Solar power set for a boost in Brazil

. Feb 17, 2020
This week, how Brazil plans to rely more on solar power plants. The names on Bolsonaro's shortlist for incoming vacancies at the Supreme Court. Photovoltaic power plant. Photo: André Nery/Shutterstock

This week, how Brazil plans to rely more on solar power plants. The names on Bolsonaro’s shortlist for incoming vacancies at the Supreme Court. How Brazilian markets performed. Also, what you should be looking out for this week—and the most important facts of the previous seven days.

Government plans for solar energy expansion

Solar power accounts for

a little over 1 percent of Brazil&#8217;s energy mix, but the government plans to push that share up to 8 percent in the next ten years. Investments are already underway, according to experts—and the country is expected to spend BRL 9.5 billion by 2025 on solar power plants alone. These figures only account for solar contracts that have already been awarded, at least another BRL 10.6 billion has been invested prior to 2020.</p> <p><strong>Why it matters.</strong> Brazil is one of the countries with the highest potential for solar power (over 2,200 hours of sunshine per year, according to the National Institute of Space Research). Still, this energy source is massively underutilized.</p> <p><strong>Less green.</strong> According to the Energy Expansion Ten-Year Plan for 2019-2029, Brazil plans to reduce its dependence on hydropower plants—from 58 to 42 percent of the energy mix—double wind power sources and multiply solar power&#8217;s presence fourfold. However, coal plants will have a bigger share—jumping from 7 to 14 percent—making Brazil&#8217;s energy mix less clean than it currently is.&nbsp;</p> <p><strong>Boom.</strong> The solar power sector is undergoing a boom to that of wind power plants a decade ago—between 2014 and 2019, solar panels have gone 43 percent cheaper. The government plans to increase energy production by 7 GigaWatts—enough to supply 3.6 million households.</p> <p><strong>Risks.</strong> Despite the optimism around the solar power sector, two factors are concerns: (1) the coronavirus outbreak could disrupt China&#8217;s production capacity, as the Asian giant accounts for 70 percent of the world&#8217;s solar panel production; and (2) there are uncertainties around how this energy source will be taxed.</p> <p><strong>Taxation.</strong> Individual solar producers currently benefit from subsidies, which Economy Minister Paulo Guedes plans to end—a move that could make power bills up to 70 percent more expensive. President Jair Bolsonaro has been against the move, comparing the end of subsidies as a &#8220;tax on the sun.&#8221; The benefit to a few households, however, ends up being paid by the rest of consumers—which Mr. Guedes calls a &#8220;benefit for the rich.&#8221;</p> <hr class="wp-block-separator"/> <h2>Jair Bolsonaro&#8217;s shortlist for the Supreme Court</h2> <figure class="wp-block-image"><img src="" alt="Jair Bolsonaro's shortlist for the Supreme Court" class="wp-image-31702" srcset=" 1024w, 300w, 768w, 610w, 1280w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Supreme Court material? From left to right: Sergio Moro, Jorge Oliveira, André Mendonça, and Ives Gandra Filho.</figcaption></figure> <p>President Jair Bolsonaro is set to pick at least two Supreme Court justices by the end of his term—as Celso de Mello and Marco Aurélio Mello reach the age of mandatory retirement (75) in November this year and July 2021, respectively. Sources close to the president say four men are leading the race, all of which have conservative profiles.</p> <p><strong>Criteria.</strong> The president has the power to appoint more or less anyone he wants, having to abide by only two requirements: that his pick must have a &#8220;spotless reputation&#8221; and &#8220;notorious legal mind.&#8221; Here are the president&#8217;s leading candidates:</p> <ul><li><strong>Sergio Moro.</strong> The current Justice Minister has not always seen eye-to-eye with the president but his nationwide prestige has made him the most talked-about possibility for a seat on the country&#8217;s highest court. While Mr. Bolsonaro has said he wants to pick an &#8220;extremely Evangelical&#8221; nominee for the position, picking Mr. Moro (who is Catholic) could eliminate a potential adversary in the 2022 presidential race. While the Justice Minister has never suggested he would actually run for president, his early polling numbers put him among the most competitive prospects.