Lifting the lid on lobbying in Brazil

. Oct 14, 2020
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Today, we show you how lobbying works in Brazil. How banks’ woes in the stock market raise red flags about the economy. And coronavirus deaths at lowest since May.

How lobbying operates in Brazil

The Brazilian Association of Institutional and Government Relations (Abrig) has published

a <a href="">document</a> offering a glimpse into the country&#8217;s lobbying sector. The activity is yet to be regulated in Brazil — and remains highly stigmatized in a nation so accustomed to corruption scandals.</p> <ul><li>Perhaps that&#8217;s why two-thirds of companies who use such services — whether by having its own lobbying sector or hiring outside counsel — are foreign.</li></ul> <p><strong>Company profile.</strong> The top sectors for which lobbying professionals work are not surprising: health and pharma, food and beverages, as well as agro and tech. These are sectors with constantly shifting regulations — and firms want to have a grasp on the changes to come and influence them when possible.&nbsp;</p> <div class="flourish-embed flourish-chart" data-src="visualisation/4012113" data-url="" aria-label=""><script src=""></script></div> <div class="flourish-embed flourish-chart" data-src="visualisation/4012177" data-url="" aria-label=""><script src=""></script></div> <div class="flourish-embed flourish-chart" data-src="visualisation/4012194" data-url="" aria-label=""><script src=""></script></div> <div class="flourish-embed flourish-chart" data-src="visualisation/4012202" data-url="" aria-label=""><script src=""></script></div> <div class="flourish-embed flourish-chart" data-src="visualisation/4012205" data-url="" aria-label=""><script src=""></script></div> <p><strong>Startups. </strong>Between 2019 and 2020, however, the sector saw a big surge in startups who use such services —&nbsp;this type of company represented 6 percent of the lobbying sector&#8217;s clients last year, and has now risen to 9.4 percent. &#8220;They are acting preventively to avoid excessive regulation or to try and block new rules that are harmful to their activities,&#8221; said Carolina Venuto, chairperson at Abrig.</p> <ul><li>The sector is particularly sensitive to how the new <a href="">general data protection law</a> will be enforced in Brazil. So far, the government has yet to create a regulatory body to monitor the implementation of new rules on handling citizens’ personal information. Business associations warn that the lack of regulation will lead to unnecessary litigation and insecurity about how the new law will be interpreted.</li></ul> <p><strong>Dirty word. </strong>Since the 1970s, the term &#8220;lobbying&#8221; has been used to qualify any attempt (usually illicit) to influence public officials, according to Andréa Cristina Oliveira Gozetto, a social scientist specializing in government relations and public policies at think tank Fundação Getulio Vargas. That&#8217;s why the sector prefers to call its work &#8220;government relations&#8221; instead.</p> <p><strong>Regulation, </strong><strong><em>pero no mucho</em></strong><strong>.</strong> Most lobbying professionals are in favor of their work being regulated, but with varying degrees of support. While 80 percent of consultancies and in-company government relations professionals support regulations, only 44 percent of law firms who work in the sector agree — perhaps out of fear that their field of operations may be narrowed.</p> <ul><li>Within the sector, there is also immense opposition to proposals in Congress that would establish a national database of lobbyists. Abrig claims it would limit the sector —&nbsp;saying that, &#8220;in a democracy, any citizen should be able to engage in government relations.&#8221;</li></ul> <p><strong>Benchmark.</strong> Ms. Gozetto, the social scientist, argues that Brazil should <a href="">use the Chilean model to regulate lobbying</a>. Chile was the first Latin American country to adopt a regulation on the matter, back in 2014. Now, an online system logs meetings, donations, or any kind of contact between elected officials and lobbyists. Requesting a meeting with a senator or representative goes through this online public platform, shedding light on how interest groups operate.</p> <hr class="wp-block-separator"/> <h2>Pandemic, competition slash banks&#8217; share of stock market index</h2> <p>Between December 2019 and today, Brazil&#8217;s major banks have lost one-third of their weight on Ibovespa — the country&#8217;s benchmark stock index — according to 6minutos, the content division of C6 Bank. Late in 2019, banks made up 26.6 percent of the Ibovespa portfolio. Now, that share has fallen to just 19 percent.</p> <ul><li>The main reason for this change is that big banks lost a lot of market value during the pandemic. The index for financial companies (IFNC) is the second-worst performing in Brazil, down over 26 percent since the beginning of the year.</li></ul> <p><strong>Why it matters.</strong> Investors&#8217; skepticism about banks has raised some red flags around the Brazilian economy.</p> <ul><li>With the coronavirus crisis and a record-high unemployment rate, investors worry that banks will face massive default rates. The most recent data, from July, actually shows that <em>fewer </em>Brazilians are in default — but the numbers could be misleading, as many of these people were benefited by the coronavirus emergency salary. The impact is expected to be felt from December onward, once the benefit is over.</li><li>There is a similar concern when it comes to corporate debtors. The government put in place a series of measures to postpone debt payments —&nbsp;which investors fear might only delay the problem, in many cases.