Good morning! Donald Trump says he wants a Brazil-U.S. trade deal, and that could be beneficial for Brazilian producers. Jair Bolsonaro wants to loosen up slave labor laws. The markets’ “Super Wednesday.” Enjoy your read!

A Brazil-U.S. trade deal? Trump says so

Donald Trump said on Tuesday that he will seek to establish a trade deal with Brazil, suggesting

that his close relationship to Jair Bolsonaro could help lower tariffs. U.S. Secretary of Commerce Wilbur Ross is in Brasília today, and is scheduled to meet several business owners, as well as President Bolsonaro and Economy Minister Paulo Guedes. Marcos Troyjo, Brazil’s Deputy Economy Minister for Foreign Trade, said Brazil has &#8220;ambitious&#8221; goals to enhance its trade with the U.S.—especially with regard to infrastructure.</p> <p><strong>Why it matters. </strong>The U.S. is Brazil&#8217;s number two trading partner, behind China. But, unlike the Asian giant, the Americans don&#8217;t only buy commodities from Brazil—they are also big buyers of Brazilian manufactured goods, such as airplane parts and engines, gasoline, and heavy machinery. As a matter of fact, exports to the U.S. generate more wealth in Brazil than those to China.</p> <div class="flourish-embed" data-src="visualisation/551690"></div><script src=""></script> <p>“We’ve got to expand trade with the Americans—with whom we don’t have a free trade deal—and enhance ties with our neighbors, removing the existing trade barriers,” said Carlos Abijaodi, industrial development director at Brazil&#8217;s National Confederation of Industries.</p> <p><strong>Eduardo. </strong>U.S. President Donald Trump also welcomed the possibility of Congressman Eduardo Bolsonaro—son of President Jair Bolsonaro—acting as the Brazilian ambassador to Washington. &#8220;He’s a brilliant, wonderful young man,&#8221; Mr. Trump told reporters. The American president (who has his daughter and son-in-law working as White House advisers) added that Mr. Bolsonaro naming his son ambassador was not nepotism.</p> <ul><li><strong>Go deeper: </strong><a href="">Exporting to China generates less revenue for Brazil</a></li></ul> <hr class="wp-block-separator"/> <h2>The markets&#8217; &#8220;Super Wednesday&#8221;</h2> <p>&#8220;Super Wednesday&#8221; has arrived. Today, the U.S. Federal Reserve is expected to lower interest rates for the first time since the 2008 financial crisis. Meanwhile, Brazil&#8217;s Central Bank should push the Selic benchmark interest rate to its lowest point in history. A poll by Bloomberg among 31 investment firms shows that 12 of them expect a 0.5-percentage point cut, while 16 are betting on a 0.25 one (with a minority expecting things to remain as they are).</p> <p><strong>Why it matters.</strong> In Brazil, many believe that with lower interest rates, businesses will be more prone to invest—and that could breathe some life into the country&#8217;s stalling economy, particularly when Congress is set to approve a pension reform (and possibly make advances on a tax reform) within the next few months. Itaú CEO Candido Bracher <a href="">told</a> one newspaper that this confluence of factors would make for the &#8220;best macroeconomic scene&#8221; he has ever seen in Brazil.</p> <p><strong>Yes, but… </strong>The Brazilian GDP is heavily dependent on family consumption—and job market numbers continue bleak, with over 13m people out of work. Moreover, while the benchmark rate is already at historically low levels, consumers are still exposed to sky-high rates. Annual rates for credit cards topped 270% for unpaid balances.&nbsp;</p> <p><strong>By the way. </strong>Credit cards and installment credit are widespread, with over 77% of households exposed to them in some way.</p> <div class="flourish-embed" data-src="visualisation/554393"></div><script src=""></script> <hr class="wp-block-separator"/> <h2>Bolsonaro wants to loosen slave labor rules</h2> <p>President Jair Bolsonaro criticized a law that orders the expropriation of lands and buildings where slave labor is carried out. In today&#8217;s Brazil, employers can be charged with promoting slave labor when they keep workers under the following conditions: forced labor, exhaustive hours, servitude for debt, and degrading working conditions. President Bolsonaro took issue with the final component, saying that job-creating farmers are labeled as slavers just because they give their workers &#8220;torn up linen.