The Brazilian economy needs diversification. Rio police kill an 8-year-old girl. The government on Twitter. And what to expect from Jair Bolsonaro at the UN General Assembly, tomorrow. (This newsletter is for platinum and gold subscribers only. Become one now!)


The Brazilian economy became less complex

Over the past ten years,

Brazil has lost five positions in the <a href="https://oec.world/en/rankings/country/eci/">Economic Complexity Ranking</a> (prepared by a group of researchers from Harvard and MIT since 2011), dropping to 52nd out of 133 countries. The ranking measures the knowledge intensity of an economy by considering the complexity of the products it exports. Now, Brazil comes behind much smaller economies such as Costa Rica and Uruguay.</p> <p><strong>Why it matters.</strong> The researchers point out that diversification is the key to development. But while the country added 13 new products to its export portfolio, it didn&#8217;t do it in a way that increased people&#8217;s income (the rise between 2013 and 2017 was of only USD 22 per person).</p> <p>Brazil has failed to initiate a process of structural transformation, reallocating economic activity from low-productivity sectors (such as agricultural activities) to highly productive areas such as textiles, electronics and machine production. &#8220;The global share of Brazilian textile exports has stagnated in the previous decades; electronics and machines haven&#8217;t taken off—which limits the country&#8217;s income growth,&#8221; says the study.</p> <hr class="wp-block-separator"/> <h4 style="text-align:center">What does Brazil export?</h4> <figure class="wp-block-image"><img src="https://brazilian.report/wp-content/uploads/2019/09/exports-brazil-2017-1024x608.jpg" alt="exports brazil 2017" class="wp-image-24657" srcset="https://brazilian.report/wp-content/uploads/2019/09/exports-brazil-2017-1024x608.jpg 1024w, https://brazilian.report/wp-content/uploads/2019/09/exports-brazil-2017-300x178.jpg 300w, https://brazilian.report/wp-content/uploads/2019/09/exports-brazil-2017-768x456.jpg 768w, https://brazilian.report/wp-content/uploads/2019/09/exports-brazil-2017-610x362.jpg 610w, https://brazilian.report/wp-content/uploads/2019/09/exports-brazil-2017.jpg 1175w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source: OEC</figcaption></figure> <hr class="wp-block-separator"/> <p><strong>Trade.</strong> Brazilian exports are made up essentially of low-complexity products—mainly commodities such as iron ore (9.2 percent) and soybeans (12 percent). The study also shows how little Brazil trades with its own neighbors. South America accounts for 16 percent of Brazilian exports, and 14 percent of imports. Meanwhile, Asia is the destination of 42 percent of shipped products, and accounts for 36 percent of Brazilian imports.</p> <p><strong>Recommendation.</strong> The study suggests that, given the current state of Brazilian exports, the country could better explore sectors such as chemicals and industrial machines in order to provide more balance to its export portfolio.</p> <hr class="wp-block-separator"/> <h2>Why do the Brazilian police kill so much?</h2> <p>On Friday, 8-year-old Agatha Vitória Sales Félix was shot in the back by an assault rifle while riding inside a van in the Complexo do Alemão district of Rio de Janeiro favelas. She was one more casualty of the war between police forces and drug traffickers. On Twitter, Rio&#8217;s police informed cops had been shot at and they &#8220;retaliated to the aggression.&#8221; Agatha was at least the 16th child to be shot at in Rio de Janeiro this year (a list which includes two unborn babies). Since 2007, 57 children were killed by stray bullets.</p> <p><strong>Why it matters.</strong> The death of Agatha is the result of increasingly belligerent rhetoric by Brazilian policymakers—who have convinced parts of the electorate that only ruthlessness and disregard for human life are effective weapons against criminal organizations. Rio Governor Wilson Witzel, for instance, said earlier this year that the police would shoot suspects in &#8220;their little heads&#8221; if they carried assault rifles. However, many favela residents carrying microphone poles or umbrellas have been mistakenly targeted.</p> <p><strong>A bad reality for everyone. </strong>As editor Euan Marshall <a href="https://brazilian.report/society/2019/09/11/suicide-problem-brazil-police-forces/">wrote</a> on September 11, the Brazilian military police have become increasingly deadly. At the same time, more and more cops are dying in action. However, the stressful conditions of a profession in which cops are constantly demanded to shoot to kill has created a different crisis: more officers commit suicide than are killed on duty.&nbsp;</p> <p>The problem is not exclusive to Brazil, with the U.S. and France also presenting worrying suicide rates among police officers. Notably, public security agents are armed in all three aforementioned countries, with police suicide rates in the U.K.—where officers are overwhelmingly unarmed—significantly lower.</p> <p><strong>Political reaction.</strong> While the Rio State Government issued a statement on Agatha&#8217;s killing, Mr. Witzel himself chose not to speak over the weekend. It is worth remembering that he expressed mourning when a right-wing rapper died earlier this year. Congressman Eduardo Bolsonaro chose to tweet an image of a young child carrying a gun.</p> <p><strong>Congress.</strong> After hesitating, Speaker Rodrigo Maia (who is an ally of Mr. Witzel) eventually spoke about the incident, and suggested that Congress should strike down the parts of Justice Minister Sergio Moro&#8217;s anti-crime bill that allow police officers to kill suspects without fearing prosecution. Mr. Moro&#8217;s bill states that any penalty could be made void if the judge believes there was &#8220;reasonable fear, surprise, or emotion&#8221; from the cop before shooting.</p> <hr class="wp-block-separator"/> <h2>Markets</h2> <p>Braskem (<a href="https://www.investing.com/equities/braskem-pna-n1-historical-data">BRKM5</a>) jumped almost 5 percent on Friday with news that Odebrecht, its controller, is set to sell its stake in the company. Changing owners would help Braskem, although it won&#8217;t be easy—nor provide a magical solution to all of its problems. Its Maceió operation is accused of causing damage to entire neighborhoods and could be forced into paying compensation. It also failed to comply with U.S. authorities, having its shares suspended from the New York Stock Exchange. Despite the recent bump, BRKM5 is down 32 percent this year.