🤕 More congressional defeats

Good morning! Today, we talk about the Lula administration’s recent defeats in Congress. The 200 years of Brazil-U.S. relations. And a push to tax cross-border purchases.

If you like our work and want to give us an extra boost, you can fill up our reporters’ coffee mugs. Supporters get exclusive perks! Find out more.

• Important: Tomorrow is Corpus Christi, a holiday in Brazil, so we won’t be sending out an issue of our newsletter. We’ll be back on Friday! 

Congress sends a message to Lula

Lawmakers delivered more congressional defeats to the Lula administration by striking down the president’s veto of provisions that included elements of the far-right’s culture war in the Budgetary Directives Law. 

• With the move, the government is prohibited from making expenditures that, directly or indirectly, relate to the occupation of private lands or to educational activities that reference sexual orientation.

• Then, Congress struck down the veto of a bill restricting furlough benefits to prison inmates. The government had spent the past few weeks trying to whip support around the veto, but the 314-126 majority spoke loudly about the administration’s shortcomings in coalition-building.

Also … The House also approved a bill lifting a decree issued by Lula’s Justice Ministry to tighten access to firearms. The bill now moves to the Senate.

Meanwhile … Congress did keep a 2021 veto issued by then-President Jair Bolsonaro on a piece of legislation criminalizing the spread of electoral disinformation and enhancing penalties to military officers who commit crimes against the rule of law.

 Why it matters. Tuesday’s defeats don’t mean that the Lula administration holds an entirely minority position in Congress. But it shows that the government’s ability to whip support in Congress may be restricted to economic matters — such as the tax reform or issues on public spending.

• When it comes to moral and cultural issues, Lula’s allies in the so-called “Big Center” tend to flock easily toward the hard right, especially as the municipal elections approach.

Bad vibes. A week ago, this newsletter showed that Congress’s views on the Lula administration were going sour. Two-thirds of House lawmakers believe that the president gives Congress less attention than he should; even among allies, that rate reaches 42 percent.

• Moreover, the poll says 52 percent of House members believe the president is taking the country in the wrong direction.

Be smart. One point always worth remembering is that Congress has grown more powerful and has gained more control over the budget, which allows lawmakers to pour money directly into their constituencies in order to improve their re-election odds. Easier access to that money has reduced the cost of not supporting the government du jour.

Brazil-U.S. relations turn 200

Brazil’s Congress and Foreign Affairs Ministry on Tuesday held separate ceremonies to celebrate the bicentennial of U.S.-Brazil relations. 

Context. On May 26, 1824, U.S. President James Monroe welcomed Brazilian Chargé d’Affaires José Silvestre Rebello in Washington, D.C. — thus becoming the second country to recognize Brazil’s independence from Portugal, after Argentina did in 1823.

 Why it matters. As U.S. Ambassador to Brazil Elizabeth Frawley Bagley wrote in an op-ed for The Brazilian Report, both countries “are celebrating our shared tradition of democracy, self-determination, and commitment to human rights.”

History. Brazil-U.S. relations have been steady over the past two centuries. Carlos Gustavo Poggio, an international relations professor at the São Paulo-based Armando Alvares Penteado Foundation whose research focuses on U.S. foreign policy, described the relations as “never too close, but never openly confrontational.”

• Mr. Poggio pointed out on our Explaining Brazil podcast in 2020 that this dynamic is due to the fact that South America was never as relevant for American foreign policy as Central America is — but also due to Brazil’s efforts to keep the U.S. at arm’s length, as it tries to be a regional leader.

• There have been some periods of distancing — such as when Edward Snowden revealed that the U.S. National Security Agency spied on state-controlled oil company Petrobras and then-President Dilma Rousseff. But even these episodes didn’t last long.

• As columnist André Pagliarini noted at the beginning of the year, “there is an awkward wrinkle in this historical celebration, as 2024 also marks the 60th anniversary of the 1964 civil-military coup which, with Washington’s full backing, plunged [Brazil] into two decades of authoritarian rule.”

