Hello! This week we talk about the lobbying for the massive use of facial recognition technology for public safety purposes. And the volatility of financial markets. Plus, the most important facts of the week.


The week in review

Pensions. On Wednesday, Economy Minister Paulo Guedes

faced the House&#8217;s Constitution and Justice Committee to defend his pension reform. The meeting nearly ended in a scuffle, after a Workers&#8217; Party congressman called Mr. Guedes what could be loosely translated as a &#8220;bankers&#8217; bitch.&#8221; The episode shed even more light on the president&#8217;s lack of negotiation skills, giving centrist parties leverage in future talks. For big business, the deadline for passing the pension reform is October. Failing that, they will jump ship.</span></p> <p><span style="font-weight: 400;"><strong>VP. </strong>In Boston for the Harvard/MIT Brazil Conference, Vice President Hamilton Mourão continues to draw differences between himself and the president. While Jair Bolsonaro spoke to Fox News, Mr. Mourão will give an interview to CNN. And while Mr. Bolsonaro and his son called illegal immigrants from Brazil a &#8220;national shame,&#8221; Mr. Mourão will meet with Brazilians in Boston (one of the biggest Brazilian U.S. communities).</span></p> <p><b>Poverty.</b><span style="font-weight: 400;"> Between 2014 and 2017, 7.3m Brazilians began living with under USD 5.50 per day. Now, 21% of the population is below the poverty line, according to the World Bank. During the 2003-2013 era—the so-called &#8220;Golden Decade&#8221;—the poverty rate was cut from 41 to 19%. This movement, however, was mainly based on the commodity boom and the favorable business cycle of the beginning of the century, with only 13% of poverty reduction being the result of structural (and therefore lasting) changes.</span></p> <p><b>Rio.</b><span style="font-weight: 400;"> City councilors in Rio opened an impeachment process against Mayor Marcelo Crivella, accused of illegally extending advertising contracts without holding public bidding processes. There&#8217;s still time for Mr. Crivella to avoid an ousting. Councilors are taking this opportunity to cash in and receive cabinet appointments in municipal administrations. But in a city which is almost bankrupt, the question is whether Mr. Crivella will have anything left to offer.</span></p> <p><b>Avianca.</b><span style="font-weight: 400;"> On Friday night, creditors approved Avianca&#8217;s restructuring plan. It divides the airline into 7 new companies, each housing different assets of the company, such as planes, airport slots (173 of them), employment contracts with crew, and its frequent flyer program (which has over 6m users). Latam and Gol plan to bid for at least one of the new companies, offering USD 70m each—and Azul Airlines could offer up to USD 105m for 70 airport slots and 30 planes.</span></p> <hr /> <h2>Market&#8217;s volatility beating investors</h2> <p><span style="font-weight: 400;">In the final days of March, we witnessed the Ibovespa stock market index hit 100,000—only to steeply fall after a public feud between President Bolsonaro and House Speaker Rodrigo Maia around the <a href="https://talesfaria.blogosfera.uol.com.br/2019/07/17/planalto-negocia-cargos-para-tomar-de-rodrigo-maia-o-comando-do-centrao/">pension reform</a>. In such a volatile environment, the recommended portfolio of only 9 investment firms drew positive results (10 beating the Ibovespa earnings).</span></p> <p><img class="alignnone size-full wp-image-20791" src="https://brazilian.report/wp-content/uploads/2019/03/570edca1-0d9c-44ad-bf08-89766c8874a9.png" alt="" width="1200" height="1228" srcset="https://brazilian.report/wp-content/uploads/2019/03/570edca1-0d9c-44ad-bf08-89766c8874a9.png 1200w, https://brazilian.report/wp-content/uploads/2019/03/570edca1-0d9c-44ad-bf08-89766c8874a9-293x300.png 293w, https://brazilian.report/wp-content/uploads/2019/03/570edca1-0d9c-44ad-bf08-89766c8874a9-768x786.png 768w, https://brazilian.report/wp-content/uploads/2019/03/570edca1-0d9c-44ad-bf08-89766c8874a9-1001x1024.png 1001w, https://brazilian.report/wp-content/uploads/2019/03/570edca1-0d9c-44ad-bf08-89766c8874a9-610x624.png 610w" sizes="(max-width: 1200px) 100vw, 1200px" /></p> <hr /> <p><span style="font-weight: 400;">This week, healthcare companies sparked interest at the São Paulo stock exchange. Medical labs Fleury (FLRY3) and Hermes Pardini (PARD3) gained 10.7% and 9.7% in the week, respectively. Looking at the past 12 months, both are in the red amid fears of competition with verticalized healthcare players and an ailing economy that has hit the healthcare sector hard. But, as a fund manager told The Brazilian Report, investors looking for bargains may be reconsidering the companies’ outlooks, eyeing a gradual economic recovery that would open room for premium healthcare companies.