Covid-19 pandemic has brought Brazil to its knees

. Jun 15, 2020
How the pandemic broke Brazil Image: Salomé Gloanec/TBR

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This week, we’re covering the ways in which the pandemic has brought Brazil to its knees. And the exit of Treasury Secretary Mansueto Almeida — one of the most respected members of the Bolsonaro administration.

How the pandemic broke Brazil

It’s been 16 weeks since the coronavirus reached Brazil — and the country seems no closer to developing a national strategy to reopen, rebuild its economy, or defeat the virus.

Brazil has been held hostage by leaders placing their electoral strategies ahead of public safety when deciding on how to tackle the pandemic — and short-sighted corporations who are jeopardizing the long-term economy to mitigate short-term losses. Meanwhile, the government&#8217;s only strategy to reduce deaths seems to be <a href="https://brazilian.report/coronavirus-brazil-live-blog/2020/05/15/brazil-health-minister-nelson-teich-quits-less-than-a-month-in-office/">ejecting</a> one Health Minister after another, or tampering with the numbers.</p> <p><strong>Why it matters.</strong> In recent years, every single aspect of public life seems to trigger a culture war. And that is weakening the country&#8217;s ability to respond to a crisis that demands united action.</p> <p><strong>Exposing fractures.</strong> Brazil&#8217;s response has been hobbled by trends that precede the coronavirus&nbsp;—&nbsp;growing income inequality, the rise of disinformation, lack of trust in democratic institutions, and hyper-partisanship.</p> <ul><li>&#8220;Far from being a wakeup call, it feels more and more like the pandemic will produce a worse version of the same, by worsening existing social crises and accelerating authoritarian tendencies,&#8221; <a href="https://brazilian.report/opinion/2020/06/14/what-will-brazilian-society-look-like-after-the-pandemic/">writes</a> <strong>The Brazilian Report</strong> columnist Benjamin Fogel.</li><li>Last week, President Bolsonaro <a href="https://brazilian.report/power/2020/06/12/jair-bolsonaro-encourages-supporters-to-storm-hospitals/">asked supporters to invade hospitals</a> and film &#8220;empty beds&#8221; to &#8220;unmask&#8221; what he calls a media conspiracy to inflate coronavirus numbers in order to destabilize his administration.</li><li>We are not even seeing the same threat. Supporters of the president and evangelicals are <a href="https://brazilian.report/society/2020/05/12/evangelical-churches-aggravating-brazil-covid-19-crisis/">more prone to downplay</a> the severity of the pandemic.</li></ul> <p><strong>Dangers.</strong> The pandemic has also exacerbated Brazil&#8217;s institutional deadlock, with tensions between President Jair Bolsonaro and the Supreme Court continuing to boil over.&nbsp;</p> <ul><li>Over the weekend, Mr. Bolsonaro and his vice president, Hamilton Mourão, released a statement with a not-so-veiled threat: saying that the Armed Forces operate &#8220;under the supreme authority of the president.&#8221; The statement mentions Article 142 of the Constitution, which the far-right has wrongly interpreted as a &#8220;<a href="https://brazilian.report/power/2020/06/02/brazil-far-right-has-created-a-legal-way-to-stage-a-coup-bolsonaro/">military coup voucher</a>&#8221; it could cash in if necessary.</li></ul> <hr class="wp-block-separator"/> <h2>Mansueto, out</h2> <figure class="wp-block-image size-large"><img loading="lazy" width="1024" height="613" src="https://brazilian.report/wp-content/uploads/2020/06/mansueto-almeida-1024x613.jpg" alt="mansueto almeida" class="wp-image-42500" srcset="https://brazilian.report/wp-content/uploads/2020/06/mansueto-almeida-1024x613.jpg 1024w, https://brazilian.report/wp-content/uploads/2020/06/mansueto-almeida-300x179.jpg 300w, https://brazilian.report/wp-content/uploads/2020/06/mansueto-almeida-768x459.jpg 768w, https://brazilian.report/wp-content/uploads/2020/06/mansueto-almeida-610x365.jpg 610w, https://brazilian.report/wp-content/uploads/2020/06/mansueto-almeida.jpg 1170w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Mansueto Almeida. Photo: Fábio Pozzebom/ABr</figcaption></figure> <p>The government&#8217;s economic team will suffer a major loss after Treasury Secretary Mansueto Almeida announced he will resign, after four years in the job. Mr. Almeida, however, promised to remain in office until the end of July, in order to assure an &#8220;organized transition.