Coronavirus reaches Brazil

. Feb 26, 2020
Coronavirus reaches Brazil in first confirmed case First Covid-19 infection confirmed in Brazil. Image: Outsideclick/Shutterstock

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We’re back after Carnival! This week, we cover the first confirmed Covid-19 coronavirus infection in Brazil. And the uncertainties facing Petrobras in 2020.

Brazil’s first coronavirus infection confirmed in São Paulo


61-year-old man tested positive for Covid-19, making Brazil the first Latin American country with a confirmed coronavirus case. The patient has reportedly shown mild symptoms and, according to a report by Albert Einstein Hospital, &#8220;is in a good clinical state and has no need to be hospitalized.&#8221; He will stay isolated at home for the next 14 days.</p> <p><strong>Tracing back the virus.</strong> The man had been to Italy for work between February 9 and 21—a period which coincides with the coronavirus boom in the European country, where 322 cases have been confirmed. He first went to the hospital on Monday, and state authorities were informed of his case on Tuesday.&nbsp;</p> <p>Authorities are reportedly trying to trace every step he took since returning from Italy, thus identifying everyone who might have been in contact with the patient.</p> <div class="flourish-embed flourish-map" data-src="visualisation/1453241"><script src=""></script></div> <p><strong>Politics.</strong> The coronavirus spread is not only a health issue—but also a political one. The spread on social media of misinformation (either malicious or unintentional) has helped fuel anxiety over a possible pandemic, undermining trust in governments, NGOs, and scientists, which could aggravate the problem further.</p> <p><strong>Economics. </strong>There is also the economic aspect of it. With many industries in the virus epicenter of China currently shut down, Brazilian exporters will be hit hard. Coupled with the slow pace of Jair Bolsonaro&#8217;s reformist agenda, the coronavirus could turn 2020 into the fourth-straight disappointing year for the Brazilian economy.</p> <p><strong>Optimism.</strong> Health Minister Luiz Henrique Mandetta has kept an even-keel approach. &#8220;We are going to prepare in the best possible way. But we must remain calm [&#8230;] and place our bets on science.&#8221;</p> <p>The minister&#8217;s optimism is not unwarranted. Infectious diseases expert Rosana Hartmann told our <em>Explaining Brazil </em>podcast that respiratory viruses are harder to spread in high temperatures, which, in theory, means the country is less susceptible to an outbreak.</p> <p><strong>Meanwhile … </strong>All 34 Brazilian nationals that were quarantined for 18 days in a military base after being repatriated from Wuhan, China, were released on Sunday after not testing positive for Covid-19.&nbsp;</p> <div id="buzzsprout-player-2608606"></div> <script src=";player=small" type="text/javascript" charset="utf-8"></script> <hr class="wp-block-separator"/> <h2>An uncertain 2020 ahead for Petrobras</h2> <p>Brazil&#8217;s state-controlled oil and gas company Petrobras posted record profits in 2019, yet the company faces a grim outlook for 2020. Prospects for the rest of the year are uncertain after a massive 20-day strike of its workers and the effects of the coronavirus outbreak on the Chinese economy.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/1455495"><script src=""></script></div> <p><strong>Strike.</strong> On Friday, Petrobras and workers&#8217; unions reached a deal to end a strike that began on February 1. Employees will receive better overtime rates, but unions will have to pay BRL 2.5 million for their &#8220;abusive&#8221; strike methods, according to the Superior Labor Court. Petrobras has sustained that its oil production has not taken a dent thanks to temporary hirings.</p> <p><strong>Coronavirus. </strong>Even discounting the possible effects of the strike—which could reflect in narrower margins in Q2 2020)—the biggest worry comes from China, where many industries are paralyzed.&nbsp;</p> <p><strong>Why it matters.</strong> China accounted for 72 percent of Petrobras’ oil exports between January and September 2019 (latest available data). The U.S. came second, with only 11 percent. Moreover, the fears of a pandemic have clobbered international oil prices, which are down from USD 66 on January 2 to USD 53 today.</p> <p><strong>Silver linings.</strong> Analysts have praised Petrobras&#8217; decision to increase investments in new oil and gas production systems—with seven platforms in pre-salt oil fields where the production has already been sold. They also point out the company&#8217;s divestments program as a positive for 2020—pushing Petrobras to focus only on what it considers its core activity: oil and gas extraction and production.</p> <hr class="wp-block-separator"/> <h2>Markets</h2> <p>Fears of a coronavirus pandemic led to a broad market sell-off in the world&#8217;s biggest markets. EWZ—a New York-listed Exchange Traded Fund comprised of the Brazilian stocks with highest liquidity—is down 6.3 percent since Friday. Brazil escaped the immediate effects of the panic, as the local stock market was closed for the Carnival holiday—but it should feel the blow today—especially after the first confirmed Covid-19 infection in the country. Blue chips (often targeted in volatile times) and airlines (which could be impacted by possible travel restrictions) should fall the hardest.