Coronavirus doesn’t stop Brazilian agriculture from growing

. May 27, 2020
Despite pandemic, Brazil's agribusiness sector set to grow Photo: Lourenco LF/Shutterstock

This newsletter is for PREMIUM subscribers only. Become one now!

We’re covering the positive projections for Brazil’s agribusiness. The alleged Covid-19 corruption ring run by the Rio de Janeiro governor. And new, worse projections for Brazil and Argentina.

BREAKING

The Federal Police is carrying out a search and seizure operation at the home of

pro-Bolsonaro blogger Allan dos Santos — under the scope of a congressional hearings committee to investigate the use of &#8220;fake news&#8221; as a political tool. Mr. Santos is one of the most popular far-right influencers in Brazil and his website has been a major diffuser of misinformation. In a previous interview, the hearings committee rapporteur, Congresswoman Lídice da Mata, said there was evidence that the far-right blogosphere was coordinated by an illegal network led by Carlos Bolsonaro, the president&#8217;s son.</p> <p>His supporters have quickly reacted to the operation, calling it retaliation by the Supreme Court (which oversees the probe) after Mr. Santos criticized its members.</p> <p>The police action is also reportedly targeting other figures linked to the Bolsonaro government, such as disgraced former congressman <a href="https://brazilian.report/power/2020/05/11/bolsonaro-new-ally-jefferson-must-have-a-military-coup/">Roberto Jefferson</a>, São Paulo state lawmaker Douglas Garcia, and business owner Luciano Hang.</p> <hr class="wp-block-separator"/> <h2>Despite pandemic, Brazil&#8217;s agribusiness sector set to grow</h2> <p>The Covid-19 pandemic is painting a dreadful picture for the Brazilian economy, with one exception: the agribusiness sector. According to the Institute for Applied Economic Research (Ipea), the sector should grow at least 1.3 percent this year in a worst-case scenario. Baseline predictions have agribusiness enjoying 2.5 growth even during the worst pandemic in living memory. The Ipea study is based on harvest projections by the Brazilian Institute of Geography and Statistics.</p> <p><strong>Why it matters.</strong> The agribusiness business ecosystem accounts for 21 percent of Brazil&#8217;s GDP.&nbsp;</p> <p><strong>Driving up. </strong>The record-setting soybean 2019-2020 harvest was concluded without suffering significant impacts from social distancing measures against the coronavirus. There are also positive estimates for coffee production in non-mechanized regions. Plantations are projected to have an overall 2.9-to-3.1-percent growth in 2020.</p> <ul><li>The coronavirus sparked fears of shortages, leading consumers to a rush for food. That pushed domestic prices up on almost all agricultural goods in March. From April onward, the effects of the pandemic were more diffuse.</li></ul> <p><strong>Holding agribusiness back.</strong> The beef industry had a terrible Q1 2020, with a drop of 6.5 percent in revenue. In March alone, production was down 47 percent from last year&#8217;s figures. The situation will continue to worry, as Covid-19 makes its way into several abattoirs. In the southernmost state of Rio Grande do Sul, one-third of confirmed cases affected slaughterhouse workers, with 2,079 infections.</p> <ul><li>Sugarcane production is also set to post negative numbers in 2020, even according to the most optimistic projections. The pandemic has reduced the demand for fuels and slashed oil prices, leading drivers to opt for gasoline rather than ethanol when filling up their tanks.</li></ul> <p><strong>Trade.</strong> Between January and April, Brazilian agricultural exports grew 7 percent, propelled by soybeans and beef.</p> <p><strong>Credit.</strong> On Tuesday, the Senate passed a bill authorizing agricultural producers&#8217; debts to be postponed for at least one year. The matter now goes to the lower house.</p> <hr class="wp-block-separator"/> <h2>Rio Governor suspected of running Covid-19 corruption ring</h2> <p>Rio de Janeiro Governor Wilson Witzel and his wife were targeted by a Federal Police operation on Tuesday. The couple is accused of receiving kickbacks from companies hired to build field hospitals for Covid-19 patients —&nbsp;which allegedly overprice almost every item in the construction, from ventilators to water tanks. Tuesday&#8217;s operation is a continuation of a previous probe, which had already arrested the state&#8217;s deputy health secretary for corruption.</p> <ul><li>One of the suspects was taped discussing how to tamper public bidding processes, saying everything was &#8220;agreed&#8221; with the governor.</li></ul> <p><strong>Why it matters.</strong> Brazil&#8217;s response to Covid-19 has not been up to par by nearly every single standard. And the operation suggests the little the country is doing may be hampered by corruption.</p> <p><strong>Calamity. </strong>Brazil has been in a state of calamity since late in March, which essentially lifts many of the controls administrations have to abide by when hiring companies and staff. That provides an open lane for corrupt politicians to operate.</p> <p><strong>Black box.</strong> According to the investigation, the kickbacks were paid through a law firm belonging to Mr. Witzel. This method, if proven, is similar to what former Rio Governor Sergio Cabral used to get embezzled funds.</p> <ul><li>Law firms continue shielded from most white-collar investigations in Brazil. They benefit from a strong bar association that denounces any investigative attempt as a violation of client-attorney privilege. One Brasília insider told this newsletter that judges turn a blind eye to law firms allegedly laundering money as a way to shield magistrates from corruption investigations.