&#8221;</p> <ul><li>This is not necessarily breaking news for Economy Minister Paulo Guedes, who in February hinted that the government &#8220;might lose this guy soon&#8221; to the private sector.</li><li>Mr. Almeida <a href="https://braziljournal.com/entrevista-mansueto-nao-muda-nada-no-ajuste-fiscal">said</a> he planned to leave at the beginning of the year, but that the pandemic delayed his decision. He says now is the right time, as Brazil enters what he calls the &#8220;post-Covid&#8221; stage, which will demand government action to mitigate the economic effects of the pandemic and kickstart the reopening process.</li></ul> <p><strong>Why it matters.</strong> Mansueto Almeida is seen as one of the government&#8217;s fiercest defenders of fiscal austerity —&nbsp;and his exit will certainly create apprehension among investors.</p> <ul><li>It remains unknown who will be the next Treasury Secretary, though Mr. Guedes has a shortlist with four names.</li></ul> <p><strong>Challenges ahead. </strong>Mr. Almeida&#8217;s replacement will have a gargantuan task ahead —&nbsp;making room for stimulus policies in an already tight budget.</p> <ul><li><strong>Emergency salary. </strong>The recently created BRL 600 (USD 118) coronavirus emergency salary has given some relief to poorer populations, but the government argues there is not enough money to extend it further than two more payments of BRL 300. However, a World Bank study suggests that 7 million people would be immediately pushed below the poverty line should the benefit be interrupted.</li><li><strong>New Bolsa Família.</strong> Mr. Guedes has told Congress that the government will launch a <a href="https://brazilian.report/newsletters/brazil-daily/2020/06/09/central-bank-transferwise-bolsa-familia-tax-reform/">new cash-transfer program</a> to replace the world-renowned Bolsa Família. Mr. Guedes promises that his initiative, called Renda Brasil (Income Brazil), will be broader and “more inclusive” than Bolsa Família.</li><li><strong>Debt renegotiations.</strong> Lawmakers are discussing a new debt-renegotiation program for companies with overdue tax bills. With GDP expected to fall up to 8 percent this year — according to the latest World Bank projections — there is a consensus in Brasília that aiding private business is unavoidable. But this kind of program has failed to help the government recoup tax revenue.</li></ul> <hr class="wp-block-separator"/> <h2>Markets</h2> <p>Stock offerings are slowly resuming in Brazil. After two follow-ons by retailers Centauro and Via Varejo, homebuilder You, Inc. has put in a request at the Brazilian Securities Commission to restart the analysis of its initial public offering. According to Guide Investimentos, B3, the company behind São Paulo’s stock exchange, is set to be the big winner of this decision: “with capital markets picking up again, strong trading volumes and growth in the number of investors, B3 tends to have positive results in almost all of its segments this year,” they wrote.</p> <p class="has-text-align-center"><em><strong>Natália Scalzaretto</strong></em></p> <hr class="wp-block-separator"/> <h2>What is happening in Chile?</h2> <p>Chilean Health Minister Jaime Mañalich resigned on Saturday after the number of new daily Covid-19 deaths increased sharply over the past week. Criticism toward Mr. Mañalich mounted after Ciper Chile —&nbsp;an investigation center led by journalists —&nbsp;denounced a possible distortion of official data. One week ago, the ministry was forced to include 653 deaths which had not been accounted for in its official Covid-19 toll. The coronavirus has officially claimed 3,101 lives in Chile —&nbsp;however, independent sources say the real numbers are closer to 5,000.