Brazil becomes more and more reliant on Asia

. May 05, 2020
Brazil becomes more and more reliant on Asia Shibuya Shopping Street, in Tokyo. Photo: Siriwat Sriphojaroen/Shutterstock

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We’re covering the growing importance of Asia for Brazilian exporters. The new Federal Police Chief. And the possibility of a strict lockdown in Brazilian states.


Brazil’s future lies in Asia

On Monday, the Economy Ministry disclosed that Brazil’s trade surplus for Q1 2020 reached

<fontsninja-text id="fontsninja-text-1020">USD 6.7 billion, the highest in three years. From a closer examination of the data, we see that 47.2 percent of Brazilian exports headed to a single continent: Asia. Last year, the region accounted for 39.4 percent of exports — and 36 percent over the last five years, on average.</fontsninja-text></p> <ul><li>Even when we discount Brazil&#8217;s largest trade partner China, which gobbled up 32 percent of exports, smaller Asian economies bought 15 percent of the country&#8217;s goods sold abroad. That is more than the U.S. (10.3 percent) and almost ties with the European Union (16 percent).</li></ul> <div class="flourish-embed flourish-chart" data-src="visualisation/2251576" data-url="https://flo.uri.sh/visualisation/2251576/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Why it matters.</strong> Soon, Asia will account for the majority of our sales abroad, in a trend that is set to be further accentuated by the coronavirus. Western economies are still battling the outbreak and many are choosing the path of protectionism and insularization, <a href="https://brazilian.report/latin-america/2020/04/25/argentina-exits-mercosur-negotiations-upending-trade-deals/">as is the case with Argentina</a>. Meanwhile, many countries in Asia appear to have overcome the worst part of the crisis, at least for the time being.</p> <ul><li>It remains to be seen what the effects of a European and American slowdown will be on Asian countries — especially in Southeast Asia — as well as a possible second wave of Covid-19.</li><li>Another risk is the U.S.&#8217;s increasingly aggressive rhetoric against China, with White House officials banging the drums for a <a href="https://foreignpolicy.com/2020/05/04/trump-china-trade-war-restoring-tariffs-2020-election/">renewed trade war with the Asian giant</a> — which could have devastating consequences in an already ravaged global economy.</li></ul> <p><strong>Foot in mouth. </strong>The numbers have not prevented members of the Brazilian government from attacking Asian countries —&nbsp;most notably China. Foreign Minister Ernesto Araújo has called the coronavirus the &#8220;Commie Virus,&#8221; and Education Minister Abraham Weintraub posted an offensive tweet mocking Asian speech patterns, which is under criminal investigation for racism.</p> <p><strong>Interesting.</strong> In Q1, Brazilian exports dropped only 3.7 percent — a negligible figure considering the outright collapse of the global economy. (The World Trade Organization foresees a 22-percent drop in global trading volume for 2020.) The country&#8217;s resilience is due to agribusiness products — soybeans, cotton, beef, and pork posted record-setting numbers in April.</p> <hr class="wp-block-separator"/> <h2>Bolsonaro gets a new Federal Police Chief</h2> <p>In a swift ceremony inside the presidential office, President Jair Bolsonaro named Rolando Alexandre his new Federal Police Chief. The newcomer was vouched for by Alexandre Ramagem, the head of the Brazilian Intelligence Agency and Mr. Bolsonaro&#8217;s original pick for the job. Mr. Ramagem&#8217;s initial appointment, however, was blocked by the Supreme Court due to his proximity to the Bolsonaro family — especially Carlos Bolsonaro, the president&#8217;s second-eldest son, who is at the center of a federal probe about an underground (and illegal) fake news apparatus.</p> <p><strong>Context.</strong> On March 24, former Operation Car Wash Judge <a href="https://brazilian.report/power/2020/04/24/sergio-moro-resigns-justice-minister-and-goes-out-swinging/">Sergio Moro resigned from the Justice Ministry</a> claiming that Mr. Bolsonaro wanted to change the head of the Federal Police, planting someone who would leak confidential information to him about investigations affecting his inner circle.</p> <p><strong>Why it matters. </strong>Mr. Alexandre&#8217;s first act in office certainly doesn&#8217;t send a message of independence. As soon as he was inaugurated, the new chief changed the Federal Police Superintendent in Rio de Janeiro, something Mr. Bolsonaro had repeatedly lobbied for.&nbsp;</p> <ul><li>It is worth remembering that Rio is the president&#8217;s political base, and is where his eldest son Flávio is being investigated for possible <a href="https://brazilian.report/newsletters/brazil-daily/2019/10/04/organized-crime-links-jair-bolsonaro-urban-militias/">links with paramilitary police mafias</a>.&nbsp;</li><li>&#8220;The president&#8217;s insistence on changing the top detectives in Rio de Janeiro suggests that he is afraid of what those guys might find,&#8221; said one Federal Police detective, speaking to <strong>The Brazilian Report</strong> on condition of anonymity.</li></ul> <p><strong>Reaction.</strong> Rolando Alexandre is considered to be more than capable for the job. However, given the circumstances of his appointment, his margin for error will be nil. In 2018, then-Federal Police Chief Fernando Segóvia was sacked after just 109 days after detectives failed to recognize his authority. He was picked by former President Michel Temer — who was under federal investigation at the time&nbsp;—&nbsp;to act as a buffer. It didn&#8217;t work.