Working from home Brazil’s new normal

. Jul 20, 2020
remote work Illustration: Yevgenij D/Shutterstock

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This week we’re covering how remote work might become the “new normal” in Brazil. Plus, the USD 6-billion trial against BHP for its role in the 2015 Mariana tragedy.

The future for work in Brazil seems to be remote

In June, 12.7 percent of the Brazilian formal labor force worked remotely

, according to the latest household <a href="">survey</a> by the Brazilian Institute of Geography and Statistics. And while that rate has gone down since May, when 13.3 percent continued to perform their duties from home, the truth is that most companies are unlikely to ever return to what were once &#8220;normal&#8221; practices.</p> <ul><li>A survey by Mercer shows that 43 percent of Brazilian companies have not established a date to return to their offices — even if authorities have authorized regular work to resume. &#8220;This return date was pushed back on several occasions. In April, companies thought they would be back in the office by June. We&#8217;re in July and the coronavirus numbers haven&#8217;t allowed that yet,&#8221; said Mercer&#8217;s Rafael Ricarte, when announcing the results.</li><li>Even in companies that will resume office activities, some sectors will migrate to remote work on a definitive basis. Notably, 91 percent of companies are planning to have employees on administrative tasks working from home permanently.</li></ul> <p><strong>Reasons.</strong> A study by the University of São Paulo&#8217;s School of Economics shows that 70 percent of Brazilian executives believe productivity has improved with their staff at home. Moreover, only one-third of firms have developed programs to ensure the safety of their employees in post-pandemic workspaces — something that could be expensive for many.</p> <ul><li>Seventy-eight percent of the companies surveyed by Mercer say keeping social distancing in their current office spaces is the biggest challenge. And almost half mention the lack of available Covid-19 tests to regularly monitor the virus&#8217; presence among workers.</li></ul> <div class="flourish-embed flourish-chart" data-src="visualisation/3231228" data-url=""><script src=""></script></div> <p><strong>Why it matters.</strong> Data suggests that the &#8220;new normal&#8221; will probably look a lot like what we are seeing today. Even companies that will not fully embrace remote work are likely to adopt some sort of rotation system to avoid overcrowding their place of business.</p> <p><strong>Civil servants.</strong> The Economy Minister wants to make remote work a feature in public service. Around 350,000 federal employees are currently working from home — which could allow for savings of BRL 500 million (USD 93 million) per year.</p> <hr class="wp-block-separator"/> <h2>How to get away with mud</h2> <p>This week, a group of 200,000 individuals — alongside 25 municipalities and 530 companies — kicks off a USD 6.3-billion lawsuit against BHP at a court in Manchester, England. The Anglo-Australian oil and mining giant owns a 50-percent stake at Samarco, a company responsible for one of the worst environmental disasters in Brazilian history.</p> <ul><li>After an iron ore tailings dam collapsed in the municipality of Mariana, some 65 kilometers from Belo Horizonte, the equivalent of 25,000 Olympic swimming pools of toxic sludge was spilled into the surrounding area, destroying entire towns and resulting in 19 deaths. It also devastated the nearby Doce river, killing thousands of animals. Experts at the time reckoned that it would take decades to reverse the catastrophic damage caused.</li></ul> <p><strong>The trial. </strong>An eight-day hearing will establish if the case can be heard in England and Wales. Plaintiffs want BHP to be held liable for its &#8220;ultimate responsibility&#8221; as a Samarco owner. They claim — and are backed up by evidence —&nbsp;that Samarco deliberately ignored safety warnings, repeatedly increasing the dam&#8217;s capacity by raising its height and ignoring cracks that showed early signs of a possible rupture.</p> <ul><li>As journalist Karla Mendes showed on <strong>The Brazilian Report</strong>, the disaster could have been avoided if Samarco, the mining company responsible for the dam, had spent a <a href="">mere USD 1.5 million in safety measures</a>.