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Good morning! We’re covering the left and its struggles to challenge Jair Bolsonaro. The crisis within the president’s party gets worse. And Brazil’s upcoming energy auction. (This newsletter is for platinum subscribers only. Become one now!)


Early polls signal problems for Brazilian left

A poll published this morning by pollster FSB Pesquisas shows

an uphill battle for the Brazilian left in the quest to return to the political forefront. Between Lula&#8217;s arrest and Jair Bolsonaro&#8217;s landslide win, the Workers&#8217; Party—and the left as a whole—have been unable to present itself as viable options to Bolsonarism.</p> <p>Despite being in jail for one and a half years, former President Lula remains the undisputed central figure of the left. While it shows how strong Lula&#8217;s legacy may be among voters, it indicates a problem: relying exclusively on a man who is ineligible for office until 2026 might be problematic. In three tested scenarios, Fernando Haddad, the former mayor of São Paulo who ran for president in 2018 as Lula&#8217;s proxy, is way below the Workers&#8217; Party traditional voting capital of 30-ish percent of votes.</p> <div class="flourish-embed" data-src="visualisation/790132"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <p><strong>Why it matters.</strong> While it is awfully early to foresee the results of a national race which takes place in three years, these polls could help predict trends for next year&#8217;s municipal votes—as local elections have increasingly been influenced by national disputes. If the left continues losing key mayoral battlegrounds (as it did in 2016), it could be left without much of its muscle to run grassroots campaigns in 2022.</p> <p><strong>Yes, but … </strong>Left-wing sympathizers have looked at other South American countries for comfort, with the left well-positioned to win races in Argentina, Uruguay, and Bolivia. But replacing Jair Bolsonaro may be easier said than done. The center-left appears to be losing ground to the moderate right in Brazil.</p> <p><strong>Out of the closet.</strong> At the turn of the century, &#8220;right-wing&#8221; was a dirty word in Brazil—heavily associated with the authoritarian years of the military regime. Few parties—if any—called themselves right-wing. Times have certainly changed.</p> <hr class="wp-block-separator"/> <h2>The president&#8217;s party continues to implode</h2> <p>The tug-of-war between President Jair Bolsonaro and Congressman Luciano Bivar for the control over the Social Liberal Party continues. In a plot filled with holy-crap-did-this-just-happen moments, yesterday might have been the weirdest to date.</p> <p>In short, Mr. Bolsonaro&#8217;s backers tried to stage a coup to remove Congressman Delegado Waldir as the party&#8217;s whip, replacing him with Eduardo Bolsonaro, the president&#8217;s son. In a matter of hours, the holder of the position changed four times, with Delegado Waldir eventually holding on to his post.&nbsp;</p> <p>Meanwhile, Delegado Waldir—who should be, in theory, trying to gather support for the administration—threatened in leaked audio messages to &#8220;implode&#8221; the administration, suggesting he has compromising recordings of Mr. Bolsonaro.</p> <p><strong>Why it matters.</strong> The more the president isolates himself—even from his own party—the less agenda-setting powers his administration has. That could impact important reforms that need to pass in Congress. This week, the president&#8217;s party gave him a taste of what life without a party could be—when it joined forces with the Workers&#8217; Party to obstruct a vote.</p> <p><strong>Wary investors.</strong> Political turmoil can scare off investors—and had negative repercussions on the stock market yesterday. Despite an overall positive international scenario (boosted by positive news regarding a Brexit deal), the São Paulo stock market index stopped a 6-day positive streak, closing the day down 0.4 percent.</p> <p><strong>Context.</strong> Boosted by Jair Bolsonaro, the Social Liberal Party became the second-biggest political group in the House—and will receive BRL 100 million from a public fund to finance political parties. Luciano Bivar and the president are fighting over the control of that pile of cash.</p> <p><strong>Embassy job.</strong> The latest crisis—coupled with a lack of support in the Senate—led the president to (at least for now) give up on naming his son Eduardo to a position as Brazil&#8217;s ambassador in Washington D.C.</p> <hr class="wp-block-separator"/> <h2>Brazil holds auction for energy projects</h2> <p>Today, the Brazilian government holds an auction to hire <a href="https://brazilian.report/money/2018/04/10/brazil-energy-matrix/">energy</a> for new ventures, to be operational by 2025. The bidding should see a dispute between oil companies—who push forward natural gas-based projects—and wind- and solar-based producers.</p> <p><strong>Why it matters.</strong> As Brazil moves to deregulate its gas market, the country could attract major investments. The federal administration sees this source of energy as a good <a href="https://www.portosenavios.com.br/noticias/geral/petroleiras-miram-termeletricas-e-disputarao-leilao-de-energia-a-6">alternative</a> to variable renewable energy sources—such as photovoltaic and wind power, in which companies can&#8217;t keep a constant production output due to weather conditions.</p> <p>Currently, Brazil&#8217;s thermal energy segment is dominated by plants based on diesel and combustible oil.</p> <p><strong>Wind power.</strong> The government has changed its framework for hiring wind-based power, making companies pay for extra electricity to meet contractual demands when they are unable to produce enough energy themselves. That increases the risk for companies—putting wind power producers in the same conditions as other segments.</p> <hr class="wp-block-separator"/> <h2>What else you need to know</h2> <p><strong>Oil. </strong>Brazil&#8217;s state-owned oil and gas company Petrobras will get an extra BRL 1 billion from the upcoming auction of the so-called &#8220;transfer of rights&#8221; oil fields, earning a total of BRL 34.6 billion. The difference in value is because the premium had initially been calculated in USD, and then converted to BRL. As currency exchange rates changed, values were recalculated. The new reserves are estimated at up to 16 billion barrels—and have attracted at least 14 bidders for a November auction expected to raise at least BRL 106 billion (just over USD 25 billion).</p> <p><strong>Jobs. </strong>For the sixth-straight month, Brazil&#8217;s formal job market posted positive numbers. In September, 157,213 net jobs were created—the best result for the month since 2013. This year, so far, the country has a positive balance of 761,776 new jobs. The stats show how slow Brazil&#8217;s economy is recovering: 90 percent of new positions offer salaries up to just BRL 1,500 per month (for comparison, the minimum wage is at BRL 998).</p> <p><strong>Aviation. </strong>John Rodgerson, CEO of Azul Airlines, is confident that the Brazilian economy will bounce back in 2020. He announced the intention of investing BRL 6 billion in the company&#8217;s Brazilian operations (after already investing the same amount this year), and considers raising his order of 51 Embraer planes. In 2019, Azul started to fly to and from eight new cities, totaling 114 destinations in Brazil.</p> <p><strong>Petrobras. </strong>Formula 1 has no Brazilian drivers at the moment—and is likely to stop using Brazilian fuel as well. Petrobras announced the end of a sponsorship deal with the McLaren racing team, valued at GBP 163 million. The contract was signed during the previous administration and considered by the current management as &#8220;inadmissible.&#8221; The move is part of a wider strategy to reduce sports sponsorship deals by state-owned companies.

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Daily BriefingOct 18, 2019

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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.