2021 begins with uncertainty over Brazil’s vaccination plan

. Jan 04, 2021
vaccine vaccines brazil 2021 Photo: Stanislav71/Shutterstock

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Happy New Year! After a much-needed two-week rest, The Brazilian Report returns for what is set to be another hectic year. In today’s newsletter, we look back at what you might have missed over the end-of-year period and look forward to January’s major issues, such as the questions around a vaccine in Brazil and the looming economic crisis.

Your ultimate guide to 2021 in Brazil

In 2021, President Jair Bolsonaro will have to walk a dangerous tightrope. He must lead the country into economic recovery — which requires the approval of structural reforms — while preserving his political capital among the electorate. Coronavirus welfare programs expired completely at the end of the year due to budgetary constraints. Without a safety net, Brazil’s record unemployment rate could explode, fueling social dissatisfaction.

History tells us that the combination of poor economic performance and low popularity is a dangerous cocktail for Brazilian presidents. For Mr. Bolsonaro, 2021 will determine whether he will go down as the man who steered Brazil out of the coronavirus crisis, or if his administration will implode along the way. 

To learn about the challenges Brazil will face in 2021, we have prepared an exclusive special report. Take a peek at the table of contents:

  • Vaccine race will decide Brazil’s coronavirus fate
  • Economy: Brazil avoids the worst but future remains open-ended 
  • Brazilian agro faces enormous pressure
  • Big capital tries to force Brazil to go green
  • Congress leadership vote key to government’s success
  • How to mend fences with top trading partners
  • Tech gap a major bottleneck for 2021

Order now

Stories you might have missed during the holidays

The end-of-year holidays are usually a quiet period for Brazilian politics and business, as Congress and the Supreme Court take a month-long recess, while most of the population enjoys its summer vacations. But with a deadly pandemic still raging across the country, uncertainty about Brazil’s coronavirus vaccination plan, and a looming crisis set to be triggered by the end of the coronavirus emergency salary, 2021 has started at full speed.

To bring you back up to date, we have prepared a rundown of the most important issues over the past two weeks.

