Bolsonaro gives Trump far more than he receives

Author

Gustavo Ribeiro
March 20, 2019 • Reading Time: 7 minutes

In today’s issue: Bolsonaro and Trump pledge cooperation. China imposes barriers on Brazilian meat plants. And the attack on a uranium convoy.

Bolsonaro gives Trump far more than he receives

Jair Bolsonaro is back from his Washington meeting with U.S. President Donald Trump, bringing home some diplomatic victories for his administration. Mr. Trump agreed to support Brazil’s bid to join the OECD, which can give more credibility to the country before investors, and to make Brazil a “major non-NATO ally,” which can increase military cooperation between the two largest democracies in the Americas.

However, he made more concessions than his counterpart did. Brazil agreed to give up its “developing country benefits” at the World Trade Organization (such as more room for agricultural subsidies and longer deadlines to implement WTO policies), and agreed to more access for American pork in Brazil, and an import quota of 750,000 tons of American wheat with zero tariffs.

  • In return, the U.S. pledged to “schedule a technical visit to audit Brazil’s raw beef inspection system, as soon as it is satisfied with Brazil’s food safety documentation.”

In a nutshell: Brazil promised to buy more goods from the U.S., and the U.S. promised to think about buying from Brazil. Not a balanced deal by any means.

Venezuela. Once again, Mr. Trump admitted to the possibility of military intervention in Venezuela, saying “all options are on the table.” When asked if Brazil would help the U.S. should that option be used, Mr. Bolsonaro was coy, saying that what was discussed between the two leaders should remain a secret, as it concerns “strategic information.” At no point, however, did Brazil’s president try to establish his independence from Mr. Trump’s stance.

The difficult task of reforming military pensions

The government is expected today to present its proposal to reform military pensions—a requirement for Congress to begin analyzing the reform of the general pension system, the top priority on the administration’s economic agenda. However, the Armed Forces—occupying key positions within the government—are resistant to cut their benefits. The Ministry of the Economy is trying to come up with a solution that will save money, while not dissatisfying the military.

Low-ranked military officers have been vocal against changes to their pension system, which led President Bolsonaro to analyze more than one proposal on the issue. He arrives in Brasília early today, and has yet to make a decision about which bill to sponsor. That could compromise the government’s timetable, and slow down the progress of the pension reform in Congress.

The current proposal—elaborated by the Ministry of Defense—changes the time of contribution from 30 to 35 years. It also raises the rate of contribution, from 7.5% to 10.5%. Relatives who receive pensions, who currently don’t contribute to social security, will pay 7.5%. In compensation, the military will keep some of its perks: such as pension benefits matching their last salary, and they could see significant pay raises. According to government officials, savings could reach BRL 92bn in 10 years.

China says ‘no’ to Brazilian meat plants

China’s sanitary authorities have refused to allow new Brazilian meat plants to export products to the country, frustrating expectations from major players such as JBS, Marfrig, and Minerva. In November, Chinese inspectors visited 10 poultry and beef plants, and mentioned that up to 70 plants could get the green light—which didn’t happen. Government sources believe the move could be a response to Jair Bolsonaro’s hostile declarations toward Beijing.

With the decision, Brazilian meat producers lose out on the opportunity to occupy the void left by an outbreak of African swine fever in China. The disease has spread to 111 confirmed cases in 28 provinces and regions across the Asian country—leading hog prices to a 14-month high. But Brazilian plants are already at their maximum capacity, and exports can only increase with the approval of new production sites.

China is Brazil’s top meat exporting market—representing USD 2.5bn in 2018. Brazil’s Agriculture Minister Tereza Cristina will visit China in May, to try to get approval for more plants. After meeting with U.S. President Donald Trump, Jair Bolsonaro reaffirmed his pledge to visit China later this year.

Uranium plant convoy attacked in Rio

Armed criminals shot at a convoy transporting uranium to one of Brazil’s two operating nuclear power plants, located in the coastal city of Angra dos Reis (Rio de Janeiro). The truck carrying the nuclear fuel and its police escort were passing through the town of Frade (just 13km from its destination). No one was injured—nor were the criminals arrested.

The nuclear fuel used in the Angra 1 and Angra 2 plants is produced in a government facility in Resende, a city in the interior of Rio de Janeiro state, located 130 km from Angra dos Reis. Brazil only processes uranium to be used as fuel for power plants, under close supervision of the International Atomic Energy Agency.

What else you need to know today

  • Investigation. Center-right senators have asked for a parliamentary hearings committee to be launched to investigate superior courts. The move has been interpreted as a way to intimidate the Supreme Court, which is responsible for prosecuting and trailing members of Congress. It has found opposition from Senate President Davi Alcolumbre, who believes that Congress’ rules don’t allow this kind of probe. It is the second attempt to corner the judiciary.

  • Interest rates. The Central Bank’s Monetary Policy Committee will reach a decision today on the country’s benchmark interest rate. Markets expect that the Selic rate will remain at 6.5%—its lowest ever.

  • Investments.General Motors announced investments of USD 2.7bn in two factories located in the state of São Paulo over the next five years. Governor João Doria said both plants were going to be shut down by GM, and that 65,000 workers employed directly and indirectly would have lost their jobs without his intervention. Earlier this month, Mr. Doria announced a tax break (of up to 25%) for automakers who invest in São Paulo. The move was used by Dilma Rousseff in the past—and was very detrimental to Brazil’s financial health.

  • Labor.Brazil’s Superior Labor Court will hold a trial today to decide on how to interpret hot-button issues concerning the 2017 pro-market labor reform approved by the Michel Temer administration. Justices will establish rules for lower courts on how to deal with outsourcing laws (which the reform loosens), and whether or not commutes should count as time worked (the reform stopped counting this time as such).

  • Happiness.According to a Gallup survey, Brazilians have never been so unhappy—following a worldwide trend. The worst recession in Brazilian history and a profound crisis of representation are listed by Gallup as the main causes. Over the past six years, sales of antidepressants in Brazil almost doubled, according to IQVIA, a research company.

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