✨ Keeping one’s hopes up

Good morning! Today, we talk about how Brazilians are most optimistic about their own situation — but worry about inflation. New accusations against the governor of Rio de Janeiro. And Brazil’s most valuable brands.

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Multi-layered optimism 

Roughly 70 percent of Brazilians believe that their personal situation will improve this year, according to a new survey commissioned by Febraban, a federation of banks. The number is down from 75 percent in February. Still, the rate of those who say the country as a whole will be in a better economic shape has slightly improved from 53 to 56 percent.

Top of mind. Inflation continues to be a top concern for Brazilians in 2024. Since February, the rate of voters who consider that consumer prices have increased over the past six months went up from 67 to 70 percent — still below the December 2022 peak (79 percent).

 Why it matters. Brazilians’ economic outlook for the country is not so grim, but rising food prices have stained their optimism. Almost three-quarters of voters have felt the pinch of more expensive foodstuffs and household products.

What they are saying. “In the first months of the year, the mood and expectations of Brazilians changed little, but registered a slight downward sign,” said Antonio Lavareda, CEO of pollster Ipespe, which conducted the survey.

Politics. For the government, it is of utmost importance that Brazilians feel more optimistic — which can lead to more consumption and a healthier economy. Ultimately, that will have an impact on President Luiz Inácio Lula da Silva’s approval ratings (which have taken a hit in recent months).

• Presidents usually get more credit than they deserve when things are going well, but they also get more blame than they should when conditions are not so favorable (which can be motivated by many factors outside of a government’s control).

Market outlook. Citizens are not the only ones worried about inflation. The Focus Report, a weekly survey carried out by the Central Bank with top-rated investment firms, shows that inflation expectations for 2025 are going up (from 3.6 to 3.64 percent in a week). 

• These projections could lead the Central Bank to slow down its rhythm of interest rate cuts. A new policy decision will be announced on Wednesday. The expectation of another half-percentage point cut is not unanimous, with some analysts believing that a smaller, 0.25-point cut could be made instead.

Rio de Janeiro governor accused of loading the dice

Electoral prosecutors in Rio de Janeiro have asked for the state’s top officials to be removed from office for illegally using their posts to create an unfair advantage for themselves during the 2022 election. The request concerns Governor Cláudio Castro, Lieutenant Governor Thiago Pampolha, and State House Speaker Rodrigo Bacellar, among others.

 Why it matters. Mr. Castro is the highest authority in Rio de Janeiro state politics. Messrs. Pampolha and Bacelar are the first and second in the line of succession. Besides their removal, prosecutors also ask for all but one of the 12 suspects to be made ineligible for public office until 2030.

What they are saying. Prosecutors say the accused used the public purse to artificially boost social programs in the first half of 2022, with the aim of increasing their re-election chances. 

• One public foundation and a university were also allegedly used as fronts for the state government to hire thousands of political campaigners as temp workers and have them work for the accused’s campaigns on the public dime.

By the numbers. Reports by news website Uol showed that these temp workers withdrew BRL 22 million (USD 4.33 million) in cash from ATMs late in 2022. This strategy has been used in other schemes in which participants sought to move money while leaving a minimal trace.

Ground rules. Brazil’s electoral legislation seeks to create an even playing field for candidates by limiting what incumbents can do in electoral years. Former President Jair Bolsonaro, for instance, was convicted twice of abusing his office to stack the deck when running for re-election in 2022.

Thought bubble. It remains to be seen whether the accusations will indeed end in punishment. The case will be tried by electoral judges in Rio de Janeiro, but will ultimately be decided by the Superior Electoral Court. Brazil’s electoral justice system is infamous for moving too slowly, except in cases where there is accompanying political momentum (such as the case of Mr. Bolsonaro).

• At this moment, the necessary political momentum doesn’t seem to be going against Mr. Castro and his allies.

Not the only. Governor Castro is no stranger to controversy. He was accused by the Federal Police of taking multiple bribes between 2017 and 2019 while serving as a Rio de Janeiro city councilor and as the state’s lieutenant governor.

Brazil’s most valuable brands

Consulting firm Brand Finance released its latest ranking of Brazil’s top 100 most valuable brands. Banks dominated the top three positions and made up four of the top six. They also accounted for over a third of the overall value of the top 100 Brazilian brands.

Streak. For the eighth consecutive year, Itaú — Latin America’s biggest private bank — is the most valuable brand in Brazil, according to Brand Finance. The bank maintained pole position despite a 4.4 percent drop in brand value, as customers were less likely to recommend the brand to others than in previous years.

 Why it matters. Brazilian brands can, in some way, act as a gauge of the overall economy. For instance, the top 100 most valuable brands combine for a market value of USD 77.2 billion — 35 percent lower than in 2013. Since then, Brazil has experienced its two worst recessions on record, which impacted brand value.

What they are saying. “The banking sector plays an important role in Brazil’s economy,” said Eduardo Chaves, Brand Finance Brazil’s managing partner. 

• “In Brazil, banking brands can implement various strategies to reflect better economic and social conditions,” he added, “such as promoting financial education, improving operational efficiency by investing in technology, increasing access to financial institutions, diversifying investments to mitigate risks, and collaborating with the government and other institutions to implement policies that maintain the country’s stability.”

Quick catch-up

Planning Minister Simone Tebet called for scrapping the rule that indexes Brazil’s pension benefits to the minimum wage. President Lula’s Workers’ Party criticized her statements as a betrayal of his 2022 manifesto and harmful to millions of Brazilians.

Supreme Court Justice Alexandre de Moraes is ending his term as Brazil’s chief electoral justice. His stint was marked by controversial moves to curb electoral disinformation. Justice Cármen Lúcia will replace him at the head of the electoral court.

Israeli forces seized the Rafah border crossing in Gaza. The Brazilian government said Israel chose to “deliberately intensify the conflict” in an area filled with civilians, a display of “disregard for compliance with the basic principles of human rights.”

Still battling floods, Rio Grande do Sul state is under alert for possible hail and windstorms. Temperatures could drop to 10oC. Experts worry about the worsening of the climate crisis.

While southern Brazil experiences widespread flooding, the Pantanal in the Center-West of the country is suffering through successive droughts. The world’s largest wetlands lost 81.7 percent of their water surface between 1985 and 2022. Precipitation and river levels are at their lowest since 2020; in the first four months of 2024, the number of wildfires increased by 1,033 percent.

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