Jair Bolsonaro was never a liberal. During the more than two decades in which he has been a federal deputy in Brazil, his political performance has always been close to interventionist policies.
There is an evident difficulty of the president in defending the liberal agenda of the minister Paulo Guedes. To make matters worse, it is also very evident that the current president does not believe much of this agenda. For this reason, Bolsonaro defends little or almost nothing the agenda of its own government.
The CCJ stage in the Pension Reform, which was seen as something easy, ended up becoming very difficult for a disjointed government.
This has helped to worsen many of the country's growth projections. The government's ability to implement the reforms advocated during the campaign produced dismay among Brazilian and foreign investors.
The deterioration of the Brazilian economy will make even more difficult the life of a government that until now has been completely disarticulated in the political plane.
This picture produced a lot of reluctance from foreign investors to bet on Brazil, especially after it became clear the Brazilian government will not be able to produce the liberal shock that the market expected. As a result, Brazil will be experiencing continued volatility in the coming days.
Thursday, 18 April 2019
Wednesday, 17 April 2019
Brazilian Congress does not advance in Pension Reform and Financial Market reacts badly
The Social Security reform ended up in the CCJ (Commission of Constitution and Justice) of the Chamber of Deputies. The draftsman of the text of the Pension Reform, Deputy Marcelo Freitas, did not appear in the session.
CCJ president Felipe Francischini, also from the party of the government of Jair Bolsonaro, the PSL, said that Freitas was at a meeting on the text of the Pension Reform, so he had failed. Nevertheless, Freitas had confirmed his presence in the session and, therefore, did not need to have a physical presence. Opposition MPs did not accept Francischini's response and went to the presiding board to pressure him. The session then became a big bustle and ended up being closed.
Freitas, who is from the government party, simply did not appear in Congress. This led to voting in the CCJ for after Easter.
That made the Ibovespa index, the main stock index of the country, to fall at the end of the day. Ibovespa fell 2% after a Social Security vote was postponed at CCJ. The dollar rose 1% and surpassed the R$ 3.94.
CCJ president Felipe Francischini, also from the party of the government of Jair Bolsonaro, the PSL, said that Freitas was at a meeting on the text of the Pension Reform, so he had failed. Nevertheless, Freitas had confirmed his presence in the session and, therefore, did not need to have a physical presence. Opposition MPs did not accept Francischini's response and went to the presiding board to pressure him. The session then became a big bustle and ended up being closed.
Freitas, who is from the government party, simply did not appear in Congress. This led to voting in the CCJ for after Easter.
That made the Ibovespa index, the main stock index of the country, to fall at the end of the day. Ibovespa fell 2% after a Social Security vote was postponed at CCJ. The dollar rose 1% and surpassed the R$ 3.94.
The minimum wage in Brazil will not increase above inflation in 2020, which has not happened for 15 years
According to the draft budget presented by the government of Jair Bolsonaro for the year 2020, the minimum wage should be R$ 1,040, only with the replacement of inflation. The project also does not predict real increase for servers, only the military will have increased above inflation.
If approved, the adjustment begins in January 2020, with payment starting in February 2020.
Thus, Bolsonaro interrupts a public policy of real increase of the minimum wage that it has begun 15 years ago, and that aimed at reducing the social inequalities of the country.
Brazil is one of the most unequal countries on the planet. Almost 30% of Brazil's income is in the hands of only 1% of the country's inhabitants.
According to Oxfam, 86% of Brazilians believe that the country's backwardness is related to the gigantic economic inequality between rich and poor.
If approved, the adjustment begins in January 2020, with payment starting in February 2020.
Thus, Bolsonaro interrupts a public policy of real increase of the minimum wage that it has begun 15 years ago, and that aimed at reducing the social inequalities of the country.
Brazil is one of the most unequal countries on the planet. Almost 30% of Brazil's income is in the hands of only 1% of the country's inhabitants.
According to Oxfam, 86% of Brazilians believe that the country's backwardness is related to the gigantic economic inequality between rich and poor.