</li></ul> <p><strong>What they are saying.</strong> &#8220;The companies atop the BHP Group&#8217;s structure have so far been spared by the Brazilian justice system, but must be held accountable for their deeds,&#8221; said Tom Goodhead, who represents the plaintiffs. &#8220;This case seeks a little bit of justice for the thousands of lives that were immediately impacted by the environmental chaos that was caused.&#8221;</p> <ul><li>In an emailed statement to <strong>The Brazilian Report</strong>, BHP said the claims duplicate matters which are, or have been, subject to pre-existing legal proceedings in Brazil and are also covered by the work of Renova Foundation, an entity created by the miner and its partners to manage reparations and repairs. “To BHP, the Brazilian courts and Renova Foundation are better placed to address claims, arising from events which occurred in Brazil and are brought under Brazilian law, and where there is already considerable experience in dealing with these claims,” they wrote.</li><li>Reached out to by <strong>The Brazilian Report</strong>, Samarco said that BRL 8.85 billion had been spent on reparations by Renova Foundation up to May 2020. The company is expected to resume operations by year-end.&nbsp;</li></ul> <p><strong>What has been done so far?</strong> According to BHP, almost six years after the disaster, Renova Foundation has carried out:</p> <ul><li>Around 280,000 payments of damages amounting to roughly BRL 2.7 billion, and emergency financial aid to over 22,000 people;</li><li>Forty-two programs of compensation, remediation and rehabilitation for people and the environment;</li><li>Resolved 10,000 claims for general damages; another 12,000 are currently under consideration;</li><li>Over 110 houses and properties, 27 businesses, and over 180 plots of land were restored in the city of Barra Longa (MG).</li></ul> <p><strong>But … </strong>Not a single individual has been punished in Brazil — and legal cases have encountered many hiccups along the way.</p> <p><strong>The other Samarco owner.</strong> Samarco is also partially owned by Brazilian mining giant Vale (which was involved in a second dam disaster last year). Despite this track record, Vale shares topped BRL 62, their highest price ever, boosted by high iron ore prices and the possibility that Vale may pay dividends once more.</p> <p><em>— with Natália Scalzaretto</em></p> <hr class="wp-block-separator"/> <h2>Markets</h2> <p>Protected against default, digitally competitive … and a bargain. That is how analysts at brokerage firm XP have evaluated Banco do Brasil — the biggest state-controlled bank in the country. They point out that 27 percent of the bank&#8217;s portfolio relies on credit to rural producers, &#8220;which can be an advantage in times of crisis, while allowing for long-term gains.&#8221; That&#8217;s because rural credit, while less profitable, has a substantially lower default rate.&nbsp;</p> <hr class="wp-block-separator"/> <h2>Eyes on November</h2> <p>Earlier this year, we had stressed the importance for the government not to lose any time in pushing its agenda forward in Congress. That&#8217;s because 2020 is an <a href="">electoral year</a>, with the country&#8217;s 5,570 municipalities expected to head to the polls in November to choose new mayors and city councilors. As the chart below shows, Congress&#8217; <a href="">focus will be elsewhere</a> in the second half of 2020: of the House&#8217;s 513 members, 112 are going to run for municipal office. With the pandemic <a href="">disrupting traditional campaigning</a>, candidates will be required to produce tons of content to try and lure voters —&nbsp;which could impact quorums for congressional sittings.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/3199357" data-url=""><script src=""></script></div> <hr class="wp-block-separator"/> <h2>Looking ahead</h2> <ul><li><strong>Tax reform.</strong> The government is expected to submit its own <a href="">tax reform bill</a> this week. Economy Minister Paulo Guedes has insisted on a few proposals which are unpopular among lawmakers, such as the recreation of a tax on financial transactions. The Economy Minister’s biggest adversary is House Speaker Rodrigo Maia — who instead supports an ongoing bill in Congress to create a value-added tax by merging several municipal-, state-, and federal-level duties. Political disagreements and the pandemic led JPMorgan to tell its clients it is &#8220;skeptical&#8221; about the possibility of a reform passing in 2020 —&nbsp;or even 2021.