</span></p> <p><b><i>Natália Scalzaretto, TBR markets reporter</i></b></p> <hr /> <h2>Facial recognition in Brazil: does security trump privacy?</h2> <p><img class="size-full wp-image-17445 aligncenter" src="https://brazilian.report/wp-content/uploads/2019/05/unnamed.gif" alt="huawei facial recognition" width="640" height="360" /></p> <p><span style="font-weight: 400;">On Wednesday, the House&#8217;s Science and Technology Committee held a public hearing on the use of facial recognition software against criminals. Sponsored by Congressman Bibo Nunes, a member of Jair Bolsonaro&#8217;s Social Liberal Party (PSL), the hearing gathered public servants, researchers in human rights on the internet, and tech companies Huawei, NEC, and FULLFace, which produce such technologies.</span></p> <p><span style="font-weight: 400;">During Carnival this year, China&#8217;s Huawei tested its facial recognition system in Salvador and Rio de Janeiro. And the company&#8217;s representative at the hearing, sales manager Ricardo Mansano, set the tech companies&#8217; tone for the debate: &#8220;We can&#8217;t live in a country where we are held hostage by criminals.&#8221; He showed congressmen the company&#8217;s &#8220;trophy&#8221; from its tests—a 19-year-old fugitive spotted in Salvador dressed up as a woman.</span></p> <p><span style="font-weight: 400;">Facial recognition systems process faces and match them with government-provided databases of criminals. In theory, it can accurately find fugitives in the middle of a group. However, such systems remain highly unreliable when operated in massive crowds—last year, facial recognition was used during the UEFA Champions League final in Cardiff, Wales. Of the 2,470 potential matches with custody pictures, 92% (or 2,297) were wrong.</span></p> <p><span style="font-weight: 400;">The criminal in Salvador was spotted while passing through a security check—when people are in a line, not in a crowd. According to Joana Varon, from the NGO Coding Rights, false positives happen more often among black people, especially black women. These systems operate better in environments such as train stations and airports.</span></p> <p><span style="font-weight: 400;">She raised another question: who is to say that the data won&#8217;t be accessed by urban militias, which have umbilical ties with police forces in several states, notably Rio? It could be used as a tool for hired killings, such as that of Rio councilor Marielle Franco.</span></p> <h4>Brazil&#8217;s Data Protection Law</h4> <p><span style="font-weight: 400;">Privacy issues were treated by congressmen as a secondary problem. &#8220;Many are concerned about privacy, but public interest trumps all,&#8221; said Congressman Felipe Laterça (PSL). Meanwhile, even Brazil&#8217;s Intelligence Agency admits the need for more regulation and debate: &#8220;People are fine with tech companies accessing their personal data, but it scares them when the state does it. And it&#8217;s obvious why: the state can throw you in jail,&#8221; said intelligence agent Felipe Soares.</span></p> <p><span style="font-weight: 400;">Brazil&#8217;s new Data Protection Law will take effect next year. It treats people&#8217;s facial recognition as sensitive data (therefore needing special treatment) but leaves a few gaps. For instance, how public safety will come into the equation—and who will &#8220;watch the watchmen.&#8221;</span></p> <p><span style="font-weight: 400;">As things stand, the future National Data Protection Agency will be subject to the president&#8217;s office—which would mean the state would oversee agency transgressions. But that&#8217;s cause for concern in a country where the Federal Data Processing Service (Serpro), a state-owned IT processing firm, has been accused of selling the personal data of Brazilian citizens without their consent.</span></p> <p><span style="font-weight: 400;">The question remains open to debate, and there is intense lobbying for the independence—both technical and budgetary—of the agency. A committee of senators and House members will decide on the issue.</span></p> <p><span style="font-weight: 400;">Earlier this year, a group of congressmen and senators from President Jair Bolsonaro&#8217;s Social Liberal Party (PSL) went to China—with all expenses paid for by Beijing—to learn about the country&#8217;s state-of-the-art facial recognition technology. That sparked fury from Olavo de Carvalho, the president&#8217;s ideological guru. &#8220;[That] would mean handing over information on all people living in Brazil to the Chinese government.&#8221;

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BY The Brazilian Report

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