Brazil’s plan to save jobs by taking away labor rights

. May 21, 2020
The Economy Ministry's new attempt to save jobs. The standoff between Jair Bolsonaro and state governors. And the worrisome trend of Covid-19 in Brazil Stores closed in Rio de Janeiro. Photo: Tânia Rego/ABr

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We’re covering today the Economy Ministry’s new attempt to save jobs. The standoff between Jair Bolsonaro and state governors. And the worrisome trend of Covid-19 in Brazil.

Fewer rights, more jobs? Economy Minister believes so

Expecting a substantial rise in unemployment rates in July and August, the Economy Ministry is looking for ways to encourage companies to hire — or, at least, not fire — workers.

So far, the ministry&#8217;s playbook has been an utter failure. The program allowing companies to cut wages and working hours — with the government compensating employees — has used up only BRL 1.6 billion from its intended BRL 40 billion budget.</p> <ul><li>One solution thought up by Economy Minister Paulo Guedes&#8217; team is recycling an old program initially intended to reduce youth unemployment: the so-called <a href="">Green and Yellow Work Contract</a>.&nbsp;</li></ul> <p><strong>Why it matters.</strong> The pandemic has begun eroding Jair Bolsonaro&#8217;s approval ratings among the middle and upper classes. If the predicted job apocalypse does materialize, it could spark social unrest and end his ability to govern.</p> <p><strong>What is the &#8220;new&#8221; program? </strong>The Green and Yellow Work Contract would have allowed companies to pay fewer benefits and social contributions when hiring youngsters between 18 and 29 years old in their first professional job. Passed by way of a provisional decree, it went on to expire without showing any of the results advertised by the government.</p> <ul><li>The idea now is to revive the initiative and lift the age restrictions. Mr. Guedes and President Jair Bolsonaro have said numerous times that it is better to have fewer labor rights than be unemployed.</li></ul> <p><strong>But, but, but … </strong>Since President Michel Temer&#8217;s administration (2016-2018), the government has passed legislation reducing labor rights in the name of curbing unemployment — but the strategy has not worked. The rate of people out of a job today is double what it was before the 2014-2016 recession. Many economists argue that a dysfunctional political system, coupled with a long crisis period, is what holds back investments and keeps unemployment so high.</p> <ul><li>One economics commentator called the program &#8220;economic chloroquine,&#8221; a reference to the government&#8217;s promotion of the antimalarial drug as a possible cure for Covid-19 —&nbsp;despite no evidence of its efficacy.</li></ul> <p><strong>Trouble ahead.</strong> As we showed in <a href="">yesterday&#8217;s Daily Briefing</a>, the government&#8217;s BRL 600 (USD 105) emergency salary is what is holding Mr. Bolsonaro&#8217;s approval rating above the 25-percent mark. Mr. Guedes, however, said the only way to extend the benefit for three more months would be to slice it up into three BRL 200 payments.</p> <ul><li>Cutting two-thirds of the benefit would reduce families&#8217; purchasing power by 0.3 percent —&nbsp;per month.</li></ul> <hr class="wp-block-separator"/> <h2>Bolsonaro and governors in a game of chicken</h2> <p>President Jair Bolsonaro and state governors will hold a two-hour video conference today in what is meant to be an armistice between local and federal administrations —&nbsp;which have been at odds since March over social isolation measures. To bury the hatchet, the president is expected to sign a bill into law granting BRL 125 billion in financial aid to states and municipalities, including BRL 60 billion in direct transfers over four months.</p> <ul><li>The plan was approved by Congress at the beginning of the month but has sat on Mr. Bolsonaro&#8217;s desk for weeks. The government disagrees with lawmakers’ decision to include several exceptions to the one condition the Economy Ministry requested: that the aid would require the freezing of civil servants&#8217; salaries until at least 2022.</li></ul> <p><strong>Veto. </strong>Mr. Bolsonaro said he plans on vetoing articles that allow raises for several public service professionals and hopes to share the political burden of the austere move with state governors —&nbsp;who are in favor. However, they are expected to say they won&#8217;t interfere with the president&#8217;s decision.