The president is heading to Texas

Good morning! Privatizations not a short-term reality in Brazil. The president is heading to Texas. Benchmark interest rates continue at lowest-ever.

Privatizations not a short-term reality in Brazil

Last year, Economy Minister Paulo Guedes promised to lead the boldest privatizations plan in Brazilian history—selling off all 138 companies owned by the federal government. Then, in January, he pledged to raise BRL 20bn from said deals. But the goal will not be achieved—as privatizations need congressional approval, and the administration already has its plate full with the pension reform as it is. The bulk of the plan will be set into motion no earlier than 2021.

According to federal privatization secretary Salim Mattar, the process of setting up a privatization auction takes between 6 months and a year, in order to comply with federal law. Instead, Mr. Mattar defended a short-term divestment program, with the government reducing its shares in the companies it currently controls. The timetable for such moves is much shorter—from 60 to 90 days.

The government’s privatization program includes 105 projects and assets—59 of which were included yesterday. The new list features controversial projects, such as the Angra 3 nuclear plant—which has stalled for years—and the Brazilian Mint. The government expects these 59 new projects to generate BRL 1.6 trillion in investments for the next 30 years. Dozens of roads, railway connections, and airports were also included.

Go deeper: What would Brazil gain from privatizing Petrobras?

The president is heading to Texas

The Brazil-U.S. Chamber sparked controversy and fury after deciding to honor President Jair Bolsonaro with the “Person of the Year” award in a gala at the Natural History Museum, in New York City. The museum canceled the reservation, sponsors pulled out, and politicians criticized the event. The organizers decided to move the gala to Dallas, Texas. The president could be heading there next week, in what would be his second U.S. trip in less than five months in office.

Government officials are attempting to arrange a meeting between Mr. Bolsonaro and former President George W. Bush and Senator Ted Cruz—both Republicans. The president could also meet with the Mayor of Dallas, Democrat Mike Rawlings.

Mr. Bolsonaro responded to comments made by NYC Mayor Bill de Blasio, who called him a dangerous man. “I won’t wade into the controversy, considering that I’m such an inconvenience to [Mr. de Blasio]. But I’m not an inconvenience to [U.S. President Donald] Trump nor to the American people,” said the Brazilian president.

Benchmark interest rates continue at lowest-ever

As expected, the Central Bank’s Monetary Policy Committee decided to keep the Selic benchmark interest rate at 6.5% for the 9th consecutive time. The bank stood by the words of its former president, Ilan Goldfajn, who preached “caution, serenity, and steadiness”—signaling that it shouldn’t promote any cuts in the foreseeable future. However, the Selic rate is bound to continue very low, even if it potentially climbs back up slightly.

The problem is that investors wanted a sign of more cuts in the short-term—which could help stimulate economic activity, which is still sluggish, with companies retaining investments due to political uncertainties. The flip side is that, with lower interest rates, Brazil can lose investments, as the difference in interest paid in the country and the rest of the world is not an attractive prospect. That makes the Brazilian Real weaker against the U.S. Dollar—which in turn helps push inflation rates up.

Go deeper: Who is the president of the Brazilian Central Bank?

An app for ordering cattle

Giant meat producer Friboi—which owns brands such as JBS and Pilgrim’s Pride—has launched a mobile app for purchasing cattle. The company expects the new interface to improve communication with suppliers and sees the app representing 40% of overall deals in up to three years. Friboi currently buys its cattle for slaughter on the spot market and by way of fixed contracts.

The new app will allow cattle ranchers to access the suggested prices for his product and region, and directly make a bid to the meat processing team. But Friboi doesn’t expect its app to evolve into an online cattle marketplace—reaffirming that it will exclusively be used for deals between itself and cattle producers.

What else you need to know today

Pensions. One strategic mistake of Economy Minister Paulo Guedes is insisting on talking about switching Brazil’s pension system from the current pay-as-you-go system to a capitalization model. There is no detailed project for it, and it only generates unnecessary controversy around the pension reform bill. Moreover, the government still can’t answer how much would it cost to transition from one system to the other. Which drives analysts to ask: why bother? 

Corruption. A federal court has ordered former President Michel Temer return to prison. He is accused of running a corruption ring and accepting BRL 1m in bribes from an infrastructure company. Mr. Temer had been arrested on March 21 for allegedly representing a risk of tampering with investigations, but was released four days later after an injunction. Facing 10 criminal investigations—Mr. Temer told reporters he would turn himself in today.

Apps. The Supreme Court reached a unanimous decision in favor of ride-sharing apps such as Uber and 99. According to the court, laws prohibiting their operation are unconstitutional, as app drivers have the right to free enterprise. Justices consider that such apps help people replace inefficient public transportation systems on their commutes. App companies said the decision establishes clear rules for Brazil and will help to foster investments in technology.

Guns 1. The new gun decree approved by President Bolsonaro, loosening gun ownership rules, drove shares of gun manufacturer Forjas Taurus to a 23% hike yesterday. The move, however, is highly speculative, given Taurus’ huge debts, scandals, and history of product malfunction. Between January and October 2018 (when the presidential election took place), Taurus shares rose by 423%. But their prices were cut in half in a matter of two days, as investors cashed in their profits.

Guns 2. Experts believe that the president’s decree has overstepped the boundaries of the law, by granting the right to carry firearms to 11 professions, including journalists, truck drivers, and lawyers. Minors will also be allowed to practice in shooting ranges with parental authorization. Legal scholars say that Mr. Bolsonaro altered federal legislation—which can only be done by Congress.

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