</p> <hr class="wp-block-separator"/> <h2>Chart of the week</h2> <p>President Jair Bolsonaro has elected Twitter as his main forum of debate. Several of his cabinet members—as well as his sons—have also used the microblog to enhance their profiles. However, none of them reach anywhere near the same level of engagement as Mr. Bolsonaro himself. As a matter of fact, most of them only reached prominence when facing accusations. Justice Minister Sergio Moro&#8217;s peak was when <em>The Intercept</em> began leaking his private messages, shining a light on his wrongdoings during Operation Car Wash. And Environment Minister Ricardo Salles only gained attention after the Amazon fire crisis.</p> <div class="flourish-embed" data-src="visualisation/678222"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <hr class="wp-block-separator"/> <h2>Looking ahead</h2> <p><strong>UNGA.</strong> As tradition dictates, Brazil will open the UN General Assembly general debates. This time around, the level of scrutiny will be higher than ever, following the international crisis triggered by a rise in Amazon fires and President Jair Bolsonaro&#8217;s confrontational attitude towards other countries. Mr. Bolsonaro is expected to reaffirm Brazil&#8217;s sovereignty over the Amazon, defend sustainable development, and bash his left-wing opponents in Brazil and around Latin America. His words will also be closely monitored in Brazil, as agricultural producers fear losing markets if their products are associated with deforestation and climate change-inducing practices. (In tomorrow&#8217;s Daily Briefing, we will bring more detailed coverage of the 74th UNGA).</p> <p><strong>Venezuela.</strong> After months outside of the news cycle, Venezuela is back in the headlines. This week, members of the Organization of American States will meet to decide whether to activate the Inter-American Reciprocal Assistance Treaty (Tiar), a defense alliance dating back to the Cold War. The move could lay the ground for military intervention—which Brazil&#8217;s Armed Forces oppose. Instead, Brasília sees the Tiar as an opportunity to slap economic sanctions on Venezuela without the approval of the UN Security Council. On Wednesday, U.S. President Donald Trump will host a meeting to discuss the situation—President Bolsonaro won&#8217;t attend, as he will have already flown back to Brazil.</p> <p><strong>Pension reform.</strong> On Tuesday, the Senate is expected to hold its first-round vote on the pension reform bill. Needing the support of two-thirds of senators, it should pass without hiccups. The bill to be voted on by the floor is essentially the same as what was approved by the lower house—with substantial changes having been presented in another piece of legislation which is running in parallel. Senators opted to split the bills in order to avoid delays. Had the proposal been amended, it would have to return to the House for final approval. The second-round vote is expected for October 10.</p> <p><strong>Prosecutor general.</strong> Augusto Aras, chosen by President Jair Bolsonaro to be Brazil&#8217;s prosecutor general for the next two years, will sit in front of the Senate this week in his confirmation hearing. He will field questions on controversial issues such as the independence of Operation Car Wash, environmental regulations, and human rights. His confirmation vote will act as a temperature of the relationship between the government and the Senate, after a high-profile senator was targeted by a Federal Police operation last week.</p> <hr class="wp-block-separator"/> <h2>In case you missed</h2> <p><strong>Tax authority.</strong> On Friday, Economy Minister Paulo Guedes chose José Barroso Tostes Neto to head the Federal Revenue Service. Mr. Tostes has worked in the institution for 28 years, and led fiscal probes against high-profile politicians when in charge of the body for the North region. His mission will be to increase revenue, which will help the government reduce primary deficits and be able to invest more. He will also be charged with drafting proposals for tax reform, as the government&#8217;s previous version (involving a tax on financial operations) was buried with the firing of Mr. Tostes&#8217; predecessor.</p> <p><strong>Image crisis.</strong> During the weekend, the Brazilian government kicked off the BRL 40-million &#8220;<a href="http://brazilbybrasil.com/">Brazil by Brasil</a>&#8221; ad campaign to boost the country&#8217;s image abroad, tainted by the recent Amazon crisis. It will explore the connection between agricultural technologies and environmental preservation, trying to dissociate the image of Brazil&#8217;s agribusiness from Amazon destruction. The ads will run in Europe and the U.S. The Tourism Ministry&#8217;s latest attempts to promote the country have been <a href="https://brazilian.report/society/2019/09/12/brazil-tourism-board-cater-foreigners/">amazing flops</a>—this time, the campaign was headed by the president&#8217;s office instead.</p> <p><strong>Mercosur-EU.</strong> For the first time, the parliament of a European country passed a motion to force its government to reject the recently signed trade agreement between the European Union and Mercosur. The decision came from Austria, setting off worries that other countries could soon follow suit. The official reason is the &#8220;unacceptable&#8221; environmental policies of Jair Bolsonaro, but Brazilian diplomats claim the issue has been instrumentalized for political effect. Even before the Amazon fire crisis, Vienna was resistant toward opening up its market to South American agricultural goods.</p> <p><strong>Interest rates. </strong>As expected, the Brazilian Central Bank cut the Selic benchmark interest rate by a half percentage point, to 5.5 percent—the lowest level ever. In its comments on the decision, the bank&#8217;s monetary policy committee left the door open for additional cuts if the scenario remains stable—with low inflation and no major international troubles.

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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.