</p> <ul><li>That approach allows governors to avoid massive spending while letting the president take the blame for salary freezes.</li></ul> <p><strong>Why it matters.</strong> Fighting the pandemic requires coordination between the multiple levels of government —&nbsp;but Brazil has seen nothing of the sort. Depending on how the meeting goes, it could result in a momentary truce between the president and governors.&nbsp;</p> <ul><li>Any long-term positive relationship is unlikely, however, considering that the president&#8217;s temperament and governors&#8217; presidential hopes will likely put them on a collision course once again.</li></ul> <hr class="wp-block-separator"/> <h2>In 24 hours, more cases than Japan&#8217;s all-time total</h2> <p>According to the latest coronavirus update by the Health Ministry, Brazil recorded 19,951 infections between Tuesday and Wednesday — more than the total number of cases in South Africa, Colombia, Israel, and Japan. The country also has had more deaths in the past week than anywhere in the world —&nbsp;except for the U.S.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/2498251" data-url=""><script src=""></script></div> <p><strong>Why it matters.</strong> In one month, Brazil could become the country with the world&#8217;s highest daily Covid-19 death rate.</p> <p><strong>Transparency.</strong> The government&#8217;s <a href="">Covid-19 dashboard</a> is a textbook example of how data visualization can be used to mislead the public. A day after Brazil registered over 1,100 coronavirus-related deaths in a single day, the government altered the page to give greater emphasis to &#8220;recovered&#8221; cases.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Economy.</strong> The Supreme Court has mediated a settlement between state governments and the federal government in a case dating back to 1996, when a law lifted state taxes on several exports. Compensation for the tax break had never been established, until now. The central government will transfer BRL 65.5 billion over the next 17 years —&nbsp;with BRL 5.2 billion to be paid in 2020.&nbsp;</li><li><strong>Aviation.</strong> Brazilian airlines have begun announcing their plans to resume domestic flights from June onwards. Gol, the largest domestic airline, hopes to reach 100 daily trips — which would still be 87 percent below capacity. In an <a href="">op-ed</a> published in newspaper <em>Folha de S.Paulo</em>, Latam chief executive officer Jerome Cadier said airlines &#8220;won&#8217;t recover on their own,&#8221; and that they need credit to get back on their feet. Mr. Cadier also mentioned the need for &#8220;profound changes in operation and management.&#8221;</li><li><strong>Another one bites the dust.</strong> The musical chairs in Jair Bolsonaro&#8217;s cabinet continue, as actress Regina Duarte was fired from the <a href="">Culture Secretary position</a> due to not pleasing the government&#8217;s more ideological wing, which sees culture as the right-wing&#8217;s most important battleground. Ms. Duarte leaves after less than three months in office, without any accomplishments to show for her sting in government. She did spark controversy, however, by being dismissive of state-sponsored torture during the dictatorship. Since April 16, five cabinet members have been fired, including two Health Ministers.&nbsp;</li><li><strong>Education.</strong> On Wednesday, the government decided to postpone Brazil’s National University Entrance Exam (Enem) — the nationwide standardized test used by most public universities as a selection process for students. The decision came after the Senate had passed a bill suspending all college entrance exams due to the pandemic. Now, both the in-person and online versions of the test will take place within 30 to 60 days after the original dates — November 1 and 8 for the former, and November 22 and 29 for the latter.</li><li><strong>Drugs.</strong> The Federal Police made the <a href="">biggest drug bust</a> in Brazilian history: 28 tons of marijuana. The drug was found hidden in a corn truck in the city of Ponta Porã, which sits on the border with Paraguay — a key location in the so-called <a href="">&#8220;hillbilly drug route.&#8221;</a> According to federal marshals, the cargo was being transported to Rio Grande do Sul, Brazil&#8217;s southernmost state.

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