Bolsonaro and Guedes clash over cash-transfer policy. Again

. Aug 27, 2020
Bolsonaro and Guedes clash over cash-transfer policy. Again Economy Minister Paulo Guedes. Photo: Alan Santos/PR

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Today, we look at the latest disagreements between President Jair Bolsonaro and Economy Minister Paulo Guedes. The data protection law could finally become a reality. The pandemic’s impact on retail. And new regulation for Zoom calls with executives.

Guedes is on the clock

President Jair Bolsonaro overruled his Economy Minister on Wednesday,

telling reporters that he ordered Paulo Guedes to halt his plan for a new cash-transfer policy. Mr. Bolsonaro said he couldn&#8217;t agree to a program that foresaw slashing other benefits — such as salary bonuses to people in formal employment — saying he would not condone &#8220;taking money away from the poor to give to the miserable.&#8221; The president gave Mr. Guedes until Friday to come up with a new proposal.</p> <p><strong>Why it matters.</strong> The disagreements between deficit hawks within the Economy Ministry and the government&#8217;s spendthrift military wing are notorious. This public scolding once again ignited fears that Mr. Guedes could resign —&nbsp;causing the stock market to go down and the Brazilian currency to lose ground against the U.S. Dollar.</p> <p><strong>Tough choice.</strong> Mr. Bolsonaro has some tough choices ahead. He must balance the federal spending cap, while offering help to the millions who were deprived of their income due to the pandemic. And regardless of his decision, he will have to upset someone —&nbsp;whether it be markets, or voters … or both.</p> <ul><li>The coronavirus emergency salary (consisting of stipends of BRL 600, or USD 107) has a prohibitive price tag of BRL 50 billion a month for the government. To replace it, the Economy Ministry had drafted a beefed-up version of the Bolsa Família program — but payments would be of only BRL 220, just slightly more than the BRL 190 monthly benefit of Bolsa Família.&nbsp;</li><li>Mr. Bolsonaro wants families to receive at least BRL 300. But the government still doesn&#8217;t seem to be on the same page — increasing uncertainty about its commitment to austerity and to a more social agenda.</li></ul> <p><strong>Solution?</strong> One option being discussed in Brasília is passing a constitutional amendment to lower the mandatory expenses that eat up most of the federal budget. But the administration&#8217;s lack of political strength has made any sort of venture a longshot.&nbsp;</p> <p><strong>By the way … </strong>In 2012, the government began cutting payroll taxes. Since then, it has waived BRL 118 billion — the equivalent of half its spending on Bolsa Família in the same period.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/3585279"><script src=""></script></div> <hr class="wp-block-separator"/> <h2>Uncertainties surrounding data protection in Brazil</h2> <p>The Senate reverted a decision by the lower house and allowed the immediate enactment of the new General Data Protection Law in Brazil. The law will be enforced as soon as President Jair Bolsonaro ratifies it, but punishment for non-compliant companies will only begin after August 2021.</p> <ul><li>The government wanted to postpone the data protection regulations until May 2021. The House had shortened that extension —&nbsp;but the Senate scrapped it altogether.</li></ul> <p><strong>Why it matters.</strong> Most businesses in Brazil have access to consumer data, such as people&#8217;s tax identification numbers — but the law is hazy when it comes to how they must deal with that information. Moreover, the Brazilian government itself has increasingly enhanced its data-collection infrastructure. Legislation on data protection is paramount to protect citizens and consumers from abuse.</p> <p><strong>Meanwhile … </strong>Two controversial cases related to data protection are currently pending before Brazilian courts.</p> <ul><li>The Superior Court of Justice, the country&#8217;s second-highest judicial body, ordered Google to provide information of all internet users in Rio de Janeiro who did searches on the late City Councilor Marielle Franco — assassinated two years ago. Investigators believe the information could lead to those who ordered the murder, but data privacy advocates warn about the dangerous precedent the decision could open.</li><li>A court in southern Brazil ordered Twitter to disclose the data of the people behind the social media profile Sleeping Giants Brasil — which exposes companies that run ads on misinformation websites. The decision regards a lawsuit filed by Jornal da Cidade Online, a well-known spreader of false information. The judge sided with the plaintiffs, despite recognizing that the Sleeping Giants account committed no crime in its activity.</li></ul> <iframe src="" width="100%" height="232" frameborder="0" allowtransparency="true" allow="encrypted-media"></iframe> <hr class="wp-block-separator"/> <h2>Market regulator tells firms to obey the rules in live broadcasts</h2> <p>For years, investment firms have invested in the production of content to draw interest to the investment world and increase their client database. With the pandemic, these companies have ramped up their output of video content, with daily live broadcasts featuring members of the government, top investors, and C-level executives of listed companies. But these events have not exactly been above board, according to the Brazilian Securities Commission (CVM).