2022 presidential campaign starts early with vaccine squabbles

. Dec 08, 2020
vaccine squabbles Photo: Nata Kolosok/Shutterstock

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Today, we explain why the coronavirus vaccine race has brought the 2022 presidential election forward to 2020. The ghost of hyperinflation haunts Brazil again. And a massive infrastructure gamble by the government.

Brazil’s crazy vaccine race brings presidential election forward

The Brazilian very own vaccine race has officially started, with São Paulo Governor João Doria announcing the start of his state’s Covid-19 immunization plan for January 25.

The state is collaborating with Chinese lab Sinovac Biotech to develop the CoronaVac, of which phase 3 clinical trials are expected to be concluded in the coming weeks. By announcing his state&#8217;s plans, Mr. Doria — who has done little to disguise his presidential ambitions — has coaxed President Jair Bolsonaro into action, despite the president having adopted a vaccine-skeptic approach.</p> <ul><li>In his announcement, the governor said that any Brazilian resident — whether they live in São Paulo or not —&nbsp;may receive the vaccine, raising fears in cities along state lines of a massive inflow of &#8220;vaccine tourists.&#8221;</li></ul> <p><strong>Reaction. </strong>Hours after the São Paulo announcement, news broke that the Brazilian government &#8220;advanced in negotiations for an intended purchase of 70 million doses&#8221; of the Covid-19 vaccine manufactured by Pfizer. Just last week, Health Ministry&#8217;s officials had essentially <a href="https://brazilian.report/newsletters/brazil-daily/2020/12/02/pfizer-and-moderna-vaccines-ruled-out-for-use-in-brazil/">ruled out</a> that potential vaccine due to its need to be stored in ultra-cold temperatures.</p> <ul><li>Mr. Bolsonaro said the government would offer &#8220;free and non-mandatory&#8221; vaccines for all — once regulators clear them. Meanwhile, Filipe Martins, a senior foreign policy advisor to the president, took to <a href="https://twitter.com/filgmartin/status/1335987233812262919">Twitter</a> to accuse Mr. Doria of joining a &#8220;global tyranny against the government&#8217;s struggle for people&#8217;s freedom.&#8221;</li></ul> <p><strong>Risks.</strong> &#8220;We haven&#8217;t set a month or a date for clearing potential vaccines,&#8221; said Antônio Barra Torres, head of federal health regulator Anvisa during a <a href="https://www.poder360.com.br/coronavirus/diretor-da-anvisa-deseja-boa-sorte-a-quem-fixa-dia-para-a-vacina/">radio interview</a>. &#8220;For those who have, I wish them good luck.&#8221; Coming from a close ally to a president who has actively undermined the coronavirus response and has tried to discredit the Chinese-made vaccine, Mr. Barra Torres&#8217; words could be understood as a threat.</p> <p><strong>Why it matters.</strong> Without federal guidance, states are adopting an every-man-for-himself strategy, which could lead to longer delays in rolling out immunization and higher costs for already cash-strapped local administrations.</p> <ul><li>Three states have entered talks with São Paulo to purchase the CoronaVac. Others, such as Bahia in the Northeast, are keen on negotiating directly with Pfizer. And a third group — largely made up of states depending on federal aid — are waiting for the government to guide their next steps, fearing Mr. Bolsonaro&#8217;s wrath.</li><li>Even House Speaker Rodrigo Maia has joined the fight, saying that Congress will take the lead in a nationwide vaccination campaign to avoid &#8220;widespread panic&#8221; among Brazilians, if the government does not get its act together.</li></ul> <p><strong>Wrong horse? </strong>The Bolsonaro administration&#8217;s biggest bet is the AstraZeneca vaccine, which will be delayed after problems with clinical trial data.</p> <p><strong>Unorganized.</strong> Despite having a logistics expert at the helm, the Health Ministry has yet to order the massive production of syringes required for a vaccination campaign — the lack of this input <a href="https://saude.estadao.com.br/noticias/geral,associacao-alerta-para-risco-de-faltar-seringa-para-vacinar-contra-covid-no-brasil,70003543681?utm_source=meio&amp;utm_medium=email">could seriously delay</a> any nationwide plan.</p> <p><strong>Human toll.</strong> This electorally-charged vaccine fight happens as the 7-day rolling average for new daily Covid-19 deaths goes up in 18 of 27 states.</p> <hr class="wp-block-separator"/> <h2>Ghosts of recessions past</h2> <p>Today and tomorrow, the Central Bank&#8217;s Monetary Policy Committee (Copom) will hold its final meeting of the year. The scenario is much less comfortable for the bank this time around, with a rapidly rising inflation rate and record unemployment. This morning, the Brazilian Institute of Geography and Statistics will release the official inflation results for November. If estimates are correct, the rate will hit close to 0.78 percent, bringing inflation over the last 12 months to 4.2 percent — slightly above the target but still comfortably below the tolerance margin.