</p> <p style="text-align:center"><strong><em>Natália Scalzaretto</em></strong></p> <hr class="wp-block-separator"/> <h2>State-level pension reforms are passing</h2> <p>After Congress refused to include state-level servants in the pension reform bill passed in 2019, governors were tasked with the job of presenting bills to do just that. Salaries and pensions eat up more than 50 percent of the budget in <em>all </em>states—and over 60 percent in 11 of them—reducing their capacity to invest and focus on improving public services.</p> <div class="flourish-embed flourish-map" data-src="visualisation/1454951"><script src=""></script></div> <hr class="wp-block-separator"/> <h2>Looking ahead</h2> <ul><li><strong>New clash ahead.</strong> After the president&#8217;s chief security officer called Congress &#8220;extortionist,&#8221; far-right activists have scheduled a demonstration for March 15 against Congress and in favor of &#8220;military intervention&#8221;—in other words, a self-coup—in Brazil. The protest has been supported by congresspeople linked to the government—and by President Bolsonaro himself, who shared a video among friends calling Brazilians to join the protest. The country&#8217;s main political leaders outside of government have all repudiated the move, and opposition parties plan to file an impeachment request against Mr. Bolsonaro. However, there is no indication that House Speaker Rodrigo Maia—who would hold all the power in a potential impeachment case—would move forward with it.&nbsp;</li><li><strong>Reforms.</strong> The government is expected to present its administrative reform proposal this week, aimed at reducing costs of the public service. For months the bill has been delayed, leaving investors uneasy. The proposal should lower entry-level salaries and reduce the number of careers in public service—as well as reducing the job stability currently enjoyed by all civil servants, and identified as partially responsible for their inefficiency.</li><li><strong>Saudi Arabia.</strong> A mission from the Public Investment Fund of Saudi Arabia could visit Brazil within two months, as part of a plan to invest up to USD 10 billion in the country. However, the recent reshuffling of Brazil&#8217;s cabinet—with the president naming a new Chief of Staff and changing his responsibilities—has created a bureaucratic vacuum that stalled preparations for the visit. Sources say the Saudis willingness to invest in Brazil remains strong, after being announced during President Bolsonaro&#8217;s visit to Riyadh in October.</li><li><strong>Privatizations. </strong>The Council for Public-Private Partnerships—which operates under the Economy Ministry—has <a href="">recommended</a> the government to sell all of its minority shares in publicly-traded companies, in a process that has already started. There is one exception, however: the federal administration&#8217;s &#8216;golden shares.&#8217; This type of share gives the government a final say on strategic decisions in privatized companies, such as Embraer. Economy Minister Paulo Guedes would still have the power to defend keeping a minority stake in a company, as long as it is &#8220;properly justified.&#8221;</li></ul> <h2>In case you missed it</h2> <ul><li><strong>Police strike.</strong> Law enforcement agents in the state of Ceará remain on strike, continuing stoppages which have now gone on for a week. Agents demand better wages in protests that often become violent, including one that finished with a <a href="">senator trying to literally bulldoze a blockade of police officers</a> and being shot twice. Over the past week, 170 murders have been recorded—an average of 25 per day. On Sunday, 2,500 military troops arrived to the state to help authorities with police duties. Other states are monitoring the Ceará crisis closely, fearing their state police forces could pull similar moves in search of increased pay. According to Brazilian legislation, it is illegal for any police force to go on strike.</li><li><strong>Meat.</strong> Agriculture Minister Tereza Cristina announced on Twitter that the U.S. has lifted a ban on Brazilian in natura beef, after negotiations had been suspended in 2017. Brazilian companies have never had a big market in the U.S., but getting approved by one of the strictest sanitary agencies in the world is very positive for producers, as many countries use U.S. standards for their own meat import policies.&nbsp;</li><li><strong>Central Bank. </strong>The Senate’s Economic Affairs Committee passed a bill granting <a href="">autonomy to the Central Bank</a>. As an attempt to reduce political interference in monetary policy, the bill establishes that the bank&#8217;s president and its nine board members will have four-year terms, which do not coincide with those of the Brazilian President.</li><li><strong>Tax reform. </strong>Congress took its first step toward passing a tax reform, with the creation of a <a href="">special committee</a> on the matter including 25 members each from the House and Senate. As a constitutional amendment, the reform must go through two votes in each chamber—having at least two-thirds of support each time. President Bolsonaro&#8217;s <a href="">constant fighting with state governors</a>, however, could frustrate the reform.&nbsp;</li><li><strong>Protest.</strong> On Tuesday, Brazilian Human Rights Minister Damares Alves abandoned the UN Human Rights Council meeting in protest when Venezuelan representative Jorge Arreaza began speaking. The protest was planned beforehand, as the minister entered the room just minutes before Mr. Arreaza was set to address the council. Ms. Alves reiterated the Brazilian government&#8217;s criticism of the Venezuelan regime, citing that Brazil has welcomed over <a href="">1 million migrants</a> who fled the country&#8217;s socio-economic collapse.

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