Written by THE BRAZILIAN REPORT · Jan 19 — Feb 1, 2019

TABLE OF CONTENT

BUSINESS AND INVESTMENTS

Rise in sanctions for ratings agencies

To the core: A new normative instruction by Brazil’s securities and exchange commission (CVM) promotes stricter sanctions for ratings agencies. These agencies may now be prohibited from operating for up to 20 years in Brazil if the credit note issued by them “contains false statements” or “misleads the user as to the credit situation of an issuer or a financial asset.” The increase in punishment also applies to cases of reports produced by rating companies without “compliance with the procedures and methodologies adopted by the agency.”

Other issues to bear in mind:
  • The rule also establishes that a lack of diligence in the management of the fund on behalf of the administrator or fund manager constitutes as a serious violation, including “receiving any remuneration, benefit or advantage, directly or indirectly through related parties, which could undermine the independence of the fund’s investment decision-making.” In other words, it also extends the rigidity of conflicts of interest in the administration and management of investment funds.
  • The instruction also addresses the rules for offering stock in the restricted mode. (Unlike the classic IPO, there is no need to register or preview the offer at the CVM and it can only be offered to up to 75 investors. The focus is on professional investors, with investments above BRL 10 million.) The change affects the possibility of offering real estate and agribusiness receivables certificates. They can now only be offered in this restricted category if issued by securitization companies registered with the CVM as publicly-held companies.

Source: Instrução nº 605, de 25 de janeiro de 2019 (Comissão de Valores Mobiliários)

Caution on money allocation of pension funds

To the core: The government has set out a number of criteria that pension funds should follow when it comes to determining the hiring of portfolio managers and selecting investment funds where they will place money from fund participants. The instruction establishes rules of caution for this definition, in order to anticipate risks and define specific points to be observed regarding the efficiency and safety of each fund.

Other issues to bear in mind:
  • The statement also defines criteria that pension funds should follow in order to keep track of performance monitoring of their contracted portfolio managers and investment funds where fund resources are applied.
  • Rules are defined for the choice of investment funds in general, as well as specific complementary rules for investment in Private Equity Investment Funds, Credit Rights Investment Funds and Real Estate Investment Funds.
  • Although the instruction does not establish how compliance with these criteria should be registered by the pension fund, a resolution of the National Monetary Council, to which Previc’s instruction complements, already provides that pension funds must “keep a digital record of all the documents that support the decision-making process for the application of the plans’ resources.”

Source: Instrução nº 1, de 21 de janeiro de 2019 (Superintendência Nacional de Previdência Complementar)

PENSIONS AND SOCIAL SECURITY

Pension fraud and other controversial issues

To the core: The government created, by way of a Provisional measure, the Revision Program, in order to promote the intense inspection (for the next two years at least) of pension benefits paid by the federal government which show signs of fraud or improper payments. In the same act, Jair Bolsonaro established more restrictive rules for aid that the government pays to the families of prison inmates, and withdrawing power from trade unions, workers federations and rural workers confederations.

 

Other issues to bear in mind:
  • The payment of imprisonment aid will only be made if the inmate has already made at least two years of contribution to the pension system (as a regular employee for a company, for example). Until now, this grace period did not exist and payment to the prisoner’s dependents was immediate. In addition, the payment will now only be made in cases of prisoners in high-security facilities.
  • Inmates in high-security prisons will not be entitled to sickness benefits. If the person is receiving benefits for serious illness and it arrested, the benefit will be suspended. If, after 60 days, the person is still in prison, the benefit will be canceled indefinitely.
  • The decree eliminates the possibility of an agreement with workers’ entities, specially confederations or federations, for the maintenance and management of the rural pension beneficiaries’ registry. This cuts off the link with federations of rural workers, such as Contag, who used to do this intermediation. The unions will no longer be able to attest to the rural activity of those rural workers. From 2020, the insured rural workers will be recognized only through the INSS (the national social security institute) registration. There will be no other way.
  • The seizure of family assets (including residential property) in the event of charges for improperly paid benefits or fraud, “including by a third party who knew or ought to know of the illicit origin of the assets,” is permitted. This final passage is puzzling, but it is clear that it opens up quite a wide range for the possibility of seizing family assets.
  • In case of finding irregularities in the granting of INSS benefits, the presentation of a formal defense must occur within 10 days. Until now, the rule established a 30-day deadline. If there is no defense within 10 days, the benefit gets suspended. In case the INSS isn’t able to officially notify the person, the benefit may be suspended despite being “based on pre-constituted evidence.”
  • Before being a requirement every five years, now people receiving benefits from the INSS will have to prove that they are alive every year, via biometrics, attending bank branches or other means still to be defined.
  • In order to have control over the benefits and beneficiaries, the INSS will have unrestricted access to data from the Federal Revenue Service and the public health system (SUS), as well as transactions of Guarantee Fund for Length of Service (FGTS) accounts and “medical documents kept by public and private entities.” In the case of private entities (which could be private hospitals), it will be necessary to sign agreements for the transfer of this data. The information collected by the INSS in all cases cited will be kept confidential, but Brazil has a solid record regarding cases of INSS data being leaked and illegally marketed.
  • With regard to dependents of federal workers, the legislation previously provided they would be entitled to benefits as pensioners from the date of the worker’s death. It now only considers the benefit to be paid calculated from the date of death if requested up to 90 days after death. For children under 16 years old, the count is valid even if requested within 180 days after death. If the request is made after the 90-day deadline, the benefit will be valid from the date of request. In the event of presumed death (disappearance, for example), the pension will only be valid from the date of a court sentence acknowledging it.
  • If an unrecognized child goes to the court claiming to be a dependent and therefore entitled to the benefit of a pension, the amount due will be withheld until a final sentence defining that the person is, in fact, a dependent. If, at the end of the process, the court rules that the person isn’t dependent, then the amount, initially withheld, is paid to the other dependents, proportionally.
  • In order for elderly people (over 65 years of age) or disabled people to receive a lifetime pension of one minimum wage per month, it is necessary to authorize the government to have access to their banking records, in order to prove that they are not able to support themselves on their own.

