Hollywood-esque prison break raises security at Brazilian border

. Jan 20, 2020
prison break

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Good morning! This week, we are covering a Hollywood-esque prison break by Brazil’s deadliest drug gang. The government’s latest strategy to raise money. How Brazilians perceive public servants. (This newsletter is for premium and standard subscribers only. Become one now!)

Brazil’s main drug cartel pulls spectacular prison break in Paraguay

In the early hours of Sunday,

75 inmates fled a prison in Pedro Juan Caballero, a Paraguayan city located at the Brazilian border. Most prisoners are members of the First Command of the Capital (PCC), Brazil’s most powerful and farthest-reaching drug gang. The Brazilian Justice Ministry sent 200 troops to reinforce security at the border and prevent the criminals from entering the country. &#8220;If they do,&#8221; tweeted Justice Minister Sergio Moro, &#8220;they get a one-way ticket to [a] federal prison.&#8221;</p> <p><strong>The problem.</strong> Pedro Juan Caballero is separated from the Brazilian city of Ponta Porã by nothing more than an ordinary road—making it a highly porous border.</p> <p><strong>Why it matters.</strong> The Pedro Juan Caballero-Ponta Porã region is key to PCC&#8217;s international drug trade. It is the entry point of the so-called &#8220;hillbilly route&#8221; of cocaine, where drugs from Bolivia and Peru cross into the Brazilian state of Mato Grosso do Sul and the São Paulo countryside, on their way to the Port of Santos for international distribution.</p> <p><strong>How it happened.</strong> Paraguayan authorities found a tunnel inside one of the prison blocks—and many sandbags. But the country&#8217;s Justice Minister Cecilia Perez says the tunnel might have been a diversion—she believes the inmates simply walked out of the prison after paying USD 80,000 in bribes.</p> <figure class="wp-block-image"><img src="https://brazilian.report/wp-content/uploads/2020/01/prison-break-pcc.jpg" alt="prison break pcc" class="wp-image-30440" srcset="https://brazilian.report/wp-content/uploads/2020/01/prison-break-pcc.jpg 768w, https://brazilian.report/wp-content/uploads/2020/01/prison-break-pcc-300x200.jpg 300w, https://brazilian.report/wp-content/uploads/2020/01/prison-break-pcc-610x407.jpg 610w" sizes="(max-width: 768px) 100vw, 768px" /><figcaption>Sandbags used in the prison break</figcaption></figure> <p><strong>Modus operandi.</strong> Researcher Bruno Paes Manso, who studies the PCC, says prison breaks are a core point in how the gang operates. In October 2018, authorities seized an <a href="https://brazilian.report/society/2019/02/14/pcc-drug-gang/">outlandish plan to free PCC&#8217;s leader Marcos “Marcola” Camacho</a> and several of his cronies from federal penitentiaries—using bulletproof cars, helicopters, weapons, and mercenaries.</p> <p><strong>What is the PCC?</strong> The gang was created in São Paulo on October 31, 1993—with the goal of denouncing what they saw as “oppression” by the prison system. Almost 30 years later, it has over 30,000 members spread across nearly every Brazilian state. Some estimates say it has an annual turnover of at least BRL 400 million (USD 106 million) and up to BRL 800 million. The gang is also present in five South American countries: Colombia, Paraguay, Bolivia, Peru, and Guyana.&nbsp;</p> <p><strong>War in São Paulo.</strong> Few Brazilians knew about the group’s existence until May 12, 2006, when the PCC staged a series of attacks against police forces. After 765 inmates—including the PCC’s alleged leader—were transferred to a maximum-security prison, 59 police officers were murdered in a total of 293 attacks. Even Congonhas airport in downtown São Paulo was closed after a bomb threat.</p> <p><strong>How to stop the PCC?</strong> The inhumane conditions of Brazil&#8217;s prison system are one of the gang&#8217;s main recruiting assets—as the PCC offers protection for newly incarcerated inmates. Guaracy Mingardi, a political scientist and member of the Brazilian Public Security Forum (FBSP), says federal law-enforcement should be investigating the PCC’s money-laundering methods, instead of making splashy-but-small-time drug busts.</p> <hr class="wp-block-separator"/> <h2>Government wants out of minority stakes</h2> <p>The government is aiming to raise BRL 3 to 4 billion by selling its minority stakes in companies such as banks Santander and Itaú Unibanco, telecom firms Vivo and Tim, and planemaker Embraer. There is a total of 57 companies on the radar, according to Privatization Secretary Salim Mattar—who said it took five months to map all of these stocks.</p> <p><strong>Why it matters.</strong> Despite its promises, the Bolsonaro administration has not been able to privatize all the assets it wanted to.&nbsp;</p> <p><strong>BNDES. </strong>Another move by the government is to shrink the investment portfolio of the Brazilian Development Bank (BNDES). The trend began with the Michel Temer administration (2016–2018) but it now picking up steam. In December 2019, the bank sold its shares in energy company Light, meat producer Marfrig, and car-leasing firm Unidas—raising around BRL 4 billion. The government says the money will be used to finance infrastructure projects.&nbsp;</p> <p><strong>2020.</strong> This year, BNDES should sell its stock in at least four companies, including beef giant JBS and Petrobras—considered to be the bank&#8217;s crown jewel—hoping to raise BRL 40 billion.</p> <p><strong>Side effects.</strong> Officials fear that, by announcing its willingness to dump its stocks, the government might cause stock prices to fall, defeating the purpose of the move.