Good morning! We wrap up the most important facts of the week. Brazilians blaming on President Bolsonaro for Brazil’s economic woes. And shopping malls’ struggle against e-commerce.

The week in review

Tensions 1. The “push and pull” relationship between the Executive and Legislative branches continues. The House approved some of the

President&#8217;s provisional decrees which were set to expire on June 3, but Speaker Rodrigo Maia said his relationship with the government&#8217;s whip is &#8220;beyond repair.&#8221; On Friday, Economy Minister Paulo Guedes threatened to resign if lawmakers approve a watered-down version of his pension reform. </span></p> <p><b>Tensions 2.</b><span style="font-weight: 400;"> The government&#8217;s win in Congress this week was partial. Despite approving the piece of legislation that establishes the current layout of the presidential cabinet, the measure was tweaked by members of the House—the Justice Ministry lost control over the money laundering enforcement agency (COAF), which could be used more intensely in anti-corruption probes, and the Agriculture Ministry lost its power to demarcate indigenous lands. </span></p> <p><b>Tensions 3.</b><span style="font-weight: 400;"> On Sunday, President Bolsonaro&#8217;s supporters are set to protest against Congress and the Supreme Court. The president mulled over joining the demonstrations but was advised against it. Party leaders believe that the protests will escalate political tensions—regardless of their outcome.</span></p> <p><b>Guns.</b><span style="font-weight: 400;"> President Jair Bolsonaro had to backpedal on his attempt to loosen up gun ownership rules. Assault rifles will no longer be permitted—but other articles remain almost as controversial, such as allowing people to bear arms in the &#8220;legitimate defense of their land,&#8221; a huge blow for landless movements across the country. </span></p> <p><b>Embraer.</b><span style="font-weight: 400;"> The Praetor 600, Embraer&#8217;s new executive jet, has been certified by the European Union Aviation Safety Agency and U.S. Federal Aviation Administration—just one month after Brazilian regulators gave the jet the green light. In the same week, the company finally unveiled the name of the new company created by its merger with Boeing: Boeing Brasil-Commercial. Brazil was written in Portuguese, with an &#8216;s&#8217;, to avoid touching a nerve of Brazil&#8217;s pride of Embraer.</span></p> <p><b>LGBTQ.</b><span style="font-weight: 400;"> The Supreme Court reached a majority in favor of criminalizing homophobia and transphobia—with 6 of the 11 Justices defending the change in the legislation. The trial, however, has yet to be finished—and will resume on June 5. Once it does, discriminatory actions could see perpetrators face prison sentences of up to 3 years in jail.</span></p> <p><b>Privatizations.</b><span style="font-weight: 400;"> The Economy Ministry approved a resolution to stimulate governors and mayors to privatize state-owned companies. The federal administration will be the guarantor of loans with the International Monetary Fund and the World Bank—regardless of recipients&#8217; ability to repay—when the credit operations aim at privatizing assets and paying other debts.</span></p> <hr /> <h2>Blame it on Bolsonaro</h2> <p><span style="font-weight: 400;">According to a survey published on Friday, more Brazilians believe that Jair Bolsonaro is to blame for the current economic struggles of the country. In the first week of May, 5% blamed the president—a rate that doubled two weeks later. The same poll shows that 36% classify the Bolsonaro government as &#8220;bad or terrible,&#8221; outweighing his approval ratings, which sit at 34%.</span></p> <hr /> <p><a href=""><img class="alignnone size-full wp-image-20717" src="" alt="" width="1200" height="480" srcset=" 1200w, 300w, 768w, 1024w, 610w" sizes="(max-width: 1200px) 100vw, 1200px" /></a></p> <hr /> <h2>Markets</h2> <p><span style="font-weight: 400;">It&#8217;s been an eventful week for <a href="">Oi Telecom</a>. The company has been grappling with the biggest creditors’ protection lawsuit in Brazilian history and suffered a setback when a judge blocked an incentive payment plan for directors, which had been approved by shareholders. The judge has also ruled that all changes in management must have court approval, which, for strategists at investment bank BTG Pactual, “adds a layer of bureaucracy and reduces Oi’s agility” to move forward.