Source: Medida Provisória nº 871, de 18 de janeiro de 2019

More time for municipalities to submit pension investments

To the core: It changes the yearly deadline for states and municipalities to submit to the federal government their Statement of Investment Policy (DPIN) for the following year from October to December. The document is required for the issuance of the Certificate of Social Security Regularity. The DPIN is the document that indicates where, and in what proportions, states and municipalities will invest the resources of their own social security schemes (RPPS) – that is, the money from the contributions of their public servants.

Source: Portaria nº 23, de 30 de janeiro de 2019 (Ministério da Economia)

Adjustment on social security taxation

To the core: A new and extensive set of changes to a 2009 Normative Ruling, which establishes general rules of social security taxation. In practice, it serves only to make adjustments arising from the labor reform and other recent legislation in the 2009 text. That is, there are no new standards that have not previously been defined in law. It is purely a formal adjustment.

Source: Instrução Normativa nº 1.867, de 25 de janeiro de 2019 (Receita Federal)

LABOR ISSUES

Registration of new unions remains suspended

To the core: The Minister of Justice, Sergio Moro, decided to maintain the suspension of the analysis of union registration processes until April 30. The proceedings have been suspended since last July.

Source: Portaria nº 87, de 30 de janeiro de 2019 (Ministério da Justiça)

HEALTHCARE SYSTEM

Benefits for health insurers in exchange for avoiding bankruptcy

To the core: The National Health Agency (ANS), which regulates the health insurance market, has paved the way for the agency—in exchange for clarity in internal controls and risk management to avoid financial breakdown—to make it more flexible for operators to maintain capital reserved for risk coverage (regulatory capital factors), reducing the amount required.

Potential loopholes:
  • The verification of compliance with the criteria required by the ANS (there are only four) will be made annually through the Pre-Agreed Procedures Report (PPA) – mandatory for large and medium-sized operators. But the PPA report will be produced by external auditors. The ANS resolution itself already sees a potential conflict of interest in establishing that it is the operators’ responsibility to verify that the auditors meet the criteria of independence and competence and to declare that the auditor has not provided services to the operator in the last two years. It is a self-audit, similar to the one practiced in the troubled mining sector.
Other issues to bear in mind:
  • The submission of the PPA will only be mandatory as of 2023.
  • It defines that health plan operators must be transparent to society, “independently of those required by legislation” – which can have a broad interpretation about what kind of documents should be made public. Also, governance practices and structures should be clearly defined and “broadly disseminated to stakeholders”, i.e., beneficiaries.

Source: Resolução Normativa nº 443, de 25 de janeiro de 2019 (ANS)

FOOD AND HEALTH SECURITY

Priorities for the year

To the core: Anvisa (Sanitary Vigilance National Agency) has published its annual update of the topics that are part of the agency’s list of priorities until 2020. For this year, potentially important items have been shelved (that is, simply removed from the priority list, without being concluded) in the area of pesticides regulation. Other topics were included. The main topics excluded are:

  • “Revision of the technical regulation for the active ingredient acephate as a result of its toxicological reassessment.” (Acephate is a highly toxic component used in pesticides and can cause cancer.) In a presentation that I found from Anvisa itself, late last year, the regulation of this issue was marked as “high urgency / high relevance”, linked to a prior court. At that time, the regulation’s revision internal discussion had not even started.
  • “Parameters for microbiological control of personal hygiene products, cosmetics and perfumes”.
  • “Regularization of sunscreens”.
Other issues to bear in mind:
  • Among the items included in Anvisa’s priority list are: “Sanitary requirements for vegetable oils, vegetable fats and vegetable cream,” “Information on phenylalanine [good for health] in food,” “Good practices for food services,” “National manufacturers of active pharmaceutical ingredients,” “Good Practices on Medication Manufacturing,” “Procedures for the importing/exporting of drugs,” “Regularization of in vitro diagnosis products,” and “Logistic chain control of tobacco-based smoking products”.

Source: Agenda Regulatória Quadriênio 2017-2020 (Anvisa)

Thalidomide applications

To the core: The power to authorize the alternate use of Thalidomide for purposes other than the treatment of leprosy, HIV, chronic-degenerative diseases, and multiple myeloma is delegated to the General Manager for Monitoring Products Subject to Sanitary Surveillance.

Source: Portaria nº 216, de 22 de janeiro de 2019 (Anvisa)

Extra time for small producers

To the core: It extends the validity period of the submission of a Declaration of Aptitude to Pronaf (the Familiar Agriculture National Program) for families of small rural producers and the legal entities formed by small producers (rural family businesses, cooperatives and associations of family agriculture). Before it was a year, now it has been increased to two years.

