Brazilian companies say worst is behind them

. Sep 03, 2020
Brazilian companies say worst is behind them Shopping mall in São Paulo. Photo: Roberto Parizotti/FP

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Today we’re looking at growing optimism among Brazilian companies, the government’s attempt at a ‘patriotic Black Friday,’ and a new public service reform will be submitted.

The worst could be behind most Brazilian companies. But don’t pop the champagne just yet

By the end of July, 37 percent of Brazil’s 3 million-plus companies still felt the negative effects of the pandemic.

But for most of them, the worst has already passed. As a matter of fact, one-quarter of firms report that they perceive the coronavirus&#8217; impact as <em>positive</em> on their business, according to the latest study on the matter by the Brazilian Institute of Geography and Statistics (IBGE).&nbsp;</p> <p><strong>Why it matters.</strong> There has been a major improvement from late in June, when 62 percent of companies still felt the negative effects of the crisis. IBGE&#8217;s Alessandro Pinheiro, however, tempers his optimism: &#8220;The numbers show stability within a scenario of great difficulty.&#8221;</p> <ul><li>The Brazilian economy is fueled by family consumption, which <a href="https://brazilian.report/business/2020/09/01/worst-gdp-ever-what-does-the-future-hold-for-brazil/">fell considerably in Q2</a>). But consumption decisions are based on sentiment, and the survey suggests Brazilians are now less fearful about the economic outlook.&nbsp;</li></ul> <p><strong>By the numbers. </strong>Data journalist Aline Gatto Boueri breaks down the results:</p> <ul><li>The services sector — the backbone of the Brazilian economy — was hit the hardest. After five months of the coronavirus in the country, 43 percent of companies still felt the blow.</li><li>The North region, the first to experience a collapse in local healthcare networks, has the highest rate of companies reporting positive effects from the current scenario (41 percent).</li><li>Most companies (55 percent) say there was no impact whatsoever on their ability to produce goods or serve customers.</li></ul> <p><strong>Disparity.</strong> But the numbers also show how much tougher life can be for small companies. Bigger, better-structured businesses have less difficulty to access loans or even benefit from government programs to delay tax payments. Meanwhile, 19 percent of big companies laid off staff — against less than 8 percent of small firms.</p> <ul><li>Small companies account for 99 percent of all businesses in Brazil, making up one-quarter of the Brazilian GDP and employing 52 percent of the registered workforce.</li></ul> <div class="flourish-embed flourish-chart" data-src="visualisation/3645262" data-url="https://flo.uri.sh/visualisation/3645262/embed" aria-label=""><script src="https://public.flourish.studio/resources/embed.js"></script></div> <div class="flourish-embed flourish-chart" data-src="visualisation/3645282" data-url="https://flo.uri.sh/visualisation/3645282/embed" aria-label=""><script src="https://public.flourish.studio/resources/embed.js"></script></div> <hr class="wp-block-separator"/> <h2>Government tries to boost consumer spending with &#8220;patriotic Black Friday&#8221;</h2> <p>From now until September 12, retailers will be offering major discounts to celebrate the second installment of the so-called &#8220;<a href="https://brazilian.report/newsletters/brazil-daily/2019/09/10/amazon-prime-game-changer-brazil/">Brazil Week</a>&#8221; — a campaign created by the federal government in 2019 to increase consumption and help retailers. The discount frenzy will start as Brazil surpasses the mark of 4 million coronavirus cases, bearing the motto &#8220;Moving forward, with care and confidence.&#8221;</p> <p><strong>Why it matters.</strong> Last year, the initiative helped boost online transactions by 41 percent, according to Ebit/Nielsen, and saw sales rise 11.3 percent in brick and mortar stores.</p> <ul><li>Finance reporter Natália Scalzaretto writes that neither the government nor retail associations have made any predictions for this year, though.</li></ul> <p><strong>Sanitary measures.</strong> Sector representatives have provided stores with suggested guidelines for safe reopening. They want to avoid the <a href="https://www.youtube.com/watch?v=Dbh3--KUeYo">scenes of mayhem</a> witnessed during the opening of a home appliance store in Rio two weeks ago.</p> <div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" width="500" height="280" src="https://brazilian.report/wp-content/uploads/2020/09/ezgif.com-resize-2.gif" alt="shopping frenzy brazil" class="wp-image-48995"/></figure></div> <ul><li>The Colombian government planned tax-free days to boost consumption earlier in the year. In June, sales went up by 30 percent — thanks, however, to massive amounts of shoppers flocking to stores. At the same time, the country&#8217;s infection rates rose, leading President Iván Duque to postpone a second edition of the event.</li><li>Retail giant Via Varejo told <strong>The Brazilian Report</strong> that teams are instructed to let consumers inside stores &#8220;gradually.&#8221;</li></ul> <p><strong>Trends.</strong> Holding a Black Friday-like campaign amid a pandemic seems like a health hazard, but data shows it makes sense on the <em>economic</em> side of things, as consumption picks up steam in Brazil. For instance, purchases of flagship smartphones — which cost at least three times the minimum wage — had a 175-percent uptick in August, after dropping 41 percent at the beginning of the pandemic. Experts say it is a normal trend:&nbsp;a &#8220;panic&#8221; phase, succeeded by a period of &#8220;indulgence.