Guedes stays in the cabinet, at a cost of BRL 5 billion

. Aug 19, 2020
paulo guedes budget Economy Minister Paulo Guedes. Photo: Alan Santos/PR

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We’re covering today the continuous struggle of Economy Minister Paulo Guedes over public spending in Brazil; growing optimism about the progress of the pandemic; and another slaughterhouse banned from exports due to coronavirus scares. 

Drawing a line in the sand

After a dreadful Monday, markets bounced back on Tuesday after

Economy Minister Paulo Guedes reaffirmed that he and President Jair Bolsonaro are on the same page. While Mr. Guedes got public endorsement for his austerity agenda, he also had to yield a bit: the federal budget has fiscal space of BRL 31 billion (despite the crisis), and Mr. Guedes agreed to allocate BRL 5 billion to infrastructure projects to be executed this year. And no more.</p> <p><strong>Why it matters. </strong>The extreme reactions to rumors of a &#8216;Guedes-exit&#8217; have shown that Mr. Bolsonaro would be able to change his Economy Minister — but not without a major image crisis with investors.</p> <p><strong>Continuing tension.</strong> But the <a href="https://brazilian.report/power/2020/08/12/paulo-guedes-is-losing-the-battle-for-brazilian-public-spending/">tug of war</a> continues between pro-austerity economists within the administration and some of the president&#8217;s advisers who want the government to spend big bucks on infrastructure and social programs. The biggest sticking point of all is the government&#8217;s BRL 600 emergency coronavirus salary.</p> <ul><li>It is hard to understate the importance of this program, which has helped push Jair Bolsonaro&#8217;s popularity ratings to their highest levels ever. According to data from think tank Fundação Getulio Vargas, it represented 97 percent of the income of the poorest 10 percent of Brazilians.</li><li>However, the program would have a yearly cost of BRL 600 billion — that is, twice the market value of Petrobras, Brazil&#8217;s state-controlled oil and gas giant.</li><li>The government hopes to decide by the end of the week how it may extend the benefit at least until the end of the year, even if at a reduced value. Congressional leaders defend an extra BRL 600 installment, followed by two BRL 300 payments. But Speaker Rodrigo Maia has signaled that he will not push for a vote on the matter before the government indicates where the extra money will come from — and promised to fight against a new tax on financial transactions proposed by Economy Ministry Paulo Guedes. </li></ul> <div class="flourish-embed flourish-chart" data-src="visualisation/3511669"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <hr class="wp-block-separator"/> <h2>Brazilians more optimistic, less isolated</h2> <p>Confirmed coronavirus cases in Brazil have reached 3.4 million, with almost 110,000 total deaths. The spread continues to advance in at least eight states, especially in the interior of the country, where healthcare networks are less robust. Still, isolation rates in the country are at their lowest since the beginning of the pandemic, with the rate of people in &#8220;total isolation&#8221; going from 18 percent in April to 8 percent now, according to a poll by Datafolha.&nbsp;</p> <ul><li>Senior citizens, women, and low-income people are those who observe most caution in going out.</li><li>For the first time, there are more Brazilians saying they believe the pandemic crisis is improving rather than getting worse.</li></ul> <div class="flourish-embed flourish-chart" data-src="visualisation/3511075"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <div class="flourish-embed flourish-chart" data-src="visualisation/3511173"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Why it matters. </strong>There might be reason for optimism, indeed. According to Imperial College London, the country has posted —&nbsp;for the first time in four months — a contagion rate below 1, indicating that the spread is slowing down.</p> <p><strong>Optimism in business.</strong> A Bank of America survey showed that Latin American managers no longer cite the coronavirus as <em>the</em> main reason for concern in their companies. In July, the pandemic was the top worry for 35 percent of polled executives, a rate now at 10 percent. Instead, they see Chinese deceleration (and its impacts on commodity prices) as the main concern now.</p> <p><strong>Yes, but … </strong>Almost 45 percent of Brazilian companies are still feeling the negative effects of the coronavirus crisis. The services sector — the backbone of the Brazilian economy — was the worst-hit, with 47 percent of businesses reporting a downturn in revenue.