Source: Portaria nº 1, de 29 de janeiro de 2019 (Ministério da Agricultura)

New rules on food buying by the government

To the core: The National Department of Food and Nutrition Security changed the rules of the Food Acquisition Program, in the modality that involves the purchase of food produced by family farmers and its immediate donation to people in need. However, although the wording of the ordinance can be applied in a general way, the change to the rules is currently only valid in the case of Brumadinho, the town affected by the rupture of a Vale iron ore tailings dam. The new rules increase the situations in which the maximum limit for government spending on the purchase of food can be expanded, depending on the municipality’s socioeconomic factors. These are the main alterations:

  • For municipalities with up to 15,000 inhabitants, the government will buy food up to the limit of BRL 90,000. For cities with more than 500,000 inhabitants, the ceiling for acquisition will be BRL 3 million. And for medium-sized municipalities, the number of inhabitants should be multiplied by six. Thus, family farmers of a city of 200,000 inhabitants will be entitled to BRL 1.2 million. However, reinforcing what was said above, these and the following rules are valid, at least for the time being, only for Brumadinho.
  • For municipalities where the percentage of the population linked to family agriculture is between 10 and 30 percent, the maximum limit of the amount reserved for food purchases will be increased by another 10 percent. In the case of municipalities with more than 30 percent of the population linked to family agriculture, the limit expansion will be 20 percent.
  • In addition, there will also be an expansion of the maximum limit based on the relation between the percentage of families living in extreme poverty in the municipality and the general percentage of the country in this regard. In this case, the spending limit will have an additional expansion between 5 and 30 percent, divided into five brackets.
  • The expansion calculation also includes “the value corresponding to the percentage of serious food insecurity in the state in which the municipality is inserted”.
  • For the final definition of the amount to be used to buy food produced by family producers, the value that was demanded by the municipality and the final limit amount will be compared. Whichever is smaller will be considered valid.
  • At least 40 percent of the purchases must be from female producers, and 5 percent from organic or agro-ecological products.
Potential loophole:
  • These limits will be divided quarterly, but they will still depend on the budget execution by the ministry, and may suffer cuts or even (less likely considering Brazil’s budget constraints) increases in values.

Source: Portaria nº 22, de 29 de janeiro de 2019 (Secretaria Nacional de Segurança Alimentar e Nutricional)

AGRIBUSINESS AND LAND OWNERSHIP

Social responsibility in agribusiness to be rewarded

To the core: The “Agro + Integrity Seal” award, granted every two years by the Ministry of Agriculture as a way of recognizing good practices in the agricultural industry, will also award agricultural cooperatives, as well as companies, in its next edition. Practices of social responsibility will also be recognized as of this year’s edition.

Source: Portaria nº 212, de 18 de janeiro de 2019 (Ministério da Agricultura)

CORRUPTION AND ACCOUNTABILITY

A loophole for more secrecy in public documents

To the core:: This was widely reported in the Brazilian press, but there are some nuances to be considered on this subject. A decree amended a previous decree of 2012, and thus defined that the high authorities of the federal government, originally entrusted with the power to classify public documents as “top secret” (25 years of confidentiality) and “secret” (15 years), may also grant this power to officials from lower echelons. In other words, more people will be able to sign orders ruling that at least until 2034 people won’t have access to documents they consider need to be kept secret. This was previously not allowed in the decree, although the Access to Information Law already left open possibilities of delegation of power – however, the 2012 decree did not stipulate this concretely.

 

Other issues to bear in mind:
  • Under the new rules, a group of 198 second-level officials from all federal executive agencies (ie, the decree does not apply to the legislature, the judiciary, state governments and municipalities) may, if they are authorized to do so, make public documents confidential ones. This includes ministry secretaries (responsible for monitoring and overseeing private activities and abuses against the environment, among many other things), police chiefs and even close advisers to the president.
  • Regarding the 15-year level of secrecy, it gives potential power to a group of another 901 people. That is, if we only consider positions of leadership of third-level officers. If special advisors, who have a similar level in the DAS 5 category, are considered, the number of applicable persons scattered around the Republic’s offices increases further.
  • Faced with the controversy, it is also important to note the following. The government argues that documents in ultra-secret degree of secrecy are “very rare.” Indeed they are. But what the decree makes possible is an increase on the number of authorities with this power and, consequently, a potentially greater dissemination of this degree of secrecy. Secret documents, on the other hand, are not so small, and the tendency, if subdelegations are to be fulfilled, is to increase in the same way.

Source: Decreto nº 9.690, de 23 de janeiro de 2019

Sergio Moro to avoid pro-corruption changes in law

To the core: The minister Sergio Moro has decided to create a working group to give hints in the normative changes that the Central Bank is preparing on its money laundering prevention system (a first draft of the new ruling already indicates, for example, that there would no longer be monitoring of politicians’ relatives, widely used to hide asset ownership). The group will be coordinated by the Brazilian money laundering enforcement agency (Coaf), with representatives of the Department of Asset Recovery and International Legal Cooperation of the National Secretariat of Justice, and the Federal Police all taking part. The working group will have 30 days to present its results for approval by the minister.

Source: Portaria nº 82, de 28 de janeiro de 2019 (Ministério da Justiça)

Administrative processes against companies

To the core: One of the duties of the Office of the Comptroller General of the Union (CGU) is to publish precedents on topics that are deemed to be unclear in legislation involving the prevention of corruption and illicit acts in general in the public administration. This week, it published on precedent that tweaked the Anti-Corruption Law, stating that the expected term (6 months) for the conclusion of the process of finding liability against companies “could be extended, more than once, by means of a reasoned act of the instituting authority, to enable the regular conclusion of the process”. This is a double-edged sword, as it may give more time for evidence to be collected, but on the other hand it may allow for the indefinite prolongation of controversial cases.