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/2848637" data-url="https://flo.uri.sh/visualisation/2848637/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <hr class="wp-block-separator"/> <h2>Looking ahead</h2> <ul><li><strong>Coronavirus.</strong> As the state of São Paulo&nbsp;—&nbsp;Brazil&#8217;s Covid-19 epicenter in absolute numbers —&nbsp;continues to reopen its economy, experts warn of the risks a rushed return to normality entails. Researchers from the University of São Paulo and Fundação Getulio Vargas project a 71-percent increase in coronavirus deaths in the state by the end of the month. So far, the virus has killed over 10,500 people in São Paulo.</li><li><strong>Congress.</strong> Lawmakers must vote this week on the provisional decree allowing companies to suspend contracts or cut workers&#8217; hours and wages (which will be partially compensated by the government), for three months. In a push to help businesses, the government wants to allow companies to cut wages for 60 extra days. The change, however, is not set in stone, as it depends on budgetary space.</li><li><strong>Interest rate.</strong> The Central Bank&#8217;s Monetary Policy Committee will announce Brazil&#8217;s new benchmark interest rate on Wednesday. While it is a consensus among market analysts that the bank will promote a further cut from the current level of 3 percent, forecasts are divided between a reduction of 0.5 or 0.75 percentage points. Since the beginning of the pandemic, the committee has lowered the rate two times, from its 4.25-percent pre-pandemic level.</li></ul> <hr class="wp-block-separator"/> <h2>In case you missed it</h2> <ul><li><strong>Impeachment.</strong> The Rio de Janeiro State Congress has initiated <a href="https://brazilian.report/newsletters/brazil-daily/2020/06/11/impeachment-process-against-rio-governor-wilson-witzel/">impeachment proceedings</a> against Governor Wilson Witzel. Two weeks prior, he was targeted by a Federal Police operation and is <a href="https://brazilian.report/power/2020/06/06/amid-pandemic-rio-governor-worries-about-his-political-survival/">suspected of taking kickbacks</a> from companies that siphoned part of Rio&#8217;s coronavirus budget. Barring his own ousting will be a Herculean task for Mr. Witzel, and will require immense pork-barrelling.</li><li><strong>Cabinet.</strong> In order to please his new allies in Congress, President Jair Bolsonaro re-created the <a href="https://brazilian.report/power/2020/06/11/with-communications-ministry-bolsonaro-fully-embraces-old-politics/">Communications Ministry</a>, naming Congressman Fabio Faria as minister. He is a member of the Social Democratic Party — which holds 36 seats in the lower house — and son-in-law of TV mogul Silvio Santos, whose SBT network has been supportive of the government. One of the ministry&#8217;s key challenges is the 5G auction, which is unlikely to take place before 2021.</li><li><strong>Intimidation.</strong> A handful of members of a far-right group known as &#8220;<a href="https://brazilian.report/power/2020/05/07/bolsonaro-far-right-wants-turn-brazil-into-2013-ukraine/">Brazil&#8217;s 300</a>&#8221; launched fireworks in the direction of the Supreme Court building on Saturday — simulating a bomb attack. At the request of Chief Justice Dias Toffoli, the prosecutor general has opened an investigation into the act — and a former government contractor was temporarily detained for publishing a video with threats to the court members.</li><li><strong>Finance. </strong>After a two-year evaluation process, Brazil&#8217;s Central Bank has <a href="https://brazilian.report/newsletters/brazil-daily/2020/06/09/central-bank-transferwise-bolsa-familia-tax-reform/">authorized</a> British fintech TransferWise to operate in the country as an exchange brokerage. The <a href="https://brazilian.report/business/2020/01/05/transfer-money-to-from-brazil/">international money transfer</a> service, most recently valued at USD 3.5 billion, has operated in Brazil since 2016 but has always had to use a Brazilian bank as an intermediary. Now, the company promises to reduce its fees from an average of 1.5 percent to somewhere closer to its global 0.74-percent average.

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