Supreme Court blocks investigation of president’s son

Author

Gustavo Ribeiro
July 17, 2019 • Reading Time: 8 minutes

Good morning! The Supreme Court chief justice has suspended investigations into Senator Flávio Bolsonaro. The Mercosur Summit takes place in Argentina. Electrobras is to be privatized. The profitable business of education. Enjoy your read!

Supreme Court blocks investigation of president’s son

Supreme Court Chief Justice Dias Toffoli determined yesterday the suspension of all cases that involve the use of “detailed financial data” shared by regulatory authorities without previous judicial authorization. The move comes after a request by Senator Flávio Bolsonaro’s defense attorneys, who tried to block investigations into suspected money laundering by his client.

Why it matters. Despite the ruling having impinged on Senator Bolsonaro’s case, it was extended to all such cases. According to prosecutors—who were highly critical of the decision—the ruling halts nearly all investigations into money laundering in the country, because many are initiated after watchdogs flag suspect financial operations. It is, however, impossible to immediately measure the impact, as each case will be analyzed individually. The ruling was controversial in the Supreme Court, even among justices who agree with the rationale behind it, because of questions over its constitutionality.

Context. Senator Flávio Bolsonaro is suspected of forcing his staff members to surrender part of their paychecks back to him. This scheme would have taken place while Mr. Bolsonaro served as a state lawmaker in Rio. Monthly deposits made into his account around staffers’ payday were flagged as “atypical” by Coaf, the money laundering enforcement agency.

The move could further dent the president’s image—Jair Bolsonaro is already the least popular head of state after six months in office. For one, because it shows the Bolsonaro clan doing what it always criticized, that is, using legal maneuvers to dodge investigations. And because it suggests the Court doing the president’s family a favor.

Jair Bolsonaro, regional leader

President Jair Bolsonaro will spend the day in the Argentine city of Santa Fé, for the 54th Mercosur Summit. For the next six months, he will hold the rotating presidency. The Brazilian government promises continuity in the priorities sought by the outgoing Mercosur president, Argentina’s Mauricio Macri: more trade deals and lower common tariffs. 

Why it matters. According to Mercosur rules, member states (Brazil, Argentina, Paraguay, Uruguay—and Bolivia in the future) can’t sign trade deals unilaterally—they must do so as a bloc. So the collective conduct of the group really matters for getting such different economies to go in the same direction. For the short term, the priority will be to get the trade deal agreed the European Union signed into law by all four national parliaments.

Context. After winning the election, President Bolsonaro and Economy Minister Paulo Guedes belittled Mercosur as “not a priority,” and too “ideological.” They seem to have changed their stance on the bloc, however, opting for cooperation instead of aloofness. Still, Mr. Guedes defends more freedom for member states to negotiate bilateral deals on their own.

Absence. One of the main topics of discussions in South America just months ago, the Venezuelan crisis and President Nicolás Maduro—a sort of bogeyman for both Mr. Bolsonaro and Mr. Macri—has nearly disappeared from the agenda. In yesterday’s speeches by foreign ministers, the subject only received passing mentions. 

Brazil’s highly profitable private education sector

In a country in which public education is so deficient, private education companies have become highly profitable. Even amid a sluggish economy, the sector is the fastest-growing in the country, with a 37% jump in the number of companies (the overall number of active companies in Brazil fell by 7% in the same period).

Why it matters. Recent cuts to the education budget—and the current administration’s praise of remote education—represent a major opportunity for investors. One move that is popular within the Bolsonaro administration is relying on private institutions for basic education, giving families vouchers.

Big business opportunities

In two days time, medical education platform Afya will set stock prices for its initial public offering at Nasdaq. The company is to sell 13.9m shares at around USD 17 apiece, in a move that would raise USD 236m and value Afya at USD 1.5bn. Medical education is considered to be one of the most profitable businesses in the booming private education sector, aided by low dropout or default rates, coupled with high tuition fees.

Another major deal is about to be revealed. Global equity funds GIC and General Atlantic have reportedly bought 30% of Hotsmart, a startup that facilitates the monetization of online courses. The values involved have not yet been disclosed.

Government fast-tracks bill to privatize Eletrobras

The federal administration has accelerated the drafting of a bill to privatize state-owned energy company Eletrobras. The move comes as the government scrambles to meet its primary deficit goals. The Economy Ministry plans to raise around BRL 12bn with the deal, which would also serve as a pro-market image boost, following the approval of pension reform in the first of two rounds of votes in the House.

Before sending the bill over to Congress, however, the economic team needs the approval of President Jair Bolsonaro.

Why it matters. The initial 2019 budgetary law included BRL 12bn in revenue from Eletrobras’ privatization. The government, however, decided to remove the amount due to uncertainties about how the project would advance—which increased the size of cuts made to balance-out the bottom line. Currently, about BRL 35bn have been frozen, from several areas.

Also noteworthy

LGBTQ. President Bolsonaro announced that the Education Ministry ordered the cancelation of an entry exam reserved for trans and non-binary people to the federal Afro-Brazilian Lusophony University, scheduled for this week. Education experts criticized the move, saying it goes against the university’s managerial autonomy.

Car Wash. After a request by the Workers’ Party, the Federal Prosecution Office’s internal affairs unit will investigate if Car Wash prosecutors Deltan Dallagnol and Roberson Pozzobon trespassed ethical limits when charging large sums of money for lectures on about their work as public servants. In chats leaked by website The Intercept, the duo discussed the creation of an events company that would be registered under the names of their wives, to avoid public scrutiny.

HIV. According to official data, Brazil saw a 21% bump in HIV infections since 2010. The numbers make the country an outlier when compared to the rest of the world, where infections have stalled, if not reduced, over the past decade. While the enormity of the Brazilian territory makes checks harder, UN experts cite a lack of public policies targeting populations more susceptible to infections—like youngsters—as a major cause.

BNDES. The new president of Brazil’s National Development Bank (BNDES), Gustavo Montezano, said that his number one priority will be opening the “black box” of shady investments supposedly made during the Workers’ Party era in government. This was a major point of contention between President Bolsonaro and Joaquim Levy, Mr. Montezano’s predecessor. A caveat, though, is that such a black box may not even exist.

Correction: A previous version of this newsletter contained the name Afya spelled in the wrong way. The text has been corrected.

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