Former Peruvian President Alan Garcia dies after shooting himself before receiving an arrest warrant linked to the Odebrecht case
Alan García was accused of receiving bribes in a case involving the corruption plot of the Brazilian construction company Odebrech. The Peruvian politician shot himself in the head the knowledge that he would be arrested preliminarily by the justice of his country.
In February 2019, the Brazilian company told the US Justice Department that it would have spent US$ 29 million on corruption in the country.
Garcia had unsuccessfully tried to seek asylum from Uruguay on November 2019. However, the Uruguayan president Tabaré Vázquez refused to accept it.
In February 2019, the Brazilian company told the US Justice Department that it would have spent US$ 29 million on corruption in the country.
Garcia had unsuccessfully tried to seek asylum from Uruguay on November 2019. However, the Uruguayan president Tabaré Vázquez refused to accept it.
Most Brazilians are against the Pension Reform proposed by Bolsonaro's government
A survey conducted by the Datafolha Institute indicates that 51% of Brazilians are against pension reform proposed by the government of Jair Bolsonaro. The survey was conducted by Datafolha between April 2 and 3.
For most Brazilian economists, the Pension Reform is urgent and must be done. However, the population fears that the poorer classes will again be the most disadvantaged. The population knows that the Pension and Social Security systems yield deficits are caused by the enormous privileges of politicians, some public servants (judges, prosecutors, and procurators) and the military, who receive very high pensions by Brazilian standards.
President Jair Bolsonaro, for example, started receiving, at the age of 33, retirement as retired captain of the Brazilian Army. Bolsonaro, who is now 64 years old, has been receiving the retirement of Exércio for more than 30 years (according to data from the Brazilian Army, the salary of captain in 2018 was R $ 8,517.00). In January 2019, Bolsonaro became eligible to retire also by the former Congressional Pensioners Institute (IPC), being able to receive from the Chamber a further R$ 29,301.45 per month. Meanwhile, an urban worker from the private sector (who retires by the age criterion: 65 for men and 60 for women) receives monthly R$ 1,129.31, which corresponds to about 290 dollars. In Brazil, the average retirement of a federal deputy is 23 times higher than that of ordinary workers.
There are even more absurd cases like those of military daughters who receive pensions practically throughout their entire lives. Only these cases cost Brazilian public coffers about R$ 5 billion per year. Most of these 110,000 women are fit to work. Some work in private companies and thus have two sources of income. However, the military daughters enjoy a lifetime pension inherited from their father, even though they have a job. Many of them marry but do not officialize the marriage so as not to lose the pension. These "single" women receive on an average monthly payment of about 6,000 reais in a country where two-thirds of the Brazilian workers retire with six times less.
Since 2000 it is no longer possible for the military to bequeath the benefit to their unmarried daughters. Even with this extinct benefit, however, Brazil will continue to disburse around 5 billion reais per year until 2060 for the daughters of the military who already receive this pension.
Therefore, besides being an economically unsustainable social security system, generating innumerable and grotesque inequalities, there is enormous difficulty and even lack of will to combat these inequalities. Mainly because the political class, responsible for Pension Reform, is one of the most benefited by the current framework. As a result, it becomes very difficult to believe that politicians will produce reform that promotes social justice and reduces current disparities.
For most Brazilian economists, the Pension Reform is urgent and must be done. However, the population fears that the poorer classes will again be the most disadvantaged. The population knows that the Pension and Social Security systems yield deficits are caused by the enormous privileges of politicians, some public servants (judges, prosecutors, and procurators) and the military, who receive very high pensions by Brazilian standards.
President Jair Bolsonaro, for example, started receiving, at the age of 33, retirement as retired captain of the Brazilian Army. Bolsonaro, who is now 64 years old, has been receiving the retirement of Exércio for more than 30 years (according to data from the Brazilian Army, the salary of captain in 2018 was R $ 8,517.00). In January 2019, Bolsonaro became eligible to retire also by the former Congressional Pensioners Institute (IPC), being able to receive from the Chamber a further R$ 29,301.45 per month. Meanwhile, an urban worker from the private sector (who retires by the age criterion: 65 for men and 60 for women) receives monthly R$ 1,129.31, which corresponds to about 290 dollars. In Brazil, the average retirement of a federal deputy is 23 times higher than that of ordinary workers.
