Presidents Emmanuel Macron, from France, and Jair Bolsonaro, from Brazil.

Good morning! A look at Brazil-France relations, amid the feud between Jair Bolsonaro and Emmanuel Macron. Brazil could finally accept international money to fund anti-deforestation projects. A landmark trial that could affect Operation Car Wash. The changes to the pension reform bill in the Senate. The government’s strategy to tame the devaluation of the Brazilian currency. (This newsletter is for platinum subscribers only. Become one now!)


Social media bravado creates rift between Brazil and France

The escalating war of words between Brazilian President Jair Bolsonaro and his French counterpart, Emmanuel Macron, has pushed Brazil-France relations

to their worst state in at least 50 years. The dispute began around Amazon fires and evolved into a personal feud. Its latest development was a social media comment mocking the appearance of French First Lady Brigitte Macron—seen by the international community as a particularly low blow.</p> <p><strong>Why it matters.</strong> While France accounts for only 2% of Brazil&#8217;s imports, French presence in the country is quite important—companies from France are the biggest foreign employers in Brazil, with over 500,000 direct jobs in groups such as L&#8217;Oréal, Casino, and Carrefour. Moreover, Brazil is the fifth-biggest destination for investments from the French Development Agency, which amount to almost EUR 2bn. Not to mention the project to build, by 2029, one nuclear submarine and four conventional ones (the first of which has already been launched).</p> <p><strong>Track record. </strong>Brazil and France have a long history of cooperation in other areas, too. The University of São Paulo, Brazil&#8217;s most prestigious, was founded in 1934 with the help of a group of French intellectuals, including Roger Bastide, Claude Lévi-Strauss, and Pierre Monbeig.</p> <p><strong>Lobster War.</strong> Perhaps the lowest point in Brazil-France relations happened in the 1960s, in the so-called &#8220;Lobster War.&#8221; At the time, the Brazilian government didn&#8217;t allow French fishing vessels to catch spiny lobsters 160 kilometers off the Brazilian north-eastern coast, claiming lobsters &#8220;crawl along the continental shelf,&#8221; while the French maintained that &#8220;lobsters swim&#8221; and that therefore, they could be caught by any fishing vessel from any country. &#8220;The dispute was resolved unilaterally by Brazil, which extended its territorial waters to a 200-mile zone, taking in the contested lobster bed,&#8221; as written in the Encyclopedia of the United Nations and International Agreements.</p> <hr class="wp-block-separator"/> <h2>The pension reform is back</h2> <p>Senator Tasso Jereissati presented his report on the pension reform bill—a document that turned out to be less ambitious than initially promised. Mr. Jereissati proposed ten changes from the bill approved earlier this year by the lower house.</p> <p><strong>Why it matters.</strong> The pension reform is the heart and soul of the government&#8217;s economic agenda. Mr. Jereissati&#8217;s report lowers the savings the reform will be able to provide within the next decade, from BRL 1 tr to about BRL 900bn. The figure is still within the markets&#8217; expectations, but its changes could delay the timetable of the reform&#8217;s approval. By law, if the Senate makes any changes to the text approved by representatives, it must go back to the lower house for a final vote.</p> <p><strong>Strategy.</strong> Mr. Jereissati&#8217;s report includes some articles which had been struck down by the House, such as taxation on agricultural exporters. He believes that if the Senate proposes them, it will alleviate political pressure on representatives to eventually approve them.</p> <hr class="wp-block-separator"/> <h2>A landmark verdict</h2> <p>For the first time since Operation Car Wash was launched in 2014, the Supreme Court has overruled a conviction by former Federal Judge Sergio Moro. A panel of four justices decided to annul an 11-year sentence for corruption and money laundering slapped on Aldemir Bendine, a former CEO at Petrobras and Banco do Brasil.</p> <p><strong>Why it matters.</strong> The justices considered that due process was not respected, and that the defense was not given enough time to counter every point presented by the prosecution. Members of Operation Car Wash fear that the same interpretation could now be applied to many—if not all—similar Car Wash cases. This, however, would not include former President Lula, the operation&#8217;s most notorious defendant.</p> <p><strong>Losing momentum.</strong> The decision comes at a time when Sergio Moro, the Car Wash &#8220;hero&#8221; who became Jair Bolsonaro&#8217;s Justice Minister, is weakened. The government hasn&#8217;t backed his anti-crime bill, Congress approved new rules outlawing many of the tactics used by Car Wash investigators, and leaks from <em>The Intercept</em> showed he and prosecutors committed several ethical transgressions—and even illegalities—throughout the probe.</p> <hr class="wp-block-separator"/> <h2>The Central Bank&#8217;s move to tame the U.S. Dollar</h2> <p>Yesterday, the Brazilian Central Bank announced yet another auction of U.S. Dollars on the spot market in order to tame the rise of the American currency against the Brazilian Real. The move happened between 1:20 and 1:25 pm, when the USD had peaked at BRL 4.19. After the intervention, the Brazilian currency regained some ground, with the USD closing the day at BRL 4.14.</p> <p><strong>Why it matters.</strong> Since 2016, the Brazilian Central Bank has been known for its low level of interference with currency exchange rates, opting for a more orthodox approach. The bank had already announced a series of operations on the spot market—the first such moves since the 2009 crisis—which began on <a href="https://brazilian.report/money/2019/08/15/why-is-brazilian-central-bank-selling-dollars-after-ten-years/">August 21 and will run until tomorrow</a>, aiming at reducing currency volatility.</p> <p><strong>Trend.</strong> Central Bank President Roberto Campos Neto said that the Brazilian currency has not behaved abnormally when compared to other emerging currencies—which is true. However, the BRL has lost more ground against the USD than the Indian Rupee, South African Rand, Turkish Lira, Mexican Peso, or Russian Ruble.</p> <div class="flourish-embed" data-src="visualisation/628794"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <hr class="wp-block-separator"/> <h2>What else you should know today</h2> <p><strong>Amazon Fund.</strong> Governors of Amazon states met with President Jair Bolsonaro to discuss the spike of forest fires in the region. They want the government to accept funding from other countries—including the USD 22m offered by G7 countries, recently snubbed by the Jair Bolsonaro administration. Foreign Minister Ernesto Araújo <a href="https://oglobo.globo.com/sociedade/chanceler-de-bolsonaro-aceita-ajuda-de-10-milhoes-de-libras-do-reino-unido-para-amazonia-23909282?utm_source=newsletter&amp;utm_medium=email&amp;utm_campaign=newsdiaria">said</a> Brazil would accept GBP 10m from the U.K.—but it is not clear if this is the country&#8217;s share in the G7 pot, or if it is related to separate negotiations.</p> <p><strong>Soybeans.</strong> Politicians from the state of Mato Grosso—Brazil&#8217;s largest soybean producer—are worried that local farmers could face international barriers due to increasing deforestation. The state is home to some of the highest levels of forest destruction. &#8220;More than half of what we produce is bound for exports—so we depend on a good international image and good relationships with foreign markets,&#8221; said Governor Mauro Mendes, in an interview with <em>Folha de S.Paulo</em>.</p> <p><strong>Argentina.</strong> Consultancy firm Gustavo Córdoba &amp; Asociados published its latest opinion poll for the Argentinian presidential election—placing Kirchnerist candidate Alberto Fernández with 53% of voting intentions, and incumbent Mauricio Macri with 32%. This result would give Mr. Fernández a win without a need for a runoff election—a major blow to Mr. Macri who, only two years ago, amassed a huge win in midterm elections.

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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.