ministry—replacing him with former Congressman Rogério Marinho, who was serving as head of pensions under Economy Minister Paulo Guedes. Government officials believed Mr. Canuto “under-delivered” during his tenure.</p> <p><strong>Why it matters.</strong> The Regional Development Ministry is one of the most-coveted by political parties, as it deals with many questions that affect voters’ day-to-day lives, such as basic sanitation and housing projects. In a year of municipal elections, as is the case in 2020, it becomes even more important.</p> <p><strong>The replacement. </strong>The newly-appointed Rogério Marinho is considered a skilled political negotiator. He was pivotal for the negotiations around the pension reform, approved last year in Congress.</p> <p><strong>Goals. </strong>Mr. Marinho will be tasked with helping the government to earn more political support, by managing which regions will be warranted funds. The idea is to use the Regional Development Ministry to “steal” the Northeast region from the Workers’ Party—it was where Mr. Bolsonaro had the least votes and has his highest rejection rates.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <p><strong>M&amp;A. </strong>Brazil’s telecom regulator Anatel approved the merger between AT&amp;T and Time Warner, becoming the 19th country to greenlight the USD 84.5-billion deal. The decision, however, is contested by other market players, as current legislation forbids companies from owning simultaneous majority stakes in content producers and broadcasters. AT&amp;T controls the Sky broadcasting group in Brazil, whereas Time Warner owns channels such as HBO, CNN, and Cartoon Network, among others.</p> <p><strong>Indigenous rights.</strong> The government presented a bill that would authorize mining and power-generating ventures on indigenous reserves—allowing for technical studies to be carried out at a distance and giving native communities little say in these matters. While it has yet to be analyzed by Congress, the bill could be responsible for placing Brazil in the International Labor Organization’s list of countries suspected of violating international conventions on indigenous rights.</p> <p><strong>Impeachment.</strong> A group of 26 representatives and two senators from ten different parties filed an <a href="https://brazilian.report/power/2020/02/06/impeachment-request-against-brazil-education-minister/">impeachment request against Education Minister Abraham Weintraub</a>. It is unlikely to prosper, as (1) the Supreme Court does not traditionally meddle in matters of the Executive branch, and (2) the fact that left-wing groups want Mr. Weintraub’s impeachment should earn him points with President Bolsonaro.</p> <p><strong>Aviation.</strong> Brazil could have its second foreign-controlled airline operating domestic flights, as Spain’s Air Nostrum has filed for a license to operate in the country. Last year, President Bolsonaro signed a law lifting restrictions on companies controlled by foreign groups from making regional flights. Globalia—also Spanish—was the first to be granted an operating license.</p> <p><strong>Hacking.</strong> A federal judge in Brasília rejected an indictment request against journalist Glenn Greenwald—accused by federal prosecutors of being an accessory to the hacking of cellphones of hundreds of public authorities. Cybercriminals accessed private messages of members of Operation Car Wash—<a href="https://brazilian.report/podcast/2019/06/12/intercept-car-wash-leaks-moro/">many of them casting doubt on their actions during investigations</a>—and leaked them to Mr. Greenwald, who published them on his website, <em><a href="https://theintercept.com/brasil/">The Intercept</a></em>. The case’s judge said he believes Mr. Greenwald committed an “abuse of power,” but followed a Supreme Court injunction which shields the journalist from investigations into how he obtained the material.

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