 

Other issues to bear in mind:
  • In another precedent, published on the same day, the CGU defines that for the purpose of applying suspensions to public officials, the repetition required for warnings “is generic”, that is, it does not matter if the warnings were given for different reasons. All serve to justify the next punitive step, which is suspension.

Source: Enunciado nº 7, de 23 de janeiro de 2019 e Enunciado nº 9, de 23 de janeiro de 2019 (Controladoria-Geral da União)

 

Entrepreneurship and public servants

To the core: Another CGU precedent defines that federal public servants cannot act as individual entrepreneur or as administrator of individual companies.

Source: Enunciado nº 8, de 30 de janeiro de 2019 (Controladoria-Geral da União)

 

Power to punish companies

To the core: The administrative processes for punishment of companies with public contracts with agencies within the structure of the Ministry of Economy (greatly expanded in this government) will no longer be directly in charge of the minister. Paulo Guedes delegated the responsibility of having the final say on these processes to his executive secretary (his immediate substitute in office). Regarding the rules already in force, it is now defined that, when the process of determining companies responsibility involves more than one body within the structure of the Ministry of Economy, it will be up to the Disciplinary Board of the Ministry of Economy to lead the investigation into the suspicions of irregulatities.

Source: Portaria nº 20, de 29 de janeiro de 2019 (Ministério da Economia)

Political appointments for public offices

To the core: The appointment and succession policy for the board of directors and regional superintendencies of Conab, the National Supply Company, is due to enter into force in April. The purpose of the instrument is to limit political appointment and to require qualification criteria for professionals to fill the positions. The norm should have been valid since December, signed by the then chairman of Conab’s Board of Directors. The postponement was signed by the acting president. So far the new government has not appointed anyone to the head of the company. With the change of rules, nominations before April may be made by weaker criteria, by prompting political arrangements.

Source: Resolução nº 5, de 24 de janeiro de 2019 (Companhia Nacional de Abastecimento)

Access to Information from tax authorities

To the core: The Deputy Secretary-General of the Federal Revenue Service is to decide on appeals submitted to requests denied by the agency under the Access to Information Law. In his absence, the decision will be left to the Deputy Secretary of Collection, Registrations and Attendance.

Source: Portaria nº 109, de 31 de janeiro de 2019 (Receita Federal)

Cooperation between public agencies

To the core: It will be the assignment of the Deputy Secretary-General of the Revenue Federal Service to evaluate the possibility of transferring data to other government bodies on, among others, the CPF, CNPJ, Rural Real Estate Registry, Electronics Invoice System and public companies debt control system. Only non-confidential data can be granted, but the ordinance does not deal with public access, only from requests made by other official bodies – such as the antitrust authority and Coaf etc.

Source: Portaria nº 110, de 31 de janeiro de 2019 (Receita Federal)

VIOLENCE AND CRIMINAL MATTERS

Prison system task force

To the core: Minister Sergio Moro recreated the Penitentiary Intervention Task Force, with some difference from previous versions of this same task force. The main change is that now, in addition to the “control, surveillance and custody” of prisoners, one of the group’s tasks will be to carry out intelligence activities related to the prison system – that is, monitoring the notorious Primeiro Comando da Capital (PCC) crime gang and other rival groups which operate within prisons. But only when this is triggered by states.

Potential loophole:
  • On the same day that the task force was recreated, the Ministry of Justice published an ordinance, moving the group to a 45-day mission in the state of Ceará, but without specifying if there would be any action in the area of intelligence. The same hiatus was in another ordinance that mobilizes the task force for a period of “training and readiness.”

 

Other issues to bear in mind:
  • A similar Task Force, with the same name, had already been created in January 2017. At the time, it was linked only to the National Security Force (FSN). Last October, there was a change and it became linked to both the FSN and the National Penitentiary Department (Depen). Now it’s only Depen, fortified under Sergio Moro. But in both cases, the task force had no mandate to act in the area of intelligence, as it has now.
  • The task force will have an Institutional Coordination (probably headed by a representative of the federal government) and the state governments will be able to transfer the prisons management for this coordination.

Source: Portaria nº 65, de 25 de janeiro de 2019 (Ministério da Justiça)

LOGISTICS AND INFRASTRUCTURE

New rules and old problems in international cargo transportation

To the core: The National Agency of Land Transport (ANTT) updated the rules for the concession of licenses for Brazilian carriers to transport international cargo (and foreign carriers to bring cargo into Brazilian territory). The previous resolution had been in force for more than 12 years and was already fragile on ways to curb the use of cargo transportation for illicit activities, such as drug and arms trafficking, smuggling and illegal timber trade, for example. Fragility remains in the new resolution though – and with new gaps.