</li><li><strong>Jorge Oliveira.</strong> Currently serving as the president&#8217;s Secretary-General, Mr. Oliveira has the loyalty factor in his favor—he has worked with Mr. Bolsonaro for years, since the president was still a low-ranking congressman. His appointment would be highly opposed among the legal field, however, having only started practicing law in 2013 after a career in Brasília&#8217;s military police.</li><li><strong>André Mendonça.</strong> The current Solicitor General—who is also a religious preacher—ticks the &#8220;extremely Evangelical&#8221; box. But his major strength could also be the biggest obstacle to his appointment: the president is very pleased with his low profile and track record representing the government in legal battles. Officials say the lack of a suitable replacement as Solicitor General could prevent Mr. Bolsonaro from naming him.</li><li><strong>Ives Gandra Filho.</strong> A member of Brazil&#8217;s Superior Labor Court, Mr. Gandra Filho is known for his extreme religious and conservative ideas. He is linked to the Catholic Church—notoriously being <a href="">part of Opus Dei</a>, arguably the most controversial group in the church)—and also has excellent relationships with the political class.</li></ul> <p><strong>Two more seats.</strong> If President Bolsonaro gets reelected in 2022, he would have two more Supreme Court seats to fill. Justice Ricardo Lewandowski turns 75 in May 2023, and Justice Rosa Weber would reach retirement age in October of that year.</p> <p><strong>Obstacles ahead?</strong> On the return of the legislative branch from vacation, Senate President Davi Alcolumbre declared it would be his priority to pass a constitutional amendment bill changing how presidents pick new justices to the Supreme Court. Instead of being able to choose any &#8220;notorious legal mind,&#8221; the bill would limit the choice to a three-person list elaborated by a committee made up of seven institutions, among which would include the Supreme Court itself and the Brazilian Bar Association (OAB). The bill would also set a 10-year term for justices, instead of the current lifetime tenure.</p> <p style="text-align:left"><em>—with Brenno Grillo, from Brasília</em></p> <hr class="wp-block-separator"/> <h2>Markets</h2> <p>Priner, an industrial services company, holds its BRL 200-million (USD 46 million) initial public offering today. While the usual size of a Brazilian IPO is over USD 600 million, Priner&#8217;s case marks the return of &#8220;tiny IPOs&#8221; to the local market—as investors get hungrier for riskier assets due to record-low benchmark interest rates. This year, there are ten such &#8220;tiny IPOs&#8221; scheduled in São Paulo&#8217;s stock market—and 27 overall offerings (which should combine for BRL 30 billion).</p> <hr class="wp-block-separator"/> <h2>Bolsonaro&#8217;s approval ratings go up</h2> <p>For the first time since Jair Bolsonaro took office as president, latest opinion data shows his administration has more supporters than detractors. A poll commanded by weekly magazine <em>Veja</em> shows that 36 percent of voters consider he is doing a &#8220;great&#8221; or &#8220;good&#8221; job—with 31 percent evaluating him as either &#8220;bad&#8221; or &#8220;terrible.&#8221; While the poll shows that political polarization is enduring, it suggests the government is cashing in on its popularity thanks to a recent drop in the number of murders—a decrease that began before Mr. Bolsonaro took office and is also influenced by the recalibration of conflicts between organized crime gangs.</p> <div class="flourish-embed" data-src="visualisation/1404783"><script src=""></script></div> <hr class="wp-block-separator"/> <h2>Looking ahead</h2> <ul><li><strong>Religion &amp; politics.