Good morning! Petrobras tries to show independence from political meddling. Big takes from the Economy Minister. Watering down the pension reform.

Petrobras tries to show independence from political meddling

In an effort to end the latest crisis around its pricing policy, Petrobras announced a 4.8% bump on diesel prices (roughly BRL 0.10/liter). CEO Roberto Castello Branco assured investors of the company’s political independence, but the fact that the hike is smaller than the one Petrobras tried to implement last week (which was blocked by President Bolsonaro) suggests the pricing policy is not entirely immune to the political climate.

</span></p> <p><span style="font-weight: 400;">Mr. Castello Branco also announced that further price bumps may come at intervals longer than 15 days, depending on &#8220;what the company deems to be appropriate.&#8221; Between 2016 and 2018, the company&#8217;s prices were pegged to international rates, changing almost on a daily basis. That helped Petrobras to recover from a profound financial crisis, but also sparked the truckers&#8217; strike in May 2018.</span></p> <p><span style="font-weight: 400;">Markets&#8217; first response was positive: after the announcement, Petrobras shares on the New York Stock Exchange rose 2.8% in the aftermarket. But analysts demanded more transparency in the company&#8217;s pricing policy. Despite the price bump, diesel prices in Brazil are 14% below the international average, per Global Petrol Prices (USD 0.91 and USD 1.06/liter).</span></p> <p><span style="font-weight: 400;">Groups of truckers are threatening another strike in May. The sector is highly disgruntled, asking for the government to ensure that minimum freight prices are being enforced. According to a study by two professors from the Federal University of Rio Grande, one factor shows why a new truckers&#8217; strike remains on the horizon: autonomous truck drivers have lost 20% of their earnings over the past year.</span></p> <p><span style="font-weight: 400;">Go deeper: <a href="">Is Brazil heading for another truckers’ strike?</a></span></p> <hr /> <h2>Watering down the pension reform</h2> <p><span style="font-weight: 400;">The government failed to gather enough support to vote on the pension reform bill in the House&#8217;s Constitution and Justice Committee (CCJ). A new vote has been scheduled for April 23—but no consensus has been established yet. Congressman Delegado Waldir, the whip for President Jair Bolsonaro&#8217;s Social Liberal Party (PSL), summed up the problem: &#8220;PSL is one of the least dependable parties. Our guys are suffering a lot of pressure on social media [against the reform].&#8221;</span></p> <p><span style="font-weight: 400;">While the CCJ is only tasked with determining whether the bill respects constitutional principles, centrist parties are already trying to water down the reform. Four points are being targeted:</span></p> <ul> <li><span style="font-weight: 400;">The end of FGTS (a severance fund for dismissed workers) payments for retired people still in work;</span></li> <li><span style="font-weight: 400;">The possibility of lowering the compulsory retirement age of Supreme Court Justices;</span></li> <li><span style="font-weight: 400;">Changing the rules for lawsuits concerning the social security system, and</span></li> <li><span style="font-weight: 400;">Giving the Executive branch exclusive rights to change the pension system from now on.</span></li> </ul> <p><span style="font-weight: 400;">After the reform failed to move forward, the Brazilian currency lost value against the U.S. Dollar—going against the tide of other emerging currencies. Economy Minister Paulo Guedes signaled he could offer BRL 6bn to aid cash-strapped states, but conditioned the money to the approval of reforms.</span></p> <p><span style="font-weight: 400;">Go deeper: <a href="">Jair Bolsonaro becomes his own worst enemy in pension reform fight</a></span></p> <hr /> <h2>Big takes from the Economy Minister</h2> <p><span style="font-weight: 400;">Economy Minister Paulo Guedes gave an interview to GloboNews, Brazil&#8217;s leading news cable channel, on Wednesday evening. Here are the main takes from the interview:</span></p> <p><span style="font-weight: 400;">Pension reform: The minister admitted there are &#8220;coordination issues&#8221; in Congress, due to a lack of experience of a renewed Congress. He said the government is willing to negotiate some points of the reform, without specifying which ones. He reaffirmed the reform will bring savings of over BRL 1 trillion and admitted that supporting the pension reform bill presented by the previous administration would have fast-tracked the process. &#8220;It takes time to get it right.&#8221;</span></p> <p><span style="font-weight: 400;">Petrobras&#8217; pricing policy: Mr. Guedes said that the oil company must find a balance between daily price changes (which is &#8220;not reasonable for the Brazilian economy&#8221;) and price controls (&#8220;which would destroy Brazil&#8217;s investment capacity&#8221;).</span></p> <p><span style="font-weight: 400;">Tax reform: The government&#8217;s objective is to lower the tax burden from 36% to 30% of the <a href="">GDP</a>. Mr. Guedes said that, &#8220;ideally,&#8221; future administrations would follow the trend until Brazil&#8217;s tax bill reaches 20%. He reaffirmed the intent to merge different taxes into one value-added tax (VAT).</span></p> <hr /> <h2>What else you need to know today</h2> <p><span style="font-weight: 400;">Violence. According to official data from Brazil&#8217;s 27 states, the number of homicides in Brazil has dropped 25% in the first two months of 2019, confirming a trend that comes from 2018. The Northeast, Brazil&#8217;s most violent region, has consistently improved its numbers. Ceará, a state in the middle of international drug shipping routes to Europe, has reduced its murder rate by 58%—even after almost 300 attacks by criminal groups in January and February. </span></p> <p><span style="font-weight: 400;">Education. Brazilian states and municipalities have until 2024 to ensure that all kids between 6 and 14 years old have finished—or are at least enrolled in—elementary school. Data from state accounting courts, which monitor public spending, show that 89% of cities risk not meeting this goal, which was set by the 2014 National Education Plan.</span></p> <p><span style="font-weight: 400;">Conspiracy? Congressman Marco Feliciano, the government&#8217;s deputy whip in the House, filed an impeachment request against Vice President Hamilton Mourão, alleging he is conspiring against President Jair Bolsonaro. The evidence would be the fact that the VP liked a tweet in which a journalist says Mr. Mourão is more fit for office than the president. Mr. Feliciano says this request &#8220;is a warning shot.&#8221;</span></p> <p><span style="font-weight: 400;">Peru. Alan García, Peru&#8217;s president between 1985–1990 and 2006–2011, committed suicide yesterday to avoid being arrested in an Operation Car Wash-related investigation. He is accused of pocketing USD 300,000 in bribes from construction company Odebrecht—which admitted to paying USD 29m in kickbacks to Peruvian politicians.</span></p> <p><span style="font-weight: 400;">Neymar. The Ministry of the Economy confirmed that Minister Paulo Guedes met yesterday with the father of Neymar Jr., the star footballer who plays for Brazil&#8217;s national team and Paris Saint-Germain in France. They reportedly talked about the player&#8217;s BRL 69m tax debt. In 2015, Neymar was fined BRL 188m by revenue authorities—after being accused of not paying BRL 63m in taxes.

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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.