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Good morning! Brazil’s currency woes “not a problem” for the government. The U.S. to make life easier for Brazilian travelers. Operation Car Wash could have pulled a thread to unravel South America’s cocaine trade. And YouTube’s new anti-misinformation tool. (This newsletter is for platinum subscribers only. Become one now!)


Weaker currency “as expected,” says Brazilian Economy minister

For the first time ever, we wake

to the U.S. Dollar being worth BRL 4.21—yet a new nominal record. But that doesn&#8217;t scare Economy Minister Paulo Guedes, for whom such an exchange rate was expected—and that Brazilians should become accustomed to a new reality of lower interest rates and high exchange rates. “We have a floating currency, so it floats,” he said.</p> <p>It is worth remembering that when we discount for inflation, the 2019 currency exchange rate is nowhere near September 2002—which would be, in today&#8217;s values, around BRL 10.27.</p> <p><strong>Why it matters.</strong> In 2019 alone, the Brazilian Real lost 9 percent against the USD—making it one of the worst-performing emerging currencies this year. A weaker currency puts pressure on companies that import a lot—thus making purchases in USD—narrowing their profits. In a sluggish economy, that can spell trouble for many players.</p> <p><strong>External factors.</strong> Brazil&#8217;s troubles in attracting foreign investment and the slow pace of the economy are certainly reasons for the weaker currency. But, as Alfonso Esparza, a financial market analyst at brokerage Oanda, told reporter Natália Scalzaretto, problems all over Latin America have also put pressure on the Brazilian Real.</p> <p><strong>Praise.</strong> Mr. Guedes&#8217; tranquility was praised by many private equity fund managers on social media. But it is worth remembering that many of them predicted the USD to be hovering around BRL 2 with the Economy Minister&#8217;s neoliberal agenda.</p> <p><strong>Also.</strong> With the lowest benchmark interest rates in history (from 14.25 to 5 percent since 2016), Brazil becomes less attractive to speculative investments. The influx of dollars to Brazil is already at its lowest level since 1999—when the country stopped pegging its currency to the USD.</p> <hr class="wp-block-separator"/> <h2>Easier to enter U.S. for Brazilians?</h2> <p>The government announced on Monday the launch of a &#8220;global entry&#8221; program for Brazilians traveling to the U.S. This program allows expedited clearance for pre-approved, low-risk travelers upon arrival—something Brazilian business travelers have been demanding since 2012, when Brazil was close to signing such a deal. However, the Barack Obama administration never followed suit.</p> <p>The Global Entry program does not mean lifting visa requirements—but rather making clearance at U.S. customs quicker.</p> <p><strong>Why it matters.</strong> Since 2017, close to 2 million Brazilians have traveled to the U.S. annually, spending more than USD 7 billion per year, according to the U.S. Travel Association.</p> <p><strong>Give and take.</strong> Earlier this year, Brazil lifted visa requirements for tourists from the U.S., Canada, Australia, and Japan. But the move was unilateral, and the Brazilian government was heavily criticized for not asking for reciprocity.</p> <p><strong>Trial.</strong> President Jair Bolsonaro said a trial program will be launched soon, and some 20 Brazilian executives will test the system’s functionality.</p> <p><strong>Free trade?</strong> Mr. Bolsonaro wants Brazil to increase its ties with the U.S.—which is shown by a strategy of near-total alignment with the White House on foreign affairs issues. Economy Minister Paulo Guedes has also talked about signing a free-trade deal with the U.S. There are, however, many obstacles for that—as the U.S. is one of Brazil&#8217;s main agricultural competitors.</p> <hr class="wp-block-separator"/> <h2>How Operation Car Wash explains South American drug trade</h2> <p>Last week, Operation Car Wash targeted associates of Dario Messer, a legend in the organized crime world—even called the “dollar smuggler of dollar smugglers.” The probe went as far as <a href="https://brazilian.report/power/2019/11/20/brazil-operation-car-wash-arrest-paraguay-president-horacio-cartes/">ordering the arrest of Paraguay&#8217;s former President Horacio Cartes</a>—and now investigators believe it could go much further than corruption schemes. With one of Mr. Messer&#8217;s associates, the police found a list of Paraguayan police officers and Interpol agents on the gang&#8217;s payroll.</p> <p><strong>Why it matters.</strong> The documents reveal details of the cocaine trade in South America. There are mentions of drug amounts sold, dirty money, and even the purchase of a landing strip to transport cocaine.