Time running out for Brazil to pass 2021 budget

. Dec 16, 2020
budget congress brazil Photo: Min C. Chiu/Shutterstock

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Today, questions remain over Brazil’s overdue 2021 budget. Foreign companies to find it easier to purchase Brazilian land. Government gives more information on vaccination plan

The 2021 budget imbroglio continues

Congress is scheduled to vote today on the Budgetary Directives Law (LDO), which sets the government’s fiscal priorities for the following year.

But members of the opposition to President Jair Bolsonaro intend to obstruct the sitting and delay any potential decision, arguing that the LDO cannot be appraised before lawmakers assess a series of presidential vetoes clogging up the docket — some of which have been pending since last year.</p> <p><strong>Why it matters.</strong> Regardless of what happens today, Brazil will not approve the 2021 federal budget before the beginning of next year. The LDO, however, is the crucial first step in this process; failing to approve it before the start of 2021 would throw Brazil into uncharted waters and greatly increase the risk of a government shutdown.</p> <ul><li>Without the LDO, the president would have to make all public spending decisions through provisional decrees — but such expenses are not limited by the federal spending cap, which would spark investors&#8217; distrust in government solvency.&nbsp;</li><li>If the LDO passes, but not the budget, the government will be allowed to spend one-twelfth of the 2020 budget every month (that has happened four times already — in 2006, 2008, 2013, and 2015).&nbsp;</li><li>There is never a good moment for a shutdown — but in the middle of a deadly pandemic that will require government-led nationwide vaccination efforts, it could be catastrophic.</li></ul> <p><strong>Budget consensus? </strong>Despite the opposition&#8217;s attempts to obstruct the vote, most lawmakers who spoke with <strong>The Brazilian Report</strong> believe that a consensus will be reached before the end of the legislative year and the LDO will be approved.</p> <p><em>— with Débora Álvares</em></p> <hr class="wp-block-separator"/> <h2>Brazil moves to facilitate land purchases by foreigners</h2> <p>Senators passed a bill reducing the red tape foreigners must overcome to purchase or lease land in Brazil, ending distinctions between domestic and international companies. If the bill passes in the House and is signed into law by President Jair Bolsonaro, foreign entities will be allowed to purchase areas of up to 25 percent of a municipality&#8217;s territory —&nbsp;but limits acquisitions to those by agricultural and industrial ventures, and government approval would be required for deals to be made official.&nbsp;</p> <ul><li>Acquisitions by NGOs, sovereign wealth funds, private foundations, or in the Amazon and border regions will also need a nod from the National Defense Council.</li></ul> <p><strong>Why it matters.</strong> Unclogging foreign investment in rural properties could boost capital flows into Brazilian agriculture. But those opposing the bill fear that it could also represent a loss in control over <a href="https://brazilian.report/business/2018/05/29/international-investors-brazilian-land/">food-producing assets</a> — a long-term risk for the country.</p> <p><strong>Grabbing land.</strong> Data from 2016 compiled by Land Matrix — a platform that monitors big land acquisitions — reveals that between 2000 and 2015, over 42 million hectares were purchased by foreign companies across the world, predominantly in the southern hemisphere. Brazil is among the top five countries in terms of area involved in such transactions.</p> <ul><li>According to a December 2017 survey from NGO Grain, foreign groups obtained roughly 3 million hectares of Brazilian land.</li><li>Rising food prices and the 2008 global financial crisis are among the leading factors for companies’ interest in land located in the southern hemisphere, according to specialists like Devlin Kuyek, a researcher at Grain.</li></ul> <p><strong>Final farming frontier.</strong> Mato Grosso and the Matopiba (a portmanteau of the states of Maranhão, Tocantins, Piauí, and Bahia) are the most sought-after regions for big acquisitions. These regions&#8217; savannah-like biome is considered to be Brazil’s final agricultural frontier. Land values in parts of Matopiba have increased by over 300 percent since 2003.</p> <hr class="wp-block-separator"/> <h2>Vaccination efforts should last 16 months. At least</h2> <p>In response to a Supreme Court query, the Health Ministry stated that Covid-19 vaccination in Brazil can start five days after federal regulators approve at least one potential vaccine. But the effort to immunize the Brazilian population should take at least 16 months — an initial four-month stage would focus on health workers, senior citizens, and at-risk groups. Then, it would take another 12 months to vaccinate the &#8220;general public.&#8221;</p> <ul><li>Today, President Jair Bolsonaro and Health Minister Eduardo Pazuello are expected to present the &#8220;National Plan for Operationalizing the Vaccine.&#8221;</li></ul> <p><strong>Why it matters.