Good morning. In today’s issue: Are markets bailing on Brazil? Congresswoman asks for police protection from Tourism Minister. Financial aid program for states could deepen regional inequality. Embrapa to launch genetically-modified pinto beans.


Are markets bailing on Brazil?

The positive (though inconsistent) performance

of the São Paulo stock exchange hides a growing pessimism among market operators about the Brazilian economy. Investors have recently shifted their portfolios from companies depending on domestic consumption, to focus more on exporters. The best-performing companies this year are driven by sales abroad—notably in the commodities and energy sectors.</span></p> <p><span style="font-weight: 400;">On the flip side, the worst-performing shares belong to companies selling to Brazilian consumers, such as retail chains, shopping mall administrators, and travel firms. That reveals a lack of faith from investors that the economy will gain traction this year. GDP growth in Brazil is driven by family consumption—so, not believing in domestic consumption amounts to betting against the Brazilian economy.</span></p> <p><span style="font-weight: 400;">The election of Jair Bolsonaro injected optimism in local investors—which were the driving force of the recent surge in Brazil&#8217;s stock market. Since taking office, however, the president has proven not to be the libertarian investors were hoping for, eroding the appetite for assets which depend on a healthier local economy.</span></p> <p><span style="font-weight: 400;">Midway through 2018, investment firms forecast a 3% GDP growth for Brazil in 2019. Those expectations are now below 2%—and today&#8217;s Focus Report (a weekly survey conducted by Brazil’s Central Bank with top-rated investment firms) should confirm the negative trend.</span></p> <p><img class="aligncenter size-full wp-image-17022" src="https://brazilian.report/wp-content/uploads/2019/05/ef26fe7b-a3c1-4e0d-8ee6-38de8b276155.png" alt="" width="1200" height="800" srcset="https://brazilian.report/wp-content/uploads/2019/05/ef26fe7b-a3c1-4e0d-8ee6-38de8b276155.png 1200w, https://brazilian.report/wp-content/uploads/2019/05/ef26fe7b-a3c1-4e0d-8ee6-38de8b276155-300x200.png 300w, https://brazilian.report/wp-content/uploads/2019/05/ef26fe7b-a3c1-4e0d-8ee6-38de8b276155-768x512.png 768w, https://brazilian.report/wp-content/uploads/2019/05/ef26fe7b-a3c1-4e0d-8ee6-38de8b276155-1024x683.png 1024w, https://brazilian.report/wp-content/uploads/2019/05/ef26fe7b-a3c1-4e0d-8ee6-38de8b276155-610x407.png 610w" sizes="(max-width: 1200px) 100vw, 1200px" /></p> <hr /> <h2>Congresswoman asks for police protection from Tourism Minister</h2> <p><span style="font-weight: 400;">Congresswoman Alê Silva said she received death threats from Tourism Minister Marcelo Antônio. Ms. Silva, a member of President Jair Bolsonaro&#8217;s Social Liberal Party (PSL), exposed a scheme of illegal campaign finance maneuvers run by Mr. Antônio, who served as chair of the party&#8217;s Minas Gerais chapter. She asked for Federal Police protection.</span></p> <p><span style="font-weight: 400;">Evidence has shown that Mr. Antônio used dummy candidates to funnel public money that should have financed political campaigns to companies connected to him. So far, four candidates from the party have told Federal Police investigators that they were dummy candidates—or at least were asked to be. Four others are under scrutiny. Early police reports show that investigators believe in Mr. Antônio&#8217;s involvement in the scheme.</span></p> <p><span style="font-weight: 400;">The minister, however, denies any wrongdoing, saying that Ms. Silva is trying to get notoriety at his expense. The government has remained coy about the subject. Even some right-wing leaders—including from the PSL—have sided with the congresswoman, and asked for the firing of the Tourism Minister.</span></p> <hr /> <h2>Financial aid program for states could deepen regional inequality</h2> <p><span style="font-weight: 400;">With state administrations financially depleted, the federal government has come to the rescue. However, in order to qualify for financial aid, states must drop the tax breaks they use to lure companies, as well as slashing local subsidies. That worries governors who see a great risk of losing factories and jobs to states in better financial shape—further increasing regional discrepancies.</span></p> <p><span style="font-weight: 400;">São Paulo, the richest state of the federation, has announced a series of incentives for companies. Automakers get tax cuts of up to 25% if they invest and create jobs in the state. And airlines get cheaper fuel if they increase the number of departures within the state. A move, by the way, which has been criticized by economists, who see no point at giving incentives to a decaying industry such as automobiles.</span></p> <hr /> <h2>Embrapa to launch genetically-modified pinto beans</h2> <p><span style="font-weight: 400;"><a href="https://brazilian.report/money/2018/06/14/agricultural-research-embrapa/">Embrapa</a>, the Brazilian Agricultural Research Corporation, is set to launch Brazil&#8217;s first genetically-modified pinto beans this month. The new product is resistant to the golden mosaic virus—which can destroy entire plantations.</span></p> <p><span style="font-weight: 400;">Producers, however, are resistant to the new bean, fearing that consumers might not be keen on buying a genetically-modified product. Embrapa, however, is emphatic in defending its new creation. &#8220;The main control method for the golden mosaic virus is using pesticides—with up 20 sprayings per harvest, not always having the desired effects,&#8221; says the state-run company. Each round of spraying can cost up to BRL 100/hectare, crushing producers&#8217; margins.</span></p> <p><span style="font-weight: 400;">Their fears, however, are grounded in reality. A recent <a href="https://www.ipsos.com/pt-br">Ipsos</a> survey shows that the term &#8220;genetically-modified&#8221; inspires fear from Brazilian consumers, with 41% saying they wouldn&#8217;t eat such food products.</span></p> <hr /> <h2>What else you need to know today</h2> <p><span style="font-weight: 400;">Radicalism. A survey carried out by Ipsos in 27 countries shows that political radicalism has gotten to worrisome levels in Brazil. 32% of Brazilians believe that it is not worth talking to people who don&#8217;t think alike—only India and South Africa had higher rates. Also, 44% of people believe Brazil has gotten more dangerous due to political polarization. </span></p> <p><span style="font-weight: 400;">Land. Over the first 100 days of the Bolsonaro administration, only one land occupation of landless workers was registered. In the same period last year, there were 43 occupations. President Bolsonaro&#8217;s radical opposition to such groups is a factor—alongside easier access to guns by landowners. But the main factor might be the lack of funds—during the Workers&#8217; Party era, landless movements benefited from public money through NGOs. Ten murders in rural areas were registered this year.</span></p> <p><span style="font-weight: 400;">Holocaust. President Bolsonaro wrote a letter to Israeli President Reuven Rivlin apologizing for suggesting that the crimes of the Holocaust could be forgiven though not forgotten. In response to the backlash, Mr. Bolsonaro wrote: “Forgiveness is something personal, my speech was never meant to be used in a historical context, especially one where millions of innocent people were murdered in a cruel genocide.”</span></p> <p><span style="font-weight: 400;">Award. New York Mayor Bill de Blasio is calling on the American Museum of Natural History to cancel an event where the guest of honor is Jair Bolsonaro—whom he called a &#8220;very dangerous human being.&#8221; The honor will be delivered by the Brazilian-American Chamber of Commerce. The museum initially said it didn’t know Mr. Bolosanaro was being feted when the rental deal was made. “We are deeply concerned and we are exploring our options,” the museum tweeted Thursday night.

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BY Gustavo Ribeiro

An award-winning journalist with experience covering Brazilian politics and international affairs. His work has been featured across Brazilian and French media outlets.