Brazil’s budget talks stall again, despite new Speaker

. Feb 09, 2021
budget talks brazil Entrance of Congress' Budget Committee. Photo: Edilson Rodrigues/CN/AS

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Today, the process of approving the 2021 budget continues to stall. Antivax employees could be fired with cause. The price of beef skyrockets, which is good news for major producers, but bad for consumers. 

New Speaker, same problems

Yet again, the creation of Congress’ Budget Committee will be postponed — despite newly-elected House Speaker Arthur Lira having promised it would take place today.

The reason is the same that prevented the committee from functioning in 2020 and has left Brazil without a 2021 budget: <a href="https://brazilian.report/newsletters/brazil-daily/2020/10/30/squabbles-over-2021-budget-could-throw-brazil-into-shutdown/">parties simply cannot agree</a> on who will take the main seats. In the best-case scenario, parties would resolve their squabbles today and the committee could be created on Wednesday.</p> <ul><li>Still, there are questions on whether lawmakers will choose to fast-track proceedings to approve the 2021 budget. Congress has no sittings scheduled for next week due to the Carnival holiday, even if celebrations have been banned in 20 states.</li><li>Given the complexity of negotiations concerning federal spending, one should not be surprised if Brazil finishes Q1 without a 2021 budget in place.</li></ul> <p><strong>Why it matters.</strong> So far, the government is only allowed to spend one-twelfth of its 2020 budget every month — and investment is currently on hold. Therefore, talks around a new cash-transfer policy to help vulnerable Brazilians cannot go anywhere until a new budget is approved.</p> <ul><li>Moreover, multiple areas of the federal administration are at risk of shutdown. Newspaper O Globo <a href="https://oglobo.globo.com/economia/bc-nao-tem-dinheiro-para-pagar-salario-dos-servidores-em-marco-24874763">reports</a> that the Central Bank doesn&#8217;t have the money to pay its employees&#8217; salaries beyond February. For the Armed Forces, the problem could begin in April.</li><li>The budget delay could also seriously hamper funds for public education, <a href="https://g1.globo.com/politica/noticia/2021/02/05/sem-orcamento-repasse-de-73percent-da-verba-federal-do-fundeb-pode-atrasar-aponta-orgao-do-senado.ghtml">compromising</a> 73 percent of the money earmarked for elementary schools. That would further widen the gap between rich and poor students — already enhanced by the pandemic, which left millions of children and teens without access to education for months.</li></ul> <hr class="wp-block-separator"/> <h2>Workers who refuse Covid-19 vaccine could be fired with cause</h2> <p>Brazil&#8217;s Labor Prosecution Office has decided that companies may fire employees who refuse to take a coronavirus vaccine without the need for severance. Last year, the Supreme Court ruled that while the state cannot impose vaccination on citizens, it can indeed impose sanctions on those who fail to inoculate themselves.</p> <ul><li>Such sanctions already exist. People without an up-to-date vaccination card are not allowed to enroll in public schools or take office as civil servants, for example.</li></ul> <p><strong>What they are saying.</strong> &#8220;The vaccine is collective protection, not an individual one. And the community&#8217;s interest shall always impose itself over personal interests. Solidarity is a founding principle of our constitutional values,&#8221; said Alberto Balazeiro, Brazil&#8217;s Labor Prosecutor General.</p> <p><strong>Eager for a shot.</strong> Convincing Brazilians to vaccinate themselves is not expected to be difficult. A recent poll shows that 83 percent want to protect themselves against Covid-19. That has forced President Jair Bolsonaro to change his stance on vaccines. After <a href="https://piaui.folha.uol.com.br/bolsonaro-recusou-tres-ofertas-de-vacina/">refusing three deals</a> for millions of doses in 2020, the president said on Monday that widespread immunization will improve Brazil&#8217;s chances of a <a href="https://epocanegocios.globo.com/Economia/noticia/2021/02/bolsonaro-diz-que-vacinacao-aumenta-chance-de-retomada-da-economia.html">quicker economic recovery</a>.