Sergio Moro to the Supreme Court

Good morning! President Bolsonaro promises Sergio Moro a Supreme Court seat. A tsunami coming to Brasília? Bolsonaro wants to change Brazil’s income tax brackets.

Sergio Moro to the Supreme Court

On Mother’s Day Sunday, President Jair Bolsonaro announced he will appoint Justice Minister Sergio Moro for a Supreme Court seat as soon as a vacancy is available. Unless one of the 11 court members were to resign or die, that will happen in November 2020, when Justice Celso de Mello turns 75 years old and is forced to retire.

Regardless of his agenda, Mr. Moro does qualify for the job—having served 22 years as a federal judge and having clerked for Justice Rosa Weber in the past. He is also considered one of the biggest experts in money laundering on the bench. But the president said he has promised the job to Mr. Moro, suggesting it was a condition for him to join the cabinet—which raises many ethical issues.

Moreover, Congress could get in the way of the president and the minister’s plans. One group is aiming at pushing a constitutional amendment to raise the age limit for justices from 75 to 80.

Why announce Mr. Moro so soon?

The move was reportedly aimed at empowering the minister, who was recently served a huge political defeat when Congress took Brazil’s money laundering enforcement agency away from his jurisdiction. Instead, however, it holds Mr. Moro hostage to the Senate, which must confirm any Supreme Court appointment.

At least in theory, Mr. Moro was chosen for the Justice Ministry to crack down on corruption. If he does his job effectively, though, he could be killing his hopes of making to Brazil’s highest court. The hand-kissing ritual that every nominee has to undergo has already started for him.

• Go deeper: How does Brazil’s justice system actually work?

A tsunami coming to Brasília? 

On Friday, President Jair Bolsonaro took part in a corporate event at Caixa, Brazil’s largest state-owned bank. He told the audience that the government “may face a tsunami” this week, without going into any further detail. The Brazilian Report spoke to congressmen, high-ranking officials, and top aides within the administration—all of whom said they had no clue what the president was referring to.

The statement comes as Congress tries to impose defeat after defeat on the government—threatening not to vote on the provisional decree which established the current cabinet structure. If it is not approved by June 3, the government will have the outlook it did on December 31—with 29 ministries instead of 22. But some reports say that Mr. Bolsonaro could provoke the tsunami himself.

The president’s statement has put investors on their heels—anticipating a nervous week for markets. Especially in an unfriendly global scenario—international markets are hitting a 7-week low today as China vows ‘no surrender’ in its trade war with the U.S. Meanwhile, Brent crude oil has jumped by 1.6% to USD 71.76, after an attack on two Saudi oil tankers.

Whatever it is, the tsunami could not find the president, who heads to Dallas tomorrow, where he will receive an award from the Brazil-U.S. Chamber of Commerce.

Bolsonaro wants to change Brazil’s income tax brackets 

During a radio interview, President Bolsonaro promised to adjust Brazil’s income tax brackets for inflation, starting next year. The statement blindsided the economic team, as it would lead to a loss in revenue while the government is already cash-strapped as it is. The federal administration is expected to record primary deficits until 2022 at least. This year, the deficit should be around BRL 139bn.

Experts agree that, if the move is confirmed, then the government would become even more dependent on a non-diluted pension reform, putting further pressure on negotiations with Congress. The last update to income tax brackets happened in 2015. Since then, Brazil’s accumulated inflation has been 21%. Today, workers earning up to BRL 1,904 are exempt from paying income tax. Considering that the inflation for 2019 should be at 4%, that bar would be raised to BRL 1,981.

An update like this brings some relief to lower-income Brazilians. However, there should be more brackets to tax higher incomes. The current system creates distortions because, in proportion, poorer Brazilians pay more taxes than richer citizens. Taxes on consumption have the same impact on everyone, so this form of taxation is heavier for those with lower incomes.

What else you need to know today

Violence. Brazil recorded 10,324 violent deaths over the first quarter of the year (including all states except Paraná, which didn’t report its data). The number is a 24% drop from last year—with all Brazilian states registering fewer murders this year. Potential causes include: better-structured policies to fight organized crime, lowering tensions between drug cartels, and public pressure—which forced states to act more urgently. 

Diplomacy. In just 4 months, the Foreign Affairs Ministry has already spent BRL 12.8m of its BRL 14.2m budget for international trips. That is without counting this week’s trip to Dallas. In all 2018, former President Michel Temer spent BRL 15.5m.

Dinosaurs. A court in Lyon, France, authorized Brazilian authorities to repatriate 45 fossils of dinosaurs and other animals that were illegally exported—and were being sold online. They are valued at around BRL 2.5m. The fossils were put for sale by a company managed by François Escuillie—who owns Europe’s largest fossil repair and reconstruction laboratory.

Startups. Since 2011, when digital entrepreneurship started to gain steam in Brazil, venture capital funds have already invested BRL 13bn in new businesses. Despite the sluggish economy, the quest for the next Brazilian unicorn raised BRL 5.1bn—an amount 51% bigger than in 2017, according to the Latin American Private Equity and Venture Capital Association. Brazil concentrated two-thirds of investments in the region.

Celebrities. Jair Bolsonaro’s Social Liberal Party is betting on having household names for the 2020 municipal elections. The party officially recruited TV presenter José Luiz Datena, who runs a daily true crime news show, to potentially run for mayor of São Paulo. Other names on the radar include comedian Danilo Gentili (recently convicted for libel after calling a congresswoman a ‘whore’) and TV mogul Silvio Santos.[/restricted]

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