Economy Minister Guedes threatens to walk

. Nov 25, 2020
guedes economy Economy Minister Paulo Guedes talks to the press, with President Bolsonaro (left) and House Whip Ricardo Barros behind him. Photo: Alan Santos/PR

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Today, we talk about the wedge between Jair Bolsonaro and his Economy Minister, Paulo Guedes. China threatens Brazil with “negative consequences.” And the highest Covid-19 transmission rate in six months.

Exclusive: Growing tensions between Bolsonaro and his Economy Minister

Economy Minister Paulo Guedes threatened to resign on Tuesday, according to senior government sources who spoke to Brasília correspondent Débora Álvares.

During a visit to President Bolsonaro&#8217;s office, Mr. Guedes warned he would walk unless his boss supported the Economy Ministry&#8217;s reform proposals, drawn up to avoid losing support from business sectors who are &#8220;already fed up with the administration&#8217;s lack of economic results.&#8221;</p> <ul><li>Tantrums by Paulo Guedes are not uncommon, multiple cabinet members told <strong>The Brazilian Report</strong>. And while the idea of losing his guarantor with financial sectors once scared Jair Bolsonaro, that is no longer the case. Aides who witnessed the meeting between Mr. Guedes and the president called it just &#8220;another huff that will soon fade away.&#8221;</li></ul> <p><strong>Context.</strong> The Economy Minister has been informed that neither the tax reform bill nor the administrative overhaul proposed by the government will advance in 2020, as there is simply not enough time in the congressional calendar. January is likely to be lost, too, as lawmakers will focus on the internal elections for House Speaker and Senate President.</p> <ul><li>But President Bolsonaro has been the major roadblock for reform, not Congress. He has positioned himself against any effort by the economic team to substantially reduce public spending, such as including current civil servants in public service reform proposals, cutting servants&#8217; wages in emergency situations, or reassessing social policies.</li><li>Meanwhile, some BRL 605 billion (USD 112 billion) of <a href="https://brazilian.report/newsletters/brazil-daily/2020/10/15/brazilian-meat-kings-jbs-scandals-imf-moodys-rating/">domestic federal debt</a> is due for repayment in the first four months of 2021 — according to figures from the Treasury Department — forcing the administration into a major refinancing effort. Financial analysts believe that the risk of a boycott by lenders is very slim, but it is not non-existent and will depend on political and economic conditions.</li></ul> <p><strong>Not seeing eye to eye.</strong> While Mr. Guedes is frustrated with the president, sources tell us the feeling is mutual. Mr. Bolsonaro complains about the Economy Minister&#8217;s lack of commitment to his wishes to launch a <a href="https://brazilian.report/power/2020/06/15/bolsonaro-makes-bid-for-support-with-new-welfare-program/">new cash-transfer program</a> replacing the coronavirus emergency salary, and he wants Mr. Guedes to find a way to finance the initiative.</p> <hr class="wp-block-separator"/> <h2>Has China had enough of the Bolsonaros?</h2> <p>Following a tweet by the president&#8217;s third-eldest son, Congressman Eduardo Bolsonaro, the Chinese Embassy in Brasília struck back in a harsh tone. In a <a href="https://twitter.com/EmbaixadaChina/status/1331359272450596870?s=09">public statement</a>, diplomats advised the lawmaker — who presides over the House&#8217;s Foreign Affairs Committee — to drop the act and &#8220;avoid going too far on the wrong path.&#8221; Or else, the document says, &#8220;they will bear the negative consequences and carry the historical responsibility of disturbing the normality of China-Brazil relations.&#8221;</p> <p><strong>Context.</strong> On Monday, Eduardo Bolsonaro said Brazil would follow the U.S. in promoting 5G infrastructure &#8220;without Chinese espionage.&#8221; The tweet has been deleted.</p> <p><strong>Why it matters.</strong> Chinese business leaders told <strong>The Brazilian Report</strong> that, while they do not believe there will be immediate consequences on trade, they fear that Brazil-China relations could quickly evolve into a scenario of trade sanctions.&nbsp;</p> <ul><li>Brazil could follow a similar path as Australia, which has increasingly antagonized China since 2017. After banning Chinese telecom giant Huawei from its 5G grid and blaming Beijing for the coronavirus, Australia <a href="https://www.abc.net.au/news/2020-11-25/australian-businesses-caught-up-in-china-trade-dispute/12919074">suffered a ban</a> on cotton and coal exports to China, their leading market.</li><li>China has been Brazil&#8217;s biggest <a href="https://brazilian.report/business/2018/11/14/brazil-trade-china-commodities/">trading partner</a> since 2009, and the country gobbled up 33.7 percent of Brazilian exports in the <a href="https://brazilian.report/business/2020/08/03/trade-pandemic-makes-brazil-even-more-reliant-on-china/">first half of 2020</a>. Such overreliance on the Asian giant makes the Bolsonaros increasingly aggressive anti-China stances all the more puzzling, given Beijing&#8217;s penchant for using economic leverage to settle political scores.