</strong> As the 2020 municipal elections approach, expect to see more and more power brokers making stump speeches, and often from church altars. Last week, former President Lula stirred fury from conservatives after meeting with Pope Francis—just days later, President Jair Bolsonaro was the star in a mega-event organized by some of Brazil&#8217;s most popular televangelists. Lula has already ordered his party to cater to Brazil&#8217;s Evangelical Christian population, which has become one of Mr. Bolsonaro&#8217;s most-faithful support bases.</li><li><strong>Strike.</strong> Trade unions say that all offshore oil-drilling platforms along the coast of São Paulo have joined a national strike of oil workers, which began on February 1. Despite over 20,000 employees having joined the movement, Petrobras CEO Roberto Castello Branco says the state-owned company has not reduced production &#8220;by a single barrel of oil&#8221; due to the hiring of strikebreakers. In 2017, a 27-day strike reduced the company&#8217;s annual output by 5 percent.</li><li><strong>Currency.</strong> The Brazilian Real hit its lowest nominal value against the U.S. Dollar (USD 1 : BRL 4.38) and only bounced back slightly after the Central Bank intervened by selling over USD 2 billion in the spot market. Meanwhile, Economy Minister Paulo Guedes says he is &#8220;not worried&#8221; about the drop of the Brazilian currency—saying it is a side effect of a positive change: low interest rates in Brazil, which scares off speculative investors. Analysts will be monitoring the behavior of the currency this week.</li><li><strong>Reforms.</strong> After many promises and U-turns, markets will have a close eye on whether the government will be able to submit its proposals for reforms to the country&#8217;s public service and tax system. Analysts are united in saying that Brazil will not be able to achieve sustainable growth rates without these reforms.</li></ul> <h2>In case you missed it</h2> <ul><li><strong>Uninspiring.</strong> The Central Bank Economic Activity Index (IBC-Br) suggests the Brazilian economy grew only 0.89 percent in 2019. The index is considered a predictor of the official GDP data, and it came below analysts&#8217; expectations, despite growing optimism among Brazilians. Experts say the poor results are due to the Brumadinho dam collapse in January, the U.S.-China trade war, and the recession in Argentina. The official GDP data will be published on March 4.</li></ul> <div class="flourish-embed" data-src="visualisation/1404881"><script src=""></script></div> <ul><li><strong>Argentina.</strong> Argentinian Foreign Minister Felipe Solá visited President Jair Bolsonaro last week, trying to <a href="">bury the hatchet between Buenos Aires and Brasília</a>. Defending a pragmatic and realistic stance, the minister said Argentina won&#8217;t be an obstacle for free-trade deals between Mercosur and other countries, and asked his “Brazilian brothers [to help] in whatever way they can” with Argentina&#8217;s deal with the International Monetary Fund.</li><li><strong>Hit job?</strong> Last week, the Military Police in Bahia killed Adriano da Nóbrega, considered to be one of the leaders of Rio de Janeiro&#8217;s deadliest paramilitary police mafia—and linked to Senator Flávio Bolsonaro, the president&#8217;s eldest son. Weekly magazine <em>Veja</em> published autopsy photos suggesting his death was not incidental, but rather execution. Mr. Nóbrega&#8217;s wounds are consistent with close-range shots and downward bullet trajectories—which does not match the police&#8217;s claims that he was killed in a &#8220;confrontation.&#8221; During a political event, President Bolsonaro cast responsibility for the death on Bahia&#8217;s state government—which is run by his opponents the Workers&#8217; Party.</li><li><strong>Climate.</strong> After Minas Gerais and Espírito Santo, the city of São Paulo was battered by intense rainfall at the beginning of last week. Brazil&#8217;s biggest city was plunged into chaos, with 164 points of flooding, 193 collapsed buildings and over 200 fallen trees. Food supply hub <a href="">Ceagesp lost roughly 7,000 tons of products</a>—and retailers estimate losses of BRL 110 million for a single day. The disaster has two main causes: poor urban planning (São Paulo has hundreds of rivers which are almost all channeled underground through pipes) and the fact that <a href="">extreme climate events</a> are now recurring.

Our content is protected by copyright. Want to republish The Brazilian Report? Email us at