Street light in Liberdade, São Paulo's Asian neighborhood. Photo: Luan Rezende

This week, we talk about how China moves to know more about Brazil. Scientists believe they’ve found the origin of the massive oil spill in the Northeast. Why are things so expensive in Brazil? How Brazilian markets performed. Also, what you should be looking out for this week—and the most important facts of the previous seven days. (This newsletter is for platinum and gold subscribers only. Become one now!)


Chinese people learning more and more Portuguese 

Since 2011, when the Beijing

Language and Culture University opened a Portuguese department, it became the second most-sought-after foreign language in the university, behind Spanish (not considering English, which is mandatory in schools). The choice is linked to a growing demand for professionals in Chinese companies, banks, and government institutions based in Brazil.</p> <p><strong>Why it matters.</strong> China is Brazil&#8217;s main trading partner—and one of its most significant investors: for every BRL 10 invested in the country between January 2015 and June 2017, BRL 3 came from China. By improving its level of Portuguese, China is preparing to set an even bigger footprint and influence in Latin America&#8217;s largest economy.</p> <p>That contrasts with Brazil&#8217;s sheer ignorance of China. A 2017 survey showed that only 0.34 percent of Brazilian professionals spoke any level of Mandarin.</p> <p><strong>Problems. </strong>&#8220;This [cultural barrier] makes Brazilian leaders and businessmen rely on second-hand views on the country, transmitted by American and European outlets—which have an agenda not necessarily in line with Brazil&#8217;s,&#8221; said Mauricio Santoro, an international relations professor at the State University of Rio de Janeiro, to our <a href="https://brazilian.report/podcast-brazil/2019/04/24/brazil-deal-china-relations/"><em>Explaining Brazil </em>podcast</a>.</p> <script src="https://www.buzzsprout.com/299876/1078940-57-how-should-brazil-deal-with-china.js?player=small" type="text/javascript" charset="utf-8"></script> <p><strong>Change?</strong> But while Brazil&#8217;s interest in China is much smaller than it should be, it is rapidly growing. The number of Brazilian nationals living in the country has grown 50 percent in the last five years, to almost 17,000 people.&nbsp;</p> <p>Since 2004, China has opened ten branches of the Confucius Institute, a Beijing soft power tool, sending 50 Brazilians to China each year. &#8220;Most don&#8217;t want to come back, but the idea is that these students will bring their experience back to Brazil,&#8221; Ana Qiao, director of the institute in Rio, told <em>Globo</em> in August. In other words—the idea is to enhance Sinophilia in Brazil.</p> <hr class="wp-block-separator"/> <h2>Oil spill: origin found?</h2> <p>Based on a mathematical model of Atlantic currents, researchers from the Federal University of Rio de Janeiro believe they have identified the source of the massive oil spill invading the Northeastern coast. They say it comes from an area between 600 and 700 kilometers from the shore—that is, outside of Brazilian waters.</p> <p><strong>Crime scene.</strong> The researchers say it is impossible to be more accurate at this moment, as authorities don&#8217;t know exactly when the stains reached the coast. But, with more data, it would be possible to know if the crude oil leak was a one-off event or whether it persists.</p> <figure class="wp-block-image"><img src="https://brazilian.report/wp-content/uploads/2019/10/oil-spill-origin-1024x615.jpg" alt="brazil oil spill origin" class="wp-image-26188" srcset="https://brazilian.report/wp-content/uploads/2019/10/oil-spill-origin-1024x615.jpg 1024w, https://brazilian.report/wp-content/uploads/2019/10/oil-spill-origin-300x180.jpg 300w, https://brazilian.report/wp-content/uploads/2019/10/oil-spill-origin-768x461.jpg 768w, https://brazilian.report/wp-content/uploads/2019/10/oil-spill-origin-610x366.jpg 610w, https://brazilian.report/wp-content/uploads/2019/10/oil-spill-origin.jpg 1086w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>The probable location from where the oil came. Image: UFRJ</figcaption></figure> <p><strong>Why it matters.