&#8221; Following the president&#8217;s words, allies talked about new laws for dealing with slave labor, in order to &#8220;curb abuse.&#8221;</p> <p><strong>Why it matters.</strong> Slave labor remains a reality in Brazil—with an estimated 161,000 modern slaves in the country. The phenomenon is especially present in (but not exclusive to) remote areas. In the past 20 years, over 53,000 enslaved people were rescued by authorities. The number of rescued workers went from 341 in 2017 to 1,700 last year—the first bump since 2007. According to labor prosecutors, that has everything to do with the economic crisis—without job perspectives, workers are more prone to subject themselves to degrading conditions. &#8220;Extreme poverty and slavery are siamese twins,&#8221; said Maria Cláudia Falcão, a member of the International Labor Organization (ILO) in Brazil.</p> <p><strong>Danger.</strong> The budget for anti-slavery operations has been cut severely over the past decade (which makes the bump in rescued workers all the more worrisome, as labor prosecutors were able to find more people with fewer resources). Mr. Bolsonaro&#8217;s speech on slave labor is a further indication of what has been an effort to dismantle human rights policies in Brazil.</p> <p><strong>The Brazilian Report</strong> is currently a part of a documentary production for the ILO about slavery. And we can attest that workers considered to be enslaved are subject to much more than just &#8220;torn up linen.&#8221;</p> <figure class="wp-block-image"><img src="" alt="" class="wp-image-21536" srcset=" 942w, 300w, 768w, 610w" sizes="(max-width: 942px) 100vw, 942px" /></figure> <ul><li><strong>History:</strong> <a href="">Slavery in Brazil</a></li></ul> <hr class="wp-block-separator"/> <h2>What else you should know</h2> <p><strong>Tax reform. </strong>Brazil&#8217;s 27 governors have come to an agreement to back the current tax reform proposal being discussed in Congress. The bill unifies consumer taxes at the federal, state and municipal levels, and should reduce red tape to make Brazil&#8217;s tax code more predictable for companies. The governors&#8217; only caveat is that they want more power over the federal administration on tax enforcement. Next week, our <em>Explaining Brazil </em>podcast will interview one of the people who drafted the bill, tax expert Vanessa Rahal.</p> <p><strong>Startups.</strong> Japan&#8217;s SoftBank has already led investment rounds that injected USD 700bn in Brazilian startups. This week, they poured BRL 760m into fintech Banco Inter in exchange for 8% of shares. Inter&#8217;s follow-on offering raised a total of BRL 1.24bn. SoftBank reportedly tried to negotiate with another fintech, NuBank, but talks didn&#8217;t progress.</p> <p><strong>Budget cuts.</strong> The government has finally detailed which areas will lose money with the new BRL 1.44bn budget freeze. Under President Jair Bolsonaro, no area has lost more money than the Ministry of Education, which has seen a total of BRL 6.2bn in cuts already this year.</p> <p><strong>Impeachment 1. </strong>Janaína Paschoal, a state lawmaker for São Paulo (and one of those responsible for the impeachment request that ousted former President Dilma Rousseff) has asked for the removal of Supreme Court Chief Justice Dias Toffoli. The request is based on the justice&#8217;s recent decision to suspend all investigations using data from the money laundering enforcement agency without a court decision (the law, however, gives the agency power to flag suspicious financial operations).&nbsp;</p> <p><strong>Impeachment 2. </strong>It shouldn&#8217;t have any result—at least, not for now—as the Senate, which would be responsible for impeachment proceedings against a member of the Supreme Court, doesn&#8217;t seem to be the slightest bit inclined to engage in a war with another branch of power. The Senate and Supreme Court have been at each other&#8217;s throats in recent years, but incumbent Senate President Davi Alcolumbre doesn&#8217;t seem eager to breach the momentary peace.

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BY Gustavo Ribeiro

Gustavo is the founder of The Brazilian Report, and is an award-winning journalist with experience covering Brazilian politics and international affairs. His work has been featured across Brazilian and French media outlets.