There are even more absurd cases like those of military daughters who receive pensions practically throughout their entire lives. Only these cases cost Brazilian public coffers about R$ 5 billion per year. Most of these 110,000 women are fit to work. Some work in private companies and thus have two sources of income. However, the military daughters enjoy a lifetime pension inherited from their father, even though they have a job. Many of them marry but do not officialize the marriage so as not to lose the pension. These "single" women receive on an average monthly payment of about 6,000 reais in a country where two-thirds of the Brazilian workers retire with six times less.
Since 2000 it is no longer possible for the military to bequeath the benefit to their unmarried daughters. Even with this extinct benefit, however, Brazil will continue to disburse around 5 billion reais per year until 2060 for the daughters of the military who already receive this pension.
Therefore, besides being an economically unsustainable social security system, generating innumerable and grotesque inequalities, there is enormous difficulty and even lack of will to combat these inequalities. Mainly because the political class, responsible for Pension Reform, is one of the most benefited by the current framework. As a result, it becomes very difficult to believe that politicians will produce reform that promotes social justice and reduces current disparities.
Tuesday, 16 April 2019
Brazilian GDP may have negative results in the first quarter of 2019
Several Brazilian banks reduced their forecasts for the Brazilian GDP growth in the first quarter of 2019. In recent days, Itaú has reduced its expectation of 2% growth of Brazilian GDP in 2019 to 1.3%. Safra bank lowered its forecast from 2% to 1.5%. Bradesco, which projected a growth of 2.4% in GDP growth in Brazil in 2019, changed its expectation to 1.9%.
The worst projection was due to Banco Fator, which had forecast a growth of 1.7% of the Brazilian GDP in 2019. Now, Banco Fator understands that Brazilian GDP growth should be at 1.3% in 2019. The Factor also pointed out that the first quarter of 2019 should be marked by a decrease of 0.7% in GDP.
Because of these reductions, there is, therefore, a large decrease in bets favorable in relation to Brazil between domestic and foreign investors.
The current uncertainties in the political scenario and the reform agenda certainly greatly delay economic growth because it greatly reduces growth expectations for the Brazilian economy. However, this is the third consecutive year in which market expectations are reduced considerably. This points to a recurring error in the analyses made by economists in relation to the Brazilian political structure.
The financial market players erred in analyzing the Temer government and now erred again in expecting Jair Bolsonaro's presidency a minimally organized government. So far, what has been seen was a lot of confusion, unpreparedness and a tendency to give up the liberal agenda against any pressure, as occurred in the case of Petrobras.
According to Reuters, "although Bolsonaro vowed orthodox economic policies in his far-right presidential campaign last year, his first 100 days in office have raised concerns that more populist factions in his government may have an upper hand over free-market voices".
This shows a huge gap between market analysis and expectations and the real capacity for reform and to carry out economic policies that Brazilian politicians have.
The worst projection was due to Banco Fator, which had forecast a growth of 1.7% of the Brazilian GDP in 2019. Now, Banco Fator understands that Brazilian GDP growth should be at 1.3% in 2019. The Factor also pointed out that the first quarter of 2019 should be marked by a decrease of 0.7% in GDP.
Because of these reductions, there is, therefore, a large decrease in bets favorable in relation to Brazil between domestic and foreign investors.
The current uncertainties in the political scenario and the reform agenda certainly greatly delay economic growth because it greatly reduces growth expectations for the Brazilian economy. However, this is the third consecutive year in which market expectations are reduced considerably. This points to a recurring error in the analyses made by economists in relation to the Brazilian political structure.
The financial market players erred in analyzing the Temer government and now erred again in expecting Jair Bolsonaro's presidency a minimally organized government. So far, what has been seen was a lot of confusion, unpreparedness and a tendency to give up the liberal agenda against any pressure, as occurred in the case of Petrobras.
According to Reuters, "although Bolsonaro vowed orthodox economic policies in his far-right presidential campaign last year, his first 100 days in office have raised concerns that more populist factions in his government may have an upper hand over free-market voices".