</li><li><strong>Vaccine. </strong>A shipment carrying a <a href="">potential coronavirus vaccine</a> developed in China arrived in São Paulo on Monday —&nbsp;and tests with healthcare workers from five states will begin. A second round of testing shall include 9,000 volunteers (over 1 million people have applied for the trials), and São Paulo Governor João Doria hopes the vaccine will be available by June 2021. Beijing-based lab Sinovac Biotech became the first pharmaceutical company able to successfully protect animals from infection by the coronavirus, according to Science Mag.</li><li><strong>Credit.</strong> The House should vote on Monday on approving a presidential provisional decree with the potential of injecting BRL 32 billion (USD 5.9 billion) in subsidized credit for small- and medium-sized companies. Around 60 percent of the funds will go to the so-called PESE, a credit line run by the National Development Bank (BNDES) to help small firms with their payroll. PESE, however, has been massively underperforming, and only 10 percent of its available BRL 40-billion amount has been lent.</li><li><strong>Multilateralism.</strong> Brazilian diplomacy has started to lobby for Federal Judge Monica Sifuentes to be appointed to one of the six seats up for selection at the International Court of Justice in December. The court has entered the administration&#8217;s radar after it received three complaints against President Jair Bolsonaro&#8217;s dealing with the coronavirus, using such terms as &#8220;crimes against humanity&#8221; and &#8220;genocide.&#8221;</li></ul> <hr class="wp-block-separator"/> <h2>In case you missed it</h2> <ul><li><strong>Telecom.</strong> Brazil&#8217;s three major telecom companies —&nbsp;TIM, Vivo, and Claro&nbsp;—&nbsp;have presented a joint bid to purchase the mobile telephony assets of the country&#8217;s fourth-largest player, Oi. Sources say an unidentified foreign investor has placed a second bid. Under <a href="">court-supervised reorganization since 2016</a>, Oi wants at least BRL 15 billion for its mobile infrastructure and it plans to use the money to enhance its fibre-optic broadband network and pay off some of its debt, which <a href="">topped BRL 65 billion</a> when it entered into administration.</li><li><strong>&#8220;Fake&#8221; meat.</strong> One of 2019&#8217;s biggest success stories in the stock market, Beyond Meat —&nbsp;which sells plant-based meat imitations — has arrived in Brazil. The country is the world&#8217;s second-largest beef consumer, after the U.S., but the no-meat &#8220;revolution&#8221; won&#8217;t be for everyone. Beyond Meat will be sold in 19 upscale stores in São Paulo, with its imitation burgers costing four times the price of local competitors.&nbsp;</li><li><strong>Tainted exports.</strong> A study called “<a href="">The rotten apples of Brazil’s agribusiness</a>” shows that up to 22 percent of Brazilian exports which leave the Amazon and Cerrado biomes and head to the European Union may have been produced on illegally deforested land. Last week, the government finally made a commitment to preserve the rainforest. The <a href="">latest episode</a> of our Explaining Brazil podcast breaks down what that means.</li><li><strong>BRICS. </strong>The Senate approved the creation of a <a href="">Brazilian branch of the Shanghai-based New Development Bank</a> — NDB, commonly known as the BRICS Bank — in São Paulo. The new office will serve as the bank’s headquarters in the Americas. The bank will also have a representation bureau in capital city Brasília. With the São Paulo HQ, Brazil takes on a bigger role in the bank, after picking its newly-inaugurated chair Marcos Troyjo, a former Secretary of Foreign Trade at the Economy Ministry.</li><li><strong>Revenue.</strong> It sounds counterintuitive, but <a href="">Brazilian workers&#8217; average income</a> has actually gone <em>up</em> amid the pandemic. Economist Daniel Duque, of think tank Fundação Getulio Vargas, believes in two possible explanations: (1) the crisis has been harsher on informal workers or those in low-paying jobs, and (2) telephone surveys — a method imposed by the pandemic —&nbsp;can over-represent rich population strata.

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