THE WEEK IN REVIEW

  • Privatization. On Friday, the Brazilian government auctioned off 12 airports across 8 states. The privatization raised BRL 2.1bn—a 986% bump from the minimum prices set by the government. Southeastern airports were taken by Zurich (Switzerland); Socicam and Sinart (Brazil); and Aena (Spain). Over the next 30 years, the companies are expected to invest a combined amount of BRL 3.5bn in infrastructure. This auction generated much more interest than the previous round of airport privatizations.
  • Credit. The Senate approved the creation of a “good payers” list—which will compile credit information from customers who paid their debts without delay. Advertised as a way to lower banks’ risks (and therefore interest rates), the move could expose the private data of millions of customers to companies. Between 2015 and 2017, complaints about the inappropriate use of personal data rose by 1,134%.
    </li> <li><strong>Boeing+Embraer.</strong><strong> </strong>Despite being approved by shareholders, the merger of U.S. planemaker <a href="https://brazilian.report/money/2019/03/14/embraer-boeing-joint-venture-future/">Boeing with Embraer</a> has yet to take off. VP Hamilton Mourão has told minority stockholders that the government might use its golden share to block the deal. The military wing of the administration is not sold on the possibility of putting Embraer&#8217;s top defense products—such as the Super Tucano plane—under Boeing control, or the possibility of the company shutting down its Brazilian operations for the U.S.</li> <li><strong>Corruption.</strong><strong> </strong>The Supreme Court decided that election-related crimes probed by Operation Car Wash should be handled by the short-staffed, overburdened electoral courts—and not the criminal courts. The ruling essentially <a href="https://brazilian.report/power/2019/03/15/anti-corruption-operation-car-wash-end/">neuters the power of the anti-corruption </a><a href="https://brazilian.report/power/2019/03/15/anti-corruption-operation-car-wash-end/">investigation</a> and lays ground to annul past convictions. The court also rejected a plea deal between the investigation and Petrobras—freezing BRL 2.5bn that the oil company would have to pay.</li> <li><strong>Pension reform.</strong><strong> </strong>The Jair Bolsonaro administration started to resort to methods characteristic of &#8220;old politics.&#8221; All in the name of the pension reform. Over BRL 1bn in funds for projects of congressmen&#8217;s discretion were authorized, and parties were allowed to suggest names for cabinet positions. But House members have already indicated that this might not be enough—they want more if the government wants to avoid the bill&#8217;s<a href="https://brazilian.report/podcast-brazil/2019/02/27/brazils-pension-system/">predicted BRL 1 trillion of savings</a> being watered down.</li> <li><strong>Marielle Franco.</strong><strong> </strong>On Tuesday, just 2 days before the 1-year anniversary of the murder of Rio&#8217;s City Councilwoman Marielle Franco, the police arrested two men accused of being the perpetrators of the case—one of which is a neighbor of President Jair Bolsonaro in Rio. However, the investigators still <a href="https://brazilian.report/podcast-brazil/2019/03/13/marielle-franco-impunity-cops/">don&#8217;t know who ordered the hit on Ms. Franco</a>. On Thursday, right-wing congressmen interrupted a minute of silence for her in the lower house by barking—allegedly to protest against animal abuse.</li> </ul> </td> </tr> </tbody> </table> </td> </tr> </tbody> </table> <table width="100%"> <tbody> <tr> <td></td> </tr> </tbody> </table> <table width="100%"> <tbody> <tr> <td> <table> <tbody> <tr> <td><b><a href="https://us16.admin.mailchimp.com/campaigns/preview-content-html?id=307007">CHART OF THE WEEK</a></b></td> </tr> </tbody> </table> </td> </tr> </tbody> </table> <table width="100%"> <tbody> <tr> <td> <table width="100%"> <tbody> <tr> <td> <h2>It&#8217;s getting more expensive to produce soybeans in Brazil</h2> <p>According to the Brazilian Association of Soybean Producers (Aprosoja), it is getting more and more expensive to produce in Brazil. Fertilizers have gotten more expensive, due in part to the rise of gas prices for industries. In several areas, such as north-eastern state Maranhão, farmers claim their production costs have gone up 20% for the next harvest—which has eroded their margins.