</p> <p><strong>Bottom line.</strong> For the past 17 years, the Federal Police has managed to create a culture of political independence. This autonomy will now face its biggest challenge yet.</p> <div id="buzzsprout-player-3553348"></div> <script src="https://www.buzzsprout.com/299876/3553348-106-moro-puts-jair-in-the-corner.js?container_id=buzzsprout-player-3553348&amp;player=small" type="text/javascript" charset="utf-8"></script> <hr class="wp-block-separator"/> <h2>Is Brazil heading for a lockdown?</h2> <p>A 10-day lockdown begins today in Greater São Luís, in the northeastern state of Maranhão. All non-essential activities are suspended and citizens may only leave their homes to buy food and medicine or to go to hospitals or police stations. Non-compliance will incur fines and even arrests.</p> <ul><li>In Rio de Janeiro, Governor Wilson Witzel went from talking about reopening the state to weighing up a full lockdown in &#8220;critical areas,&#8221; following a recommendation from his Covid-19 committee.</li></ul> <p><strong>Why it matters.</strong> As Brazil&#8217;s Covid-19 infection and death curves continue to rise — at the same time that quarantine measures lose support among Brazilians&nbsp;— other states could see themselves forced to adopt tighter measures.</p> <ul><li>Quarantines have become something of a cultural battlefield, with far-right supporters of President Bolsonaro holding aggressive demonstrations against stay-home rules. Strict lockdown could lead to social unrest.</li></ul> <hr class="wp-block-separator"/> <iframe title="COVID-19 cases and deaths in Brazil" aria-label="Map" id="datawrapper-chart-vvN3h" src="https://datawrapper.dwcdn.net/vvN3h/6/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="559"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(a){if(void 0!==a.data["datawrapper-height"])for(var e in a.data["datawrapper-height"]){var t=document.getElementById("datawrapper-chart-"+e)||document.querySelector("iframe[src*='"+e+"']");t&&(t.style.height=a.data["datawrapper-height"][e]+"px")}}))}(); </script> <hr class="wp-block-separator"/> <p><strong>No room for everybody. </strong>As states&#8217; healthcare systems operate at almost full capacity — and the number of patients keeps growing — doctors&#8217; associations have developed protocols to help medical professionals triage patients and select who should receive treatment first. The Pernambuco State Medical Council, for instance, adopted a priority scale according to survival chances in the short- and long-term.</p> <p><strong>Epicenter.</strong> After the full-scale collapse in the Amazonas state, the southern state of Santa Catarina could become the country&#8217;s next Covid-19 center. Since April 24, the number of confirmed cases in the state jumped from 1,200 to 2,346 — and deaths are also expected to pile up. Citizens of Santa Catarina have been among the staunchest supporters of reopening business as soon as possible.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong><fontsninja-text id="fontsninja-text-1407">Job market.</fontsninja-text></strong><fontsninja-text id="fontsninja-text-1406"> According to data from the government&#8217;s Social Security Office, 51 percent of all workers who signed labor agreements with their employers, accepting a cut in working hours and wages, are between 30 and 49 years old. Companies with annual revenue of up to BRL 4.8 million (USD 866,000) were behind 56 percent of these deals. And more than half of these deals (53 percent) were signed in the Southeast region — Brazil&#8217;s wealthiest.</fontsninja-text></li><li><strong><fontsninja-text id="fontsninja-text-1409">Moro v. Bolsonaro.</fontsninja-text></strong><fontsninja-text id="fontsninja-text-1408"> The Prosecutor General&#8217;s Office has requested a video recording of a cabinet meeting in which, according to former Justice Minister Sergio Moro, President Jair Bolsonaro threatened to fire Mr. Moro unless he swapped the Federal Police Chief for someone trusted by the president. Three cabinet members will also be subpoenaed. Mr. Bolsonaro is also likely to be summoned, but as head of state, he has the prerogative to answer in writing.</fontsninja-text></li><li><strong><fontsninja-text id="fontsninja-text-1411">Banking.</fontsninja-text></strong><fontsninja-text id="fontsninja-text-1410"> Itaú Unibanco, Brazil&#8217;s largest private bank, reported BRL 3.9 billion in recurring profits for Q1 2020 —&nbsp;a 49-percent drop from one year ago. In a note to investors, the bank said it has suspended all forecasts for 2020, given the unpredictability of the short-term scenario caused by the Covid-19 pandemic. &#8220;We believe it is more sensible to withhold projections until it is possible to more accurately estimate the impacts of the crisis on operations,&#8221; read the statement.</fontsninja-text></li><li><strong><fontsninja-text id="fontsninja-text-1413">Projections.</fontsninja-text></strong><fontsninja-text id="fontsninja-text-1412"> The latest Focus Report — a weekly survey by the Central Bank with top-rated investment firms — brought lowered expectations for the country&#8217;s GDP performance this year for the 12th consecutive week. Markets expect a contraction of -3.76 percent for 2020, down from </fontsninja-text><a href="https://public.flourish.studio/visualisation/1733972/"><fontsninja-text id="fontsninja-text-1414">-3.34 percent one week ago</fontsninja-text></a><fontsninja-text id="fontsninja-text-1412">.</fontsninja-text>

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