Pork becomes the most prolific meat sector in Brazil

Hello. This week’s issue: The most important facts of the week. The new face of Operation Car Wash. Pork becomes the most prolific meat sector in Brazil.

The week in review

• Corruption. Former President Michel Temer was arrested on Thursday in the latest Operation Car Wash-related probe, making him the 2nd former president jailed by the anti-corruption task force. Mr. Temer faces a total of 10 inquiries; the one which led to his arrest is connected to a scheme to siphon money from a state-owned nuclear power company. Mr. Temer and his group allegedly pocketed BRL 1.8bn over several decades. 

• Pension reform 1.The government presented its bill to overhaul the military pension system. President Bolsonaro’s proposal creates savings of BRL 97bn in 10 years—but was accompanied by a bill creating a system of bonuses for the military, which reduces the decade-long savings to only BRL 10.4bn.

• Pension reform 2.The privileges for the military, coupled with the president’s lack of commitment to the reform, have soured relations between the government and House Speaker Rodrigo Maia—a constant target of social media attacks by Carlos Bolsonaro, son of the president. Mr. Maia said he won’t pilot congressional negotiations anymore, and advised the president to spend more time working with congressmen and less time on social media.

• Diplomacy 1.President Bolsonaro made his first bilateral visit to the U.S. and met with Donald Trump on Tuesday. The Brazilian leader gave up a lot more than he received, giving American pork and wheat more access to the Brazilian market—and in return, he was promised that the U.S. will, in the future, reassess sanitary conditions of Brazil’s meat plants.

• Diplomacy 2.Mr. Bolsonaro flew to Chile, where he signed on the creation of Prosur, a right-wing multilateral body aimed at replacing Unasur. During the visit, Congressman Eduardo Bolsonaro (the president of the House’s Foreign Affairs Committee, and who acts as his father’s de facto Foreign Minister) said in an interview that “the use of force in Venezuela will be necessary.” To the Brazilian media, though, both Eduardo and Jair Bolsonaro denied the possibility.

• Environment.A fear shared by hydrologists and environmental activists has been confirmed: the mud spilled after the Jan 25 Brumadinho dam collapse has reached the São Francisco River—the longest waterway entirely within Brazil’s borders. The São Francisco represents 70% of available fresh water in the Northeast—the country’s aridest region.

• Presidential popularity.Jair Bolsonaro’s approval rate has fallen—especially among middle-class and low-income voters. Since January, 30% of people who supported him no longer believe the president is doing a good job. Less than 3 months into his term, Mr. Bolsonaro has popularity numbers on par with presidents entering their second term—when they have years of political wear and tear on the belts.

Pork becomes the most prolific meat sector in Brazil

Better prices, a wider variety of products, and a bigger concern with how the meat is presented have boosted the consumption of Brazilian pork in recent years. However, the sector still relies almost entirely on domestic consumption. Producers are investing to open up markets in South Korea, Japan, and Mexico—seen as the most promising destinations.

Markets

Many analysts have blamed the government’s inability to rally Congress around the pension reform and Michel Temer’s arrest for the abrupt fall of the São Paulo stock market index, which went from breaking the 100,000-point mark to a 5.4% overall loss over the week. But that doesn’t tell the whole story. Across the world, stock indexes have slumped with fears of a recession in the U.S. amid slower global growth. This stress results in higher volatility—as registered by a rampant VIX index—and risk aversion (which is always bad for emerging economies). Amid a hostile environment, creating better macroeconomic conditions is more important than ever for Brazil.

Natália Scalzaretto, TBR markets reporter

The new face of Operation Car Wash

The latest high-profile move of Operation Car Wash—the arrest of former President Michel Temer and a former member of his cabinet—has raised more than a few eyebrows around the country, particularly in the wake of squabbles between the anti-corruption task force and the Supreme Court.

The move came just one week after the Supreme Court dealt prosecutors their toughest blow since the investigation’s inception in 2014—a ruling establishing that all cases involving electoral crimes must be trialed by Brazil’s electoral court system, which is understaffed and more lenient towards defendants. This was a direct hit to Operation Car Wash, as many of its cases involve some form of illegal campaign donation allegations.

The legal piece signed by Federal Judge Marcelo Bretas, who oversees the task force efforts in Rio de Janeiro, helped fuel theories of a “Car Wash revenge,” as he took some jabs at the Supreme Court:

Mr. Bretas took 3 full pages explaining that the case bears no connection with electoral crimes, and should remain in the criminal courts; He also went out of his way to explain why the case has no relation with other Car Wash-related investigations in Rio—a move to take habeas corpus appeals out of the jurisdiction of Supreme Court Justice Gilmar Mendes. The justice has been historically lenient toward white-collar criminals, and is a vocal opponent of the operation—calling prosecutors “scoundrels.” Mr. Bretas also said that judges don’t start investigations, prosecutors do. That was in reference to Chief Justice Dias Toffoli’s initiative to open a probe into social media attacks against Supreme Court justices.

The new epicenter of Operation Car Wash

This week’s arrests have drawn a line under what has been a gradual shift of focus of Operation Car Wash: moving away from its original base of Curitiba, and embedding itself in Rio de Janeiro, a place its own mayor recently described, in lewd terms, as a cesspool of corruption.

As cases slowed down in Curitiba, Marcelo Bretas ramped things up. At the end of 2016, Operation Car Wash’s Rio branch arrested former Governor Sérgio Cabral and opened up a sordid bottomless pit of corruption in that state, giving Mr. Bretas and his team plenty of work to do for years to come.

With Sérgio Moro leaving the bench and joining the government, Marcelo Bretas has become the new face of Operation Car Wash. Having already claimed two monumental scalps in Mr. Temer and Mr. Cabral, there is no expectation things will slow down any time soon.

There is even more at stake for Mr. Bretas, as over the next two years, two spots on the Supreme Court will open up with the forced retirements of Celso de Mello and Marco Aurélio, in 2020 and 2021, respectively. Thanks to his leading role in Operation Car Wash, Marcelo Bretas is the clear frontrunner.

With Euan Marshall

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