</p> <ul><li><strong>Vaccine arrives in Latin America. </strong>No world region was hit harder by the pandemic <a href="https://brazilian.report/latin-america/2020/08/26/coronavirus-in-latin-america-a-tale-of-failed-leadership-and-inequality/">than Latin America</a>, where over 15 million people have been infected with the coronavirus and <a href="https://br.reuters.com/article/topNews/idBRKBN29321V-OBRTP">more than 500,000 died</a>. However, only four countries in the region have started to vaccinate their citizens against Covid-19: Argentina, Mexico, Chile, and Costa Rica. The latter three have started using the Pfizer vaccine, while Argentina is using Sputnik V, made in Russia. Costa Rica began by vaccinating senior citizens living in retirement homes, while the other countries prioritized health workers. Chile hopes to vaccinate 80 percent of its population in the first half of 2021 (so far, it has managed to reach 0.05 percent of Chileans, according to <a href="https://ourworldindata.org/covid-vaccinations?utm_source=meio&amp;utm_medium=email">Our World in Data</a>). The governments of Ecuador and Colombia promised to start immunization in January.</li><li><strong>VP tests positive for Covid-19.</strong> Brazilian Vice President Hamilton Mourão tested positive for the coronavirus last week. According to his press secretary, Mr. Mourão is in a &#8220;good&#8221; state of health. His diagnosis means that every person in Brazil&#8217;s presidential line of succession — including <a href="https://brazilian.report/podcast/2020/07/08/explaining-brazil-podcast-bolsonaro-is-one-in-a-1-6-million/">President Jair Bolsonaro himself</a> — has contracted the virus.</li><li><strong>Rio&#8217;s outgoing mayor arrested. </strong>Before ending his term as mayor of Rio de Janeiro on December 31, Marcelo Crivella was arrested on December 22. He is accused of running a criminal organization that demanded kickbacks in exchange for awarding contracts with the Rio de Janeiro city hall — a scheme which allegedly raised BRL 50 million (USD 9.6 million). Mr. Crivella was quickly moved to house arrest due to his age, as he is part of the Covid-19 risk group. The arrest bookends what was a <a href="https://brazilian.report/power/2019/12/19/rio-de-janeiro-catastrophe-under-mayor-marcelo-crivella/">widely unpopular and ineffective four-year term</a>, which led citizens to deliver Mr. Crivella a massive electoral defeat back in November.</li><li><strong>Brazil still has no 2021 budget, but avoids shutdown. </strong>President Jair Bolsonaro signed the <a href="https://brazilian.report/newsletters/brazil-daily/2020/10/30/squabbles-over-2021-budget-could-throw-brazil-into-shutdown/">Budgetary Directives Law</a> (LDO) on the very last day of 2021, allowing his administration to avoid a government shutdown. Still, Brazil&#8217;s fiscal situation for 2021 remains upended, as the LDO is only the first step toward approving a definitive budget for 2021. Passing the LDO allows the government to spend one-twelfth of the 2020 budget each month while it works toward voting on a financial plan for this year. The president, however, vetoed one article of the LDO forbidding the administration from freezing funds earmarked for vaccine efforts.</li><li><strong>A new minimum wage. </strong>Brazil&#8217;s new minimum wage has risen to BRL 1,100 (USD 212) per month. This represents a 5.2-percent increase from 2020 and is higher than what lawmakers had foreseen. Pensions and retirement benefits are pegged to the minimum wage.</li><li><strong>New mayors take office. </strong>Mayors elected in November began their four-year terms on January 1, with 37 percent of municipalities seeing newcomers take charge of city hall. They will be thrown straight into the deep end, as most cities face dwindling revenues coupled with a need for investment to boost local economies and combat the coronavirus pandemic. The crisis has accentuated revenue inequalities between state capitals and smaller municipalities, which have received much less aid from the federal government and will be left to fend for themselves.</li><li><strong>New Year&#8217;s revelers forget about the pandemic. </strong>Brazil&#8217;s<strong> </strong>New Year&#8217;s Eve celebrations were certainly different this time around, with most cities canceling firework displays and forbidding large gatherings. But recommendations for small New Year&#8217;s celebrations at home did not deter thousands from gathering at Brazil&#8217;s top clubbing destinations. One <a href="https://twitter.com/BCovidfest">Twitter account</a> set up by two journalists from Curitiba shared videos of revelers partying hard without observing social distancing or wearing masks. Experts warn that Brazil&#8217;s infection and death curves could spike in the next few weeks, as people return from their end-of-year holidays.</li></ul> <div class="flourish-embed flourish-chart" data-src="visualisation/2641109"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <div class="flourish-embed flourish-chart" data-src="visualisation/2641192"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <hr class="wp-block-separator"/> <h2>What we&#8217;re looking out for in 2021</h2> <p>The year starts with many unanswered questions and possible crises ahead. We&#8217;ve selected the main threads you should be keeping an eye on:</p> <ul><li><strong>Vaccine timetable still a question mark.</strong> Latin America&#8217;s biggest country has yet to confirm when its Covid-19 vaccination plan will begin. While no lab has requested authorization for emergency use of vaccines so far, the Health Ministry expects the first inoculations to occur between January 20 and February 10 — but the department&#8217;s erratic statements make it impossible to take the Ministry&#8217;s words at face value. Federal regulators recently authorized the import of 2 million doses of the AstraZeneca/Oxford vaccine. </li><li><strong>São Paulo to have its own vaccine? </strong>A potential deal with the São Paulo government to purchase all doses of the Chinese-made CoronaVac vaccine produced in the state has not advanced, and Governor João Doria could go ahead with his plan to begin local vaccination on January 25. However, there are still doubts around the release of CoronaVac clinical trial data: phase 3 results were promised for December 22, but were postponed indefinitely. Meanwhile, private clinics have begun negotiations to purchase 5 million doses of an Indian-made vaccine which has been cleared for use in its country of origin.