This shows a huge gap between market analysis and expectations and the real capacity for reform and to carry out economic policies that Brazilian politicians have.
Monday, 15 April 2019
Brazilian farmers are exempt from paying R$ 40 billion in taxes
The Tax on Circulation of Goods and Services (ICMS) will not be charged to farmers by the Brazilian state governments. The measure will help contain the rise in food prices, but it will also cost about R$40 billion reais to the public safes.
The problem is that many state governments are broken. The worst cases are Rio de Janeiro, the Rio Grande do Sul, Minas Gerais, Roraima, Rio Grande do Norte, and Mato Grosso, which have already declared a state of public calamity in the financial sphere.
Therefore, on the one hand, the measure that helps farmers and secure food prices in the short term will make even worse the financial situation of states facing a calamity situation in the public accounts in the long run.
The problem is that many state governments are broken. The worst cases are Rio de Janeiro, the Rio Grande do Sul, Minas Gerais, Roraima, Rio Grande do Norte, and Mato Grosso, which have already declared a state of public calamity in the financial sphere.
Therefore, on the one hand, the measure that helps farmers and secure food prices in the short term will make even worse the financial situation of states facing a calamity situation in the public accounts in the long run.
Friday, 12 April 2019
Bolsonaro's government decides to interfere in fuel prices
Petrobras had announced that the average liter value of the fuel would rise 5.74% from today. However, the government of President Jair Bolsonaro, who until then claimed to be liberal in the economy, prohibited that the increase was applied.
The government fears a new strike by truck drivers like the one that stopped the country in 2018.
According to analysts, this measure hinders the work of reduction of debt and sale of assets made by Petrobras in recent years. The interference, very similar to the one made by the Dilma Rousseff government, can greatly harm the health of Petrobras. Petrobras' stock prices are expected to reflect this interference negatively. This should also drive the performance of the financial market in Brazil today and in the coming days.
In addition, the government also waved at the possibility of creating a tax on all financial transactions in Brazil. This should also be not welcomed with many criticisms of the Brazilian financial market.
The promise to reduce taxes made during the campaign of Jair Bolsonaro to the presidency generated many expectations in the Brazilian financial market. If the new tax is presented by the current government, the tendency is for the Brazilian financial market to take a more critical stance on the government.
The government fears a new strike by truck drivers like the one that stopped the country in 2018.
According to analysts, this measure hinders the work of reduction of debt and sale of assets made by Petrobras in recent years. The interference, very similar to the one made by the Dilma Rousseff government, can greatly harm the health of Petrobras. Petrobras' stock prices are expected to reflect this interference negatively. This should also drive the performance of the financial market in Brazil today and in the coming days.
In addition, the government also waved at the possibility of creating a tax on all financial transactions in Brazil. This should also be not welcomed with many criticisms of the Brazilian financial market.
The promise to reduce taxes made during the campaign of Jair Bolsonaro to the presidency generated many expectations in the Brazilian financial market. If the new tax is presented by the current government, the tendency is for the Brazilian financial market to take a more critical stance on the government.
Brazilian banks have the highest profit in history
Profits of Brazilian banks grew by 17.40% between 2017 and 2018. This was pointed out by the Brazil Central Bank's Director of Inspection, Paulo Souza. According to him, the net profit recorded by banks in Brazil at the end of 2018 was R$ 98.5 billion.
According to the banks, the factors that contributed to this result are the reduction of defaults and administrative expenses. The profits of the country's four largest banks (Banco do Brasil, Bradesco, Itaú Unibanco, and Santander) were R$ 69 billion in 2018. This represents a 20% increase compared to 2017.
This exceptional performance contrasts with a country where the majority faces a framework 63 million people unable to clear their names and regain their credit, where 13 million are unemployed and more than 30 million work in informality.
It is very difficult to understand how a country with stagnant economic performance, industry hitting negative records, falling per capita income, rising poverty levels may have a sector with so much profitability.
For some economists, these results are a direct result of the banking oligopoly that exists today in Brazil. This oligopoly guarantees extravagant profits. If Brazil had a more competitive banking system, the fees charged by banks would be lower, the services would be better and profits would not be so exorbitant.