</p> <p><img class="alignnone size-large wp-image-14280" src="http://brazilian.report/wp-content/uploads/2019/03/11118428-9256-47bf-8fb3-f443deea9a4f-1024x683.png" alt="" width="1024" height="683" /></td> </tr> </tbody> </table> </td> </tr> </tbody> </table> <table width="100%"> <tbody> <tr> <td> <table style="font-size: 1.7em;" width="100%"> <tbody> <tr> <td> <table> <tbody> <tr> <td> <h5><b><a href="https://us16.admin.mailchimp.com/campaigns/preview-content-html?id=307007">MARKETS</a></b></h5> </td> </tr> </tbody> </table> </td> </tr> </tbody> </table> </td> </tr> </tbody> </table> <table width="100%"> <tbody> <tr> <td> <table width="100%"> <tbody> <tr> <td> <h2>Weekly performance Mar 11— Mar 17</h2> </td> </tr> </tbody> </table> </td> </tr> </tbody> </table> <table width="100%"> <tbody> <tr> <td> <table width="100%"> <tbody> <tr> <td>▲ <strong>IBOVESPA</strong>         <strong>99,136.74</strong>       <strong>+3.93%</strong></p> <p>▼ <strong>USD-BRL</strong>           <strong>3.8144</strong>            <strong>-1.38%</strong></p> <p>▼ <strong>EUR-BRL</strong>           <strong>4.3191</strong>            <strong>-0.66%</strong></td> </tr> </tbody> </table> <table width="100%"> <tbody> <tr> <td>▲ <strong>PETROBRAS_PS   </strong>    <strong>28.25</strong>     <strong>+4.55%</strong></p> <p>▲ <strong>VALE </strong><strong>    </strong>                      <strong>50.55</strong>     <strong>+3.37%</strong></p> <p>▼ <strong>BRF     </strong>          <strong>  </strong>            <strong>22.22     +10.8%</strong></td> </tr> </tbody> </table> </td> </tr> </tbody> </table> <table width="100%"> <tbody> <tr> <td> <table width="100%"> <tbody> <tr> <td> <table width="100%"> <tbody> <tr> <td>Petrobras may be on the verge of closing some of the most important deals on its USD 27bn divestment plan: TAG and Braskem. This week, Petrobras CEO Roberto<strong> </strong>Castello Branco<strong> </strong>said that he would like to close the TAG deal this quarter. It concerns a gas pipeline network that spans over 4,500km across 10 Brazilian states; worth USD 8bn. Braskem, on which Petrobras has a 36% stake, has finished the due diligence process with suiter LyondellBasell. Selling these assets is seen by investors as an important measure to increase efficiency and deliver more value to shareholders.</p> <p><strong><em>Natalia Scalzaretto, TBR markets reporter</em></strong></td> </tr> </tbody> </table> </td> </tr> </tbody> </table> </td> </tr> </tbody> </table> <table width="100%"> <tbody> <tr> <td> <table> <tbody> <tr> <td> <h5><b><a href="https://us16.admin.mailchimp.com/campaigns/preview-content-html?id=307007">POWER</a></b></h5> </td> </tr> </tbody> </table> </td> </tr> </tbody> </table> <table width="100%"> <tbody> <tr> <td> <table width="100%"> <tbody> <tr> <td> <h1>What to expect from Jair Bolsonaro&#8217;s visit to Washington</h1> </td> </tr> </tbody> </table> </td> </tr> </tbody> </table> <table width="100%"> <tbody> <tr> <td>&nbsp;</p> <table width="100%"> <tbody> <tr> <td><img class="alignnone size-full wp-image-14281" src="http://brazilian.report/wp-content/uploads/2019/03/f1305b90-fc86-4ff6-a8f5-0c0ba0eccaf1.jpg" alt="" width="666" height="375" /></td> </tr> <tr> <td width="546">Bolsonaro visits Trump next week</td> </tr> </tbody> </table> </td> </tr> </tbody> </table> <table width="100%"> <tbody> <tr> <td> <table width="100%"> <tbody> <tr> <td>“Trump of the Tropics” is a moniker that has stuck with Jair Bolsonaro. While the nickname wasn&#8217;t meant to be flattering, the Brazilian President welcomes the comparison. After all, he has mimicked U.S. President Donald Trump and his communication strategy, and his political group and family defend total alignment with their northern neighbors. Now, Mr. Bolsonaro and Mr. Trump will meet in person for the first time.