B3: Ibovespa sets a new record and reaches 102 thousand points

The Ibovespa traded today in a high and hit a new record, above the 102 thousand points. In the week, the main stock index of the Brazilian financial market accumulated a gain of 4.05%, the highest increase since the last week of December 2018.

The optimism of Brazilian investors is a direct result of the growing possibility of interest cuts in the United States and the increase in the voting chance of the Pension Reform in Brazil.

The Broadcast website today reported a report in which the analyst at Terra Investimentos Régis Chinchila said that the signaling that central banks in the US and other parts of the developed world can reduce interest rates is positive for Brazil.

Brazil spends 4.1% of GDP to pay interest and public debt charges in 2018

A report by the Federal Audit Office (TCU) shows that in 2018 the federal government spent $ 279.6 billion on interest and debt charges. The figure represents 10.1% of all committed expenditures (R $ 2.7 trillion) and 4.1% of GDP (Gross Domestic Product).

Gross debt, which accounts for the liabilities of federal, state and municipal governments, rose in March, according to data from the Central Bank (BC), released 30.Apr.2019 to R$ 5.431 trillion. The value corresponded to 78.4% of the Gross Domestic Product (GDP, the sum of all goods and services produced in the country), 0.9 percentage points more than in February. This ratio between debt and GDP is the highest in the historical series, which began in December 2001.

The same report indicates that tax waiver reached R$ 314.2 billion, corresponding to 25.6% of net primary revenue and 4.6% of GDP. According to the TCU, the waiver of social security contributions surpassed R$ 62 billion in 2018.

São Paulo Stock Exchange, the B3, rises 0.9% and reaches 100,303 points; Natura (NATU3) leads high

Shortly after Fed Chairman Jerome Powell announced that he would keep interest rates in the US between 2.25% and 2.5% a year, the Ibovespa returned to reach 100,000 points today (19.June.2019) in Brazil. 

The commercial dollar, in turn, fell 0.25% today and reached R$ 3.85 in the sale. It was the second low followed by the currency and the lowest since April 10 (R$ 3,824) in 2019.

The shares of Natura (NATU3), a cosmetics company, rose 5.3% and led the highs in the Ibovespa today, after news that the cosmetics manufacturer got in court right to a tax benefit.

Natura obtained in the Federal Regional Court (TRF) of the 3rd Region, in São Paulo, the right to exclude up to 60% of its expenses from income tax and Social Contribution on Net Income (CSLL). technological research and development of technological innovation.

Long-term unemployment grows in Brazil

According to data released by the Institute of Applied Economic Research (Ipea), the number of Brazilians seeking employment for more than two years rose 42.4% between the first quarter of 2015 and the same period in 2019. Since then, the number of people in these conditions has reached 3.3 million. The situation affects women and the North and Northeast regions more intensely. According to Ipea's assessment, unemployment should only begin to subside as of next year.

According to the Valor newspaper, the percentage of long-term unemployed in the country increased from 17.4% in the first quarter of 2015 to 24.8% in the same period this year, reaching a level of 3.3 million people.

According to the G1 website, the study concludes that the Brazilian labor market, therefore, remains quite deteriorated, with large numbers of unemployed, discouraged and underemployed.

Another defeat: Brazilian Senate committee shuns Bolsonaro's decree easing guns law

The decree for the liberation of the arms proposed by the government of Jair Bolsonaro suffers a defeat in the Senate. The text was not approved. This shows a clear separation between the customs agenda defended by the government and the economic agenda, which despite the Bolsonaro government's continued inability to negotiate politically, continues to be moving in the Chamber of Deputies, mainly the Pension Reform.

Rodrigo Maia, the president of the Chamber of Deputies, has decided to maintain the economic agenda despite the ongoing criticism he makes of the current government of Jair Bolsonaro. Maia, who is an economist, said this week that the departure of economist Joaquim Levy from BNDES was "unprecedented cowardice."

Levy resigned last Sunday (16.June.2019), a day after President Jair Bolsonaro told a news conference Levy was with "a price on his head."

Level of construction jobs in Brazil was practically stagnant in the first four months of 2019

The civil construction sector in Brazil generated 20 thousand jobs in the first four months of 2019. Data compiled by the FGV and the Civil Construction Industry Union based on Caged, the number of people employed in the civil construction sector in the period increased by 0,88% compared to the same period in 2018. The employers' union saw growth well below the expected resumption. The projection for GDP expansion in construction fell from 2.0% in early 2019 to 0.5% now.

However, if seasonal effects are disregarded, employment in the Brazilian construction industry would have registered growth of 0.08% in April (+1 954 jobs). At the end of this month, the sector employed 2,314,065 workers in Brazil. With this growth of only 0.08%, it seems that the country is far from the resumption of economic growth predicted by many analysts in early 2019.

As I have written here, this error is the result of the bet and support that many economic agents gave the Bolsonaro government. "In early 2019 financial institutions, according to this same bulletin Focus, forecasted a 2.6% growth in the Brazilian economy this year. However, this bet on the world of finance was mistakenly based on a very positive judgment of Jair Bolsonaro's ability to lead the country's economy".