</p> <p><strong>International drug trade.</strong> According to the documents, the cocaine was shipped from Bolivia to Paraguay—from which it would enter Brazil. The criminal organization operated in Ponta Porã, a city in the state of Mato Grosso do Sul separated from Paraguay&#8217;s Pedro Juan Caballero by only one street, but little to no border control.</p> <script src="https://www.buzzsprout.com/299876/1078982-47-brazil-s-war-on-drugs-failed-what-next.js?player=small" type="text/javascript" charset="utf-8"></script> <hr class="wp-block-separator"/> <h2>YouTube&#8217;s anti-misinformation tool</h2> <p>Starting today, YouTube is launching a new tool to warn Brazilian users if a video contains false information. The tool has been tested in India since March. Fact-checking will be made in partnership with third parties, including many of Brazil&#8217;s mainstream media outlets—which will be responsible for verifying content.</p> <p><strong>Yes, but …</strong> YouTube <a href="https://brazilian.report/tech/2019/10/18/big-tech-brazil-effort-against-misinformation/">won&#8217;t shut off channels dedicated to spreading false information</a>. And research has proven that fact-checking stamps have limited effects on how most users consume content.</p> <p><strong>Why it matters.</strong> With over 100 million users in Brazil, YouTube is one of the biggest content-consumption platforms in the country. And it has become something of an echo chamber that has allowed the propagation of extremist conspiracies.&nbsp;</p> <p><strong>AI. </strong>YouTube&#8217;s artificial intelligence systems are <a href="https://brazilian.report/opinion/2018/12/06/brazil-election-social-media-democracy/">designed to maximize watch time</a>, learning from user behavior and recommending content users will be drawn to.</p> <p><strong>Godwin&#8217;s Law.</strong> Godwin&#8217;s law is an Internet adage asserting that &#8220;as an online discussion grows longer, the probability of a comparison involving Nazis or Hitler approaches 1.&#8221; A similar thing could be said of YouTube&#8217;s AI—the more you watch videos on YouTube, the probability of ending up in a conspiracy theorist&#8217;s channel also approaches 1.</p> <script src="https://www.buzzsprout.com/299876/1079060-26-the-role-of-social-media-in-brazilian-politics.js?player=small" type="text/javascript" charset="utf-8"></script> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <p><strong>Aviation.</strong> Starting in March 2020, <a href="https://oglobo.globo.com/economia/branson-da-virgin-quer-quebrar-duopolio-na-rota-sao-paulo-londres-fazer-preco-das-passagens-cair-24097429">Virgin Atlantic</a> will start begin flying between São Paulo and London. Founder Richard Branson says he will lower ticket prices to break the duopoly of Latam and British Airways (the only two to connect the two cities). His strategy includes offering first-class seats for the price of executive ones, having a Portuguese-speaking crew, and offering Brazilian food on board.</p> <p><strong>Oil spill.</strong> Researchers from the Federal University of Bahia have found a 66-percent reduction in the number of live benthic invertebrates (such as corals, crustacea, octopuses, or lobsters) in four beaches they analyzed following the massive oil spill that affected over 770 coastal locations in ten states. It will take up to 20 years for these ecosystems to recover. The spill—for which authorities have yet to pinpoint a culprit—is the largest environmental disaster in Brazilian history, in terms of affected area.</p> <p><strong>Strike.</strong> A union representing part of Petrobras employees went ahead with its decision to hold a five-day strike, beginning yesterday. They demand job security amid the company&#8217;s recent waves of layoffs. On Friday, the Superior Labor Court sided with Petrobras, setting a fine of BRL 2 million per day of strike and freezing the union&#8217;s assets. The government says there is no risk of a fuel shortage.</p> <p><strong>Women.</strong> Between 2010 and 2017, over 1.2 million Brazilian women were victims of violence, according to think tank Instituto Igarapé. While the number of reported crimes against white women rose by 297 percent in that span, the growth rate of crimes against black women jumped 409 percent. However, it is not possible to say if that means more crimes are being committed, or if victims are reporting it more, as domestic violence and sexual assault are traditionally underreported. The government has supported special care for women at every Brazilian police precinct—even promoting spurious measures such as having special rooms painted pink.

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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.