Potential loopholes:
  • For a company to obtain a license, it only requires a registered phone number, an address for physical correspondence and two email addresses. Therefore it does not need to have a complete structure. Companies that use accounting offices as their formal headquarters may receive permission to cross the border with their trucks. Before, the former resolution, which was also insufficient on that matter, at least made reference to an “office” as a way to prove the carrier’s existence.
  • Vehicles which are not owned by the carrier but which are “in the possession” of it may be used for international transportation. The previous resolution demanded a vehicle lease document.
  • The only documents required to grant ANTT license for regular transport, with 10 years’ validity, are a copy of a social contract or statute and a list of vehicles (in addition to a proxy issued by the company CEO, when applicable, and a proof of a mandatory fee payment). If the carrier already has a license for a country and wants to obtain a new license for another country, they only need to pay the required fee, without having to submit new documentation.
  • The resolution provides that ANTT can also grant licenses for sporadic trips (i.e., the transport of products for music festivals, fairs, exhibitions, support for emergency, and even residential moves). In this case, the license shall not exceed six months and the trip may not be outsourced. It will also be necessary to describe the cargo carried both on the way and the return, as well as the reason for the trip. However, there is no requirement for evidence (such as a contract with a show producer) other than invoices.
  • Another provision is the authorization of international transportation of companies’ own cargo. In this case, individuals can also get a license, not only companies. The previous resolution did not allow it. This applies, for example, to cases of “transit of goods for sale” even in a vehicle which is owned by another person but is in its possession, and “transfer of goods between establishments of the same holder” (that is, if one owned, if only on paper, a slaughterhouse in Mato Grosso and another in Bolivia, they could cross the border to take equipment between locations).
  • If the person responsible for a foreign carrier is prosecuted for crimes, even in the case of smuggling, this is not a deterrent. The same goes for Brazil. There is no demand for anything such as a criminal record certificate from those responsible for the carriers.
  • In the only point of the resolution in which the criminal matter is addressed, it is only defined that “the operation of international road transportation of cargo for the accomplishment of illegal activity subjects the violator, through prior administrative process, to the penalties of suspension or cancellation of the respective license, in the form of the law”. It does not even say whether that company will be able to request a new license or if the responsible person, linked to another legal entity, may have some kind of obstacle.

Source: Resolução nº 5.840, de 22 de janeiro de 2019 (ANTT)

Airfare control

To the core: It updates the rules for registration of airfares on international flights, so that the government, through the National Agency of Civil Aviation (Anac), can control the price charged by Brazilian and foreign airlines. One-way tickets now must also be registered. Previously, in the pre-existing ordinance from 2010, only round-trip tickets were required.

Potential loopholes:
  • An item that ruled that the airfare data records would have restricted access and would only be released on a consolidated basis ceases to exist. However, there is also no specific indication in the new ordinance ruling that such data will be made available to the public. The text is silent on this point, which should allow access through Freedom of Information Act requests.

Source: Portaria nº 198, de 21 de janeiro de 2019 (Agência Nacional de Aviação Civil)

Investments of state-owned companies

To the core: The government defined new rules for changing the planned state-owned companies’ Investment Budget. For any change that implies in the reduction of the allocation initially approved, the companies will have to submit the effects of this change on the company’s performance during 2019 to the government, as well as to update the physical goals involved. To request supplementary or additional credits (this one related to expenses not provided for in the Budget Law), the request deadline will be August 30. For additional credits, the deadline is October 31.

Priorities for the electricity sector

To the core: The National Electricity Agency (Aneel) has published its regulatory agenda for 2019 and 2020, with priority issues for regulation. Of the 81 activities planned for the biennium, 41 are considered “new activities”. There are some that are expected to have a draft already in the first half of this year:

  • Review of the Geographic Information System, in which electric power transmission units are informed on a map.
  • Regulation of items defined by the decree signed in December by Michel Temer, which provides for the implementation of electricity infrastructure in situations of social interest, such as in poor areas or in recently built communities. (in the first quarter)
  • Geospatial Transmission Facilities (first quarter)
  • An important measure for the corporate organization of electricity transmission concessionaires: a review of the rules adopted in 2016 will be carried out, which allows the parallel development of operational and holding activities by companies. That is, a concessionaire company can control several other companies, but there are conditions for this, which were defined in 2016 and will now be reviewed – it is not known if the changes will better attend companies or limit this possibility. One of the objectives of the 2016 measure was to allow greater competition and facilitate the process of economic and financial supervision. A draft should be released as early as the first quarter.
  • Improvement of the electric energy commercialization rules.
  • Review of the driving ranges and the additional tariff lines.

Source: Portaria nº 5.571, de 29 de janeiro de 2019 (Aneel)

DEFENSE AND HOMELAND SECURITY

More prestige to the President’s closest general

To the core: A presidential decree creates two additional positions of special adviser for General Augusto Heleno, the Minister of Institutional Security, besides three technical advisers. It represents a strengthening of the figure of the general, who is one of the closest and top-ranked advisors to President Jair Bolsonaro.

Source: Decreto nº 9.687, de 18 de janeiro de 2019

ENVIRONMENTAL ISSUES

Environmental plea bargain

To the core: Ibama, Brazil’s environmental protection agency, has opened a new window to benefit individuals and companies that have been fined by the environment watchdog agency until February 2018 and which, instead of paying what they owe in cash, wish to convert those fines into services (of equivalent value) that help preserve and recover the environment. The infringing companies can make this request until December 31 of this year and with a discount of up to 60% in the amount to be applied in preservation actions. This plea for the government, created in February last year, provided that those fined before the rules were published could only claim the benefit until last August. Now this deadline is reopened by Ibama, and for a much longer period than the original norm.