</p> <ul><li>So far, nearly 3.8 million Brazilians have received a vaccine, but only 30,000 have taken a second dose.</li></ul> <p><strong>Pandemic.</strong> The spread of the coronavirus continues at high levels in Brazil. For the 19th straight day, the 7-day rolling average of new daily deaths topped the 1,000 mark.</p> <ul><li>The emergence of new variants also brings with it the risk of a wave of re-infections. Authorities in the Center-West state of Goiás say they have found a new variant of the coronavirus —&nbsp;different from those originally spotted in Manaus, the United Kingdom, and South Africa. The patient in question had previously been contaminated with Covid-19.</li></ul> <hr class="wp-block-separator"/> <h2>Beef exporters celebrate all-time high prices</h2> <p>After a 13-percent spike in the last year, cattle prices in Brazil have reached all-time highs —&nbsp;BRL 300 (USD 56) for every 15 kilos, a unit of measurement known in Brazil as an <em>arroba</em>. While that is good news for major producers, families are cutting down their beef consumption amid a steep loss in purchasing power. At its new rate, one <em>arroba</em> now represents 27 percent of the country&#8217;s minimum wage.</p> <p><strong>Why it matters.</strong> Food <a href="https://brazilian.report/business/2020/09/09/food-inflation-triggers-warning-for-brazil-bolsonaro/">inflation</a> could speed up an already-expected increase in Brazil&#8217;s benchmark interest rates. According to the latest Focus Report — a weekly survey by the Central Bank — top-rated investment firms foresee the Selic rate ending this year at 3.5 percent, quite a jump from its current level of 2 percent.</p> <p><strong>What drives the spike. </strong>Exports have almost single-handedly driven prices up. In 2020, <a href="https://brazilian.report/environment/2020/09/27/china-deforestation-footprint-in-brazil/">immense demand from China</a> (further fueled by a devaluation of the Brazilian currency) has led to a lack of cattle ready for slaughter. Even as demand from China slows due to the Lunar New Year season, these effects will continue being felt until at least March.</p> <ul><li>Demand is having ripple effects on other agribusiness sectors. Prices of corn, a staple ingredient in Brazil, are approaching record levels.</li></ul> <p><strong>Consumers. </strong>As Brazilians battle the coronavirus crisis, beef has essentially become a luxury item. Consumption fell for the second straight year, from 33.9 to 29.3 kilos per year between 2018 and 2020.</p> <p><strong>High prices, low margins.</strong> For small butchers and meat-processing firms, high beef prices mean squeezed margins. But groups relying more heavily on international markets can escape this. JBS, the world&#8217;s top beef producer, gets only 25 percent of its revenue from domestic sales. For Marfrig, another giant, the rate is a mere 8 percent.</p> <ul><li>Pedro Galdi, a stock analyst at Mirae Asset, tells <strong>The Brazilian Report</strong> he expects big meatpackers to post strong Q4 2020 results. But he warns that the industry could be disrupted by persistent droughts in major cattle-herding areas. &#8220;Pastures won&#8217;t grow unless rainfall normalizes and that would impact animal growing processes.&#8221;</li></ul> <p><em>— with Natália Scalzaretto</em></p> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Congress.</strong> House Speaker Arthur Lira promised to begin deliberations over a bill that would grant <a href="https://brazilian.report/newsletters/brazil-weekly/2020/11/03/biden-or-trump-the-effects-us-election-on-brazil/">formal independence</a> to Brazil&#8217;s Central Bank. The proposal states that the monetary authority&#8217;s board members would serve terms that do not coincide with those of the president, thus shielding monetary policy from political interference — at least in theory.</li><li><strong>Loan.</strong> Brazil is set to get an <a href="https://static.poder360.com.br/2021/02/nota-Banco-Brics-9fev2021.pdf">extra USD 1 billion</a> from the New Development Bank, also known as the &#8220;BRICS Bank.