Congress corners Bolsonaro over U.S. Secretary of State visit

The Foreign Affairs Committee confirmed the appointments of 32 people to diplomatic posts abroad — and also approved the formal invitation to Foreign Minister Ernesto Araújo to come before the committee and provide clarifications about the U.S. Secretary of State Mike Pompeo&#8217;s visit to the Venezuelan border last Thursday.</p> <p><strong>Why it matters.</strong> Such moves are acts of defiance by lawmakers, and show the fragility of President Jair Bolsonaro&#8217;s support base in Congress. Despite his recent spending of political capital to form an inchoate coalition, he still lacks a tight grip on the legislature.&nbsp;</p> <ul><li>While Mr. Araújo is not obliged to accept the invitation to speak before the Foreign Affairs Committee, he said he will go to Congress on Thursday, fearing problems for the government were he to refuse.</li></ul> <p><strong>What they are saying.</strong> Mr. Pompeo&#8217;s visit was criticized by all sides of the political spectrum.</p> <ul><li>House Speaker Rodrigo Maia said Mr. Araújo&#8217;s decision to take Mr. Pompeo to the headquarters of Operation Welcome,&nbsp;which hosts Venezuelan migrants in the border state of Roraima,&nbsp;&#8220;affronts Brazil&#8217;s tradition of being an autonomous and proud diplomacy.&#8221; He also lashed out at the timing of the visit —&nbsp;just 46 days before the U.S. election.</li><li>Former leftist President Luiz Inácio Lula da Silva called it an act of provocation toward Venezuela, and <a href="https://www.reuters.com/article/instant-article/idINKBN26A0B1">told</a> Reuters the U.S. &#8220;needs to drop this habit of wanting to be the world’s sheriff.&#8221;</li><li>A group of six former Foreign Ministers published a statement repudiating what they called &#8220;a spurious utilization of Brazilian soil by a foreign power as a platform for provocation and hostility towards a neighboring nation.&#8221;</li></ul> <p><strong>Context.</strong> As international relations professor Carlos Gustavo Poggio told our <a href="https://brazilian.report/podcast/2020/07/22/biden-trump-what-changes-brazil-latin-america/">Explaining Brazil Podcast</a>, Brazil&#8217;s recent stance of total alignment with the U.S. is a new thing. &#8220;Throughout history, Brazil has always tried to keep the U.S. close — but never too close.&#8221; Even Brazil&#8217;s U.S.-backed military dictatorship maintained a certain distance from Washington, with an independent foreign policy.</p> <p><strong>UNGA.</strong> This latest questioning of Brazil&#8217;s foreign policy comes as President Jair Bolsonaro opens the debates at the socially-distanced 75th United Nations General Assembly. Last week, we anticipated that Mr. Bolsonaro&#8217;s <a href="https://brazilian.report/newsletters/brazil-daily/2020/09/16/what-bolsonaro-plans-to-say-to-the-united-nations-next-week/">pre-recorded address will try to spin the narrative</a> around recent environmental tragedies and the government&#8217;s mismanagement of the coronavirus pandemic.</p> <iframe src="https://open.spotify.com/embed-podcast/episode/3ulkklC6bRRy1yXQvDqUjH" width="100%" height="232" frameborder="0" allowtransparency="true" allow="encrypted-media"></iframe> <hr class="wp-block-separator"/> <h2>Pandemic slashed 20 percent of Brazilians&#8217; income&nbsp;</h2> <p>The first three months of the pandemic were brutal on Brazilian households, according to a recent <a href="https://static.poder360.com.br/2020/09/Covid-Trabalho-Marcelo_Neri-FGV_Social.pdf">study</a> by think tank Fundação Getulio Vargas. Average income dropped 20 percent — as millions of workers saw their employment contracts reduced, suspended, or terminated. Moreover, the number of bankruptcy filings rose 71 percent nationwide.</p> <p><strong>Meanwhile … </strong>Brazil&#8217;s Gini index for individual income from labor — a measurement of inequality — shot up from 0.792 at the end of last year to 0.825 after Q2 2020. The crisis was disproportionately harder on women, indigenous populations, young professionals, and illiterate people.</p> <ul><li>Still, overall inequality actually went <em>down</em>, thanks to relief measures by the government — i.e., the coronavirus emergency salary.</li></ul> <div class="flourish-embed flourish-chart" data-src="visualisation/3797972" data-url="https://flo.uri.sh/visualisation/3797972/embed" aria-label=""><script src="https://public.flourish.studio/resources/embed.js"></script></div> <div class="flourish-embed flourish-map" data-src="visualisation/3798274" data-url="https://flo.uri.sh/visualisation/3798274/embed" aria-label=""><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Yes, but … </strong>The emergency salary has now been halved to payments of BRL 300 (USD 55) a month, and is set to end after December. &#8220;When the emergency aid&#8217;s &#8216;anesthesia-like effect&#8217; is over, the country&#8217;s <a href="https://brazilian.report/power/2020/08/20/what-happens-when-brazils-coronavirus-emergency-aid-ends/">social situation could severely deteriorate</a> if labor conditions don&#8217;t improve fast,&#8221; writes economist Marcelo Neri, who heads the study.</p> <p><strong>And there&#8217;s more.</strong> The study &#8220;<a href="https://www.nber.org/papers/w27352">Inflation with Covid Consumption Baskets</a>,&#8221; by the National Bureau of Economic Research, compares official inflation rates with price fluctuations of the &#8220;Covid-19 basket of goods,&#8221; that is, inflation that takes new consumption habits into account. The difference between the &#8220;Covid inflation&#8221; and the official consumer price index was higher in Brazil than in any of the 18 countries analyzed by economist Alberto Cavallo.