Brazil’s 2018 growth around 1.2%

Author

Gustavo Ribeiro
February 25, 2019 • Reading Time: 7 minutes

In today’s issue: Brazil wants more pressure on Venezuela. After crisis, leader of Bolsonaro’s party wants to end electoral fund. Brazil’s GDP growth.

Brazil wants more pressure on Venezuela

During a meeting of the Lima Group (a 14-country body

created to find solutions for the Venezuela crisis) later today, Brazil’s vice president Hamilton Mourão will argue for the need to increase the diplomatic pressure on Nicolás Maduro’s regime, and boost international support for opposition leader Juan Guaidó—who proclaimed himself the country’s legitimate president. However, Mr. Mourão will stress that no aggressive military action should be taken.

The Brazilian military wants to lower tensions at the border. On Saturday, two trucks loaded with food and medicine crossed the border into Venezuela but had to pull back after security forces blocked them, throwing tear gas on Brazilian soil. Venezuelan protesters clashed with security forces and at least four people were killed. Meanwhile, reports say that members of the Venezuelan army are robbing people on the Brazilian side of the border.

To make matters even more complicated, the sector of the government which backs total alignment with the U.S.—led by Foreign Minister Ernesto Araújo and Congressman Eduardo Bolsonaro, one of the president’s sons—are not opposed to the deployment of Brazilian troops in Venezuela. For now, though, the Brazilian military—which wants a more cautious approach and was against sending humanitarian aid against the Venezuelan government’s consent—is being able to avoid more damage.

After crisis, leader of Bolsonaro’s party wants to end electoral fund

President Jair Bolsonaro has already fired one of his cabinet ministers after accusations of electoral fraud, and a second could face the same fate. Leaders of the president’s Social Liberal Party (PSL) were accused of using dummy candidates as a front to siphon money from the publicly-financed electoral fund into companies connected to the party top brass. At least 13 parties are suspected of doing the same. Following the scandal, PSL whip in the Senate, Major Olímpio, proposed to end the fund altogether.

Ironically, the fund was created with a declared goal of curbing illegal campaign funding. When companies were allowed to throw money at candidates, campaigns became more and more expensive, and candidates began taking dirty money to finance their bids for public office—in exchange for favoring their donors after getting elected. Companies are now forbidden from donating, and only money from the electoral fund can be used.

Brazil’s 2018 GDP growth around 1.2%

Brazil’s GDP figures for 2018 are nothing to shout about. Economists are predicting a growth rate of only 1.2% before the official results are released on Thursday. This would be only a slight improvement on 2017, when the Brazilian GDP grew 1.1%—after shrinking 3.5% in 2015 and 2.2% in 2016. It will also be way below the government’s 3% growth forecast at the beginning of 2018.

The results were majorly influenced by May’s 10-day truckers’ strike. As Brazil is heavily dependent on trucks for the transportation of goods and fuels, the strike brought the country to a halt—with food and fuel shortages reported in several cities. But they also follow a long trend of underwhelming results. The Brazilian GDP has performed worse than the government’s forecast every year since 2011.

Government promises pension reform for military “soon”

Congress has threatened to stall proceedings on the pension reform bill presented by President Jair Bolsonaro last Wednesday, until the government also proposes an overhaul of military pensions. The pension system for the Armed Forces has a much higher deficit per capita than civilian pensions. Pensions secretary Rogério Marinho promised the bill would be submitted in the next 30 days, but now says it could be presented before March 20.

Some of the changes to be proposed are already known, such as raising the minimum length of service from 30 to 35 years, with contribution rates jumping from 7.5 to 10.5%. In order to lower resistance from congressmen, Mr. Marinho even suggested that Congress could vote on the military pension reform before deciding on the general bill.

The pension reform bill will take all the negotiating power from the Bolsonaro administration. The project is the most ambitious presented in recent history and attacks interests from many organized lobbies. However, it has also been harsh on the very poor—and some tweaks are possible without gutting the savings that the reform will allow.

What else you should know

  • Congress. Senate President Davi Alcolumbre has been accused of concealing part of his estate from the electoral justice—which could ultimately (but unlikely) result in his impeachment. Between 2002 and 2012, he declared having absolutely no possessions—which was contradicted by the public record in his home state of Amapá. Mr. Alcolumbre was elected to head the Senate in a very bitter election—and his adversaries could now seize this opportunity to go after him.

  • Investments.Brazilian investment fund 3G—owner of brands such as Burger King, Kraft+Heinz, and Budweiser—is taking a hit after a 27% drop in share value last week. JP Morgan Chase has openly questioned the fund’s belt-tightening strategy, saying its approach totally oriented to cost-cutting might have damaged the fund’s most valuable brands. The fund will begin a divestment strategy.

  • Roraima 1.Brazil’s National Electricity Agency (ANEEL) said the state of Roraima, which currently gets its energy supply from Venezuela, won’t be left in the dark if the neighboring country decides to cut power transmission altogether. The agency said Roraima has the capacity of generating electricity through thermal power from fuel oil—which is, however, highly polluting.

  • Roraima 2.The local government of Roraima has declared a state of calamity in the state healthcare system. The escalating tensions at the border have increased the demand for health services—and the government claims it needs to carry out emergency purchases of medicine.

  • Soft Power.São Paulo’s Mayor’s Office has begun looking for an advertising agency willing to develop, for free, a brand for the city, in the molds of the “I love NY” campaign. The project includes research on what about São Paulo raises interest from tourists—from which a concept and a logo would be created.

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