🌊 Climate catastrophe

Good morning! This week, we talk about the continuous climate crisis in Brazil’s southernmost state. The collaboration between far-right groups in Brazil and the U.S. And the litigation bill for airlines.

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A state-wide climate emergency

The Brazilian federal government on Sunday declared a state of calamity in 336 of the 495 municipalities in Rio Grande do Sul due to the heavy rains and flooding affecting Brazil’s southernmost state. The state of calamity decree helps speed up the receipt of federal funds to address the needs of areas hit by disasters.

 Why it matters. According to state officials, storms and floods have killed at least 78 people, forced more than 95,000 out of their homes, and left at least 100 people missing. It has been described as the worst climate catastrophe in state history, and arguably in Brazilian history.

Capital. The Guaíba River, which runs alongside state capital Porto Alegre, has reached unprecedented levels. Around 70 percent of the 1.3 million people city have had their water supply cut off, and city officials have recommended that those who can should leave Porto Alegre temporarily.

Wartime. Congressional leaders have called the situation “war-like” and promised to approve measures to recover affected areas. House Speaker Arthur Lira promised an effective response, comparing the current crisis to the disruptions caused by the Covid pandemic. Governor Eduardo Leite asked for a Marshall Plan-like aid package.

Financial impact. Besides the obvious human toll, extreme climate events have also had an increasingly large financial impact on Brazil. Losses caused by natural disasters amounted to BRL 15 million (USD 2.96 million) in 2013, according to the National Confederation of Municipalities. Eight years later, that bill had jumped to BRL 72.3 billion — over 4,700 times more.

• Rio Grande do Sul is an important rice and soybean producer; the full impact of the torrential rains on harvests remains to be assessed. For local producers, this climate disaster could be a death blow to their business, given that they had to deal with massive droughts caused by the La Niña weather phenomenon in the last harvest cycle. 

• Losses in Rio Grande do Sul have reached at least BRL 559 million so far. However, the full impact is far greater, as only 19 cities have been able to fully assess the damages to their infrastructure.

Fiscal impact. There is no denying that the Rio Grande do Sul tragedy demands a swift response and significant financial resources. Economists, however, are worried about the government and Congress’s plan of action. 

• Analysts worry that Congress will, instead of creating one-off funding mechanisms, amend the Constitution to create new spending possibilities. That would supersede the fiscal framework legislation and erode budget controls.

• A bill to force members of Congress to use at least 5 percent of their budgetary earmarks on projects to mitigate the impact of climate events could go to a vote this week.

Continuous effort? Environment Minister Marina Silva says Brazil should place almost 2,000 municipalities (out of a total of 5,570) under a continuous state of climate emergency, commanding year-round strategies to avoid similar catastrophes. Ms. Silva made similar suggestions during previous climate crises but little has been done to make the idea a reality.

• The government launched an inter-ministerial committee to debate Brazil’s adaptation to the climate emergency. It is tasked with drawing up a 12-year plan, to be revised every four years. Again, however, little has been done so far.

International far-right collaboration

The U.S. House Foreign Affairs Subcommittee on Global Health, Global Human Rights and International Organizations, chaired by Congressman Chris Smith (a Republican from New Jersey), will on Tuesday hold a hearing on Brazil with witnesses dear to the Brazilian far-right.

Context. In March, Mr. Smith held a press conference outside the Capitol with a delegation of far-right Brazilian lawmakers who support former President Jair Bolsonaro. During that event, Congressman Eduardo Bolsonaro, the third-eldest son of the former president and a close ally of Steve Bannon, claimed that Brazil is “no longer a democracy.” 

• Mr. Bolsonaro compared ongoing Supreme Court-approved probes and arrests of coup plotters to political crackdowns by authoritarian regimes such as those in Cuba and Venezuela.

 Why it matters. The collaboration between the far-right in Brazil and the U.S. is part of a movement described by an increasing number of scholars as the far-right going “global.”

• “The growing prominence and success of far-right movements and parties across the world cannot be seen as coincidental nor ‘explained with reference only to domestic politics,’ insofar as it has ‘an international agenda and a vision for a radically transformed world order,'” writes researcher Rodrigo Duque Estrada Campos, of the University of York.

Who will attend. One of the witnesses to speak is the American journalist Michael Shellenberger, who posted the so-called “Twitter Files Brazil” last month. 

The files. After buying Twitter late in 2022, Mr. Musk allowed investigative journalists to dig into the company’s internal communications from the pre-Musk era. The revelations of the Brazilian chapter of the saga were, just like the reporting on how Twitter dealt with content moderation in the U.S., underwhelming.

• In the case of Brazil, the files are mostly composed of a series of emails by Rafael Batista, a former senior legal counsel for Twitter in Brazil and Latin America. 

• Mr. Batista left his job at Twitter in early 2022, several months before the presidential elections, and the emails did not provide much new information for anyone regularly following Brazilian politics. They describe a series of court decisions ordering content removal and account suspensions, all extensively covered by the Brazilian press.

Musk v. Moraes. After the Twitter Files Brazil was posted in April, Elon Musk threatened to disobey Brazil’s Supreme Court decisions by lifting blocks on suspended accounts. He did not fulfill this threat, but he otherwise joined a campaign led by the Brazilian far-right to characterize Brazil as a dictatorship — an effort to discredit the ongoing investigations into an attempted coup orchestrated by former President Jair Bolsonaro. 

