Bolsonaro and governors on a collision course

President Jair Bolsonaro doubled down on the necessity to protect the economy from a catastrophe. He defended a so-called &#8220;vertical&#8221; approach to isolation, which focuses on only confining clusters of the population that are more likely to die or suffer severe damage from Covid-19: senior citizens, those with pre-existing conditions, or autoimmune problems.</p> <p><strong>How to deal. </strong>The approach is far from the mainstream consensus, which advises &#8220;horizontal isolation&#8221; (restrictions on movement and commerce of the entire population), but it does have its supporters. David L. Katz, director of the True Health Initiative and founding director the Yale-Griffin Prevention Research Center <a href="https://www.nytimes.com/2020/03/20/opinion/coronavirus-pandemic-social-distancing.html">wrote</a> that “the unemployment, impoverishment, and despair likely to result will be public health scourges of the first order.”</p> <ul><li>Recessions also have their human toll. A 2019 study shows that a 1-percentage-point increase in unemployment was associated with a <a href="https://brazilian.report/power/2020/03/25/rock-hard-place-bolsonaro-favors-economy-over-health/">0.50 increase in mortality rate per 100,000 people</a>, largely due to cancer and cardiovascular disease.</li><li>A <a href="https://g1.globo.com/bemestar/coronavirus/noticia/2020/03/24/quarentena-poe-em-risco-a-renda-de-moradores-de-favelas-brasileiras-diz-pesquisa.ghtml">study</a> released by the Data Favela Institute shows that one week in isolation is enough to lower living standards of 72 percent of the 13.6 million people living in favelas. And one-third will have trouble buying basic goods such as food.</li></ul> <p><strong>Yes, but … </strong>In Brazil&#8217;s federal system, there is only so much the president can do without having state administrations on his side. And Mr. Bolsonaro&#8217;s pledges were scolded by most governors&nbsp;—&nbsp;with many calling him &#8220;ignorant&#8221; and &#8220;irresponsible.&#8221; No less than 25 of 27 governors said they will ignore the president&#8217;s recommendations and follow recommendations issued by the World Health Organization, which says isolation, testing, and tracing are the cornerstones of the ideal response. The chart below shows the restrictions in place in each state so far.</p> <div class="flourish-embed" data-src="story/228914"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Why it matters.</strong> The outbreak is a once-in-a-lifetime crisis generator. It will take coordination and collaboration between governors and the president, to reduce the economic and human toll it will inflict upon the country. But these are rare commodities in Brazil&#8217;s current political system.</p> <p><strong>Shouting match.</strong> In a conference call with governors of the Southeast region, Mr. Bolsonaro lashed out at São Paulo&#8217;s João Doria — who had said he was &#8220;disappointed&#8221; with the president&#8217;s approach — calling him an opportunistic backstabber who should remain quiet until he has a shot at the presidency in 2022. In fairness, Mr. Doria&#8217;s every move seems to have an ulterior motive: to taunt the president, like when he hinted multiple times toward the fact that Mr. Bolsonaro has yet to release his Covid-19 test results.</p> <p><strong>G20.</strong> At 9 am, Brasília time, President Bolsonaro will take part in a video summit with G20 leaders. He and Mr. Trump have been outliers in prioritizing the economy over health, but some consensus should be reached, such as countries agreeing to share medical research and that the WHO should play a clear coordinating role in fighting the pandemic.</p> <hr class="wp-block-separator"/> <h2>Is Brazil’s bull market back? Not so fast</h2> <p>Over the past two trading sessions, the São Paulo stock exchange benchmark index rallied nearly 18 percent — the biggest two-day streak since 2008. But it might be too soon to say the worst is over. Dan Kawa, a partner at wealth management firm TAG Investimentos, warned that the first step for the stock market to recover is reducing volatility.</p> <p><strong>Bargain hunting.</strong> Some experts say Wednesday&#8217;s rally was sustained by bargain hunting, especially on stocks that suffered monumental crashes over the past few weeks, such as airlines. Expectations for the USD 2-trillion aid package in the U.S. helped to lift morale, but investors remain wary of how the pandemic will develop.