&#8221; The money will go toward funding coronavirus efforts and will be repaid over 30 years, starting in 2026, at a 1.25-percent interest rate. Between 2017 and 2019, Brazil was the <a href="https://brazilian.report/power/2019/11/13/ten-years-brics-looks-more-like-china-and-co/">BRICS nation</a> that received the least amount of money from the bank, but it became the top beneficiary in 2020, getting USD 3.5 billion in loans.&nbsp;</li><li><strong>Business against Covid.</strong> Some of Brazil&#8217;s top business groups have engaged in efforts to fight the coronavirus. Retail giants Magazine Luiza announced it will help the public healthcare system to <a href="https://www.poder360.com.br/coronavirus/luiza-trajano-lanca-movimento-para-acelerar-vacinacao-no-brasil/">purchase vaccine inputs</a>, while beverage-maker Ambev will reportedly pay up to BRL 255 (USD 47) to street vendors deprived of revenue due to the <a href="https://brazilian.report/coronavirus-brazil-live-blog/2021/02/08/carnival-celebrations-canceled-in-20-brazilian-states/">cancellation of this year&#8217;s Carnival celebrations</a>.&nbsp;</li><li><strong>Cabinet.</strong> Citizenship Minister Onyx Lorenzoni will become the president&#8217;s Secretary-General — a sort of liaison between the government and Congress — in a move which aims at clearing space in the cabinet for Jair Bolsonaro&#8217;s top allies. The Citizenship Ministry is <a href="https://brazilian.report/newsletters/brazil-weekly/2021/02/08/brazil-could-recreate-smaller-coronavirus-emergency-salary/">highly coveted</a> by parties for its electoral potential, as it oversees federal <a href="https://brazilian.report/coronavirus-brazil-live-blog/2020/05/03/citizenship-ministry-holds-back-brl-3-1-billion-aid/">cash-transfer policies</a>. This will be the second time in as many years that Mr. Lorenzoni is relocated within the cabinet, after beginning Mr. Bolsonaro&#8217;s term as Chief of Staff.</li><li><strong>Prices.</strong> For the third time this year, Brazil&#8217;s state-controlled oil and gas giant Petrobras announced a bump in <a href="https://brazilian.report/business/2019/10/21/infrastructure-fuel-prices-behaved-21st-century-brazil/">fuel prices</a>. The price of gasoline sold to refineries is up 22 percent this year. Still, markets are scared that President Jair Bolsonaro could intervene to artificially keep fuels cheaper after he indicated as much on multiple occasions. Despite a 2.2-percent hike in Brent oil prices, Petrobras shares <a href="https://www.investing.com/equities/petrobras-on-historical-data">dropped 4 percent</a> on Monday.&nbsp;&nbsp;</li><li><strong>Fake news.</strong> The Superior Electoral Court will <a href="https://www1.folha.uol.com.br/colunas/monicabergamo/2021/02/tse-julga-duas-acoes-pedindo-cassacao-de-bolsonaro-e-de-mourao-por-disparo-de-fake-news.shtml">decide</a> today on whether to accept electoral charges against President Jair Bolsonaro and Vice President Hamilton Mourão. Two lawsuits request their removal from office, claiming they were elected with the help of an <a href="https://brazilian.report/opinion/2018/12/06/brazil-election-social-media-democracy/">illegal social media misinformation network</a>.</li><li><strong>U.S.-Brazil.</strong> The Biden administration is closely following developments in Brazil with regard to human rights and the environment, but aims to continue strengthening U.S. economic ties and trade with the South American country, White House press secretary Jen Psaki said on Monday.</li><li><strong>Mourning. </strong>Senator José Maranhão of Paraíba died on Monday. At 87, he was Brazil&#8217;s oldest lawmaker and had been in <a href="https://www.cnnbrasil.com.br/nacional/2020/12/04/senador-jose-maranhao-mdb-pb-e-transferido-para-hospital-em-sao-paulo">intensive care</a> since November 29 with a severe case of Covid-19. He is the second senator to fall victim to the coronavirus, after Arolde de Oliveira of Rio de Janeiro <a href="https://brazilian.report/coronavirus-brazil-live-blog/2020/10/21/brazilian-senator-arolde-de-oliveira-dies-of-covid-19/">died in October 2020</a>. The Senate declared a period of official mourning and canceled the deliberative session it had scheduled for today.

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