Brazil strengthens ties with Trump and shuns China

Two weeks prior to the U.S. election, Brazil goes all-in on Trump — against China. São Paulo’s plan to recover its economy. And the electoral politics of the coronavirus vaccine race.

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Brazil, Trump White House join forces against “enormous risk” from China

Brazil and the U.S. have updated a 2011 trade agreement, with new provisions on trade facilitation, regulatory practices, and anti-corruption strategies. “Ultimately,” said Robert O’Brien, of the U.S. National Security Council, “this could lead to a free-trade agreement between both countries.”

• The new protocols were signed during a virtual summit on U.S.-Brazil cooperation, in which President Jair Bolsonaro celebrated the “record-breaking pace” at which the agreement was reached. In the same event, U.S. Secretary of State Mike Pompeo said both Brazil and the U.S. must “decrease […] dependence on critical items” coming from China. Mr. Pompeo cited the “enormous risk” from China’s significant participation in both countries’ economies.
• China’s Foreign Minister Zhao Lijian responded to Mr. Pompeo’s words, accusing U.S. politicians (who are part of or allowed with the Trump administration) of “smearing” normal economic and trade cooperation.

Trump has ulterior motives. While the trade agreements are the official reason for Mr. O’Brien’s visit to Brazil, he is reportedly using the occasion to push Brazil into banning Chinese telecom giant Huawei from Brazil’s upcoming 5G auction.

Why it matters. Once again, Brazil decides to shun its undisputed main trading partner, China, without hesitation.

• The fact that the meeting occurred just two weeks before the U.S. presidential election adds a new dimension, making Brazil’s alliance with the U.S. more about the Trump White House than anything else. However, all polls suggest that former Vice President Joe Biden is much more likely to win the race — which could put bilateral relations in murky waters.

No results. In almost two years, Mr. Bolsonaro’s decision for complete alignment with Donald Trump has yet to bear fruits for Brazil: trade between the two countries has just seen its worst result in 11 years; the Trump administration reduced tax-free import quotas for Brazilian steel, and the U.S. nixed Brazil’s plan to name a president for the Inter-American Development Bank, appointing an American, instead.

São Paulo’s plan to boost its state economy

Governor João Doria of the state of São Paulo launched an economic recovery plan, aiming to attract BRL 36 billion (USD 6.4 billion) in investments by way of concession deals, and promising to create 2 million jobs over four years in the process. The plan comes as a consequence of the administrative reform passed by the State Congress last week, aimed at reducing public spending.

Why it matters. São Paulo’s state economy accounts for nearly 30 percent of the Brazilian GDP. And, with 21 percent of the country’s population, it is also the epicenter of the coronavirus pandemic in Brazil — and expects a 3-percent GDP slump this year, after growing 5 percent in 2019.

The government’s strategy. The plan is to launch 19 projects (mostly in infrastructure) to boost hirings and inject money into the state. The first such endeavor is a BRL 6-billion deal with logistics giant Rumo to revamp the state’s railway infrastructure. The project is expected to create 134,000 jobs in 72 municipalities. The portfolio also includes:

• A USD 1.4-billion high-speed train to connect the cities of São Paulo and Campinas — the state’s second-largest city, serving 565,000 daily commuters.
• Selling 22 local airports to the private sector, raising USD 80 million.
• Privatizing the administration of two major metropolitan rail lines in Greater São Paulo, for around USD 500 million.

Spring cleaning. Last week, state lawmakers allowed Governor João Doria to close at least five state-owned companies in order to save BRL 7 billion — yet firing 5,600 civil servants in the process. Regardless, that won’t be enough to zero the state’s BRL 10.4-billion deficit expected for 2021.

Tax changes. A key aspect of the proposal was a tax reform on the state tax on goods and services (ICMS). Any sector paying less than 18 percent will experience a 20-percent hike in this levy — with the exception of food and medicine producers.

The race for a Covid-19 vaccine is also an electoral one

On Monday, São Paulo state authorities announced preliminary results of phase-three trials of the CoronaVac — a potential Covid-19 vaccine developed by Chinese lab Sinovac Biotech. Trials in Brazil are being conducted by the São Paulo Butantan Biological Institute. 

• Butantan Director Dimas Covas said CoronaVac is the “safest among all the vaccines tested in the country.” He mentioned the absence of severe adverse reactions — with 20 percent of volunteers experiencing mild pain at the injection site and 15 percent reporting headaches. Less than 5 percent complained about nausea.

Yes, but … Promising results don’t mean the CoronaVac will easily be available for all Brazilians. The Health Ministry has not included it in the 2021 federal vaccination calendar, and President Jair Bolsonaro says his administration will not recommend mandatory vaccination. Hinting at São Paulo Governor João Doria, the president said: “A certain governor is proclaiming himself as the doctor of the country, saying [a vaccine, when available] will be mandatory. I repeat: it won’t.”

What is happening. At a global scale, the Covid-19 vaccine race has become the ultimate geopolitical game. In Brazil, domestic politics are also at stake. President Bolsonaro and Governor Doria — who in all likelihood will be adversaries on the 2022 presidential ballot — will try to use the matter to boost their electoral stock and undermine their opponent’s.

Meanwhile … The government has presented its latest “potential cure” against Covid-19: anti-worm drug nitazoxanide. Officials claim it is effective against early cases, but offered no evidence to back their statements. During an event at the presidential palace, the government presented a slide with the title “Scientifically proven: [nitazoxanide] reduces viral load,” alongside a decreasing bar chart — but the graph was taken from online image bank Shutterstock, originally entitled “Beautiful 3D animation of a downward bar chart following the arrow trading on the stock exchange.”

• The discovery led critics to doubt the reliability of the study and compare nitazoxanide to hydroxychloroquine — the antimalarial drug with no proven effect against the coronavirus, but which was touted by President Jair Bolsonaro as a “possible cure” against Covid-19.

What else you need to know today

• Freedoms. The most-recent Global Expression Report — measuring the state of freedom of expression around the world — shows Brazil suffering the world’s biggest score drop over the one-, five-, and ten-year measures. From a score of 89 out of 100 in 2009, the country is now ranked at just 46, mainly due to the widespread dissemination of disinformation and the increase of violence against journalists. According to NGO Article 19, “the decline has accelerated with the arrival of Jair Bolsonaro to power at the start of 2019, with an 18-point drop in one year.
• Startups. The government sent a bill to Congress to create a new legal framework regulating startups in Brazil. The project — which has not been disclosed to the public as of yet — reportedly aims at making it easier for companies to open up for business, as well as making regulations for innovative technologies more flexible.
• Impeachment. Lawmakers in the southern state of Santa Catarina will vote today on a second impeachment request against Governor Carlos Moisés, accused of malfeasance in administering the Covid-19 budget. He signed off on a purchase for overpriced ventilators (paying suppliers upfront, but getting no assurance of delivery) and the over-budgeted construction of a field hospital. The governor could be suspended from office as early as Friday, when a committee will vote on the first request against the governor.
• Infrastructure. The government announced plans to merge two state-owned companies: Valec (railways) and EPL (studies for transportation concessions). The move, according to Infrastructure Minister Tarcísio de Freitas, aims at cutting costs and could be concluded in up to 270 days.
• Violence. The number of violent deaths rose 7 percent in Brazil during H1 2020, despite the months of quarantine — which reduced the number of people on the streets. During the first six months of the year, Brazil recorded 25,700 homicides. Experts say the rise is the result of turf wars by organized criminal organizations, and reflects authorities’ lack of commitment to intelligence efforts against them.[/restricted]