São Paulo, 3 pm, on August 19, 2019

Good morning! Why did São Paulo skies turn dark in the middle of the afternoon? Brazilian soy in the middle of the U.S.-China trade war. Presidential pressure sees tax secretary sacked. (This newsletter is for platinum subscribers only. Become one now!)


Did Bolsonaro turn day into night?

Citizens of São Paulo were shocked

on Monday afternoon as the city&#8217;s skies became abnormally dark around 3 pm, three hours before sunset. While the National Institute of Meteorology put the phenomenon down to incredibly thick low cloud and an incoming cold front, Twitter users were quick to make a connection between the unusual darkness and a cloud of smoke coming from deliberate forest fires in Brazil&#8217;s North. Experts from the National Institute of Space Research (Inpe) dismissed claims that the dark clouds were a result of the traveling mass of smoke, but conceded that fires from Paraguay and Brazil&#8217;s Center-West state of Mato Grosso may have made some contribution.</p> <p><strong>Why it matters. <span style="font-weight: 400;"><a href="http://www.inpe.br/">Inpe</a> data has shown that forest fires have increased 82% in Brazil this year, concentrated largely in the state of Rondônia, the south of Pará, and Mato Grosso. Cities with the most fires are also those which are leading the way in deforestation, leading to the conclusion that these blazes were started deliberately. Figures from Inpe also show that deforestation has increased by 15% in the last 12 months</span></strong>.</p> <p><strong><b>Climate Change Week</b>. <span style="font-weight: 400;">Monday saw the beginning of the Latin American and Carribean Climate Change Week in Salvador. The event, organized by the United Nations, gathers political representatives and organizations working to conserve the environment around the world. The first day stressed the participation of states and municipalities in climate change actions, in light of the &#8220;reluctance&#8221; of the federal government</span></strong>.</p> <hr class="wp-block-separator"/> <h2>Brazilian soy in the middle of the U.S.-China trade war</h2> <p><span style="font-weight: 400;">Without picking a side or being directly involved, Brazil has been thrust into the middle of the ongoing U.S.-China trade war thanks to its biggest export: soybeans. After Beijing slapped 25% tariffs on a variety of American agricultural commodities—in response to the U.S.&#8217; hike on taxes for Chinese manufactured goods—American soybeans have become too expensive for China, which has simply swapped U.S. soybeans for Brazilian exports.</span></p> <p><strong>Why it matters.</strong> <span style="font-weight: 400;">Brazil is now the world&#8217;s largest soybean exporter and China&#8217;s biggest supplier. Despite a 20% fall in demand this year (largely a result of African swine fever outbreaks among Chinese pig producers), Brazil&#8217;s soybean exports were up 35% last year, inflicting huge damage to the U.S. soy industry</span>.</p> <hr class="wp-block-separator"/> <h2>Presidential pressure sees tax secretary sacked</h2> <p>Under pressure from the Bolsonaro government, Brazil&#8217;s Federal Revenue Service has been coerced into dismissing its number two, Deputy Secretary João Paulo Ramos Fachada. The secretary was fired for opposing attempts by the administration to interfere in the agency. Mr. Fachada was a well respected member of the tax authority, having participated in important debates over the country&#8217;s impending tax reform. Within the Federal Revenue Service, it is feared that more dismissals are on the way.</p> <p><strong>Why it matters.</strong> The move against the tax authority comes as a wider push from the Jair Bolsonaro government to undermine control agencies due to investigations into people from the president&#8217;s circle, such as his son, Senator Flávio Bolsonaro, and former advisor and close family friend Fabrício Queiroz. <strong>Cuts.</strong> As a result of budget cuts, the Federal Revenue Service has been faced with the reality of paralyzing some of its systems. On Sunday 25, the authority is expected to stop emitting individual taxpayer IDs (CPFs) and issuing tax rebates.</p> <hr class="wp-block-separator"/> <h2>What else you should know today</h2> <p><strong>Prosecutor General. <span style="font-weight: 400;">The current leader in the race for Prosecutor General—to be appointed by Jair Bolsonaro—is Deputy Prosecutor Antônio Carlos Soares. Recommended by Flávio Bolsonaro, Mr. Soares had retired between 2010 and 2015, until he was forced back to work by the Federal Accounting Court, which deemed his pension was illegal due to irregularities in his documentation. In an article from 2014, he called democracy a &#8220;real hoax&#8221; and claimed the media only support it &#8220;for their own interests.&#8221;</span></strong></p> <p><strong>Markets 1.</strong> Continued fears of an impending global recession saw the BRL lose 1.6% of its value yesterday, against the USD. The American currency closed the day at BRL 4.069, which is the highest level since May. News of an inverted yield curve in the U.S. has forced investors to pull their money out of emerging markets and buy USD.</p> <p><strong>Markets 2.</strong> The benchmark index of Ibovespa also closed on a low, dropping below the symbolic threshold of 100,000 points. In 2019 so far, BRL 19.16bn of foreign capital has been taken out of Brazil&#8217;s stock exchange, which is already higher than the BRL 16.53bn seen in 2008, at the height of the global financial crisis.</p> <p><strong>Extradition.</strong> Chilean national Maurício Hernández Norambuena is set to be extradited to his home country in the coming weeks, 16 years after being put in Brazilian jail for kidnapping publicist Washington Olivetto in São Paulo in 2001. Mr. Norambuena was recently moved to a penitentiary in the interior of São Paulo state and will now serve the rest of his 30-year sentence in Chile. At the time of the events, he confessed that the BRL 10m ransom fee he requested was to fund guerrilla groups in the armed struggle in his home country.</p> <p><strong>Gangs in court.</strong> Despite waging a bloody war on the streets of Brazil, the country&#8217;s two biggest crime gangs—the First Command of the Capital (PCC), from São Paulo, and the Red Command (CV), from Rio de Janeiro—have reportedly joined forces to take Justice Minister Sergio Moro to court over the changes he has proposed to the Brazilian penitentiary system. The groups have filed three cases before the Supreme Court to question Mr. Moro&#8217;s bans on physical contact between inmates and their families, and conjugal visits.

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BY Euan Marshall

Euan Marshall is a Scottish journalist living in São Paulo. He is co-author of A to Zico: An Alphabet of Brazilian Football.