</span></p> <p><span style="font-weight: 400;">Meanwhile, the Senate is analyzing a bill to alter Brazil’s telecommunications law—which could stimulate overall investments and could be good for Oi. Senate President Davi Alcolumbre reportedly wants to vote on the bill before Congress&#8217; July recess. The outcome of this will certainly impact Oi&#8217;s share (OIBR4 and OIBR3) prices.</span></p> <p><b><i>Natália Scalzaretto, TBR markets reporter</i></b></p> <hr /> <h2>How Brazilian shopping malls try to survive e-commerce</h2> <p><span style="font-weight: 400;">The e-commerce sector in Brazil remains small when compared to mature markets such as the U.S. Still, it is rapidly growing—with online sales increasing 12.% in 2018, despite the sluggish economy. In several countries, the growth of e-commerce was followed by a sharp decline in the shopping mall industry. In the U.S., there is much talk about &#8220;the death of the mall&#8221;—as 1,100 are expected to close within the next few years.</span></p> <p><span style="font-weight: 400;">In Latin America, though, reality is a bit different. The mall industry continues to post robust numbers—with an average growth of 5% per year. In Brazil, 15 new malls will open by December, most of them outside of major urban centers. In 2018, the sector (which encompasses 563 commercial centers) saw revenue of BRL 179bn—generating 1m jobs.</span></p> <h4>The mall industry in numbers</h4> <p><img class="alignnone size-full wp-image-20715" src="" alt="malls vs. e-commerce" width="1221" height="441" srcset=" 1221w, 300w, 768w, 1024w, 610w" sizes="(max-width: 1221px) 100vw, 1221px" /></p> <p><span style="font-weight: 400;">Still, the Brazilian mall industry is trying to prepare for the future and avoid the dreadful scenario their American counterparts have faced. Large groups such as Multiplan, BR Malls, Sonae Sierra, and Iguatemi have started to explore e-commerce opportunities—a market set to raise BRL 60bn in Brazil this year. Sonae Sierra, for instance, is about to launch its own e-commerce platform, integrating store stocks to deliver goods to customers within a 100km range of their malls.</span></p> <p><span style="font-weight: 400;">The pilot project will be in Campinas—the third-biggest city in the state of São Paulo, with 1.2m residents. So, how will it work? If a customer purchases an appliance from the mall&#8217;s platform, the product will come from the store, not from the parent company&#8217;s distribution center—with the mall receiving a commission. Deliveries will happen within hours.</span></p> <h4>Less shopping, more leisure</h4> <p><span style="font-weight: 400;">Another trend malls are betting on is trying to make their spaces less about impulsive shopping and getting customers to spend hours there on leisure activities. In major urban centers such as Rio de Janeiro, São Paulo, and Brasília, most industry players are targeting millennials by offering luxury restaurants, bowling alleys, escape games&#8230; and even shooting ranges.</span></p> <p><span style="font-weight: 400;">The lack of public leisure spaces in which people feel safe in Brazil helps the malls&#8217; case. A recent survey by consultancy firm GfK says only 31% of people go to the mall to buy something. The rest, 62%, go for a meal—or simply for a stroll.</span></p> <hr /> <p><img class="alignnone size-full wp-image-20718" src="" alt="" width="1200" height="800" srcset=" 1200w, 300w, 768w, 1024w, 610w" sizes="(max-width: 1200px) 100vw, 1200px" /></p> <hr /> <h4>What&#8217;s in store for malls in the future?</h4> <p><span style="font-weight: 400;">Analysts following mall companies in the stock market see the initiatives as a positive thing—not yet reflected on share prices. And that&#8217;s because investors are in a wait-and-see mode, trying to assess with of the mall&#8217;s e-commerce platforms will be successful. However, one risk is hovering around. The entry of malls in the e-commerce universe could severely impact numerous stores. &#8220;That&#8217;s what happened to bookstores when people started to buy online. It&#8217;s not because the consumer was not there anymore, but because they were super-dimensioned,&#8221; said an analyst.

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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.