Is Brazil heading to a de facto parliamentary system?

Good morning! Is Brazil heading to a de facto parliamentary system? After dam collapse, Vale registers BRL 64bn in losses. Brazil’s lost decade. President Bolsonaro convicted for homophobic slur. Brazil’s lost decade.

Is Brazil heading to a de facto parliamentary system?

Brazilian philosopher Roberto Romano once compared Brazil’s presidency to a giant with clay feet. “He is mighty and all, but his power is also fragile. Without Congress to support him, the giant will crumble,” he said. We’re seeing that on full display under President Jair Bolsonaro. After shunning Congress, his administration has been collecting defeat after defeat since the legislative year began, on February 1.

The latest blow is a decision by the Special Budget Committee to take Brazil’s money laundering enforcement agency (Coaf) from under Justice Minister Sergio Moro’s jurisdiction, and put it back under the purview of the Economy Ministry, as it was in previous administrations. Mr. Moro’s decision to join the cabinet had been conditioned to his control of Coaf—a key element in his fight against corruption.

On the same day, the same committee voted to limit the role of Brazil’s tax authority in criminal investigations. And House Speaker Rodrigo Maia promised to fight the president’s new decree loosening gun ownership rules.

Under Mr. Maia, a group of right-leaning parties called the “Big Center” has gained more prominence than ever. This group traditionally used its size—occupying almost half of House seats—to threaten administrations and leverage more power. However, the Speaker prefers a different course of action: replacing the president’s agenda with that of Congress.

In a recent political meeting, he talked about ending presidential provisional decrees (which, like regular decrees, come into effect immediately, but must be ratified by Congress and take up the legislative agenda), and argued that Congress should control the federal budget—not the Executive branch. Unless President Bolsonaro decides to really engage in politics, Mr. Maia will gradually turn Brazil into a de facto parliamentary system. Perhaps, however, that ship has already sailed.

Go deeper: The history of Brazil’s “centrists”—and why they matter

The president convicted for homophobic slur

A Rio de Janeiro court upheld a conviction against President Jair Bolsonaro for using homophobic slurs during a 2011 interview. The president will have to pay a BRL 150,000 fine for saying he would never have a gay son because his children were “well educated.”

In the same interview, Mr. Bolsonaro made another statement also sparked fury. When asked what his reaction would be if one of his sons fell in love with a black woman, he responded: “I won’t discuss promiscuity. That’s not a risk in my family, as my children were raised properly, and not in a terrible environment.”

After dam collapse, Vale registers BRL 64bn in losses

Mining giant Vale posted a BRL 64bn loss in 2019’s first quarter—a sharp contrast to last year’s BRL 5.1bn profit one year ago, or the BRL 14.5bn gain in Q4 2018. The reason is the January 25 Brumadinho dam collapse, which claimed 270 victims, between deaths and disappearances. Since the disaster, Vale lost BRL 19bn in revenue, as the company had to spend on compensation and settlements, as well as shutting down risky dams and having part of its assets frozen.

Iron ore production went down 11%, while sales dropped 20%. Meanwhile, the company’s net debt went from USD 9.6bn to USD 12bn.

Late in April, Vale elected new board members—including a change at the helm. Eduardo Bartolomey took over as president from Fabio Schvartsman, who remains as CEO. The company promises to enhance operational safety—a pledge it also made just three and a half years ago. In November 2015, an iron ore dam partially-owned by Vale collapsed in Mariana, destroying entire cities, polluting rivers, and killing 19 people.

• Go deeper: How Vale bought off Brazil’s political class

Brazil’s lost decade

Over 90% of the countries in the world grew at a faster pace than Brazil between 2011 and 2018. A study by think tank Fundação Getulio Vargas shows that Brazil’s recent recession—the worst on record—was more on domestic factors rather than caused by international conditions.

Brazil’s biggest problem is a lack of budgetary balance. “After 16 years of primary surpluses, the country started to register deficits after 2014,” says Marcel Balassiano, one of the authors of the study. “Brazil’s gross debt ballooned from 51% of the GDP in 2013 to 78% this year.”

Go deeper: The worst economic crises in Brazilian history

What else you should know today

Budget. As the government has reduced its GDP growth forecast once again, new budget cuts are to be announced on May 22. From the government’s BRL 129bn budget for non-mandatory expenses, BRL 30bn has already been frozen. Ministries complained that they could run out of money by August. With new cuts, that partial shutdown could happen sooner. In other administrations, cuts were bigger in nominal terms—but the margin for investments and operational expenses was also much higher. 

Politicians. The Supreme Court decided to extend some legal benefits enjoyed by federal lawmakers to their counterparts in state politics—including giving state congresses the ability to suspend criminal cases against their own members. The trial ended in a 6-5 vote, with Chief Justice Dias Toffoli flipping sides. One and a half years ago, when the court began analyzing the case, he voted against the benefits. Yesterday, he was for it.

F-1. President Jair Bolsonaro said he plans to relocate Brazil’s Formula 1 GP from São Paulo to Rio, promising to build a new, privately administrated, state-of-the-art racing circuit within 7 months. São Paulo, however, has a contract to host the race until next year. For years, F-1 boss Bernie Ecclestone has voiced his displeasure with São Paulo’s circuit, threatening not to bring races to Brazil unless it is redesigned.

Budget. Two Brazilian airports—Curitiba’s Afonso Pena and Campinas’ Viracopos—were among the world’s top 10, according to a ranking elaborated by AirHelp Score 2019. They ranked 4th and 10th, respectively, making Brazil the only country with two airports on the list. Among the top 45 airports of the world, 10 are Brazilian. The analysis was based on a flight database and surveys with passengers.

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