Potential loopholes:
  • Vale was fined by Ibama, as an administrative sanction, for BRL 250 million due to the Brumadinho tragedy. This is the kind of fine that can be converted into environmental services – and that does not prevent legal actions for damages (in this case, a civil liability, not an administrative one). Samarco mining company (who has Vale as a shareholder) was already fined by Ibama after the Mariana dam collapse – and has not yet paid anything. And in that case, if Samarco/Vale had not yet asked to convert the fine within the original deadline, it will have the whole year to do so. The window is open.
  • The original rule remains valid: any company fined after the publication of the rules may request to exchange the fine received by applying this amount, with a discount of at least 35 percent, in environmental recovery projects. There is no timeframe for this, and the request can be made even after submitting closing argument in the administrative proceedings – that is, the company can go almost all the way through a lawsuit to try to cancel the fine entirely. At the last minute, the company can opt for the discount. Another window opened for Vale, this time directly related to the Brumadinho dam failure.

Source: Instrução Normativa nº 5, de 31 de janeiro de 2019 (Ibama)

 

Pesticide evaluation rules

To the core: The new president of Ibama changed the rules adopted by the agency for the evaluation of pesticides and other poisonous compounds and their effect on the environment. Previously, it was defined that it was forbidden to approve the registration of products that, in the consolidated assessment of their components OR in their individual parameters, would be considered more potentially hazardous to the environment than others already registered for a similar purpose. This registration ban now applies only to those which present negative results in the assessment of the parameters as a whole.

 

Other issues to bear in mind:
  • The individual parameters, which should now only be taken into account together, are “toxicity”, “presence of special toxicological problems, such as: neurotoxicity, fetotoxicity, hormonal and behavioral action and reproductive action”, “persistence in the environment”, “bioaccumulation”, “form of presentation” and “method of application”.
  • The previous Normative Instruction, which defined that a single individual parameter could prevent the registration of the pesticide, was signed less than a month ago, on December 27, four days before the end of the Michel Temer’s term as president.

Source: Instrução Normativa nº 3, de 21 de janeiro de 2019

Deforestation control system usage

To the core: An ordinance extends to July the deadline for deforestation actions, including for public works, attributed to municipal environmental agencies, to use the Forest Products Origin Control National System (Sinaflor). The originally scheduled deadline was May 2, 2018. Now, the new date is July 23. This new term also applies to the cutting down of isolated trees in urban areas, which had been treated separately.

Source: Instrução Normativa nº 4, de 22 de janeiro de 2019

Preservation of animals in the Amazon

To the core: The government created the National Plan of Action for the conservation of Amazonian aquatic mammals, with the objective of ensuring, in five years, the priority survival of three species: the pink river dolphin, the Amazon manatee and the giant otter. At a second level of priority, the plan will involve the conservation of three other species: the tucuxi (grey river dolphin), the neotropical otter and the boto-do-araguaia (a new species of river dolphin).

Source: Portaria nº 19, de 16 de janeiro de 2019 (ICMBio)

MINING

Brumadinho dam collapse

To the core: The government formalized a series of measures to signal a rapid reaction to the Brumadinho disaster, but few of them have any immediate practical effect. A Ministerial Council was created on the same day of the dam collapse but was only empowered to “propose” and “recommend” actions. Even a committee formed within this group, with a more executive approach, was also born without any effective powers. Any sense of real command is also missing. Although made up of more than a dozen federal government bodies, decisions in both the Ministerial Council and the Disaster Response Management and Assessment Committee are made by simple majority voting. The leadership of the Chief of Staff is only bureaucratic, as it can be defeated in the group through a vote. Only in case of a tie, however, does it have greater power, holding the deciding vote.

 

Other issues to bear in mind:
  • The Committee may invite other bodies to be part of the group (such as the Public Prosecutor’s Office, the Public Defender’s Office, the Minas Gerais government and the Brumadinho municipal government, among others), but these invited guests will not have the right to vote.
  • The first version of the decree didn’t include ministers that could overshadow the leadership of Chief of Staff Onyx Lorenzoni: the Minister of Justice (Sergio Moro), the Economy (Paulo Guedes), Infrastructure (a minister of military rank), and the Secretariat of Government and General Secretariat of the Presidency (both based in in the President’s office). They were only included in the Ministerial Council and in the executive committee in a second decree, published on Monday, January 28.
  • The group will operate for a minimum of six months, with weekly meetings, but focusing only on the issue of the failed Brumadinho dam. Although the name of the committee is generic, it is not, at least for the time being, a group to define the issues of the country’s dams in a broader sense.
  • The most concrete measure of the group so far has been to “recommend” the National Water Resources Council “immediately carries out” inspections on dams with “associated high potential damage” or “high risk”, with verification of potential removal of buildings and houses that are in a zone of direct influence of dams in these conditions (as was the case of Vale’s administrative center in Brumadinho).
  • The committee also “recommended” audits in the procedures and acts that defined the rules for dam safety oversight. These audits must be done within three months, but an order from the Ministry of Regional Development has determined that on-site surveys should be carried out right away.
  • A subcommittee was also created to draft a project to update the Dams Safety National Policy. This group, made up of federal government bodies, including agencies such as Ibama and regulatory agencies, has the mission to present a normative proposal by the end of this month, but later, it will depend on the approval of the Ministerial Council.
  • The Ministry of Mines and Energy has determined that by Monday, companies responsible for tailings dams throughout the country should inform the government if they have taken any measure regarding the safety of their dams after the tragedy in Brumadinho, clarifying, if the case may be, why they have not yet taken action. But there is no punishment involved in the even nothing has been done. On the contrary, the text foresees that companies can ask the government itself for help.