According to economist Eduardo Moreira, the five largest single-rate banks charge more than R$ 130 billion of their clients every year. To get an idea of the size of this amount, the entire health budget in Brazil is R$ 120 billion per year. For him, the banks' performance is a machine of the concentration of wealth and abusive collections of interest and taxes on the middle class and the poor Brazilians.
According to the banks, the factors that contributed to this result are the reduction of defaults and administrative expenses. The profits of the country's four largest banks (Banco do Brasil, Bradesco, Itaú Unibanco, and Santander) were R$ 69 billion in 2018. This represents a 20% increase compared to 2017.
This exceptional performance contrasts with a country where the majority faces a framework 63 million people unable to clear their names and regain their credit, where 13 million are unemployed and more than 30 million work in informality.
It is very difficult to understand how a country with stagnant economic performance, industry hitting negative records, falling per capita income, rising poverty levels may have a sector with so much profitability.
For some economists, these results are a direct result of the banking oligopoly that exists today in Brazil. This oligopoly guarantees extravagant profits. If Brazil had a more competitive banking system, the fees charged by banks would be lower, the services would be better and profits would not be so exorbitant.
According to economist Eduardo Moreira, the five largest single-rate banks charge more than R$ 130 billion of their clients every year. To get an idea of the size of this amount, the entire health budget in Brazil is R$ 120 billion per year. For him, the banks' performance is a machine of the concentration of wealth and abusive collections of interest and taxes on the middle class and the poor Brazilians.
Thursday, 11 April 2019
Articulation of the Brazilian government will determine the behavior of the Brazilian financial market in the coming days
The first three months of the government still produces some optimism among some agents of the Brazilian financial market.
The lull in the international financial market, with Central Banks acting and China and US relation showing a more positive picture, helps maintain a certain optimism among Brazilian investors.
The Brazilian government began to move more to approve the Pension Reform. However, the government has not yet been able to consolidate an allied base for approval of its projects.
It all depends on the Brazilian government's ability to do politics. However, it appears that there is no such bargaining power in government.
There is also the danger that Bolsonaro or his sons may again publicly quarrel with some important political actor, as happened weeks ago the quarrel between the President of the Republic, Jair Bolsonaro, and the president of the Brazilian National Congress, Rodrigo Maia.
The lull in the international financial market, with Central Banks acting and China and US relation showing a more positive picture, helps maintain a certain optimism among Brazilian investors.
The Brazilian government began to move more to approve the Pension Reform. However, the government has not yet been able to consolidate an allied base for approval of its projects.
It all depends on the Brazilian government's ability to do politics. However, it appears that there is no such bargaining power in government.
There is also the danger that Bolsonaro or his sons may again publicly quarrel with some important political actor, as happened weeks ago the quarrel between the President of the Republic, Jair Bolsonaro, and the president of the Brazilian National Congress, Rodrigo Maia.
Cost of living in Brazil: inflation accelerates
Brazil's Broad Consumer Price Index (IPCA) rose from 0.43% to 0.75% between February and March 2019, according to IBGE data. This is the 4th consecutive high of inflation and the highest index for March since 2015.
Therefore, the IPCA closed the month of March with a rise of 0.75%, which is above the top of the market estimates, which were between 0.50% and 0.70%.
As a result, the IPCA accumulated in 12 months jumps from 3.89% (well below the target of 4.25% to 4.58% (well above the target)
The item that had the highest growth was gasoline, which rose 2.99% and accounted for 0.12 percentage points of the inflation indicator.
Tomato and bean prices were the highest among food items. The tomato increased by 31.84% in the monthly comparison. Beans racked up 105 percent of the growth in its prices in the first quarter.
Therefore, the IPCA closed the month of March with a rise of 0.75%, which is above the top of the market estimates, which were between 0.50% and 0.70%.
As a result, the IPCA accumulated in 12 months jumps from 3.89% (well below the target of 4.25% to 4.58% (well above the target)
Tomato and bean prices were the highest among food items. The tomato increased by 31.84% in the monthly comparison. Beans racked up 105 percent of the growth in its prices in the first quarter.
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