</p> <hr class="wp-block-separator"/> <h2>Markets</h2> <p>The past week was a busy one for steelmaker CSN. The company announced a USD 500-million bond issue—to pay for the buyback of a previous bond issue—and reviewed a railway contract. Meanwhile, CEO Benjamin Steinbruch scored a legal victory in a feud with his cousins, who want more say in the family business. Leo and Clarice Steinbruch are reportedly willing to sell their stake in the company—but no agreement has been reached regarding their value. Mirae Asset analyst Pedro Galdi, however, says the variables that will affect CSN stock are iron ore prices, the USD-BRL exchange rate, and Q4 2019 earnings, to be released in February. In Q3, CSN posted net losses of BRL 871 million.</p> <hr class="wp-block-separator"/> <h2>Brazilians disgruntled with public servants</h2> <p>A survey by pollster Datafolha shows how much Brazilians believe civil servants are privileged. For 91 percent of people, they should be constantly evaluated and compensated according to their performance—as if they were in private corporations. For 88 percent, the government should end the stability enjoyed by servants, laying off underperforming professionals.</p> <div class="flourish-embed" data-src="visualisation/1259449"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <hr class="wp-block-separator"/> <h2>Looking ahead</h2> <p><strong>Davos.</strong> Economy Minister Paulo Guedes will represent Brazil at the World Economic Forum in Davos, Switzerland this week, after the event was snubbed by President Bolsonaro. Mr. Guedes is hoping to advertise what he calls &#8220;Brazil&#8217;s exit from the fiscal abyss,&#8221; but will probably be bombarded by the international press for comment on Thursday&#8217;s <a href="https://brazilian.report/power/2020/01/17/brazilian-culture-secretary-roberto-alvim-goebbels-nazi/">video by the former culture secretary, filled with Nazi references</a> (more below). &#8220;Mr. Guedes was hoping to sell an image of institutional normality, but that will be tough. Even if the secretary was fired after the video, it is yet another flirtation with authoritarianism,&#8221; says political analyst Creomer de Souza.</p> <p><strong>India.</strong> Between January 24 and 27, Bolsonaro will <a href="https://brazilian.report/newsletters/brazil-weekly/2020/01/13/lula-workers-party-bidding-evangelical-voters/">visit India</a>—where he will be a guest of honor for the celebrations of India’s Republic Day, on January 26. According to the Foreign Affairs Ministry, the two countries should sign 10 to 12 deals to stimulate bilateral trade and investments. Brazil hopes to boost an underwhelming trade relation with the South Asian country—set to grow 7.1 percent this year, according to the International Monetary Fund.</p> <p><strong>Inflation.</strong> On Thursday, the government publishes the IPCA-15 index, considered to be a predictor of the official inflation rate. The data will help markets to guide their expectations for the year, after prices soared at an unexpected pace in December.</p> <hr class="wp-block-separator"/> <h2>In case you missed it</h2> <p><strong>Goebbels.</strong> Roberto Alvim was fired as Brazil&#8217;s Culture Secretary after posting a video inspired by the aesthetics of Nazi Germany to announce a new arts prize being offered by the government. With Hitler&#8217;s favorite opera playing in the background and paraphrasing Nazi Propaganda Minister Joseph Goebbels, Mr. Alvim said the government would only finance artwork that was in line with Christian and nationalistic values. President Jair Bolsonaro, who hours before had praised Mr. Alvim, was pushed into letting him go. The government, however, at no point disavowed the policies the now-disgraced secretary announced.</p> <p><strong>Brazil-Germany.</strong> Despite the Alvim debacle, on Saturday, Brazil and Germany signed a deal to stimulate cooperation in the agricultural sector for the next three years.</p> <p><strong>Scandal.</strong> Mr. Alvim&#8217;s video took attention away from President Bolsonaro&#8217;s Press Secretary Fabio Wajngarten. Newspaper <em>Folha de S.Paulo</em> <a href="https://www1.folha.uol.com.br/poder/2020/01/wajngarten-se-defende-e-diz-nao-estar-na-secom-para-fazer-negocios.shtml">revealed</a> he has been taking money from the TV stations and ad agencies that have contracts with the federal government, by way of a company that offers media consulting services to outlets which depend on him to get ad money from governmental agencies. Mr. Bolsonaro said he wouldn&#8217;t fire Mr. Wajngarten.</p> <p><strong>Truckers.</strong> Hoping to avoid a new truckers&#8217; strike, the government announced a new reference table for freight prices, increasing minimum rates by 11 to 15 percent—but drivers remain skeptical that the new fares will be enforced. The table was created following the 2018 truckers&#8217; strike, but had an <a href="https://brazilian.report/business/2020/01/17/minimum-freight-table-trojan-horse-truckers/">unintended consequence</a>: many companies started to invest in their own fleets—reducing opportunities for autonomous truckers. Over <a href="https://brazilian.report/business/2018/05/25/truckers-protests-brazil-fuels/">60 percent of Brazil&#8217;s cargo transportation is done by road</a>.</p> <p><strong>OECD.</strong> The U.S. government has decided to support Brazil&#8217;s bid to join the Organization for Economic Cooperation and Development (OECD), ahead of neighbors Argentina. The move is a win for President Jair Bolsonaro, who has sought closer ties with Washington as a validation for his own administration. U.S. President Donald Trump had promised support for Brazil in March 2019, but later chose to place Argentina and Romania ahead in the queue.

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