</li><li><strong>Is a poverty crisis already underway?</strong> Vaccines are not only a health issue, but an economic one, too. The Economy Ministry estimates that inoculating the Brazilian population would cost 15 times less than emergency aid programs — and be more effective in the long run. But economists deem these aid policies as pivotal for the short-term outlook of the Brazilian economy. After the coronavirus emergency salary was halved to BRL 300 in September, 11.6 million people fell below the poverty line. One expert estimates that 31 percent of Brazilians could be in that situation by the end of Q1 <a href="https://brazilian.report/power/2020/08/20/what-happens-when-brazils-coronavirus-emergency-aid-ends/">after the program expired in December</a>.</li><li><strong>The race for Congress control. </strong>On February 1, the Brazilian Congress kicks off its next legislature and elects new leadership for the House and Senate. These votes will be much <a href="https://brazilian.report/newsletters/brazil-weekly/2020/10/13/forget-mayors-house-speaker-election-race-counts/">more consequential for the government</a> than the municipal elections in 2020, as the heads of congressional houses have massive agenda-setting powers and can undermine — or boost — the efforts of any administration. For the crucial House Speaker position, President Jair Bolsonaro has thrown his support behind Congressman Arthur Lira, the leader of a federation of rent-seeking parties known as the &#8220;Big Center.&#8221; His <a href="https://oglobo.globo.com/brasil/adversarios-pela-presidencia-da-camara-lira-rossi-tem-estilos-parecidos-24821226">main adversary</a> will be Baleia Rossi, handpicked by incumbent Speaker Rodrigo Maia. </li><li><strong>Brazil enters the new year facing massive fiscal risks. </strong>After a record-shattering primary deficit of BRL 844 billion in 2020, the federal government faces a debt-to-GDP ratio of 91 percent. The deficit target for this year was set at BRL 247 billion, which would be just smaller than last year. Meanwhile, the government will have to mediate between opposing factions when <a href="https://www1.folha.uol.com.br/mercado/2021/01/crise-fiscal-e-conflito-entre-cortar-e-gastar-sao-desafios-em-2021.shtml">arbitrating on budget allocations</a>. This is no easy task, as only BRL 100 billion of the BRL 1.5-trillion budget consist of &#8220;discretionary expenses,&#8221; meaning that the rest is already allocated by law and cannot be managed.</li><li><strong>Pandemic still keeps millions away from education.</strong> As schools closed to avoid the spread of the coronavirus, 81 percent of Brazil&#8217;s 48 million students were left unattended during the pandemic. A recent Unicef report also shows that 4.8 million Brazilian students spent at least six months without access to any single educational activity in 2020. That happened both due to an absence of robust online teaching programs and a <a href="https://brazilian.report/society/2020/04/23/covid-19-widens-the-education-gap-between-rich-and-poor-students/">lack of access to the internet</a>. At least 15 out of Brazil&#8217;s 27 states plan to resume in-person classes this year — but it remains unclear how they will manage to pull it off.</li><li><strong>The investigation against the president&#8217;s son.</strong> Senator Flávio Bolsonaro will face trial for <a href="https://brazilian.report/power/2020/08/12/corruption-case-against-jair-bolsonaro-son-fabricio-queiroz/">allegedly running a corruption scheme during his tenure as a Rio de Janeiro state lawmaker</a>. He is accused of forcing his staffers to surrender part of their wages and laundering the money through illegal deals. Mr. Bolsonaro will be put on trial by a special body within Rio de Janeiro&#8217;s top state court, known for its extensive delays. Decisions take an average of nine months. If the case is looking unfavorable for the president&#8217;s eldest son, history suggests that the head of state could try to use his influence and position to tip the scales, which could potentially set off another institutional crisis in the country.</li></ul> <hr class="wp-block-separator"/> <h2>Markets</h2> <p>The Brazilian Real ended 2020 as one of the world&#8217;s worst-performing currencies. According to consultancy Austin Rating, it only fared better than those of countries which were already buried deep in economic crisis before the pandemic struck: Angola, Argentina, Seychelles, Venezuela, and Zambia. By the end of 2020, the foreign exchange rate settled at USD 1 : BRL 5.19, far higher than <a href="https://brazilian.report/business/2020/12/22/the-brazilian-economy-in-2020-expectation-v-reality/">forecasts 12 months ago</a>, which projected the U.S. Dollar to sit at BRL 4.09. While the pandemic is a major culprit — by making investors wary of riskier assets&nbsp;— the Brazilian government&#8217;s fumbled response to the coronavirus crisis has certainly not helped matters.</p> <hr class="wp-block-separator"/> <h2>Brazil to see growth, not necessarily <em>real</em> growth</h2> <p>After the pandemic caused economic crashes around the world, we are almost certain to see increased nominal GDP figures by the end of 2021, even if countries&#8217; economies stagnate. The chance of posting <em>real</em> growth — that is, not only offsetting the pandemic-led losses but actually finishing 2021 on a better level than at the beginning of 2020 — depends on the ability of countries to vaccinate their populations.</p> <p>And 2021 in Brazil begins with a series of complicating factors, such as uncertainties around the budget and a government that has chosen a chaotic coronavirus response. If the Bolsonaro administration is satisfied with macroeconomic indicators alone, that could be bad news for Brazilians.</p> <div class="flourish-embed flourish-scatter" data-src="visualisation/4852334"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p>

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