</li></ul> <p><strong>Foul play?</strong> Mr. Witzel called the operation a &#8220;political investigation,&#8221; saying it was quarterbacked by the Bolsonaro family. That suspicion was raised by the fact that pro-Bolsonaro Congresswoman Carla Zambelli told a radio station on Monday that the &#8220;some governors are already being investigated by the Feds.&#8221;</p> <hr class="wp-block-separator"/> <h2>Fitch downgrades Argentina, lowers perspective for Brazil</h2> <p>Ratings agency Fitch expects the Brazilian GDP to shrink by 6 percent this year, down from its previous negative projection of 4 percent. The new forecast is in line with the median outlooks of market analysts surveyed by the Central Bank on a weekly basis, who expect a -5.89 percent contraction in 2020, according to the latest Focus Report.</p> <p><strong>Why it matters.</strong> Each week, projections about the Brazilian economy get grimmer, and the government seems to be running out of solutions for the crisis.</p> <p><strong>Small companies. </strong>The pandemic is even making Economy Minister Paulo Guedes challenge some of his own convictions. He is reportedly mulling over a BRL 10-billion plan to provide “grants” for small- and medium-sized enterprises (SMEs). Funds would be provided by public banks, and SMEs would not have to pay them back, as long as they meet their 2021 tax dues without delay, according to news website Poder360.&nbsp;</p> <p><strong>Argentina.</strong> Argentina&#8217;s <a href="https://brazilian.report/latin-america/2020/05/25/argentinas-long-debt-default-history-imf/">ninth foreign debt default</a> is now official, with the country&#8217;s bonds being <a href="https://valor.globo.com/financas/noticia/2020/05/26/fitch-rebaixa-rating-da-argentina-para-status-de-calote-restrito.ghtml">cut</a> to default status by two rating agencies, including Fitch. President Alberto Fernández&#8217;s administration extended the deadline for a deal allowing the country to restructure BRL 65 billion in overseas securities until June 2.</p> <div class="flourish-embed flourish-scatter" data-src="visualisation/2641242" data-url="https://flo.uri.sh/visualisation/2641242/embed"><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>Financial aid. </strong>The deadline is approaching for President Jair Bolsonaro to sanction or veto a bill granting BRL 125 billion in <a href="https://brazilian.report/newsletters/brazil-weekly/2020/05/04/amidst-covid-19-crisis-brazil-bails-states-municipalities-bot-sentinel/">financial aid to states and municipalities</a>, including BRL 60 billion in direct transfers over four months. The president could veto articles allowing raises for several public service professionals. If Mr. Bolsonaro misses the deadline, the entire bill is tacitly approved, per Brazilian law.</li><li><strong>Agribusiness.</strong> Brazil&#8217;s second-highest court cleared brothers Wesley and Joesley Batista to occupy senior executive positions at meat processing giant JBS. They had been suspended after accusations of <a href="https://brazilian.report/power/2018/11/09/operation-car-wash-joesley-batista-jbs/">insider trading</a>. In 2017, the brothers signed a plea deal to give the Federal Police compromising information on then-president Michel Temer —&nbsp;and then played the market anticipating the effects of their bombshell accusations. Three years later, courts found it made no sense to keep the Batistas away from the company in which they own a controlling stake.</li><li><strong>Unemployment.</strong> The Economy Ministry is finally going to publish monthly <a href="https://brazilian.report/business/2020/04/03/small-business-owners-next-firing-line-covid-19-crisis/">formal job figures</a> for the January-April period. In March, the government halted the publication of the General Register of Employed and Unemployed People (Caged), saying that not enough companies had provided sufficient data on their members of staff, allegedly affecting the quality of the data. Caged has been one of the best sources of data on the number of people in formal work around the country.</li><li><strong>Marielle.</strong> The Superior Court of Justice begins a trial today to decide whether or not to move the investigation into the March 2018 assassination of Rio City Councilor Marielle Franco to the Federal Police. The request was made eight months ago by former Prosecutor General Raquel Dodge, who identified several attempts by state figures to tamper with the probe. The victim&#8217;s family is against the move, fearing it could stall its conclusion ever further. Law experts say that, <a href="https://brazilian.report/power/2020/03/14/two-years-marielle-franco-murder-struggle-lives-family/">over two years after the crime</a>, moving the investigation is unlikely to spark any momentum to help find out who ordered the hit job on Ms. Franco.</li><li><strong>Lockdown.</strong> According to pollster Datafolha, 60 percent of Brazilians support strict lockdowns as a strategy to curb the spread of the coronavirus. The enhanced restriction is met with more resistance among wealthier people and men —&nbsp;and has more support in the Northeast, Brazil&#8217;s poorest region and <a href="https://brazilian.report/society/2020/05/21/covid-19-coronavirus-brazil-northeast-poorest-region/">where the spread is increasing faster</a>. Municipalities in six states have already adopted some sort of lockdown, but Brazil&#8217;s two biggest urban centers, São Paulo and Rio de Janeiro, resist the idea.&nbsp;

Our content is protected by copyright. Want to republish The Brazilian Report? Email us at contact@brazilian.report