&nbsp;</li></ul> <div class="flourish-embed flourish-chart" data-src="visualisation/3370686"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <hr class="wp-block-separator"/> <h2>Transmission rates go up, but Brazil lets tests expire</h2> <p>A congressional committee has invited Health Minister Eduardo Pazuello to provide clarifications about reports that Brazil could lose almost 7 million RT-PCR test kits which are about to hit their expiration dates. Test kits set to be discarded outnumber the total of RT-PCR tests administered by the public healthcare system since the beginning of the pandemic.</p> <ul><li>The <a href="https://www.who.int/news/item/07-04-2020-who-lists-two-covid-19-tests-for-emergency-use">World Health Organization</a> considers RT-PCR tests as the most effective way to detect Covid-19 infections. Through the private health system, one test can cost up to BRL 400 (USD 74), or 40 percent of Brazil&#8217;s minimum wage.</li></ul> <p><strong>Why it matters.</strong> Of the countries with the highest tallies of deaths and infections, Brazil figures among those which have tested its population the least. Even so, deaths and cases are increasing, and transmission rates have soared to their highest since May.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/4462814"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <ul><li>According to the Imperial College London, Brazil&#8217;s so-called Rt rate is at 1.31. This means every 100 people would be expected to infect 131 others, who would then infect another 171 — thus intensifying the spread of the virus.</li></ul> <p><strong>Bracing themselves.</strong> A recent poll shows that Brazilians are growing more pessimistic about the pandemic&#8217;s outlook. No less than 77 percent expect a second wave to hit the country soon, and 47 percent say the worst is yet to come (against 30 percent last month).</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Vaccine. </strong>The Argentinian government announced that <a href="https://www.poder360.com.br/internacional/argentina-anuncia-vacinacao-contra-covid-19-a-partir-da-1a-quinzena-de-janeiro/">Covid-19 vaccination</a> will begin in the first half of January. The country has a deal with British-Swedish lab AstraZeneca to purchase 22.4 million doses of its <a href="https://brazilian.report/podcast/2020/08/05/brazil-place-in-the-race-for-a-covid-19-vaccine-podcast/">potential coronavirus vaccine</a>, which is being developed alongside the University of Oxford. Health Minister Ginés González García said Argentina is also advancing toward deals to purchase vaccines from Pfizer and Russia.</li><li><strong>Aviation. </strong>Still operating under Chapter 11 bankruptcy protection, Latin America&#8217;s leading carrier Latam announced it will increase its international departures as of January 1, with flights between Cartagena (Colombia) and Lima (Peru), as well as a connection between Colombian capital Bogota and São Paulo. Meanwhile, in Brazil, new low-cost carrier Nella Airlines has applied for an operating license to conduct regional flights. Reporter Renato Alves <a href="https://brazilian.report/business/2020/07/19/amid-pandemic-mysterious-airline-set-to-launch-in-brazil/">told the story of the mysterious new company</a>.</li><li><strong>Economy.</strong> Mortgage lending in Brazil reached a record-setting BRL 13.9 billion (USD 2.58 billion) in October, up 84 percent from the same period in 2019. Between January and October, loans from the banking system to finance the purchase and construction of real estate were worth 49 percent more against the same period a year earlier, rising to BRL 92.7 billion and exceeding the total of the entirety of 2019.</li><li><strong>Coronavirus. </strong>Former Goiás Governor Maguito Vilela is poised to win the mayoral race in state capital Goiânia, polling at 63 percent — but he doesn&#8217;t know it. Mr. Vilela, 71, has been hospitalized for over a month with Covid-19 and was sedated and intubated on Election Day, before the first-round results came in. On Tuesday, he was submitted to a <a href="https://g1.globo.com/go/goias/eleicoes/2020/noticia/2020/11/24/maguito-vilela-faz-traqueostomia-apos-tempo-prolongado-de-entubacao-diz-medico.ghtml">tracheostomy surgery</a> to facilitate his breathing, and medical reports state his condition is severe but stable.</li><li><strong>Power outages.</strong> The federal government declared that the <a href="https://brazilian.report/society/2020/11/10/cut-off-amapa-state-endures-week-without-electricity/">electricity supply</a> in the northern state of Amapá has returned to normal, after 22 days of cuts. The crisis sparked protests and led authorities to postpone the municipal elections in the state capital of Macapá until early December. President Jair Bolsonaro is expected to issue a provisional decree exempting Amapá consumers from paying utility bills for a month.

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