Source: Decreto nº 9.691, de 25 de janeiro de 2019 | Decreto nº 9.693, de 27 de janeiro de 2019 | Resolução nº 1, de 28 de janeiro de 2019 (Conselho Ministerial de Supervisão de Respostas a Desastres) | Resolução nº 2, de 28 de janeiro de 2019 (Conselho Ministerial de Supervisão de Respostas a Desastres) | Moção nº 72, de 29 de janeiro de 2019 (Ministério do Desenvolvimento Regional) | Portaria nº 21, de 31 de janeiro de 2019 (Secretaria de Geologia, Mineração e Transformação Mineral – Ministério de Minas e Energia)

Mining secrets

To the core: Under the pretext of increasing transparency of mining cases, the National Mining Agency eventually expanded the possibility of secrecy regarding these documents. The ANM, in a resolution published this week, no longer considered any mining process to be secretive, but with several exceptions. Another measure indirectly related to the case of Brumadinho, but signed a few hours before the tragedy, apparently.

 

Potential loopholes:
  • The resolution leaves a huge loophole for ANM to make any document of the mining process confidential, as long as there is a request from the responsible company, indicating specific items, in cases where the disclosure of this information may compromise industrial secrecy or “represent a competitive advantage” to another company. This second point is left extremely subjective.
  • The ANM Board of Directors, even ex officio (i.e. unprovoked), may restrict access to information about mining processes “for the purposes of protection based on the public interest, necessary for the preservation of the security of society and the state.” One more point of subjectivity.
  • After making the request, the excerpts or pages intended as confidential by the companies will immediately be filed in another folder, away from public eye. Secrecy is, therefore, guaranteed. If, in the future, there is finally a decision against the request for confidentiality, then the papers returns to the main folder, open to public request for copies.
Other issues to bear in mind:
  • In addition to those open points, there are others with secrecy explicitly imposed from now on. The information generated in the mining process, such as the result of research, mining, marketing, among others, will remain in secret. The Research Report, Economic Utilization Plan, Reserve Revaluation Report and Annual Mining Report (RAL) are also kept secret.
  • Before that, the “landowners of overburdened areas”, that is, the owners of the lands where the miners do research and mining, could have access to all the confidential processes, as long as they presented the deed of the corresponding property. Now, in addition to what will be public to anybody, these owners will only have extra access to the Annual Mining Report.

Source: Resolução nº 1, de 25 de janeiro de 2019 (Agência Nacional de Mineração)

Amapá state loses prestige

To the core: An ordinance eliminates the ANM regional office in Amapá. In place, it created an “advanced unit” in the municipality of Macapá (the capital of Amapá state), reporting to the Regional Office in Pará state.

Source: Resolução nº 2, de 29 de janeiro de 2019 (Agência Nacional de Mineração)

 

PUBLIC ADMINISTRATION

Postal Service workforce adjustments

To the core: An ordinance cut 2,140 jobs from the permanent board of Correios (the official postal service company). Now there are 105,211 employees, compared to 107,351 in July 2018.

Source: Portaria nº 623, de 21 de janeiro de 2019 (Secretaria de Coordenação e Governança das Empresas Estatais)

 

Control of contracts

To the core: After having received the same powers in an ordinance signed in the first half of January, the Executive Secretary of the Ministry of Economy has now delegated the power to authorize contracts of up to BRL 10 million to the Secretary of Corporate Management, and to its equivalents in all other agencies and entities linked to the Ministry of Economy. For contracts of up to BRL 1 million, this power can also be delegated to lower echelons by these secretaries.

Source: Portaria nº 268, de 29 de janeiro de 2019 (Ministério da Economia)

 

More requirements for money transfers to states and cities

To the core: The Department of the Treasury defines that, from now on, the Public Debt Analysis System, Credit Operations and Federal, State and Municipality Guarantees (Sadipem) will be among the data to be included in the federal government’s CAUC (a system that allows the monitoring of criteria required for the federal government to sign agreements with states and municipalities, and other types of money transfers).

Other issues to bear in mind:

  • In order to be able to receive funds, states also can’t have granted irregular tax breaks – that is, incentives given without the prior approval of the council of economy secretaries from all Brazilian states (Confaz).
  • This ordinance does not have much practical effect, but it increases the transparency and the centralization of information on states and municipalities by the federal government.

Source: Instrução Normativa nº 1, de 30 de janeiro de 2019 (Secretaria do Tesouro Nacional)

 

JUSTICE SYSTEM

Legal advice at the Ministry of Economy

To the core: The General Counsel for the Federal Government will no longer serve as legal advisor to the Minister of Economy in matters related to the extinct ministries of Planning, Industry and Foreign Trade, and Labor, as well as the Social Security National Institute (INSS). The role will be filled by the General Counsel for the Federal Treasury (PGFN). However, there will be a transition period of one year, which could also be extended. During this period, federal attorneys involved in these cases will work within the physical structire of the PGFN.

Source: Portaria Interministerial nº 1, de 29 de janeiro de 2019 (Advocacia-Geral da União)

CULTURE

Risk assessment on museums, libraries and sports arenas

To the core: The Ministry of Citizenship created a working group, with the technical coordination of IPHAN (the agency responsible for the preservation of Brazilian artistic and historic heritage), with the objective of evaluating the risk situation of properties housing museums and libraries linked to the extinct Ministry of Culture. The real estates to be evaluated also include properties of the Olympic Games Legacy (such as arenas and other sports buildings) and the extinct Brazilian Legion of Assistance Foundation (LBA) – which was the entity involved in scandals at the time of the impeached Fernando Collor’s term as Brazilian president, and which ended up extinguished in 1995.