</li></ul> <p><strong>Competition.</strong> There is also one positive reason for banks&#8217; struggles in the stock market: increasing competition from fintechs and investment platforms. With lower (or zero) tariffs, these new players are rattling traditional banks and helping the inclusion of millions in the banking system — which could lower market concentration for financial services. This might be bad for shareholders but is certainly positive for the Brazilian economy.</p> <hr class="wp-block-separator"/> <h2>Coronavirus daily deaths lowest since May</h2> <p>For the first time since May 7, Brazil&#8217;s 7-day rolling average of new daily Covid-19 deaths has fallen below 500 — showing a 28-percent decrease from two weeks ago. After 28 days of stability, the Brazilian death curve has seen a downturn over the past two days.</p> <p><strong>Why it matters.</strong> The data appears to indicate that the coronavirus spread —&nbsp;which has infected over 5.1 million Brazilians, killing 151,000 of them&nbsp;— could finally be slowing down.</p> <div class="flourish-embed flourish-map" data-src="visualisation/4012082" data-url="" aria-label=""><script src=""></script></div> <p><strong>Yes, but … </strong>Data collection has been sketchy in Brazil, and death reports tend to go down during the weekends and holidays (October 12 was a national holiday). So it&#8217;s hard to know if the reduction in deaths is an accurate depiction of how the virus is spreading. Back in September, Brazil observed a momentary decrease in deaths around the time of the September 7 Independence Day holiday. After that, the curve showed stability for nearly a month.</p> <p><strong>Vaccine.</strong> Mariângela Simão, the World Health Organization&#8217;s Assistant Director-General for Drug Access, Vaccines and Pharmaceuticals, said she is &#8220;<a href=";utm_content=hyperlink-texto&amp;utm_medium=email&amp;utm_source=newsletter">positively sure</a>&#8221; Brazil will not have enough vaccine doses in 2021 for a massive vaccination campaign. &#8220;The WHO advises Brazil to prioritize health workers and people over 65,&#8221; she told CNN Brasil.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Trade deal. </strong>In a push to show that the EU-Mercosur trade deal has support in Europe, the Agriculture Ministry released a statement saying Portugal backs the agreement. Last week, the European Parliament passed an <a href="">amendment</a> to the common EU commercial policy stating that the deal “cannot be ratified as it stands,” citing environmental concerns.</li><li><strong>Military. </strong>Newspaper O Globo revealed today that, after the Brazilian government decided to <a href="">make all Venezuelan diplomats <em>personae non gratae</em></a> in the country, the Army ran military tests in the Amazon, simulating war against a hypothetical &#8220;red country.&#8221; The operation involved 3,600 troops and happened between September 8 and 22 — on September 18, U.S. Secretary of State Mike Pompeo visited the Brazilian-Venezuelan border, lashing out at the country&#8217;s president, Nicolás Maduro.</li><li><strong>Aid 1. </strong>Brazil&#8217;s National Development Bank announced it will extend the temporary suspension of debt collection on companies — one of the first measures taken by the government to mitigate the economic effects of the pandemic. The program was set to end in September — but will continue for another six months for specific sectors, including automakers, clothing industries, and hotels.</li><li><strong>Aid 2. </strong>President Jair Bolsonaro signed a decree extending the possibility of companies suspending or cutting workers&#8217; hours and wages for another two months. Back in September, Economy Minister Paulo Guedes let slip that the measure would remain in place, but the extension has only been formalized now. The program is considered to be successful in avoiding millions of layoffs, but has created doubts around how workers&#8217; Christmas bonuses — established by law in Brazil and known as the &#8220;13th salary — will be paid, as they are calculated based on monthly wages.</li><li><strong>Payments.</strong> As Brazil gets ready to launch the Central Bank&#8217;s instant payment tool PIX, Visa is also beginning to shift its business model in the country. The company is selling fraud prevention and transaction authentication services to PIX participants, in a bid to expand its business beyond credit and debit cards. Only a few days after Brazilians were <a href="">allowed to sign up for PIX</a>, cybersecurity companies found at least 60 fraudulent websites offering fake registration forms — aiming at getting people&#8217;s financial information.</li><li><strong>Rio de Janeiro.</strong> A justice of the Superior Electoral Court issued an injunction suspending the ineligibility of Rio de Janeiro Mayor Marcelo Crivella — who has been convicted of electoral crimes. Wildly unpopular, Mr. Crivella is polling at 12 percent, 15 points below <a href="">former Mayor Eduardo Paes</a>, who tries to win a third stint in office, after serving as mayor between 2009 and 2016.</li><li><strong>Supreme Court.</strong> With the retirement of Justice Celso de Mello from the Supreme Court yesterday, lawyers representing former Justice Minister Sergio Moro wasted no time in asking Chief Justice Luiz Fux to reassign the case in which President Jair Bolsonaro is investigated for alleged illegal meddling with the Federal Police. If no party in the case had made such a request — Mr. Moro was the one who accused the president — the case would automatically fall into the hands of Justice Mello&#8217;s soon-to-be replacement, <a href="">Federal Judge Kássio Nunes Marques</a>, who was handpicked by Mr. Bolsonaro.

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