&nbsp;</p> <p><strong>Losses.</strong> Consultancy firm Economatica says recent gains helped companies to increase their market cap by BRL 388.2 billion. However, year-to-date losses reach up to BRL 1.5 trillion. The Ibovespa index remains 35 percent below its peak, achieved earlier in 2020.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/1683183"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Buy the dip.</strong> Fund managers have been warning that, at current levels, there&#8217;s a lot of upsides to investing. HIX Capital’s manager Gustavo Heilberg told <em>InfoMoney</em> “there’s a lot of attractive assets. It is easier to find what you want to purchase than what you don’t want to. It’s the opposite from what we had in January.”</p> <p><strong>Forecasts.</strong> Meanwhile, JPMorgan slashed its estimates for Ibovespa from 126,000 points by year-end to just 80,500. The bank&#8217;s rationale is that companies will not be able to deliver earnings previously estimated if Brazil falls into a Covid-19-induced recession.&nbsp;</p> <p>—<em>with Natália Scalzaretto</em></p> <hr class="wp-block-separator"/> <h2>Losing on social media</h2> <p>Few politicians,&nbsp;if any, have mastered the use of social media for political gain like President Bolsonaro. But his handling of the coronavirus outbreak appears to have turned the tide against him. Following his Tuesday night address, 80 percent of social-media interactions in Brazil were negative to the government.</p> <p><strong>Why it matters.</strong> A recent survey by the Reuters Institute shows that 64 percent of Brazilians with access to the internet get their information from social media.</p> <p><strong>Clusters.</strong> Since early March, there were three clear clusters: the right-wing aligned with Mr. Bolsonaro, the left-wing anti-Bolsonaro group, and a third group with no clear allegiance. Following the president&#8217;s televised speech, the two latter factions melted into a single one, with only 7 percent of interactions supporting the head of state.</p> <p><strong>Windows.</strong> For the ninth straight day, voters in big urban centers held window protests, banging pans and pots and cursing at the president.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/1687517"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Covid-19 numbers.</strong> On Wednesday evening, the Health Ministry updated its latest coronavirus figures: infections amount to 2,433 —&nbsp;while 57 have been killed by the virus so far. The North, Northeast, and South regions recorded the first casualties outside of São Paulo (48) and Rio de Janeiro (6).</li><li><strong>Spread.</strong> A study by the London School of Hygiene and Tropical Medicine suggests the confirmed infections in Brazil could represent only 11 percent of the actual number of cases. In the same direction, Brazilian scientists mapping the coronavirus genome have identified that the virus has already mutated in Brazil. That happens when a pathogen is in a region long enough —&nbsp;and in enough quantity, for such mutations to be noticed.</li><li><strong>Mandetta.</strong> Early on Wednesday, <a href="https://brazilian.report/coronavirus-brazil-live-blog/2020/03/25/%F0%9F%9A%A8-health-minister-mandetta-could-be-fired-today-sources/">rumors</a> that Health Minister Luiz Henrique Mandetta would resign began circulating in Brasília, as he and President Bolsonaro have not seen eye to eye on how to contain the coronavirus. But, as our <a href="https://brazilian.report/coronavirus-brazil-live-blog/">live Covid-19 blog</a> verified with government sources, the decision was not made official —&nbsp;even if the president had already a two-name short-list for the job. In the end, Mr. Mandetta said he would only leave &#8220;if [his] services were no longer required.&#8221;</li><li><strong>Air travel.</strong> Rio&#8217;s Galeão international airport is a good example of how economically devastating the Covid-19 crisis is. In April, the number of international flights from Rio will drop by 93 percent — local flights will be down 87 percent. On Wednesday, the airport shut down a 100-square-meter area with 26 boarding gates that would not be used. Airlines and the government reached a consensus to reduce daily flights between the country’s 26 capitals — including Brasília — to just two flights per day.&nbsp;