</strong> Knowing the source of the spill will help authorities contain further damage—more than 2,200 kilometers of coastline have been affected so far and over 600 tons of sludge has been removed. It could also lead investigators to the culprits of what is the largest environmental disaster in Brazil history, in terms of the size of the affected area.</p> <p><strong>Inaction.</strong> The federal government is taking heat for its lethargic reaction. The first stains were detected on September 2, but it took nearly a month until Brasília mounted any response. Despite Brazil having an emergency protocol for these cases since 2013, it wasn&#8217;t put into action. When questioned, the government says it is taking measures to control the spill, without offering any further details.</p> <script src="https://www.buzzsprout.com/299876/1875641-81-oil-brazil-s-underwater-treasure.js?player=small" type="text/javascript" charset="utf-8"></script> <p>To our <a href="https://brazilian.report/podcast/2019/10/16/explaining-brazil-podcast-81-oil-brazil-underwater-treasure/"><em>Explaining Brazil</em> podcast</a>, reporter Maria Martha Bruno—who was in the state of Alagoas—said that the bulk of the clean-up is being carried out by locals without using any protective gear. In the beaches she reported from, federal officials were nowhere to be found.</p> <p><strong>Coastal monitoring.</strong> Historically, Brazil has struggled to monitor its huge borders, whether that be on land or at sea. This case shows how little of the country&#8217;s coast is monitored—which would have allowed a warning system to be triggered before any oil had reached the shore.&nbsp;</p> <figure class="wp-block-image"><img src="https://brazilian.report/wp-content/uploads/2019/10/marine-traffic-1024x495.png" alt="marine traffic" class="wp-image-26189" srcset="https://brazilian.report/wp-content/uploads/2019/10/marine-traffic-1024x495.png 1024w, https://brazilian.report/wp-content/uploads/2019/10/marine-traffic-300x145.png 300w, https://brazilian.report/wp-content/uploads/2019/10/marine-traffic-768x372.png 768w, https://brazilian.report/wp-content/uploads/2019/10/marine-traffic-610x295.png 610w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>The heavy traffic of tankers along Brazil&#8217;s coastal line. Map: <a href="http://MarineTraffic.com">MarineTraffic.com</a></figcaption></figure> <hr class="wp-block-separator"/> <h2>Markets</h2> <p>Q3 earnings season starts this week, and analysts aren&#8217;t expecting any incredible overall numbers following Brazil&#8217;s lackluster Q2 GDP growth (0.4 percent). However, it will be worth paying attention to e-commerce firms, notably B2W and Magazine Luiza. Analysts from Bradesco BBI and XP research also have good expectations for car rental companies and airlines—even though the latter may feel the pressure of a weaker Brazilian currency. On the flip side, analysts expect Petrobras to report “slightly weaker results,” given that its big production numbers were offset by lower prices.</p> <hr class="wp-block-separator"/> <h2>Why is the iPhone so expensive in Brazil?</h2> <p>Apple launched its newest iPhone model on Friday, with prices in Brazil starting at a whopping BRL 5,000 (at USD 1,227, that is 75 percent more expensive than in the U.S.). While in North America and Central Europe an iPhone won&#8217;t cost over 2 percent of a country&#8217;s per capita GDP, in Brazil that relation is 11.67 percent. That&#8217;s mainly because of what Steve Jobs once called &#8220;Brazil&#8217;s super crazy&#8221; taxes. The myriad of fees in the import chain (including transport taxes) amounts to roughly half of the iPhone 11&#8217;s price.</p> <div class="flourish-embed" data-src="visualisation/799559"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <hr class="wp-block-separator"/> <h2>Looking ahead</h2> <p><strong>Bolsonaro in Asia. </strong>President Jair Bolsonaro visits Asia this week. On Tuesday, he attends the enthronement ceremony of Japanese Emperor Naruhito. Then, he heads to Beijing, where he is set to meet with businessmen and President Xi Jinping on Friday. There are some notable absences in his entourage, with cabinet ministers Paulo Guedes (Economy) and Tarcísio Freitas (Infrastructure) not making the trip. But Agriculture Minister Tereza Cristina will be there, and she is desperate to negotiate better conditions for the entry of Brazilian commodities into the Chinese market. On his way back, Mr. Bolsonaro will visit the United Arab Emirates, Qatar, and Saudi Arabia—seeking investments for 18 infrastructure projects.