&#8221;</p> <ul><li>Meanwhile, another piece of data shows just how crucial the BRL 600 (USD 112) emergency salary has been to families. A study by the Central Bank based on debit card transactions shows that consumption is around 40 percent <em>above</em> pre-pandemic levels in poorer areas, despite the job market crisis. &#8220;This extra income is not coming from labor, but from the benefit,&#8221; said Marcelo Neri, one of Brazil&#8217;s biggest experts in socioeconomic research.</li></ul> <hr class="wp-block-separator"/> <h4 class="has-text-align-center">Debit-card transactions</h4> <div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" width="667" height="627" src="https://brazilian.report/wp-content/uploads/2020/09/transactions-brazil-economy.png" alt="" class="wp-image-48996" srcset="https://brazilian.report/wp-content/uploads/2020/09/transactions-brazil-economy.png 667w, https://brazilian.report/wp-content/uploads/2020/09/transactions-brazil-economy-300x282.png 300w, https://brazilian.report/wp-content/uploads/2020/09/transactions-brazil-economy-610x573.png 610w, https://brazilian.report/wp-content/uploads/2020/09/transactions-brazil-economy-600x564.png 600w" sizes="(max-width: 667px) 100vw, 667px" /></figure></div> <iframe src="https://open.spotify.com/embed-podcast/episode/4dATc000eSuZlGDJbUqQat" width="100%" height="232" frameborder="0" allowtransparency="true" allow="encrypted-media"></iframe> <hr class="wp-block-separator"/> <h2>Government to submit public service reform</h2> <p>The federal government will present Congress with its plans for administrative reform. But the project will not be as bold as Economy Minister Paulo Guedes initially wanted —&nbsp;and is expected to only concern future civil servants, not affecting the rights of current public employees.</p> <p><strong>Why it matters.</strong> Spending on <a href="https://brazilian.report/newsletters/brazil-weekly/2019/11/18/true-situation-brazil-public-service-charts-psl-bolsonaro/">salaries and pensions</a> gobble up a sizable portion of the public budget — especially in cities and states.&nbsp;</p> <div class="flourish-embed flourish-scatter" data-src="visualisation/945987" data-url="https://flo.uri.sh/visualisation/945987/embed" aria-label=""><script src="https://public.flourish.studio/resources/embed.js"></script></div> <ul><li>The strength of the civil servants&#8217; lobby has also led to pay raises that many administrations simply cannot afford. State-level employees have seen their salaries increase by an average of 80 percent between 2004 and 2018.</li></ul> <p><strong>Placebo.</strong> Usually, governments present radical reforms knowing they will be diluted in Congress. But this proposal begins life in a weaker position, choosing not to include a number of sensitive issues. The reform will be less of a cure for Brazil&#8217;s oversized public payroll and more like a placebo.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Rio 1. </strong>A panel of 15 members of the Superior Court of Justice, Brazil&#8217;s second-highest judicial body, confirmed Rio de Janeiro Governor Wilson Witzel&#8217;s <a href="https://brazilian.report/newsletters/brazil-daily/2020/08/28/rio-governor-suspended-in-coronavirus-corruption-probe/">180-day suspension from office</a>. He is suspected of leading a corruption ring to embezzle state funds originally earmarked for the coronavirus fight. Interim Governor Cláudio Castro is planning a cabinet overhaul — using that reshuffling as an olive branch to State Congress, which is set to vote on Mr. Witzel&#8217;s impeachment.</li><li><strong>Rio 2.</strong> Meanwhile, Rio de Janeiro City Council is set to vote on whether to open impeachment proceedings against Mayor Marcelo Crivella. He is accused of using municipal employees to prevent journalists from reporting on the city&#8217;s subpar health network. Mr. Crivella has already <a href="https://brazilian.report/power/2019/06/20/rio-de-janeiro-crivella-impeachment/">dodged another three attempts of ousting</a>, thanks to a heavy dose of horse-trading.&nbsp;</li><li><strong>Deforestation.</strong> According to Reuters, data from August on the number of fires in Brazil’s Amazon requires correction and will likely show an increase in comparison to last year, taking the number of blazes to a decade high. Brazil has recently felt the <a href="https://brazilian.report/podcast/2020/07/16/explaining-brazil-podcast-deforestation-is-bad-for-business/">pressure from international investors</a> who threaten to pull their money from the country unless the government enforces environmental controls.</li><li><strong>Payments.</strong> Central Bank Chairman Roberto Campos Neto said the Facebook-owned <a href="https://brazilian.report/tech/2020/06/16/how-disruptive-will-whatsapp-pay-be-in-brazil/">instant payment platform WhatsApp Pay</a> will get the go-ahead from regulators, as concerns about market concentration and data protection were alleviated. &#8220;It will be approved,&#8221; Mr. Campos Neto said during an online event. WhatsApp Messenger is installed on 99 percent of Brazilian smartphones and it is used by over 120 million people — which worried the Central Bank about possible market disruptions.</li><li><strong>Dams.</strong> The Senate passed a bill altering the National Dam Safety Plan (PNSB). The new framework aims at making controls stricter in order to avoid tragedies such as the ruptures in <a href="https://brazilian.report/society/2018/11/05/mariana-disaster-2015-tragedy/">Mariana</a> (2015) and <a href="https://brazilian.report/society/2019/01/27/brumadinho-collapse-desperate-situation/">Brumadinho</a> (2019). In the case of a collapse, however, the new rules create more agile ways to compensate victims and punish culprits. A report by the National Water Agency (ANA) shows that 1,124 dams in Brazil are “high-risk structures.” And nearly 3,000 present a high potential of causing a catastrophe due to their proximity to municipalities and the nature of the waste being stored.

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