</p> <p>The meeting could mark an inflection in Brazil-U.S. relations, as both countries have never had leaders so politically aligned as Mr. Bolsonaro and Mr. Trump. In fact, &#8220;Brazil has never been a priority in America’s foreign policy,&#8221; Carlos Eduardo Lins e Silva, a professor at the University of São Paulo’s Foreign Relations Institute, told <strong>The Brazilian Report</strong>.</p> <p>While there was a moment during Barack Obama’s tenure when both countries were “sympathetic” toward one another (bilateral trade and Brazilian tourism to the U.S. increased), relations soured after 2013, when whistleblower Edward Snowden revealed that former President Dilma Rousseff was being spied on by the U.S. government. George W. Bush and Lula enjoyed an excellent personal relationship, as did Fernando Henrique Cardoso and Bill Clinton—but no true cooperation was developed between the Americas&#8217; two largest countries.</p> <p>Here&#8217;s what we should expect to be on the Trump-Bolsonaro agenda:</p> <ul> <li><strong>Venezuela:</strong> While Congressman Eduardo Bolsonaro and Foreign Minister Ernesto Araújo have defended radical alignment with the U.S., the government&#8217;s military wing has been adamant in keeping a safe distance and not allowing U.S. troops to be stationed on Brazilian soil. The Army has even started to broker talks for a negotiated exit of Venezuelan President Nicolás Maduro from power.</li> </ul> <ul> <li><strong>Defense 1:</strong> The U.S. is expected to designate Brazil as a &#8220;major non-NATO ally,&#8221; which gives a country preferential access to the purchase of U.S. military equipment and technology. In Latin America, only Argentina is part of the 17-country list. Another topic of discussion will be the Boeing-Embraer merger, as <a href="https://us16.admin.mailchimp.com/campaigns/preview-content-html?id=307007#embraer">VP Hamilton Mourão has indicated the government could veto the deal</a>, even after having already agreed to it.</li> </ul> <ul> <li><strong>Defense 2:</strong> The two presidents should also formalize a technology safeguards agreement (TSA), which seeks to facilitate the launching of American satellites on Brazilian soil—in particular, from the Alcântara Launch Center in northeastern Brazil. The deal <a href="https://brazilian.report/money/2019/03/11/brazil-usa-alcantara-space-station/">allows U.S. technology to be used in launches from the Alcântara base</a>. This caused problems in the past, as nearly every satellite launch uses some form of equipment or process belonging to the U.S.</li> </ul> <ul> <li><strong>Agribusiness:</strong> Agriculture Minister Tereza Cristina has the mission of negotiating the re-opening of the U.S. market to Brazilian beef—which has been banned since 2017 due to &#8220;signs of systemic failure of [sanitary] inspections.&#8221; But U.S. Secretary of Agriculture Sonny Perdue might not even be in Washington when the Brazilian delegation arrives—a sign that lifting the ban will be difficult.</li> </ul> <ul> <li><strong>OECD:</strong> The U.S. is reluctant to support Brazil&#8217;s bid to join the OECD. Having the American support would be a tangible—although improbable—win for President Bolsonaro. At this moment, the Trump White House has supported Argentina&#8217;s bid.</li> </ul> <ul> <li><strong>China:</strong> As U.S. Senator Marco Rubio has voiced in the past, the U.S. might try to use Brazil as a buffer to Chinese influence in Latin America. While Jair Bolsonaro and his acolytes have certainly been hostile to Beijing, Brazil&#8217;s Big Agro defends closer ties to the Asian giant. After all, China is responsible for 50% of Brazil&#8217;s commodity exports. Ms. Cristina might try to educate herself on how close a U.S.-China trade deal is, which would directly impact Brazilian agricultural exports.</li> </ul> <p>President Bolsonaro will have big expectations to meet—especially since his international debut, in the <a href="https://brazilian.report/power/2019/01/22/takes-bolsonaro-davos-debut/">World Economic Forum</a>, was a flop.</td> </tr> </tbody> </table> </td> </tr> </tbody> </table> <p>&nbsp;</p> <p><span style="font-size: 1.7em;">

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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.