</p> <p><strong>New rules.</strong> The CVM passed regulations for companies who join these live events:</p> <ul><li>Broadcasts with company representatives are subject to regulations about official market communications. Therefore, companies must inform the dates and times of these events in advance, providing investors and observers with the link through which they can watch the interviews.</li><li>When possible, these communications must include the topics that will be discussed —&nbsp;or a list of questions that will be answered. If that is not possible, the interview should preferably be hosted before or after market hours.</li><li>If executives want to share a presentation, the slides must be uploaded to the company&#8217;s page on the CVM web portal —&nbsp;as is the procedure for meetings with analysts and market agents.</li></ul> <p><strong>Why it matters.</strong> Regulators fear that these live broadcasts run the risk of offering privileged information to a small pool of investors.</p> <hr class="wp-block-separator"/> <h2>Coronavirus deadlier on commerce than 2016 crisis</h2> <p>New <a href="">data</a> from the National Confederation of Commerce shows that 135,200 retailers closed shop for good during Q2 2020. The number of closures is higher than what was seen in the entire year of 2016, when 105,300 stores went out of business and Brazil faced its <a href="">worst recession</a> on record until that point.&nbsp;</p> <div class="flourish-embed flourish-chart" data-src="visualisation/3584724"><script src=""></script></div> <p><strong>Why it matters.</strong> Commerce is the sector that generates the second-largest number of jobs in Brazil, trailing only services. The 135,200 shops that closed represent 10 percent of commercial establishments with formal employees.</p> <p><strong>Bankruptcies.</strong> The hardest-hit segments were those considered as &#8220;non-essential,&#8221; such as apparel retailers. However, even &#8220;essential&#8221; establishments felt the blow, with 12,000 supermarkets and grocery stores and 10,000 construction material shops closing for good.</p> <ul><li>About 13 percent of homeware stores were run out of business by the pandemic.</li><li>The ITC sector (Information and Communication Technology) was the most resilient, with &#8220;just&#8221; 1,200 businesses shutting down — or 3.6 percent of the total.</li></ul> <p><strong>Per region.</strong> São Paulo, Minas Gerais, and Rio de Janeiro — where 40 percent of the Brazilian population lives —&nbsp;answered for half of the closures nationwide. However, states from the Northeast faced the worst proportional drops. In the case of Rio Grande do Norte, over 14 percent of shops stopped operations.</p> <p><strong>Projections.</strong> The CNC expects a plunge of nearly 7 percent in retail sales this year.&nbsp;</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>China. </strong>The Brazilian Agriculture Ministry has requested proof from Chinese authorities that traces of the coronavirus were indeed <a href="">found in chicken wings</a> exported from a factory in southern Brazil. “The health authorities in Shenzhen were unable to say whether the findings concerned only the detection of the virus’ genetic material or the active virus, nor were they able to provide further information about the alleged finding,” said the Brazilian government, in a statement.</li><li><strong>Indigenous.</strong> The Kayapó indigenous group has lifted a protest that had blocked a key grain export route in the Amazon last week. They protest the lack of government assistance amid the coronavirus outbreak and demand compensation for environmental damages caused by the paving of the BR-163 highway. The Kayapó hope that a federal judge will rule in their favor within the next 10 days.</li><li><strong>New court.</strong> The lower house voted to create a new regional appellate court in the state of Minas Gerais. The new institution has been lobbied for by the state&#8217;s politicians and judges and will come at an annual cost of BRL 270 million — despite the fact that the government is already cash-strapped as it is. The bill to create the new court now goes to the Senate.</li><li><strong>Population. </strong>According to new estimates by the Brazilian Institute of Geography and Statistics, the Brazilian population reached 211.7 million people in July 2020. That represents a 0.76-percent increase from one year ago. Accurate data on the population, however, might only be available in 2022, as the government postponed the 2020 census due to the coronavirus pandemic.</li><li><strong>5G.</strong> According to estimates from Ericsson, the implementation of <a href="">5G networks in Brazil</a> will generate investments of around BRL 9.2 billion from telecom companies until 2025. The company also discusses the creation of 205,000 direct jobs and an increase of up to 2.4 percent in the Brazilian GDP. Of course, Ericsson is not an unbiased observer, being a 5G provider itself.

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