Will the pension reform finally progress in Congress?

Author

Gustavo Ribeiro
April 24, 2019 • Reading Time: 7 minutes

Good morning! The House’s Constitution and Justice Committee (CCJ) is expected to begin its vote on the pension reform. Lula’s appeal trial is scheduled for today. Truckers agree not to go on strike—for now, after Petrobras changed its price disclosure model.

Will the pension reform finally progress in Congress? 

All eyes of financial markets in Brazil will be on Congress today, as the House’s Constitution and Justice Committee (CCJ) is expected to begin its vote on the pension reform. The government agreed to remove a few controversial points of the bill—but which don’t affect the overall savings the proposal would allow. In exchange, centrist parties agreed to approve the bill in the committee, allowing the pension reform to move on to the Special Committee, which will debate the merit of the bill in detail.

The CCJ is only tasked with analyzing whether the bill goes against constitutional principles—and rarely proposes any amendments. The government has yielded in the hope of a victory by a “wide margin,” which would give the reform some much-needed momentum.

The opposition, however, will try to stall the vote once again. A group of congressmen wants to put deliberations on hold until the government decides to lift the secrecy on the studies that were used as the basis for the reform. Newspaper Folha de S.Paulo asked to see them, through the Access to Information Act, but was informed that until the reform passes in Congress, the government doesn’t intend to disclose them.

House Speaker Rodrigo Maia said on Twitter that the government agreed to release the data on Thursday—predicting for an uneventful voting session today.

Lula’s appeal trial scheduled for today

The Superior Court of Justice (STJ), Brazil’s 2nd-highest judicial body, will rule on Lula’s latest appeal today. The case is with one of the court’s 5-judge panels. Lula was found guilty of corruption and money laundering for accepting a beachfront apartment in exchange for benefiting a construction company with the federal government. Here are the possible outcomes for today’s trial:

Justices could—like lower courts have done—reject Lula’s appeal and uphold his sentence at 12 years in prison;

Lula’s defense team claims the money laundering crime never happened—as he never became the formal owner of the flat. If this thesis is accepted, his sentence would be slashed to 3 and a half years, making him eligible for house arrest. Politically, though, it would be far from an exoneration;

The STJ could also find Lula innocent on all accounts. Brazil’s corruption laws say there must be an official act benefiting a firm to characterize quid pro quo. Lula was already out of office when the crimes happened—but prosecutors say he was still influential in the government.

There is another path to freedom for Lula. The Supreme Court is set to decide whether or not convicted felons can go to jail before exhausting all appeal routes. The Chief Justice wants Lula’s case to be ruled upon in the STJ first, to release the Supreme Court from the pressure of trying the most popular—and divisive—political figure in the country.

Truckers agree not to go on strike—for now 

After a 4-hour meeting, truckers’ representatives assured government officials that the sector won’t go on strike over the next few weeks (a protest was scheduled for next Monday). The Ministry of Infrastructure promised to enforce minimum freight prices starting today and peg rate increases to diesel prices.

The minimum freight pricing table should go up by between 10 and 17%. The government also agreed that the burden of respecting good transportation rules is on companies—not truckers. From now on, drivers will no longer be fined, only the firms hiring them.

Negotiations were made with autonomous truckers—which have lost 20% of their revenue since the last strike in May 2018. And while a truce was celebrated, truck unions leaders did make a threat: if the government doesn’t keep its word, the impetus for another strike will become greater.

Petrobras changes price disclosure model

On April 11, President Jair Bolsonaro intervened in a diesel price bump by Petrobras—leading to a scare from investors and a BRL 32bn loss of company market value. Eventually, the government reaffirmed the company’s political independence and did raise diesel prices, but the incident left a dent in the company’s image. Now, Petrobras has changed its price disclosure model in a bid to provide more transparency. From now on, the company will disclose prices in 35 distribution centers across the country.

What else you should know today

Bureaucracy. President Jair Bolsonaro is expected to sign a decree exempting low-risk businesses, such as tobacco shops, bakeries, and small department stores, from having sanitary and safety permits to operate. The idea is for the state’s auditing body to focus on activities deemed as high-risk. 

Airlines. Brazil’s antitrust watchdog Cade will monitor the sale of assets belonging to Avianca, Brazil’s 4th-largest carrier. Riddled with debts of BRL 2.7bn, Avianca will have its assets split into 7 new companies, to be auctioned. Gol and Latam have offered USD 70m each for part of the assets, but Cade warns that it could make Brazil’s air travel market even more concentrated than it already is. Together, Gol and Latam own 90% of slots in the São Paulo-Congonhas airport, Brazil’s 2nd-busiest.

Banking. Cade has opened an investigation into four of Brazil’s largest banks, accused of “blackballing” fintech Nubank, which issues zero-tariff credit cards. Caixa, Santander, Bradesco, and Banco do Brasil are accused of predatory competition, by charging Nubank with excessive tariffs for services such as automatic debit and intraday card statements.

GDP. Top-rated investment companies have, once again, lowered their GDP growth forecast for Brazil—from 1.95% last week to 1.71%, according to the Central Bank’s Focus Report. At the beginning of the year, economists predicted 2.53% GDP growth for Brazil. For 2020, they forecast a 2.5% growth—pending the approval of the pension reform, of course.

Fintechs. Last week, Rede—Itaú’s card payment company—announced it would pay merchants in 2 days without charging interest rates (as opposed to the usual 25–30 days). That caused the stocks of competitors PagSeguro and Stone to plunge, by nearly 10% and 24%, respectively. Yesterday, PagSeguro announced it would pay merchants immediately—taking its stock up 1.5%. The company didn’t inform the tariffs on immediate cash payments.[/restricted]

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