August 2, 2019
1. Basic interest rate cuts to a record low
For the first time in 23 years, Brazil’s benchmark interest rate, the SELIC, was cut to 6 percent per year. On Wednesday, the country’s Central Bank decided to reduce the 6.5 percent per year rate by 0.5 percentage points. Analysts believe the decision might start a new cycle of rate cuts if inflation is controlled and the Chamber of Deputies passes the Pension Reform bill in the first round of voting. The announcement was celebrated by President Jair Bolsonaro. Despite the reduction, Brazil’s real interest rate (adjusted for inflation) still stands as the 8th highest in the world. According to the economy news site, MoneYou, and the financial management firm, Infinity Asset Management, the current rate is 1.63%. The countries with the highest inflation rates are Argentina (5.23%), Mexico (3.84%), and Indonesia (3.35%).
2. Tax burden in Brazil reaches a record 35 percent of GDP
Brazil’s tax burden reached 35.07% of the GDP in 2018, amounting to R$ 2.39 trillion (USD$ 6.1 billion). On average, each citizen paid R$ 11,494 (USD$ 2960.16) in taxes. The calculations are part of a study by economists José Roberto Afonso and Kleber de Castro in which the authors anticipate the consolidation of last year’s tax burden numbers and search for answers in order to understand what led to such a high increase during a time of low economic growth. The hike in tax burdens for businesses and the general population in 2018 reached 1.33 percentage point, the biggest increase in the last 17 years — the record series was established in 1947. The data used in the study came from official sources and are listed on public record.
O Estado de S. Paulo: Carga tributária bate recorde e atinge 35,07%
3. After controversies, Bolsonaro says he won’t change his ways
In a rare impromptu interview, President Jair Bolsonaro said he will not change his behavior. According to Bolsonaro, despite the negative repercussions of his remarks attacking governors from Northeastern states and contesting information regarding the military dictatorship, he will not change his ways. The President said he will continue to address his earliest supporters, the more conservative sections of the population. During an exclusive, 15-minute unscheduled interview, he also said that the press harasses him, but he is unbothered. “I’m even surprised when I don’t get dragged by the press,” he said laughing.
4. Soon-to-be ambassador, Bolsonaro’s son receives endorsement from Trump
President Jair Bolsonaro (PSL) will make official the appointment of his son, federal representative Eduardo Bolsonaro, as the ambassador to the U.S. in the next week. The decision, which was already expected amongst the political milieu, was bolstered after U.S. President Donald Trump stated that he is “very pleased” with the appointment and does not view it as nepotism. Bolsonaro will wait for the end of the Senate’s recess to resume the matter. According to diplomats, it takes four to six weeks for the U.S. government to respond to consultations of that nature.
Folha de S.Paulo: Elogio de Trump fortalece apoio ao filho de Bolsonaro
5. Supreme Court bars change in indigenous land demarcation
Brazil’s Federal Supreme Court unanimously decided to uphold the veto of President Jair Bolsonaro’s decision to transfer the task of indigenous land demarcation from FUNAI (National Indigenous Foundation) over to the Ministry of Agriculture. The decision to cancel the provision, which had already been objected by one of the Justices in June, was confirmed by 10-to-0 votes. The president has stated that he will not authorise new land demarcation procedures and announced his plans to legalize mining extraction on indigenous lands. Bolsonaro has publicly stated his view that indigenous land demarcations are “hindering businesses” in Brazil.
Folha de S.Paulo: STF derrota Bolsonaro sobre demarcação indígena
Click here for the Brasilia Report, a weekly analysis prepared by JeffreyGroup Senior Advisor in Brasilia, Gustavo Krieger.