Good morning! No real gains to the minimum wage. Petrobras continues divestments (but is now under investigation). Brazilians are regaining trust in democratic institutions.

Minimum changes to the minimum wage

Congress’ Budget Committee approved the Budget Directives Law (LDO) yesterday, raising the minimum wage in Brazil from

BRL 998 per month to BRL 1,040. The slight bump only manages to cover inflation, without bringing any real gain to the minimum wage. This is expected to continue for the next two years, officially breaking with the policy of raising the minimum wage to match inflation and the previous year&#8217;s GDP expansion.</p> <p><strong>Why it matters.</strong> The minimum wage is the reference for at least 45m Brazilians, and is considered by experts as a highly effective tool to promote improvements in the quality of life of poorer populations—and stimulate consumption. Between 2004 and 2019, the minimum wage rose 74% above inflation—which is one of the reasons so many Brazilians were lifted out of extreme poverty. However, pensions and benefits are indexed to the minimum wage, which creates a heavy load for the cash-strapped government. Economy Minister Paulo Guedes says that every additional BRL 1 has an impact of BRL 300m for the federal budget.</p> <p><strong>Losing revenue.</strong> A study by think tank Fundação Getulio Vargas shows how hard the latest recession hit different groups of people. Brazilians in general lost 2.4% of their individual income—but youngsters, black people, and those living in the North and Northeast were hit the hardest.</p> <div class="flourish-embed" data-src="visualisation/580690"></div><script src=""></script> <ul><li><strong>Go deeper: </strong><a href="">What to expect from Jair Bolsonaro’s first budget?</a></li></ul> <hr class="wp-block-separator"/> <h2>Petrobras sells biofuels subsidiary</h2> <p>Brazil&#8217;s state-owned oil firm Petrobras informed investors it has sold 50% of its share in Belem Bioenergia Brasil, a biofuels company, to Galp Bioenergy (which owns the remaining half of the company, created in 2011). The deal is worth BRL 24.7m—and is pending approval by antitrust regulators.</p> <p><strong>Why it matters.</strong> Petrobras continues its recovery from its recent crisis by selling off non-core assets. This year alone, the company has raised USD 15.1bn with divestments. Next week, the company will field offers for Liquigás, its subsidiary for bottled gas distribution. The deal is expected to be worth roughly USD 770m.</p> <p><strong>Investigation.</strong> The Federal Prosecution Office has opened an investigation into the resignation of former Petrobras CEO Pedro Parente last year. The move followed the truckers&#8217; strike, which forced the government to interfere with the company&#8217;s pricing policy, which Mr. Parente didn&#8217;t accept. However, the resignation was announced during trading hours—leading to a 15% drop in Petrobras share prices (or a BRL 40bn loss in market cap). Meanwhile, BRF (the company Mr. Parente later joined) saw its stocks rise 9%.</p> <hr class="wp-block-separator"/> <h2>Brazilians regaining trust in institutions</h2> <p>A survey by Ibope shows that Brazilians are more appreciative of the country&#8217;s institutions. Interestingly enough, no institution regained more trust than the presidency, which went from 13 to 48 points on a 0-100 scale, the highest since 2012. This, despite the fact we now have arguably the most polarizing president in Brazilian democratic history.</p> <p><strong>Why it matters.</strong> In recent years, mistrust in democratic institutions reached worrisome levels, with fewer Brazilians each year saying that democracy is the best political system to live in. While political parties and Congress remain in the bottom 2 positions, they showed significant gains: parties jumped from 16 to 27 points, while Congress went from 18 to 34. One can only hope it is a sign that Brazil will be less prone to accept anti-democratic actions by extremist political groups.</p> <div class="flourish-embed" data-src="visualisation/580644"></div><script src=""></script> <hr class="wp-block-separator"/> <h2>You should also know</h2> <p><strong>Moro.</strong> Justice Minister Sergio Moro had a nightmarish day yesterday. His anti-crime bill was shelved by none other than the president himself, after which he had to explain to the Supreme Court his actions in the investigation into the hacking of authorities. A &#8220;super minister&#8221; in January, Mr. Moro now seems like an odd man out in Jair Bolsonaro&#8217;s cabinet.&nbsp;</p> <p><strong>Earnings. </strong>Banco do Brasil reported BRL 8.7bn in profits over the first half of 2019, up 39% from a year ago. The bank credited that to more credit operations for individuals and small- and medium-sized businesses. The bank also prioritized its cost-cutting program—it will require expenses of BRL 300m this year, in order to generate annual savings of BRL 500m as of 2020.</p> <p><strong>Torture.</strong> Yesterday, President Jair Bolsonaro called the late Army Colonel Carlos Alberto Brilhante Ustra a &#8220;national hero.&#8221; Mr. Ustra, who died in 2015, headed the infamous DOI-CODI intelligence unit, responsible for going after political enemies of the military dictatorship (1964–1985). Brazil’s National Truth Commision recorded 45 deaths or disappearances, as well as 502 cases of torture, during Mr. Ustra&#8217;s four-year tenure.</p> <p><strong>Slave labor.</strong> Brazil&#8217;s Labor Prosecution Office reached a deal with HBO Latin America to help fund a series about modern slavery in Brazil. Since the mid-1990s, Brazil has rescued over 50,000 modern slaves. However, government funding is going down and with less oversight (coupled with a struggling economy), more cases are being registered in recent years. The Labor Prosecution Office is about to launch a documentary on the issue, a production in partnership with the International Labor Organization—and scripted by <strong>The Brazilian Report</strong>.</p> <p><strong>Press 1.</strong> Congressman Eduardo Bolsonaro—who is set to be named ambassador to the U.S.—defended that AT&amp;T-Warner should no longer have restrictions on how it operates cable TV provider Sky and production company HBO in Brazil. A 2011 antitrust regulation prohibits cross-ownership by media companies to avoid monopolies. Mr. Bolsonaro hopes the government lifts the restrictions—hoping to hit the Globo group, called &#8220;the enemy&#8221; by his father.</p> <p><strong>Press 2.</strong> The Brazilian Embassy in Washington wrote a letter to <em>The Washington Post</em> countering the <a href="">editorial</a> talking about Jair Bolsonaro&#8217;s &#8220;reality denial.&#8221; In response, the newspaper published a long interview with Ricardo Galvão, who was fired as head of the National Institute for Space Research (Inpe) after publishing numbers showing the rise of Amazon deforestation, which displeased the government.

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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.