🔥 Pantanal Inferno

Good morning! Today, we talk about a nightmarish scenario in Brazil’s Pantanal wetlands. A look at the Central Bank’s latest policy decision. And Nubank feels the ire of engaged customers.

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Pantanal fires outnumbering 2020 nightmare 

Brazil’s Pantanal wetlands have recorded 2,333 fire alerts since January, according to data from the National Institute of Space Research (Inpe). This is an astonishing 1,628 percent increase from the 135 registered in the same period last year.

 Why it matters. More worrying still is the fact that the January-June fire totals are higher than they were in the first six months of 2020, the year the Pantanal went on to record its all-time worst fire season.

State of play. Fires occur annually in the Pantanal, the world’s largest tropical wetland. As in many of Brazil’s biomes, the region follows wet and dry seasons rather than summer, fall, winter, and spring. 

• But the extent of fires in recent years has pushed the Pantanal beyond its natural limits, aggravated by an expanding agricultural frontier and the widespread deforestation that goes with that.

• A month ago, the National Water Agency declared a state of critical water shortage in the Paraguay River Basin, in which the Pantanal lies. In some areas, river levels are at a six-decade low.

Bellwether. While the yearly increase in January-June fires is astounding when considering concrete numbers, the finding is more of a warning of destruction to come, as opposed to a pressing current problem. 

• The vast majority of Pantanal fires occur between July and September, not in the year’s first six months. The peak of dry seasons typically see around 1,000 outbreaks per week.

By the numbers. The 2020 fire season saw a total of 22,116 blazes, destroying almost 40,000 square kilometers of the Pantanal — an area roughly three times the size of New York City. Brazil will be hoping to avoid such destruction in the coming months.

Backdrop. The perspective of a historic fire season comes as environmental workers hold walkouts and go-slow operations as they try to strongarm the government into reforming their career paths and increasing their salaries. The number of environmental fines issued in Brazil has plummeted this year, while deforestation alerts are on the rise.

Central Bank shows united front in policy decision

The Central Bank’s Monetary Policy Committee unanimously decided to keep Brazil’s benchmark interest rate unchanged at 10.5 percent, citing concerns about how inflation will behave and the state of public accounts.

 Why it matters. In May, the committee was split 5-4 in favor of a slimmer rate cut than in previous meetings. The division sparked market fears that political polarization was guiding monetary policy decisions. 

• The May decision opposed the five more hawkish Central Bank board members appointed by former far-right President Jair Bolsonaro, and the four-vote minority of Lula-appointed directors, who favored deeper rate cuts.

What they are saying. “The committee judges that the domestic and international environments remain more uncertain,” the bank wrote in a statement, “requiring greater caution on the conduct of monetary policy.”

• The Central Bank again warned the government about the need to pursue its fiscal targets. “A credible fiscal policy, committed to debt sustainability, contributes to the anchoring of inflation expectations and to the reduction in the risk premia of financial assets, therefore impacting monetary policy.”

By the numbers. According to MoneYou, a consultancy, Brazil currently has the world’s second-highest real interest rates, adjusted for inflation. 

The big picture. All indications from the Central Bank point to high interest rates for a long time, meaning that the pro-Lula camp’s attacks on chairman Roberto Campos Neto will continue. The left accuses Mr. Campos Neto of harboring a political agenda and keeping rates high to cater to the interests of Big Finance.

• Lula and members of his administration have blamed interest rates for the lack of better economic results 18 months into his term.

• On Wednesday, members of Lula’s party filed a lawsuit requesting that courts forbid the central banker from making political statements — as his ties to right-wing politicians become more explicit.

Chorus. Organizations linked to industrialists and retailers have echoed the government’s complaints about borrowing costs. High interest rates aim to tame inflation by reducing consumption, but household consumption is the main driver of the Brazilian economy.

Yes, but … While depicting Brazil’s central banker as a bogeyman may give political red meat to Lula’s base, one must consider that inflation expectations for 2024, 2025, and 2026 have soured — and that is a big factor in monetary policy decisions.

Nubank feels the pinch from politically engaged customers

Nubank, Brazil’s fourth-largest bank by customers, came in for flak on social media after one of the bank’s co-founders made an Instagram post referring to a massive disinformation spreader, leading a multitude of customers to threaten to close their accounts.

Context. Cristina Junqueira, Nubank’s growth director, thanked right-wing content producer Brasil Paralelo for inviting her to an exclusive event with Canadian professor Jordan Peterson, an alt-right icon.

• Brasil Paralelo, whose goal is to become “the Brazilian right-wing Netflix,” has become notorious for publishing high production-value content filled with conservative conspiracy theories. 

• In 2022, the year of Brazil’s last presidential election, Brasil Paralelo had its YouTube channel demonetized as punishment for publishing disinformation — such as suggestions that the 2018 stabbing of Jair Bolsonaro was part of a conspiracy to kill him (disproven by multiple police investigations). 

More strikes. Ms. Junqueira had already been scolded in 2020, when she justified the low number of black and multiracial employees by saying that hiring requirements were tough and that Nubank couldn’t lower the bar.

• Additionally, Intercept Brasil published earlier this month that Nubank covered up a scandal involving a former employee (now a director at Brasil Paralelo) who had founded a forum to disseminate hate speech.

Reaction. The controversy around Ms. Junqueira was among the hottest topics on Brazilian internet this week. Nubank’s share prices dropped by 0.38 and 1.7 percent on Tuesday and Wednesday, respectively.

 Why it matters. The latest Edelman Trust Barometer shows that “consumers are expressing their politics — and their power — through brand choices, contributing to a new normal that is opening brands up to exposure they cannot avoid.”

Nothing to see. In a statement, Nubank said it “maintains a strictly apolitical position and does not adopt religious or political party positions, nor does it contribute directly or indirectly to political parties or movements.” Youssef Lahrech, the bank’s president, said Ms. Junqueira in no way disrespected the company’s code of conduct.

Quick catch-up

Petrobras held a ceremony for its new CEO, Magda Chambriard. She promised profitability to investors, “total alignment” with the government, and said oil will pay for energy transition. 

Foreign Minister Mauro Vieira believes the recent EU Parliament election does not make ratifying the Mercosur-EU free-trade deal less likely. Far-right parties, which have strongly opposed a deal, made important strides in the European Parliament. 

Electoral courts in Amapá impeached Congresswoman Silvia Waiãpi, who was accused of using public money to pay for a cosmetic procedure. She can appeal the decision.

A bill legalizing casinos is advancing in the Senate and is ready for a floor vote. Casinos and most forms of gambling have been banned in Brazil since 1946, although the country has recently moved to legalize sports betting platforms.

The Supreme Court censored (and then lifted its censorship of) press interviews with House Speaker Arthur Lira’s ex-wife, who accuses the speaker of domestic violence.

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