</p> <hr class="wp-block-separator"/> <h2>Hong Kong bans Brazilian poultry</h2> <p>The Hong Kong government announced on Tuesday that it is banning products from Aurora Xaxim, Brazil&#8217;s third-largest poultry and pork-processing plant. The move comes after Chinese authorities said they found <a href="https://brazilian.report/business/2020/08/13/chinese-authorities-say-coronavirus-found-chicken-brazilian-poultry/">traces of the coronavirus in frozen chicken wings</a> imported from Brazil, and despite the fact that the World Health Organization stated that there&#8217;s <a href="https://apps.who.int/iris/bitstream/handle/10665/331705/WHO-2019-nCoV-Food_Safety-2020.1-eng.pdf#:~:text=It%20is%20highly%20unlikely%20that,human%20host%20to%20multiply.">no evidence</a> of transmission via food products.</p> <ul><li>The Chinese government has already banned meat from 15 slaughterhouses from six countries — one-third were Brazilians.</li></ul> <p><strong>Why it matters.</strong> The Brazilian meat industry is already suffering from an <a href="https://www.theguardian.com/environment/2020/jul/28/investors-drop-brazil-meat-giant-jbs">image crisis</a> due to its lack of commitment to sustainability issues. Now, it can be frowned upon due to suspicions of lax sanitary controls.</p> <p><strong>Countermove.</strong> Aurora stated that it will perform 22,000 tests on 11,000 employees in four of its plants.</p> <ul><li>Slaughterhouses and meat-processing plants have played a <a href="https://brazilian.report/business/2020/05/30/role-meat-plants-coronavirus-spread-brazil-countryside/">key role in the coronavirus spread</a> — and not only in Brazil. These sites are breeding grounds for respiratory viruses, as they consist of closed, refrigerated spaces, with ventilation systems built to avoid external contamination. Hundreds, sometimes thousands, of people work “shoulder to shoulder” in these factories, handling animal protein.</li></ul> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Aviation. </strong>Brazilian planemaker Embraer has announced a third voluntary redundancy program — this time doubling the benefits for workers aged 50 or more. The pandemic crisis, coupled with the <a href="https://brazilian.report/newsletters/brazil-weekly/2020/04/27/amid-pandemic-bolsonaro-creates-pandemonium-brazil/">failure to merge its commercial jet division with Boeing</a>, has placed Embraer in a tough financial position. </li><li><strong>Oil and gas.</strong> The Brazilian government has postponed two rounds of auctions of oil and natural gas fields. Initially scheduled for 2020 and 2021, these bidding processes will happen in 2021 and 2022, according to the Mines and Energy Ministry. </li><li><strong>Double standard.</strong> A week ago, center-left Workers&#8217; Party chairperson Gleisi Hoffmann threatened to punish members who supported radical left-wing candidate Guilherme Boulos in the São Paulo mayoral race. Now, the party&#8217;s national committee has decided to support a pro-Bolsonaro candidate in Belford Roxo — a low-income city on the outskirts of Rio. Ms. Hoffmann conveniently sat out of the vote, as did former President Lula, who effectively controls the party. It is worth noting that the Workers&#8217; Party has always been <a href="https://brazilian.report/power/2020/06/07/bolsonaro-opposition-in-brazil-struggles-to-bury-the-hatchet/">against any multi-partisan anti-Bolsonaro front</a>.</li><li><strong>Democracy. </strong>Supreme Court Justice Edson Fachin said during an electoral law event that Brazil&#8217;s 2022 presidential elections are not guaranteed to take place. Without mentioning names, the justice said authoritarianism is rising in Brazil — particularly after the 2018 election — and talked about the presence of a &#8220;Trojan horse&#8221; within Brazil&#8217;s democracy, a jab at President Jair Bolsonaro. Earlier this week, <strong>The Brazilian Report</strong> reported that <a href="https://www.google.com/search?q=coup+bolsonaro+brazilian+report+debora+alvares&amp;rlz=1C5CHFA_enBR890BR891&amp;oq=coup+bolsonaro+brazilian+report+debora+alvares&amp;aqs=chrome..69i57j33.16437j1j4&amp;sourceid=chrome&amp;ie=UTF-8">Mr. Bolsonaro has threatened to call for military intervention on multiple occasions</a>.</li><li><strong>Social media.</strong> Sara Winter, a notorious far-right activist known for <a href="https://brazilian.report/power/2020/05/07/bolsonaro-far-right-wants-turn-brazil-into-2013-ukraine/">defending violent protests</a> against the Supreme Court — for which she was briefly arrested in June — has been banned from YouTube. She spearheaded a ferocious social media campaign to <a href="https://brazilian.report/society/2020/08/17/10-year-old-rape-victim-reignites-abortion-debate-brazil/">stop a 10-year-old rape victim from obtaining a legal abortion</a>, and even published the girl&#8217;s personal information and the address of the hospital where she was admitted. Ms. Winter could be arrested for violating the girl&#8217;s civil rights and for inciting crimes. Courts have ordered social media platforms to delete Ms. Winter&#8217;s posts related to the girl.

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