</strong> Despite early indications that the government would abandon its anti-vax stance, a few signs suggest that President Jair Bolsonaro is going back to his old ways. On Tuesday, he reposted a video on his YouTube channel in which he claims his administration will not purchase the Chinese-made CoronaVac.</p> <ul><li>On June 23, the Economy Ministry asked the Health Ministry about its interest in importing disposable syringes from China — but the memo has gone unanswered. The national vaccination plan drafted by the government discusses using a BRL 62-million budget (USD 12 million) for 300 million syringes and needles, but fails to specify when, from whom, and how these purchases will be made.</li></ul> <p><strong>Meanwhile … </strong>House Speaker Rodrigo Maia said that Congress will vote on a provisional decree earmarking funds for purchasing shots from the United Nations-backed COVAX facility, which subsidizes vaccines. He claims, however, that lawmakers will strike down the president&#8217;s demand for forcing people to sign waiver forms before getting a vaccine.</p> <p><strong>Second wave.</strong> Brazil has once again recorded an average of over 900 new deaths per day, and experts say the country could soon reach similar death and infection levels as those of July, when curves peaked.</p> <ul><li>Rio de Janeiro has become Brazil&#8217;s new hotbed for the coronavirus — confirming more deaths over the past two weeks (565) than any other municipality. With an already-saturated public healthcare system, the city canceled all official New Year celebrations, including the iconic fireworks spectacle on Copacabana Beach.</li></ul> <div class="flourish-embed flourish-chart" data-src="visualisation/2641109"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <div class="flourish-embed flourish-chart" data-src="visualisation/2641192"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>State finances. </strong>Congress approved a plan to restructure the <a href="https://brazilian.report/business/2019/09/05/state-finances-biggest-risk-brazilian-economy/">debts of state governments</a> — currently estimated at BRL 630 billion (USD 124 billion). Governors will be allowed to extend loans with the federal government, as long as they engage in austerity measures such as privatizing public companies, ending tax breaks, and overhauling the pension systems of local civil servants.</li><li><strong>Biden. </strong>Brazilian President Jair Bolsonaro has finally congratulated U.S. President-elect Joe Biden for his victory — one day after the Electoral College confirmed the result and 38 days after the election was called. Mr. Bolsonaro was the last G20 leader to do so and is set to have an uphill battle towards building a positive relationship with the <a href="https://brazilian.report/power/2020/10/19/what-a-biden-administration-plans-for-brazil-and-latin-america/">next administration</a>. </li><li><strong>Diplomacy.</strong> In a 37-9 vote, the Senate rejected the appointment of diplomat Fabio Marzano as a permanent delegate in Geneva. The vote was a major defeat for Foreign Minister Ernesto Araújo, to whom Mr. Marzano serves as deputy. Furthermore, this was the first time a diplomatic nomination has been struck down by the Senate since 2015, when senators rejected an appointment made by then-President Dilma Rousseff to the Organization of American States.</li><li><strong>Mercosur. </strong>The South American Common Market will hold its 57th summit today, via a videoconference between the leaders of Brazil, Argentina, Paraguay, and Uruguay. The meeting comes two weeks after Brazil&#8217;s Jair Bolsonaro and Argentina&#8217;s Alberto Fernández <a href="https://brazilian.report/latin-america/2020/12/01/argentina-brazil-try-to-amend-fractured-relationship/">spoke directly for the first time</a> in a year. Brazilian <a href="https://brazilian.report/latin-america/2020/06/10/blanked-brazil-argentina-turning-china-trade/">trade with other Mercosur members</a> dramatically fell this year, from USD 28 to 20 billion. The bloc&#8217;s presidency will be transferred from Uruguay to Argentina. </li><li><strong>Infrastructure.</strong> The government will <a href="https://www.poder360.com.br/economia/antt-publica-edital-de-leilao-da-ferrovia-de-integracao-oeste-leste-na-4a/">publish</a> an invitation for bids today for the auction of a 35-year concession to run the East-West Integration Railway — aimed at connecting iron ore-producing cities to the Port of Ilhéus, in Bahia. The project will require an investment of BRL 5 billion over the first five years.</li><li><strong>Corruption.</strong> Federal prosecutors presented corruption and money laundering charges yesterday against Rio de Janeiro&#8217;s <a href="https://brazilian.report/newsletters/brazil-daily/2020/06/11/impeachment-process-against-rio-governor-wilson-witzel/">suspended</a> Governor Wilson Witzel. He is accused of receiving BRL 53 million in kickbacks from contractors of the state&#8217;s health department. Prosecutors also targeted Pastor Everaldo — the chairman of Mr. Witzel&#8217;s political party — and former Health Secretary Edmar Santos.

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