Can we trust Brazil’s post-reopening recovery?

. Jul 09, 2020
Can we trust Brazil's post-reopening recovery? Photo: Andrzej Rostek/Shutterstock

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We’re covering today the positive economic indicators of May — is the recovery real? Facebook strikes down a pro-Bolsonaro disinformation network. And VP Mourão meets with CEOs to talk about the Amazon.

Is Brazil’s recovery real?

Brazilian economic indicators for May are

better than expected and have elicited some excitement among the markets. Retail sales recorded &#8220;the biggest spike in 20 years,&#8221; industrial production was up in nearly all surveyed areas, and estimates for grain production are also positive. However, it is still too soon to pop the corks.</p> <ul><li>May results are indeed quite positive — <em>if</em> compared to April, when economic activity was severely down due to strict social isolation measures. As states reopened, a bounceback was expected. Still, economic activity in most sectors remains below pre-pandemic levels. Comparing May 2020 numbers against May 2019 leads to a significantly bleaker picture than month-on-month rates might suggest.</li></ul> <div class="flourish-embed flourish-chart" data-src="visualisation/3125899" data-url=""><script src=""></script></div> <div class="flourish-embed flourish-chart" data-src="visualisation/3125853" data-url=""><script src=""></script></div> <p><strong>The biggest risk.</strong> Credit policies meant to help small- and medium-sized businesses have failed, despite the government&#8217;s efforts. Banks are in a risk-averse mode —&nbsp;and big corporations are gobbling up the lion&#8217;s share of credit during the pandemic. Experts still fear a tsunami of bankruptcies in the coming months.</p> <p><strong>Don&#8217;t expect a V-shaped recovery.</strong> Brazil should experience its worst recession on record this year. Already in May, <strong>The Brazilian Report</strong> warned that the country <a href="">will not have a V-shaped recovery</a>, due to the high debt levels in both companies and the government. Among 39 emerging markets analyzed by the International Monetary Fund, only Venezuela and Angola have a worse debt-to-GDP ratio than Brazil.</p> <p><strong>Stock market on recovery hopes.</strong> All of these warnings have not stopped Brazil&#8217;s stock market from soaring on Wednesday. The Ibovespa index neared the 100,000-point mark, its highest point since March 6.</p> <hr class="wp-block-separator"/> <h2><strong>Facebook takes down disinformation network linked to Bolsonaro</strong></h2> <p>Using data from the Atlantic Council’s Digital Forensic Research Lab, Facebook Inc suspended a slew of social media accounts linked to President Jair Bolsonaro&#8217;s underlings — used to spread political disinformation. A total of 35 Facebook profiles, 14 pages, and one group were taken down — as well as 38 Instagram accounts.</p> <ul><li>Atlantic Council researchers have tied the misinformation network to Tércio Arnaud Tomaz, a special advisor to the president. Five current or former advisors to Mr. Bolsonaro&#8217;s three politician sons were also linked to the accounts.</li></ul> <p><strong>Why it matters.</strong> Members of Congress will request Facebook to share information about the disinformation network with a hearings committee investigating the spread of fake news in relation to election tampering.&nbsp;</p> <ul><li>The data could also make its way to the Superior Electoral Court — which is investigating a network of businesses accused of using a clandestine slush fund to illegally hire social media companies to send hundreds of millions of messages to voters attacking Mr. Bolsonaro’s rivals during the 2018 campaign. If the campaign is convicted of electoral crimes, Mr. Bolsonaro and Vice President Hamilton Mourão would <a href="">lose their seats</a> — and a new election would be called.</li></ul> <p><strong>Office of Hate.</strong> Facebook&#8217;s investigation all but proves the existence of the so-called &#8220;Office of Hate,&#8221; that is, an <a href="">underground &#8220;militia&#8221; that smears adversaries</a> on social media operating from within the government — and on the taxpayer’s dime.</p> <p><strong>Not only in Brazil.</strong> Also on Wednesday, Facebook took down over 100 pages and accounts <a href=";utm_medium=email">linked to former Republican operative Roger Stone</a> for the same reason: &#8220;coordinated inauthentic behavior.&#8221;</p> <hr class="wp-block-separator"/> <h2><strong>Mourão meets with CEOs over the Amazon</strong></h2> <p>Pressured by big corporations and investment funds to change its controversial laissez-faire approach to Amazon deforestation, the Brazilian government will try to fend off the criticism. Vice President Hamilton Mourão, who was recently named head of the National Amazon Council, will hold video conferences with both foreign and Brazilian business executives today and tomorrow. And while the government is expected to admit to mistakes in managing the environmental crisis, it will ask companies to replace criticism with action —&nbsp;and help fund anti-deforestation programs.</p> <p><strong>But, but, but … </strong>The government already has over BRL 33 million in money donated by the international Amazon Fund which has been sitting unused for years. As a matter of fact, the Bolsonaro administration created so many problems with the fund that Norway and Germany, its main backers, halted investments.</p> <p><strong>Why it matters.</strong> Brazil&#8217;s shortcomings in regards to deforestation are not only fueling the climate crisis —they are also bad for business. Investment funds have threatened to pull their assets from Brazil, as they do not want to be associated with illegal practices.</p> <hr class="wp-block-separator"/> <h2><strong>What else you need to know today</strong></h2> <ul><li><strong>Privatization.</strong> In a push to pass a bill in Congress privatizing power company Eletrobras, the government could make changes to its original proposal. They would include giving the federal administration golden share privileges — which allows the government to veto strategic decisions — and creating a fund for investments in the North region of the country. This <a href="">project is dear</a> to Economy Minister Paulo Guedes, but has been tied up in Congress since last year.&nbsp;</li><li><strong>Radicalization.</strong> Recently targeted by far-right protesters, the Supreme Court has reportedly launched a procurement process for a private security contractor. The court has set aside BRL 5 million for 32 armed bodyguards to act as 24/7 security detail for justices. In August 2019, we reported that the court was <a href="">shopping for anti-riot gear and body armor</a>.</li><li><strong>Human rights.</strong> President Jair Bolsonaro struck down an obligation for the government to provide drinkable water, hygiene products, and hospital beds to <a href="">indigenous people</a> and traditional escaped slave communities known as <em>quilombos</em>. The president claims lawmakers did not think of where the money would come from — and that the cash-strapped government couldn&#8217;t bear the costs. Earlier this week, Mr. Bolsonaro lifted obligatory mask use in prisons (which, as <strong>The Brazilian Report </strong>has <a href="">shown</a>, have become breeding grounds for the coronavirus) for the same reason.

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