• The Brazilian far-right has made a mission out of denouncing the investigations into a 2022 coup plot as a political witch hunt, much like supporters of Donald Trump have done about the probes against the Republican presidential nominee. 

• In both countries, leaders conspired to overturn democracy, and mobs attacked public buildings after their leader lost re-election.

What they are saying. Bruna Santos, director of the Wilson Center’s Brazil Institute, told The Brazilian Report that she is briefing lawmakers on the fact that the people denouncing Brazil as a dictatorship are the same who supported a military coup in Brazil, which was planned to take place in late 2022 or after the January 8 riots.

• “Mr. Musk’s involvement escalated that discussion in the U.S. political stage,” she said.

Democracy. One of the reasons for the Republicans’ interest in Brazil is that both the Joe Biden and Luiz Inácio Lula da Silva administrations chose the defense of democracy as key agenda items, given both were victims of coup attempts.

• Ms. Santos adds that tomorrow’s hearing opens up a precedent for far-right movements in other countries to take their talking points to the U.S. Congress.

Speakers. Another speaker tomorrow is far-right pundit Paulo Figueiredo, grandson of the last president of Brazil’s 1964-1985 military dictatorship. He is under investigation for seditious conspiracy.

What they are saying. U.S. Congresswoman Sydney Kamlager-Dove, a Democrat from California who will also attend the hearing, told The Brazilian Report that “the political violence and attempted coup that occurred on January 8, in many ways a copycat of what we experienced in the U.S. on January 6, was a test of Brazil’s democratic institutions, which prevailed and delivered an impressively swift and decisive response.”

• She added that “Republicans are the opposite of concerned about democracy in Brazil.” 

• “They are the ones attempting to undermine it by seeking to interfere in Brazil’s judicial process and by providing a platform to individuals who aimed to discredit Brazil’s legitimate election results,” she says. 

• “Republicans see the debate around Brazil’s fight against disinformation as an opportunity to cry victim when they face accountability for their own anti-democratic actions and to give themselves cover for their enabling of the January 6 insurrectionists who sought to overthrow the results of the 2020 elections by force.”

• “Unfortunately, both [Messrs.] Trump and Bolsonaro unleashed ugly brands of politics that disregard truth and seek to dismantle democratic institutions,” she added.

Markets

The Ferrogrão project involves building a railway directly from Brazil’s soy belt to its major ports in the north. Big Agro sees the project as a game-changer that would slash the costs of exporting commodities — but the railway is deadlocked due to environmental concerns. Construction would take work right through major conservation areas, threatening the livelihood of indigenous peoples. 

Chart of the week: Litigation land

Brazil leads the world in customer lawsuits filed against airlines. The main issues concern delays, cancellations, crowded flights, and difficulties obtaining refunds. The sector says the excess of lawsuits harms its operations, makes tickets more expensive, reduces the airlines’ networks, and drives away new competitors — which could force an improvement in services. 

• According to the International Air Transport Association, companies spend roughly BRL 1 billion to fight lawsuits.

Stories we’re following

Liabilities of small and medium-sized businesses in Brazil amount to BRL 115 billion, per Serasa Experian. Most companies in debt are in the services sector. Default rates have stabilized, with about 6.3 million businesses behind on their dues.

The Central Bank’s Monetary Policy Committee will on Wednesday make a new decision on Brazil’s benchmark interest rate. The markets mostly expect another half-percentage point cut (to 10.25 percent), although many are considering the possibility of a 0.25-point cut.

Former President Jair Bolsonaro was hospitalized in Manaus to deal with a chronic skin infection, the politician said on X. 

São Paulo Governor Tarcísio de Freitas was elected in 2022 on Jair Bolsonaro’s coattails. Upon taking office, he adopted a more independent posture but has now fully embraced Bolsonarism, including adopting his mentor’s motto “God, Fatherland, and Family.”

Mubadala Capital plans to invest USD 13.5 billion in a major biofuels project in Brazil, its country head told the Financial Times.

In case you missed it

Brazil and Japan signed 38 cooperation agreements during Prime Minister Fumio Kishida’s visit to Brasília, including several regarding agriculture and land recovery. 

Brazil has declared itself free of foot-and-mouth disease (FMD) without vaccination, and in August the country will request the World Organization for Animal Health (OIE) to recognize that status.

Madonna took 1.6 million to her concert on Copacabana Beach on Saturday, surpassing official forecasts. It was the fifth-biggest concert ever, according to Guinness World Records.

Moody’s on Wednesday reaffirmed Brazil’s long-term issuer and senior unsecured bond ratings at Ba2, two notches below investment grade. Meanwhile, the rating agency improved Brazil’s outlook from stable to positive.

Embraer is considering launching a new large commercial aircraft to compete with Airbus and Boeing, which would mark its entry into a market far greater and more profitable than its regional jet niche. A decision will be made only in 2025.

The government reported that the number of confirmed dengue cases is close to the mark of 4.3 million. That is already worse than the worst-case scenario projection made at the beginning of the year.

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