Brazil: a nuclear power?

Good morning. The president’s son wants Brazil to have nuclear weapons. Bolsonaro faces his first national strike. Financial aid to states could backfire. Embraer posts BRL 160m in losses.

Brazil: a nuclear power?

Congressman Eduardo Bolsonaro—son of the president and chairman of the House’s Foreign Affairs Committee—argued that Brazil should begin developing nuclear weapons. He said the country would be “taken more seriously” if it disposed of a more potent arsenal. In Mr. Bolsonaro’s words, Brazil could inspire fear in China or Russia—two of the world’s three biggest military powers.

Mr. Bolsonaro defended that nuclear weapons ensure peace (even if, with the exception of the country’s marginal participation in the two World Wars, Brazil’s last war ended in 1870), and suggested that the country should perhaps ignore the Treaty on the Non-Proliferation of Nuclear Weapons (NPT), signed by the country in 1998.

Brazil’s nuclear program began in the 1950s. In 1979, the Navy started to develop an initiative to dominate technology to produce nuclear uranium-based fuels (Brazil has the 5th-largest uranium reserves in the world). The country’s first nuclear submarine could realistically be ready by 2029.

In 2010, German magazine Der Spiegel published an article suggesting that Brazil is toying with the idea of producing nuclear weapons—but fell short of producing evidence. Weapon-grade uranium must be enriched to 90%; Brazil reportedly has the technology to enrich to 19%. However, the country has been ambiguous on the NPT—not having signed its 1997 additional protocol, which imposes stricter monitoring of countries’ nuclear facilities.

• Go deeper:Could Brazil be the next nuclear powerhouse?

Bolsonaro faces his first national strike

Four months in, the Jair Bolsonaro administration faces its first nationwide protest. Teachers, students, and education staffers are expected to hold demonstrations in the country’s largest cities against recently announced budget cuts to federal universities and schools. In São Paulo, 30 private schools will also join the protest—and won’t have classes today.

The Education Ministry has been a textbook example of the government’s internal power struggles between the military wing and the ideological zealots linked to self-proclaimed philosopher Olavo de Carvalho—the guru of Bolsonarism. A lack of clear proposals for developing Brazil’s education system, combined with over BRL 7.4bn in cuts, has made the unlikely become a reality: both the left and right in universities are united against the administration.

Yesterday, in yet another defeat for the government in Congress, the House subpoenaed Education Minister Abraham Weintraub to explain the cuts.

It is worth monitoring how security forces will react to the demonstrations. In 2013, the São Paulo police responded to a small demonstration against rising bus fares with violence—which sparked a series of movements across the country and led to former President’s Dilma Rousseff loss of popularity.

Financial aid to states could backfire

In order to give Brazil’s cash-strapped states some room to breathe, the federal government has created a new financial aid plan which imposes austerity measures in exchange for loans. But the government’s lack of strength in Congress get in the way, as lawmakers are being pressured by governors to loosen up rules limiting public spending and impose the privatization of assets.

States in fiscal calamity, such as Rio Grande do Sul and Minas Gerais, are resistant to sell off their assets and have yet to back the pension reform—but they are in desperate need of a government bailout. The administration has sent BRL 40bn to states in four years, but governors want more.

During the Dilma Rousseff years, the government was not strict with controls on states debt. In 2016, then-President Michel Temer approved a financial aid plan extending states’ deadlines for payments, which created a problematic situation for governors who took office in January—taking over states with BRL 900bn in combined debts.

Embraer posts BRL 160m in losses

This morning, Brazilian planemaker Embraer reported a net loss attributable to shareholders of BRL 160m. The result was worse than analysts predicted. The company delivered 11 commercial jets and 11 executive craft in Q1 2019—below the 25 aircraft delivered one year ago. Still, Embraer has maintained its projection to deliver up to 95 jets this year.

Another problematic point of the report is the company’s increasing debt of BRL 4.3bn, way above last year’s Q1 level of BRL 2.5bn.

What else you have to know today

Free Temer. In a rare unanimous vote, the Superior Court of Justice revoked a preventive arrest order against former President Michel Temer, related to accusations of corruption within Brazil’s nuclear power company. The court froze his assets and forbade him from leaving the country or contacting other defendants. The decision was interpreted as the court drawing a line in the sand against “abusive” arrest orders by Operation Car Wash judges. 

M&A. Zoom, a marketplace for electronic products, announced the purchase of Buscapé, Brazil’s first price comparison portal, for an undisclosed amount. Combined, Zoom and Buscapé are expected to generate BRL 5bn in sales this year. Buscapé’s controlling company, South African group Naspers, bought 91% of Buscapé stock in 2009 for USD 342m. It is unlikely that the deal is anywhere close to that.

Cotton. The increasing demand for natural and sustainable products in the fashion world has excited Brazilian cotton producers—who are expected to earn BRL 41bn in 2019. Brazil has leapfrogged from the 7th-largest producer in value 3 years ago to the 4th largest. Over the next few years, Brazil could even challenge the U.S. for the top spot, having attained a productivity level of 1,800 kilos per hectare, against the U.S.’s 940.

Hacking. The websites of three state chapters of the Brazilian Democratic Movement (MDB) party and one chapter of the Brazilian Socialist Party (PSB) were hacked yesterday by a group called Pryzraky. They displayed images of President Jair Bolsonaro and messages belittling left-wing values. The parties believe it was a retaliation for their resistance to supporting Mr. Bolsonaro in Congress.

Slavery. During a House session supposed to celebrate Brazil’s abolition of slavery in 1888, congressman Luiz Philippe de Orléans and Bragança sparked fury. He called slavery “an aspect of human nature.” He is the great-great-grandson of Princess Isabel, who signed the abolition law. The Brazilian monarchy, however, was always supportive of slavery—until it became less profitable for owners.

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