Brazil changes regulations to increase competition

Good morning! The government moves to reduce red tape and bureaucracy. The real reason to oppose the pension reform bill. 

Brazil changes regulations to increase competition

Just before the Labor Day holiday, President Jair Bolsonaro signed a provisional decree to reduce bureaucracy for businesses. These measures are issued by the president’s office and hold the same value as laws. They are effective immediately but Congress must confirm them within 120 days, or they lose their validity. We break down the main changes in Brazilian bureaucracy for you:

• All physical documents can be digitized—and later discarded.

• Companies will be allowed to set the prices they want. Dropping fees can no longer be considered as “predatory competition.”

• Companies engaging in low-risk activities no longer need to get permits (safety, sanitary, and environmental) to operate. Companies testing new products that are not hazardous will also be exempt.

• Regulators will not be allowed to inconsistently interpret norms. Permit processes will also have an established deadline—if regulators don’t respond in time, the permit will be granted, under the argument that ‘silence is consent’.

• Brazilian companies will face an easier process to hold initial public offerings without having to go abroad. Brazil’s Securities Commission will drop several requirements—and that could include the publication of balance sheets.

According to the latest Global Competitiveness Index by the World Economic Forum, Brazil ranks in 72nd place for business among 140 countries. With the new regulations, the government is trying to tackle two major hurdles: the lack of legal security and the crippling level of bureaucracy.

• Go deeper: How to understand Brazilian bureaucracy

The real reason to oppose the pension reform bill

Labor Day brought together, for the first time ever, all of Brazil’s trade union centers. During a protest in São Paulo, Congressman Paulinho da Força, a union leader himself, explained why it is so important for left-wing parties to dilute the pensions bill: “We need a reform that won’t guarantee [President] Bolsonaro’s re-election.”

Union leaders, like financial traders, believe that if the government gets anywhere near the BRL 1.2 trillion in savings for the next decade—as proposed by the Economy Ministry—Brazil will receive an inflow of investments, which would stimulate the labor market, push revenue per capita up—and potentially make the sitting president very popular. It is a fair assessment, as presidential popularity in Brazil is inversely proportional to unemployment rates.

That is why, in 2015, then-Speaker Eduardo Cunha led Congress to approve a series of projects that would deteriorate public finances and help erode then-President Dilma Rousseff’s popularity. The left has no control over the legislative agenda, but trade unions agreed on a general strike for June 14—just before the reform is expected to be voted on by the House floor.

The lasting effects of the Brumadinho disaster

An investigation by scientists from Rio and São Paulo has shown that the toxic sludge emptied into river basins following the Brumadinho dam collapse, on January 25, could cause severe anomalies in fish embryos. The researchers warn that the long-term effects on animal and human health must be closely monitored.

Even after being diluted 6,250 times, the mud collected five days after the incident (which killed at least 233 people) was capable of killing and severely damaging fish specimens. One major red flag is the levels of mercury, a highly toxic metal, which was at least 720 times above the maximum established as safe. Iron levels were 100 times above the accepted limit.

Mercury, however, was not being used by Vale, the owner of the collapsed dam. The scientists believe that the disturbance created by the dam collapse had such an impact on the riverbed that it released sediments of old sites of mineral extraction. During the 17th century, the state of Minas Gerais was the site of a brief but intense gold rush.

Go deeper: Brazil’s mining industry needs radical change to avoid future disasters

What else you need to know today

Recovery. This is the slowest economic recovery following a recession in Brazilian history. At the current pace, Brazil’s economy will only get to 2014 levels in Q3 2023—almost one decade after the recession began. One piece of data exemplifies the slow-paced growth: Brazil’s total spending on wages, including social security benefits, is expected to rise by only 1.1% this year, to BRL 1.18 trillion. 

M&A. This week, retailer Magazine Luiza announced its intention to acquire Netshoes, an online sportswear retailer, for USD 62m (USD 2/share). A KPMG report to the U.S. Securities and Exchange Commission raises serious doubts about Netshoes’ “operational continuity”—which should force stakeholders to accept the deal, despite share prices being way below their levels on the stock exchange.

New brand. In an attempt to break with its recent past, construction company Odebrecht now operates under a new name: OEC. It is the 5th company of the group to drop the ‘Odebrecht’ family name, which became synonymous to corruption after Operation Car Wash. The group hopes its new identity will help bring new projects. For 2019, OEC expects a portfolio of USD 7.1bn—in 2013, it was at USD 30bn.

Person of the year. After the American Museum of Natural History decided not to host an event honoring President Jair Bolsonaro, three other sponsors decided to pull out. Delta Airlines, consultancy Bain & Company, and newspaper Financial Times will no longer be a part of the gala, promoted by the Brazil-U.S. Chamber of Commerce. Last month, NYC Mayor Bill de Blasio said Mr. Bolsonaro “is not welcome,” and called him “a dangerous man.”

The post Brazil changes regulations to increase competition appeared first on The Brazilian Report.