Other issues to bear in mind:
  • The working group will have 180 days (that is, until July 28) to make its diagnosis, including recommendations on possible lawsuits involving these properties, and mapping risks and proposing “measures and budgets” to eliminate critical points.
  • The ordinance provides that the WG may invite representatives including private entities, as well as experts on the subject. The meetings will be at least monthly. Decisions must be taken by consensus. The specific assignments of the group members will still be defined.

Source: Portaria nº 39, de 25 de janeiro de 2019 (Ministério da Cidadania)

Diplomatic history

To the core: Establishes regulation for the Itamaraty Historic and Diplomatic Museum, created in the 1950s in Rio de Janeiro. It is a promise to revitalize the institute, with a focus on promoting the history of Brazilian diplomacy. There will be temporary and long-term exhibitions, seminars, courses, and symposiums. In order to be financially viable, the Museum will be able to seek partnerships with NGOs and private entities, “sign cooperation agreements, terms of development and terms of collaboration” and sign “contracts for the concession, assignment and use of public space”. An article in O Globo newspaper from April 2018 stated a partnership was being set up with a NGO.

 

Other issues to bear in mind:
  • The operational side of this new phase looks loose: the Directing Council meetings, to be presided by the Foreign Relations ministry, Ernesto Araújo, will be held only once a year and could even be conducted via WhatsApp (“by any means of communication”).
  • This council should define the general rules for the museum and approve the annual work schedule. It will also be up to the Directing Council to express its views on the deliberations of the Advisory Council (an 11-person group with a three-year term) – including the power to re-evaluate any decision made by the museum executive-director or the Advisory Council “due to the degree of complexity of the matter raised, if it deems it necessary”.
  • The policy of acquisition and disposal of works of art is also attributed to the advisory group, but always subordinated to the Directing Council, which has the final say.

Source: Portaria de 18 de janeiro de 2019 (Ministério das Relações Exteriores)

COMMERCIAL REGULATION

Consultants hired by international organizations

To the core: The Federal Revenue defined that it is the responsibility of Brazilian entities to declare the amounts paid to consultants by international organizations. Some cases are exempt from Income Tax by court order, but even so, the statement must be made by the Brazilian entities.

Source: Solução de Consulta nº 36, de 23 de janeiro de 2019 (Receita Federal)

No more full destruction of goods

To the core: The Federal Revenue Service decided to make the concept of the destruction of seized or abandoned goods considerably more flexible. Now, after public auction, these products can be exported by the companies that take the goods. The destruction or disablement of products can now be understood only as “withdrawal of their commercial attractiveness”. Previously, products were required to be made “unfit for the original purpose”. Destruction should now also be done, wherever possible, so that waste can result in their cost-effective re-use. Before, it was only necessary that recycling be viable.

 

Potential loopholes:
  • The ordinance allows cigarettes and other tobacco products, once auctioned, to be exported “in cases where there is a restriction or impossibility for its use, consumption, industrialization or commerce in the country”. The same is true, at least in theory, for other products that are destined for destruction, but the only ones which are apparently viable to be exported, according to the Federal Revenue Service list, are cigarettes and tobacco derivatives – which until this ordinance were strictly intended for destruction.

 

Other issues to bear in mind:
  • The waste from the destruction of goods can now be donated to associations and cooperatives of waste pickers.
  • The ordinance also defines a series of new rules to ensure the environmental control of the final disposal of waste from the goods destruction processes. It is now explicitly forbidden for waste to be released on beaches and in rivers, in the open, and burned.

Source: Portaria nº 59, de 30 de janeiro de 2019 (Receita Federal)

Taxes exemption for churches

To the core: The social security Cofins tax exemption, to which non-profit associations are entitled, isn’t extendable to revenues that are not derived from their own activities. For example, Cofins is charged based on the revenue generated by the sale of books, CDs and DVDs, among other items. Among these associations considered by the tax authorities are “temples of any denomination”. That is, the CDs and books sold by churches in general must pay taxes.

Source: Solução de Consulta nº 25, de 18 de janeiro de 2019 (Receita Federal)

 

MEDIA REGULATION

Fee on video advertising

To the core: The companies responsible for the video advertising you see on the internet, before watching videos on Youtube or on news sites, were meant to start paying an annual fee to Ancine (the agency that regulates the film industry in Brazil) as of January 1 this year, called Condecine (Contribution to the Development of the National Film Industry). Well, they will not have to pay anything anymore. Ancine revoked a rule that included this charge. The fee was BRL 300.25 (if all scenes were recorded in Brazil), BRL 1,159.82 (if scenes were recorded abroad) and BRL 2,977.51 (when all scenes were recorded in other countries).

Source: Instrução Normativa nº 147, de 22 de janeiro de 2019 (Ancine)

 

SOCIAL MINORITIES AND HUMAN RIGHTS

Healthcare for indigenous people

To the core: It extends the deadline for the Working Group which is reviewing the National Policy on Health Care for Indigenous Peoples for an additional six months. They began to work in February 2017 for an initial four-month period. That is, they have been working for two years without any conclusion. The guidelines for change in the national policy were defined at the 5th National Conference on Indigenous Health. It is the responsibility of the Special Secretariat of Indigenous Health, of the Ministry of Health, to coordinate the work.

Source: Portaria nº 3, de 29 de janeiro de 2019 (Secretaria Especial de Saúde Indígena)

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.