Photo: Alan Santos/PR

Good morning! Today we look at the scandal created by the U.S. overlooking Brazil for OECD membership. There is also news of a billionaire windfall from an auction of oil fields, and Brazil’s consumers are gearing up for Black Friday. (This newsletter is for platinum subscribers only. Become one now!)


U.S. ignores OECD bid for Brazil

News that the U.S. will back

the memberships of Argentina and Romania to the Organization for Economic Cooperation and Development (OECD) has embarrassed Brazil. Making constant efforts to get closer to the Donald Trump government, Jair Bolsonaro&#8217;s administration had received assurances that Brazil would have the White House&#8217;s support in its ascension to the OECD.</p> <p><strong>Why it matters.</strong> The OECD has often been called a &#8220;<a href="https://brazilian.report/money/2018/03/01/joining-oecd-mean-brazil/">club of rich countries</a>&#8221; and membership essentially serves the purpose of a <a href="https://br.sputniknews.com/mundo/201512093022421-OCDE-sobre-BRICS-Brasil-China-sinal-estabilizacao-economica/">seal</a> of good practices, improving reliability and trust for investors. The Brazilian government has been desperate to gain ascension to the Paris-based group, making it one of the central strategies of its foreign policy.</p> <p><strong>Form a queue.</strong> Donald Trump replied by saying that the U.S. does still support Brazil&#8217;s full membership to the OECD, and ignoring the country in a recent letter of intent to enlarge the group was purely because Argentina and Romania are ahead of Brazil in the &#8220;queue.&#8221; The White House suggests it will back Brazil&#8217;s membership at a later date.</p> <p><strong>Brazilian gifts.</strong> In an official visit to Washington D.C. in March, Jair Bolsonaro managed to receive Mr. Trump&#8217;s approval for Brazil&#8217;s OECD membership push, but after making a series of concessions to the U.S.—including waiving special rules for developing counties, and access to hold space launches from the Alcântara Launch Center in Maranhão.&nbsp;</p> <p>Moreover, Brazil has complied with 72 or the OECD&#8217;s 248 legal instruments—more than any other candidate. Not to mention that Argentina and Romania didn&#8217;t have to make any concessions to gain their place in the queue.</p> <p><strong>Eduardo Bolsonaro. </strong>The news puts the entire foreign policy of the Bolsonaro government into check. Handing over the aforementioned benefits to the U.S. was deemed as acceptable in return for support for OECD membership, but seeing Argentina and Romania get their first comes as somewhat of an embarrassment. President Bolsonaro intends to appoint his son, Eduardo Bolsonaro, as the Brazilian ambassador in Washington D.C., but these plans may be scuppered after this latest foreign policy setback.</p> <hr class="wp-block-separator"/> <h2>Oil auction breaks records, more to come</h2> <p>The federal government managed to raise BRL 8.915 billion yesterday with the auctioning off of oil fields by the National Oil Agency (ANP). Director of the agency, Décio Oddone, said the figure represented a record for auctions of oil and gas under a concession regime.</p> <p><strong>Why it matters.</strong> This is the first of three major oil auctions Brazil has scheduled for the second half of 2019. Next up is the so-called &#8220;mega-auction&#8221; of the transfer of rights areas, which will sell off fields containing an estimated 10 billion barrels of extractable oil. The auction will take place on November 6 and should raise an astonishing BRL 106.5 billion. Another bidding process on November 7 will sell off more pre-salt areas and is valued at a further BRL 7.85 billion.</p> <p><strong>Auction &#8220;a success.&#8221; </strong>Though only one-third of the 36 blocks of oil fields were actually sold off yesterday, the auction has been deemed a rousing success. Ten companies had winning bids, either individually or in a consortium. Among the victors were ExxonMobil, Chevron, Shell, and Malaysian giant Petronas.</p> <p><strong>Petrobras. </strong>Also notable in yesterday&#8217;s auction, seen as a positive sign for the market, was Brazil&#8217;s state-owned oil company Petrobras&#8217; &#8220;conservative&#8221; approach toward the blocks on offer. The company only made two bids, of which one was successful, indicating that the austere management platform of CEO Roberto Castello Branco is having an effect. Out of comparison, in 2013, Petrobras gobbled up well over half of 72 oil fields on offer in a similar auction.</p> <p><strong>One-third. </strong>While the fact that just one-third of the 36 blocks up for auction were actually sold could lead to a negative evaluation of the bidding process, the ANP has explained that this was to be expected in light of the upcoming transfer of rights process. The mega-auction will offer oil exploitation opportunities in Brazil&#8217;s already recognized production areas, while yesterday&#8217;s fields were largely in less well-known regions.