Good morning. Petrobras just recorded the biggest quarterly profits in its history. A new plan to take doctors to remote Brazilian areas. The Supreme Court v. Operation Car Wash. Enjoy your read!


Petrobras has best quarterly results in history

Brazil’s state-owned company Petrobras has reported

BRL 18.8bn in profits over Q2 2019—the best quarterly result in its history. The main drive was the sale of a pipeline network to a French-Canadian consortium for BRL 33bn. CEO Roberto Castello Branco informed that the company concluded USD 15bn of divestments in June, and said that &#8220;much more is to come.&#8221;</p> <p><strong>Why it matters.</strong> Just a few years ago, Petrobras was in trouble. Years of poor management and rampant corruption within its ranks turned the company into the <a href="https://www.wsj.com/articles/perfect-storm-at-petrobras-the-worlds-most-indebted-oil-company-1447944976">most-indebted oil company in the world</a> with liabilities of USD 127bn as of September 2015. Its debts now stand at USD 76bn, with an average maturity of 10.25 years and a stable average cost of 6% a year. The recovery began in 2016, with the nomination of <a href="https://brazilian.report/money/2018/06/02/petrobras-boss-pedro-parente-resignation/">former CEO Pedro Parente</a>—who started to promote divestments and pegged fuel rates in Brazil to international oil fares, ending the price-control policies that helped deplete the company&#8217;s finances. His two predecessors have kept the same style of management.</p> <div class="flourish-embed" data-src="visualisation/560557"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <p><strong>Petrobras privatizations.</strong> Mr. Castello Branco said that the next subsidiary to be privatized is Liquigás, a distributor of household bottled gas. The process started in April and offers will be entertained until August 7. </p> <p><strong>By the way. </strong>President Jair Bolsonaro gave his green light to the privatization of Eletrobras, Brazil&#8217;s state-owned power company. However, the process is set to be long and complex, experts say.</p> <hr class="wp-block-separator"/> <h2>Jair Bolsonaro relaunches More Doctors Program</h2> <p>The Ministry of Health launched the &#8216;Doctors for Brazil&#8217; program, a rebranded version of the defunct &#8216;More Doctors&#8217;—created in 2013 by the Dilma Rousseff administration to use Cuban doctors in remote areas, to occupy posts Brazilian physicians usually refuse to take. The new version is bigger than the original, with 18,000 positions paying between BRL 12,000 and 31,000.&nbsp;</p> <p>More Doctors died soon after Jair Bolsonaro&#8217;s election for president. A fierce critic of the use of Cuban doctors, Mr. Bolsonaro had promised to create hurdles for them to work in Brazil—leading Havana to unilaterally pull out of the contract.</p> <p><strong>Why it matters.</strong> The program—which was praised even by critics of the president—could help curb the sheer concentration of doctors in big urban centers. A report by the University of São Paulo showed that 55% of Brazilian doctors work in state capitals, where only 24% of the population resides. “While there are 5.07 doctors per 1,000 residents in state capitals, the rate in the countryside drops to 1.28,” says the report. In the state of Amazonas, for instance, 93% of doctors are located in the state capital of Manaus, the home of only half of the state’s total population.</p> <div class="flourish-embed" data-src="visualisation/560579"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <hr class="wp-block-separator"/> <h2>The Supreme Court to go after Operation Car Wash</h2> <p>Right after new message leaks showed that Operation Car Wash&#8217;s lead prosecutor Deltan Dallagnol backed scrutinizing the financial transactions of Supreme Court Chief Justice Dias Toffoli (which is outside of his jurisdiction), the highest court in the land reacted. It requested the Federal Police to hand over all the evidence found in possession of the four alleged hackers arrested last week—including the stolen private messages exchanged by members of the probe.</p> <p><strong>Why it matters.</strong> The Supreme Court is expected to make an example out of Mr. Dallagnol and remove him from the operation. It remains uncertain what are the effects of such a move on the criminal cases raised by the investigation. Let&#8217;s not forget that the court will soon decide on a request by jailed former President Lula to vacate his conviction on the grounds that the case&#8217;s judge, current Justice Minister Sergio Moro, was biased against him.</p> <p><strong>Self-protection. </strong>It&#8217;s not that the court doesn&#8217;t have reasons to punish Mr. Dallagnol, as the leaked messages show many transgressions during the progress of Operation Car Wash. But the timing of its decision suggests it could have been primarily motivated by corporatist interests being put above due process.</p> <hr class="wp-block-separator"/> <h2>You should also know</h2> <p><strong>Energy. </strong>Two months after being signed, the deal concerning the rights over energy produced by the bi-national Itaipu dam was canceled. It sparked fury in Paraguay—and even an impeachment request against President Mario Abdo Benítez. The new terms would increase the country&#8217;s energy costs by USD 200m per year. The current deal for Itaipu (responsible for 15% of the power consumed in Brazil) expires in 2023.</p> <p><strong>Oil.</strong> Brazil&#8217;s National Petroleum Agency predicts a 40% growth in the country&#8217;s oil output until 2023—from 2.7m to 3.756m barrels per day. However, to fully reach this potential, the country would need to invest BRL 17.4bn in new production units over the next five years. The agency also defended recent fuel price bumps announced by Petrobras. </p> <p><strong>5G.</strong> U.S. Secretary of Commerce Wilbur Ross said the American government shared &#8220;private information&#8221; with &#8220;relevant persons&#8221; in Brazil about data security vulnerabilities created by 5G technology. The warning comes two months after Brazilian Vice President Hamilton Mourão visited China, and defended that Huawei should be allowed to take part in developing 5G in Brazil. The U.S., meanwhile, treats the Chinese company as a security threat, accusing it of collaborating with Beijing&#8217;s government.</p> <p><strong>Fintechs.</strong> Nubank&#8217;s new USD 400m investment round will help finance the digital bank&#8217;s expansion to Mexico and Argentina. Recently, the Latin American Federation of Banks warned traditional players about the dangers of digital-only banks—despite having a small market share now, they could become very relevant very quickly in a region where access to bank accounts and credit cards is by no means universal. Their advance lies on the still lax regulation around fintechs, coupled with their reduced costs for not having physical branches.</p> <p><strong>Indigenous affairs.</strong> In a rare unanimous decision, the Supreme Court upheld the responsibility for demarcating indigenous lands with Funai, Brazil&#8217;s agency for indigenous affairs. The ruling repeals a decree by President Bolsonaro, which gave this power to the Agriculture Ministry—which is controlled by the ruralist lobby. The decree was issued after Congress had already struck down the change, which sparked criticism from Justice Celso de Mello, the longest-serving member of the court. He called Mr. Bolsonaro&#8217;s move an &#8220;inadmissible and dangerous transgression against the separation of powers.&#8221;

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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.