</p> <p><strong>Why it matters.</strong> For 17 straight weeks, market analysts have raised their inflation forecasts for the year —&nbsp;breaking the target level for the first time.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/4592078"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p><strong>Stagflation?</strong> The Central Bank has been somewhat tolerant with inflation, keeping interest rates at record lows as a way to stimulate investment. But prices are now going up during an anemic economy. GDP is set to shrink 4.5 percent this year, and uncertainty about welfare policies in 2021 makes the scenario all the more uncertain.&nbsp;</p> <ul><li>Initially confined to food products, inflation is now being observed in housing, appliances, and fuels — which are more directly affected by currency fluctuations. Experts warn that this could be the beginning of what could evolve into a &#8220;stagflation&#8221; scenario, that is, a stagnant economy with high inflation. The antidote would be structural reforms to reduce public spending, something President Jair Bolsonaro has not been enthusiastic about.</li><li>Uncontrolled prices remain a fear for Brazilians over 40, even after 25 years of relative stability brought by the Brazilian Real. In the 1980s and early 1990s, inflation rates reached the astronomical heights of <em>80 percent a month</em> — with supermarket products bumping up their prices multiple times a day. Between 1986 and 1993, Brazil changed its currency five times. That remains one of the reasons Brazilians have the habit of shopping for their groceries monthly, and why the country cares so little for coins, which were literally worthless.</li></ul> <p><strong>Blowback.</strong> The Treasury Department had to issue short-term bonds to pay for the coronavirus response, and increasing interest rates could deliver a blow to the country’s finances. And as inflation traditionally hits the poor populations the hardest, this could fuel dissatisfaction with the government.</p> <p><strong>What to expect from the Central Bank?</strong> Analysts at Itaú BBA <a href="https://www.itau.com.br/itaubba-en/economic-analysis/publications/macro-brazil/copom-cockpit-stable-rates-persisting-risks">believe</a> the bank will jack up inflation expectations for 2020, but maintain interest rates at 2 percent nonetheless. They believe the Central Bank is on alert for any changes to the federal spending cap or any budgetary maneuver which could compromise it.</p> <ul><li>However “these signals should not result in changes to the monetary policy stance, as there has not been — at least so far — a clear turn in the fiscal regime”, they wrote.</li></ul> <hr class="wp-block-separator"/> <h2>Government bets big on major railway</h2> <p>In a push to overcome investors&#8217; hesitance, the federal government is willing to offer unprecedented financial advantages for groups willing to build the Ferrogrão Railway&nbsp;— a 933-kilometer project connecting soybean producing regions in the Center-West to a port in the Amazon region.</p> <ul><li>The Infrastructure Ministry would be willing to make BRL 2.2 billion (USD 431 million) in federal funds available to pay for &#8220;non-manageable risks&#8221; of the project. The list includes unexpected environmental compensation, a higher risk with expropriations, or an abrupt dip in demand — were the agricultural harvest to be affected by climate reasons, for example.</li></ul> <p><strong>Why it matters.</strong> Usually, governments compensate for unexpected events that would lower private partners&#8217; margins by offering extensions to concession deals. But in Ferrogrão&#8217;s case, the concession will be valid for 69 days — making it necessary for the government to <a href="https://brazilian.report/podcast/2019/01/16/brazil-infrastructure-woes/">make the venture appealing</a> through other means to provide short-term cash flow solutions. Senior officials say the move will give more legal stability to private investors.</p> <p><strong>By the numbers.</strong> The Ferrogrão Railway will require an estimated investment of BRL 8,.4 billion. In August, 11 groups showed interest in bidding for the railway, including Japan&#8217;s Sumitomo, China&#8217;s CCCC and Crec 10, Spain&#8217;s Acciona and Sacyr, Italy&#8217;s Impregilo, and domestic players CCR, Ecorodovias, Pátria Investments, and Hidrovias do Brasil.