The problems hovering around the 2020 Census

Good morning! Pension reform: the real debates begin. The problems hovering around the 2020 Census. Judicial setbacks could force Avianca into bankruptcy

Pension reform: the real debates begin

The House’s Special Committee will kick off activities today. Formed by 49 members and 49 alternates, the body will be responsible for analyzing (in 10 to 40 sittings) the details of the proposal and amend the current bill. The committee’s chairman, Congressman Marcelo Ramos, expects to promote 11 public hearings with up to 60 guests to defend their points of view on the reform.

Mr. Ramos is unsure of how long it will take to pass the bill in the committee—as the government has no interest to introduce it to the floor before it has gathered the necessary votes to approve in two rounds (308 of 513 seats). So far, the government has given no proof of its capability of whipping all the votes. After all, it took 62 days for the bill to pass in the Constitution and Justice Committee—arguably the easiest part of the process. For the sake of comparison, former President Michel Temer’s failed 2016 reform bill passed in 9 days.

Brazil spends more than others with pensions

The Inter-American Development Bank is to release today data on pension systems across Latin America. In Brazil, the system consumed 12.5% of the GDP and will pass 50% by 2065 without reform. According to the bank, Brazil spends 7 times more with its elderly than with its youth—and no other country in the region spends so much with pensions. “One of the key findings of the report is that Brazil is not investing in its future,” says Alejandro Izquierdo, one of the authors of the report.

Go deeper: Brazil’s pension reform proposal, explained

The problems hovering around the 2020 Census

A couple of weeks ago, Economy Minister Paulo Guedes suggested reducing the number of questions in the 2020 Census as a way of reducing public spending. Experts have been highly critical of the initiative, as the census represents the best source of data to assess how Brazilians live. It is particularly important to municipalities, which rely on the data for everything from health planning to districting—and determining the allocation of federal funding.

Yesterday, the newly-appointed head of the Brazilian Institute of Geography and Statistics (IBGE) fired the man overseeing the census, as well as the institute’s head of technology. The two were reportedly against the changes proposed by Mr. Guedes. On the same day, IBGE got the green light to hire 234,000 temporary employees to work on the field.

Critics of the government’s move point out that 90% of respondents will only be given a standard, reduced survey. The version with more questions is only applied to 10% of people. Moreover, in a country of Brazil’s size and infrastructure limitations, sending surveyors to 70m households is what is more expensive—not necessarily the “extra minutes” spent in each house. While there is a true budgetary limitation, taking such a cost-cutting view of the census could limit Brazil’s self-assessment of itself and cause major consequences for the next 10 years.

Brazil has already lost its capacity to produce reliable data. According to the World Bank, only Venezuela—which is under an anti-democratic regime—is producing less reliable data than Brazil.

Judicial setbacks could force Avianca into bankruptcy

The São Paulo State Court of Justice has suspended the court-supervised recovery plan approved on April 14—which canceled the auction of the company’s assets that was scheduled for today. The decision follows a complaint by Swissport, an airport ground and cargo handling services provider (and to which Avianca reportedly owes BRL 17m), which claims it has been harmed by the carrier’s recovery plan.

Swissport also questioned the legality of the auction that was supposed to take place today. Avianca was to be split into 7 new companies housing parts of its assets, including planes and its coveted 169 airport slots (authorizations to fly to and from particular airports). Swissport claims that these slots should be given as public concessions, and therefore can’t be sold. If judges find that the recovery plan doesn’t meet the required legal standards, they could declare Avianca bankrupt.

With debts of over BRL 3bn, Avianca has lost 86% of its fleet (as planes were returned to leasers), laid off over 100 staff members, and had over 3,000 canceled flights in recent months. The company was hoping to raise at least USD 210m from the auction. Until last night, Avianca hadn’t tried to get a new, favorable injunction—which could happen today.

What else you need to know today

Temer. A federal court has accepted charges of corruption and tampering with a witness against former President Michel Temer. In 2017, an audio recording was leaked showing him negotiating with businessman Joesley Batista about the alleged payment of hush money to an imprisoned former House Speaker. This is the 6th criminal case in which Mr. Temer will have to stand trial.

Infrastructure. Zurich Airports and IG4 Capital will make a bid to take over Campinas Viracopos Airport. The current administrator is under court-supervised recovery, with debts of BRL 7.5bn. The new bidders want to extend the airport concession from 30 to 35 years, and renegotiate the amount in mandatory investments and how much it must pay the government for the operational permit.

Climate change. The Environment Ministry has allocated 95% of its budget for policies to prevent climate change—which wasn’t that big, to begin with (BRL 11.8m). The move goes in line with President Bolsonaro’s initial intention to pull Brazil from the Paris Accords (from which he later backpedaled). In 2018, Brazil led the world in rainforest destruction, although deforestation fell by 37%.

Political spats. Once again, the military wing of the government is at odds with the administration’s ideological zealots. After Vice President Hamilton Mourão, the latter group has now targeted General Santos Cruz, responsible for the president’s press service—and who called for a “more responsible use of social media.” Yesterday, former Army Commander Eduardo Villas Bôas lashed out at the ideological wing of the administration, exposing the dissatisfaction in the barracks with the president’s omission in this conflict.

Interest rate. The Central Bank’s Monetary Policy Committee meets today and tomorrow—and will set the benchmark interest rate for the next 45 years. In the past 8 meetings, the committee has decided to keep the rate at 6.5% a year—markets almost unanimously agree that this should be the 9th time.[/restricted]

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