Safra Plan: the government will offer R$ 225.59 billion in credits to Brazilian farmers

The Brazilian government announced today (18.jun.2019) R$ 225.59 billion for the 2019/2020 Safra Plan, which offers credits for financing small, medium and large Brazilian farmers. The value is practically the same as the previous season.

Of this total, R$ 222.74 billion is for rural credit, of which R$ 169.33 billion for funding, marketing and industrialization. Other R$ 53.41 billion for investment.

Among the main investment programs, Moderfrota, for financing agricultural machinery and equipment, will have R$ 9.6 billion, with a financing limit of up to 85% of the value of the product.

The Agriculture and Low Carbon Program will have R$ 2.096 billion available, with a financing limit of R$ 5 million per contract. The payment term is 12 years, with interest rates of 5.25% per year and 7% per year.

"Third-level advisor assumes the BNDES"

According to journalist Josias de Souza, Brazil's economy minister, Paulo Guedes, "contented himself with a domestic solution to fill the vacancy of the president of the BNDES". For Souza, Guedes accommodated "a third-level adviser" in the position of the top echelon of the Economics portfolio, was Gustavo Montezano, who has only 38 years old and served as special assistant secretary of Privatization and Disinvestment.

According to the newspaper Correio Braziliense, Paulo Guedes "ran against time to try to contain the sangria with the resignation of Levy, announced virulently by Bolsonaro on Saturday (15.Jun.2019) in the morning. The home-based solution was chosen to avoid further upheaval. The government did not want to hear a series of 'no', as many serious people were afraid of the President's rant."

Petrobras (PETR3;PETR4) announces the discovery of new natural gas fields in Sergipe and Alagoas

Petrobras discovered 6 natural gas fields in Sergipe and Alagoas. The expectation is that it will be possible to extract 20 million cubics of gás meters per day. This is the equivalent of 1/3 of Brazilian production today.

According to a report published on Sunday (16.Jun.2019) by the newspaper O Estado de S.Paulo, consultancy Gás Energy estimates that the exploration of these fields should result in R$ 7 billion in annual revenue for the oil company and its members.

These fields have placed the State of Sergipe on the world natural gas route. In five years, the state alone must move 40 million cubic meters per day of gas, a volume that corresponds to more than four times the current consumption capacity of the entire Northeast Region of Brazil.

Paradoxically, Petrobras announced this discovery days after the Federal Supreme Court (STF) has released the sale of state-owned subsidiaries without legislative approval, mainly the Associated Gas Company (TAG). The Court also dismissed the need for bidding. It is possible that Petrobras already had information about the discovery before approval.

According to journalist Luis Nassif, "a mere survey of the last few episodes proves the scandalous articulation surrounding the burning of public assets." For Nassif, "it is evident that the giant discovery completely changes the calculations on the Internal Rate of Return of TAG."

Luis Nassif believes that minority shareholders in Brazil should sue Petrobras for potential losses from this strange coincidence in the near future.

Joaquim Levy's departure from BNDES begins a difficult week for the Brazilian economy

The dispute between the Economy Minister, Paulo Guedes, and the president of the Chamber of Deputies, Rodrigo Maia, about the Pension Reform should continue in the coming days.

In addition, Joaquim Levy's exit from the BNDES brings more uncertainty to the government's economic team. Many analysts point out that Paulo Guedes would already be preparing a possible exit from the government. For political analyst Marco Antonio Villa, Paulo Guedes would be preparing his resignation due to economic stagnation and the changes made by the deputies in the Guedes proposed Pension Reform project.

Villa believes that Guedes can leave and blame the continuity of the economic crisis on the Chamber of Deputies and the Federal Senate. Despite this scenario, it seems that the House of Representatives and the Senate will continue with the Pension Reform and other policies aimed at improving the national economic picture.

The Central Bank's Focus report published today revised the GDP forecast to less than 1%, ie the economic picture continues to worsen. Analysts are forecasting cuts in the Selic rate because of Brazil's poor economic performance.

Economists interviewed by the Central Bank (BC) in the Focus Bulletin reduced for the 16th time the growth forecast of the Gross Domestic Product (GDP) in 2019. Thus, in the bulletin released on Monday (June 17, Brazilian economy for this year is forecast at 0.93%.

Request for the resignation of BNDES president, Joaquim Levy, leaves the Brazilian government even more ideologically isolated

Joaquim Levy's resignation request from the BNDES presidency left several members of the Brazilian National Congress with the impression that the economic team led by Paulo Guedes also became a "crisis plant." The president of the Chamber of Deputies, Rodrigo Maia, told Estado de S. Paulo newspaper that he was "perplexed" by the way the minister Paulo Guedes treated his subordinate. For him, Levy was a quality framework that he had to add to guarantee the reforms that Brazil needs right now.

After the resignation of Joaquim Levy, Bolsonaro government adds 19 casualties in the second step. This coupled with the number of ministers (3 in total) who have also left after untimely measures by President Jair Bolsonaro and his sons bring the number of people who left the government in the first six months of the administration to more than 20 people.

According to the magazine Exame, "the series of layoffs reinforces the tendency of the Bolsonaro government to entrench itself in more extreme positions".

Levy was the World Bank's chief financial officer between 2016 and 2018 and superintendent-director of Bradesco, one of Brazil's largest private banks, between 2010 and 2014. He was also finance minister during Dilma Rousseff's left-center government.