</p> <p><strong>Abrolhos.</strong> Among the blocks which didn&#8217;t receive any bids were a group of seven near to the archipelago of Abrolhos, in southern Bahia. The region is known for having some of the most diverse marine life in Brazil, and the environmental impacts of extracting oil nearby had been brought into question.</p> <hr class="wp-block-separator"/> <h2>10 years of Black Friday in Brazil</h2> <p>Although almost two months away, Brazilian consumers are already gearing up to make savings on Black Friday 2019. A survey carried out by Google, released this week, shows that 58 percent more Brazilians are set to make purchases at some point in the sale, with a predicted average spend of BRL 1,330.</p> <p><strong>Why it matters.</strong> Despite Brazil not celebrating Thanksgiving, Black Friday has managed to become one of the country&#8217;s biggest calendar days for retail, especially e-commerce. With the Brazilian economy struggling to recover and prices deflating, this year&#8217;s edition would come as a much-needed boost for consumption</p> <p><strong>Be prepared.</strong> This will mark Brazil&#8217;s tenth Black Friday since retailers decided to copy the American tradition back in 2010. Google&#8217;s research shows that consumers are now more prepared than ever. Months before the sale begins, 69 percent of those who intend to take part in the purchases already know which departments and items they will be focusing on and are just waiting on the calendar in order to click the Buy button.</p> <p><strong>Brick and mortar. </strong>While largely still an e-commerce phenomenon in Brazil, there are some suggestions that the manic scenes witnessed every year in the U.S.—of consumers queuing up at physical stores and fighting each other for the best offers—may be on the horizon for Brazilians. According to Google, 37 percent intend to <em>only </em>make Black Friday purchases in brick and mortar stores, compared to 38 percent who will keep their business strictly online.</p> <script src="https://www.buzzsprout.com/299876/1079006-39-were-you-scammed-during-brazil-s-black-friday.js?player=small" type="text/javascript" charset="utf-8"></script> <hr class="wp-block-separator"/> <h2>What else you should know</h2> <p><strong>Venezuela. </strong>After the Brazilian government declared that the oil spills polluting 150 spots on the Northeast coast &#8220;probably&#8221; came from Venezuela, PDVSA—the Venezuelan state-owned oil company—released a statement denying any responsibility. Meanwhile, the Brazilian Navy is notifying 30 tanker vessels from ten different countries which passed by the region to provide clarifications about a potential leak. As we said when first reporting this spill, the case highlights Brazil&#8217;s lack of coastal monitoring.</p> <p><strong>Database. </strong>A presidential decree created a national database integrating all personal data informed by Brazilian citizens. Initially, the database will include only basic information—being progressively fed as time goes on. Data will be classified into three levels, not leaving all information automatically accessible to all ministries. Integrated databases, however, tend to be criticized by experts for security reasons: having all data in one place makes it easier for hackers.&nbsp;</p> <p><strong>Banks. </strong>Despite Brazil&#8217;s sluggish economy, the banking system has met no crisis. Between July 2018 and June of this year, banks in Brazil registered a 15.8-percent return on equity according to the Central Bank—the highest levels since 2012. The story behind the outstanding profits of Brazil’s biggest banks cannot be explained without two key points: the vast number of fees charged by these institutions (which rise above inflation every year), and the concentration of Brazil&#8217;s banking sector—which could be threatened by fintechs in the near future.</p> <p><strong>Labor.</strong> A ruling by Brazil&#8217;s Superior Labor Court essentially suspends up to 60 percent of all cases pending in labor courts. Judges decided to suspend all proceedings in which workers question the validity of collective bargaining agreements that don&#8217;t frontally violate the Constitution. The matter will only be resolved when the Supreme Court holds a trial on the validity of such agreements—but no date has been set to this day.</p> <p><strong>Fires.</strong> Brazil&#8217;s Institute for Space Research (Inpe) has shown that the number of fires recorded in indigenous lands in the first nine months of 2019 is double the amount seen last year, and is at its highest level since 2011. Satellites have picked up on 5,242 such blazes in demarcated indigenous lands between January and the end of September. The suspicion is that these fires have been caused by illegal deforestation efforts, as the rainforest has seen the highest levels of rainfall for the last four years, and spontaneous fires do not occur in the region.

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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.