Celebrations. The congressional session was held on the Senate floor and chaired by Senate President Rodrigo Pacheco and Senator Veneziano Vital do Rêgo, his deputy and head of the Senate’s U.S.-Brazil Group.

Space. The list of attendees included representatives from the Brazilian Army, Air Force, AEB space agency, and a Brazilian director at the International Air Transport Association.

• The U.S. and Brazil have stepped up their airspace cooperation in recent years. In April 2021, Brazil’s Air Force announced the names of one Canadian and three U.S. companies that would operate at the Alcântara launch center, in the northeastern state of Maranhão. Among them was Virgin Orbit, which received its operating license about a year later.

• Also in 2021, Brazil signed a cooperation agreement with NASA to join the Artemis space program to return humans to the Moon. Former U.S. Ambassador Todd Chapman said at the time he hoped to “see the Brazilian flag on the moon.”

Shared challenges. Both countries are riddled with political polarization. Mr. Rêgo, the deputy Senate president, highlighted the similarities between the riots of January 6, 2021, in Washington D.C. and those of January 8, 2023, in Brasília — an important talking point for the U.S. Mission in Brazil. 

• “Our concerns, which are common to Brazil in these recent moments and also common to U.S. citizens [include the value] of the basic principles of each of our democracies, which, there as here, at certain times, have suffered due to some destabilization attempts,” he said.

House slaps 20 percent tax on cross-border sales

The House on Tuesday approved a bill setting a 20 percent tax on cross-border purchases worth up to USD 50. The Senate is expected to vote on it today.

 Why it matters. Brazilian retailers complain about unfair competition from Asian platforms such as AliExpress, Shein, and Shopee. They say that not even reinstating the standard import tax of 60 percent on these purchases would make the situation fairer, as products sold by Brazilian retailers pay an average tax burden of 109 percent, according to estimates from IDV, a lobby for retailers. 

By the numbers. Brazilians made more than 210 million international purchases last year, per the Federal Revenue Service. A study by the National Confederation of Commerce found that imports of women’s clothing items priced up to USD 50 were up 407 percent in 2023. 

Context. The issue of taxing these small purchases has been a thorn in the government’s side. Finance Minister Fernando Haddad defends taxation as part of his strategy to raise revenue, but the electoral implications are troubling other factions of the government. Even First Lady Rosângela Silva has weighed in against these taxes.

• Last week, President Luiz Inácio Lula da Silva threatened to veto any legislation taxing these cross-border purchases, but the government eventually brokered a deal with House Speaker Arthur Lira.

• States already charge a 17 percent tax on international purchases of up to USD 50 through online platforms, and governors are considering raising the tax to 25 percent, a move that has the support of the Finance Ministry.

Quick catch-up

A new survey found that half of the retailers in São Paulo city have experienced delays in supply deliveries due to climate-related issues in the past 12 months, and 13 percent have halted their operations and claimed to have suffered significant financial losses.

In a securities filing, Gor Airlines informed that its parent company, Abra, “has begun discussions with Azul to explore business opportunities.” The move comes amid rumors that Azul is trying to take over Gol after the latter entered a Chapter 11 bankruptcy protection process in the U.S.

José Guimarães, the government’s House whip, said the Lula administration may be in need of a shakeup, including a cabinet reshuffle. “If all were well, Lula would have his 80-percent approval rate. All is not well,” he said in an interview.

Brazil named Frederico Meyer to the UN Disarmament Commission, leaving the post of ambassador to Israel vacant. Brazil and Israel have been at odds for months, as Brasília is highly critical of Israel’s offensive in Gaza.

The Justice Ministry published guidelines for the use of bodycams by police officers on duty. The government, however, recognizes states’ independence to adopt their own rules. São Paulo, for instance, wants to allow officers to switch their cameras on and off at will.

• The Supreme Court gave the São Paulo government 72 hours to explain how its system will work and whether it is in line with the Justice Ministry’s guidelines.

The post 🤕 More congressional defeats appeared first on The Brazilian Report.