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/3805823" data-url="https://flo.uri.sh/visualisation/3805823/embed" aria-label=""><script src="https://public.flourish.studio/resources/embed.js"></script></div> <hr class="wp-block-separator"/> <h2>Brazil&#8217;s brokerage market just got hotter</h2> <p>Private bank Bradesco is planning on turning its brokerage unit Ágora into a publicly-traded company. An initial public offering could happen within four to five years, but Bradesco has taken the first step in that direction, announcing it will turn Ágora into a separate company. Finance reporter Natália Scalzaretto explains the implications of the move:</p> <p><strong>Why it matters.</strong> Ágora has 500,000-plus customers and BRL 65 billion (USD 12 billion) in assets under custody. With the split, Bradesco can redirect all of its investment customers to Ágora, causing its total assets to soar to somewhere close to BRL 200 billion.</p> <ul><li>The bank says the split and listing would help the company gather resources to invest and, later, prepare for an IPO.</li></ul> <p><strong>A &#8220;new XP.&#8221;</strong> The move is reportedly part of Bradesco&#8217;s strategy to create its answer to XP Inc, arguably Brazil&#8217;s most dynamic brokerage firm, which reached a USD 15-billion valuation in its <a href="https://brazilian.report/business/2019/12/09/ipo-decade-xp-investimentos/#:~:text=According%20to%20a%20report%20by,to%2025%20percent%20in%202024.">Nasdaq IPO</a>. So far, XP is the only publicly-traded brokerage firm, managing BRL 436 billion in assets.</p> <p><strong>Meanwhile … </strong>Brokerage Ideal announced on Monday it has raised BRL 100 million in a series A investment round led by Kaszek Ventures, the biggest venture-capital fund in Latin America — known for its stakes in unicorns such as Nubank, Gympass, and Loggi. Ideal, which initially targeted international investors and has a leading position in the derivatives market, now moves to expand its portfolio with Main Street investors,&nbsp;&#8220;invading&#8221; XP&#8217;s turf.</p> <ul><li>A similar move could be pulled by Nubank, after the digital bank acquired Easynvest, as we detailed in our <a href="https://brazilian.report/tech/2020/09/11/telegram-whatsapp-nubank-investment-payroll-tax/">September 11 Tech Roundup</a>.</li></ul> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Coronavirus 1.</strong> Brazilian scientists believe that citizens in Manaus have attained a so-called &#8220;<a href="https://brazilian.report/society/2020/08/31/parts-of-brazil-may-be-close-to-reaching-herd-immunity/">herd immunity</a>&#8221; against the coronavirus. Manaus was the first Brazilian city to experience a full-scale healthcare collapse earlier this year — and up to 66 percent of its 1.8-million population may have been infected at some point, according to a survey analyzing 6,300 blood samples. Over <a href="https://covid.saude.gov.br/">4.5 million Brazilians</a> have tested positive for Covid-19, and 137,272 have died so far.</li><li><strong>Coronavirus 2.</strong> A yet-to-be-published study led by Miguel Nicolelis, a Brazilian professor at Duke University, has found a link between the spread of the coronavirus and past dengue fever epidemics — suggesting that exposure to dengue may provide some level of immunity against Covid-19. Places with lower coronavirus infection rates and slower case growth were locations that had suffered <a href="https://www.reuters.com/article/us-health-coronavirus-brazil-study-exclu/exclusive-study-suggests-dengue-may-provide-some-immunity-against-covid-19-idUSKCN26C27E">intense dengue outbreaks</a> this year or last, Mr. Nicolelis told Reuters.</li><li><strong>Strike. </strong>The Superior Labor Court ruled on the <a href="https://brazilian.report/tech/2020/08/21/how-brazilian-e-commerce-survives-postal-workers-strike/">strike of postal workers</a> — granting them a 2.6-percent wage bump and ordering their return to work. Additionally, they shall receive half-pay for the days they were on strike. Unions, however, dismissed the court&#8217;s decision as &#8220;political&#8221; and urged workers to continue the strike — even if they face BRL 100,000 daily fines.</li><li><strong>Rio. </strong>An electoral court is set to make Rio de Janeiro Mayor Marcelo Crivella <a href="https://brazilian.report/podcast/2020/09/09/explaining-brazil-podcast-rio-de-janeiros-descent-into-hell/">ineligible for public office</a> until 2026. Five of the court&#8217;s seven judges voted to convict Mr. Crivella of illegally using his office to support his son&#8217;s 2018 congressional candidacy. The trial has been suspended but is set to resume on Thursday. Even with the conviction, Mr. Crivella might still be able to run for re-election in November by way of multiple appeals.</li><li><strong>Elections.</strong> The pandemic may affect the <a href="https://brazilian.report/newsletters/brazil-daily/2020/09/15/two-months-until-brazil-2020-election-day-what-is-at-stake/">2020 electoral cycle</a> in yet another way: Brazil&#8217;s biggest media group Globo said it could pass on holding televised debates this year. In a statement by its head of journalism, the company said debates will only happen in cities where parties agree that only the four best-placed candidates shall participate — as a measure to avoid having too many people in a studio. São Paulo and Rio de Janeiro, with 10-plus candidates each, are unlikely to have any debates at all. Globo said it will not hold remote debates due to the possibility of candidates receiving outside help.