</p> <p><strong>Trial of the year.</strong> The Supreme Court will this week resume its trial on whether defendants can start serving prison sentences before exhausting all their appeals routes. Before 2016, arrests could only be made <em>after</em> cases were closed—which could often take more a decade. Three years ago, justices changed their understanding of the law—and are now set to change their minds once. Per the National Justice Council, 4,895 convicted felons could benefit from a change in precedents, including former President Lula (who nonetheless remains ineligible for office after multiple corruption convictions).</p> <p><strong>Lula.</strong> A federal court will decide this week on whether or not to allow Lula to be released from prison and serve a so-called &#8220;semi-open incarceration.&#8221; He would be allowed to work during the day, returning to his cell at night and on weekends. Leaving prison could weaken his claim of being a political prisoner, but could help him be more hands-on in organizing his Workers&#8217; Party—which has been stuck into a &#8220;Free Lula&#8221; loophole, losing much of its relevance in Congress.</p> <p><strong>Pension system.</strong> Will the pension reform finally pass in the Senate? A vote is scheduled for Tuesday and, despite the internal war within the Social Liberal Party (PSL, of which President Bolsonaro is a member), the vote is unlikely to be affected. That&#8217;s because most party leaders want the reform to pass, and because the PSL only holds three seats in the Senate—even if they do rebel, the proposal still has significant support in the upper house.</p> <hr class="wp-block-separator"/> <h2>In case you missed it</h2> <p><strong>Implosion.</strong> President Jair Bolsonaro and PSL chairman Luciano Bivar have declared war on one another. They are engaged in a fight for control over the party—and its hefty BRL 100 million annual cash flow—and have launched a number of attacks by proxy. Members of the Bolsonaro clan have called for an audit of the party&#8217;s books, while allies of Mr. Bivar want Jair Bolsonaro&#8217;s presidential campaign accounts to be scrutinized. The PSL House whip even suggested he had material to &#8220;bring the president down.&#8221; Amid this fight, reports that Mr. Bolsonaro&#8217;s campaign received undeclared money from the party have surfaced—which could ultimately lead to sanctions from electoral courts.</p> <p><strong>Polls.</strong> On Friday, an early poll for the 2022 presidential election showed that Jair Bolsonaro would beat Lula in a head-to-head runoff election. While it is awfully early to foresee the results of a national race which takes place in three years, these polls could help predict trends for next year’s municipal votes—as local elections have increasingly been influenced by national disputes. It also shows that anti-Workers&#8217; Party sentiment remains high.</p> <p><strong>Oil.</strong> In November, the federal government plans to hold the biggest oil auction in Brazil’s history—hoping to raise at least BRL 106 billion. Last week, the Senate approved (in a rare unanimous vote) the framework for how the money will be split among federal-, state-, and municipal-level governments. The <a href="https://brazilian.report/newsletters/daily-briefing/2019/10/16/imf-global-slowdown-brazil-growth-2020/">split favors Southeastern states</a> to the detriment of poorer areas in the North and Northeast.</p> <p><strong>Zika. </strong>Researchers at the University of São Paulo developed a test to improve the diagnosis of the Zika virus. Until now, the main obstacle for properly identifying the mosquito-borne disease is its genetic resemblance with dengue fever. The new test, however, enhances precision from 75 to 92 percent—virtually eliminating false positives or false negatives.

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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.