</p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Cybersecurity. </strong>Victim of a ransomware attack, Brazilian planemaker Embraer did not meet hackers&#8217; demands and suffered a significant data leak on Monday. The hack was identified on November 25 and temporarily paralyzed the company&#8217;s systems. The leaked files include the personal data of staff members, unredacted contracts, flight simulation images, 3D plane models, and information about the sale of military planes to Nigeria. Almost half of ransomware attacks in Latin America occur in Brazil — and one such attack recently <a href="https://brazilian.report/tech/2020/11/05/massive-hackers-attack-brazilian-government-on-alert/">halted Brazil&#8217;s second-highest court</a> for almost a week.</li><li><strong>5G. </strong>Vice President Hamilton Mourão argued on Monday that <a href="https://brazilian.report/power/2020/12/02/shunned-by-bolsonaro-huawei-has-friends-in-brazils-congress/">Huawei should be allowed</a> to enter Brazil&#8217;s upcoming 5G auction, as building 5G <a href="https://brazilian.report/business/2019/06/27/huawei-controls-telecom-infrastructure-brazil/">infrastructure</a> without the Chinese giant would be &#8220;much more expensive.&#8221; The statement comes as newspaper Folha de S.Paulo <a href="https://www1.folha.uol.com.br/mercado/2020/12/ala-ideologica-prepara-decreto-contra-huawei-e-empresa-deve-ir-ao-supremo.shtml">reports</a> that the president&#8217;s chief security officer is drafting a decree that would exclude Huawei from the auction — something the government has officially denied.</li><li><strong>Aviation.</strong> Gol Airlines, Brazil&#8217;s leading domestic carrier, will become the first company worldwide to resume flights with Boeing 737 Max planes as of tomorrow. The model was grounded for 20 months after two fatal crashes caused by system malfunctions. Gol says passengers will be given the right to fly in another aircraft if they prefer. When the 737 Max was launched, most regulators failed to demand specific training for the model — except for Brazil, where officials found 60 new features from the previous models, making Brazilian pilots the only ones in the world to <a href="https://brazilian.report/newsletters/brazil-weekly/2019/03/30/boeing-737-max-brazil-country-demand-specific-training/">receive specific 737 Max training</a> before the planes were grounded.</li><li><strong>Corruption. </strong>Known as Brazil&#8217;s &#8220;<a href="https://brazilian.report/business/2019/04/14/evolution-brazilian-beef-industry/">meat kings</a>,&#8221; brothers Wesley and Joesley Batista will have to pay BRL 1 billion (USD 196 million) to preserve their plea deal bargain with federal prosecutors, in which they provided information on their detailed schemes to <a href="https://brazilian.report/power/2019/03/21/michel-temer-arrested/">bribe elected officials</a>. The deal was signed in May 2017 and included a fine ten times smaller — only four months later, though, the Federal Prosecution Office alleged that the brothers had withheld information and asked for the deal to be voided, which has yet to be decided by the Supreme Court.</li><li><strong>Bolsonaro.</strong> Supreme Court Justice Alexandre de Moraes has taken the investigation into President Jair Bolsonaro&#8217;s alleged illegal interference with the Federal Police — <a href="https://brazilian.report/power/2020/04/24/could-sergio-moro-bring-down-second-president/">denounced</a> earlier in the year by former Justice Minister Sergio Moro — to the full court. The president has refused to testify in the case, alleging his right to remain in silence. Justice Moraes, however, says the Constitution does not give defendants &#8220;the right to previously and generically refuse to meet legal orders.&#8221; The indication is that the president will be forced to attend the hearing in person, but may choose to remain silent upon interrogation. Mr. Bolsonaro&#8217;s reaction to such a decision is unclear — and could spark yet another <a href="https://brazilian.report/power/2020/09/12/supreme-court-jair-bolsonaro-feud-new-chapter/">institutional clash</a>. </li><li><strong>Marielle.</strong> The investigation into the March 2018 assassination of Rio de Janeiro City Councilor Marielle Franco and her driver Anderson Gomes has now been open for 1,000 days, <a href="https://brazilian.report/power/2020/03/14/two-years-marielle-franco-murder-struggle-lives-family/">without discovering who ordered</a> Ms. Franco&#8217;s murder. One of the key lines of investigation is stalled due to a legal dispute between prosecutors, who want access to geolocation data of all cell phones in the area where the getaway car was last seen (in December 2018), and Google, which refuses to hand over the information. The case has reached the Supreme Court — after Google lost all prior appeals.

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