1. Following negotiations with the administration, Chamber of Deputies vetoes salary increase for public servants

The administration had to work to gain the support of federal representatives in order to reverse the Senate’s decision and maintain the president’s veto of salary increases for public servants. The president had decided that salaries of federal, state and municipal public servants would be frozen until the end of 2021. On Wednesday, things were tense in Congress when the Senate overturned the presidential veto. According to the Ministry of Economy, if salary increases were approved, the administration would have to provide between R$ 98 billion (USD $17.5 billion) to R$ 120 billion (USD $21.4 billion) to public servants. Since yesterday morning, President Jair Bolsonaro and his team – especially Economy Minister Paulo Guedes – had been criticizing the senators’ decision and pressuring federal representatives to reverse the decision. The President said to his supporters that if salary increases were permitted, it would be “impossible to govern Brazil”. In exchange for the veto, the government agreed to send R$ 60 billion (USD $10.7 billion) to states and cities that have been affected by the economic crisis due to the pandemic. Chamber of Deputies President Rodrigo Maia argued for a budget cut. “If no one can offer a pay rise, the more the Brazilian State costs, the worse for the Brazilian citizen.” A threat to cancel the extension of the emergency aid being offered to people in a vulnerable situation was key in pressuring representatives. An extension of the aid could be announced in the next few days.

Folha de S.Paulo: Com apoio de Maia, Câmara mantém veto a reajustes salariais
O Estado de S. Paulo: É impossível governar com reajuste salarial, diz presidente
Valor Econômico: Para Guedes, reajuste seria um “crime contra o país”

2. Study reveals a record drop of 8.7% in the Brazilian GDP in the second quarter of the year

A study reveals that the Brazilian economy had a record drop of 8.7% in the Gross Domestic Product (GDP) in the second quarter of the year in comparison to the first quarter. According to data from GDP Monitor by Fundação Getúlio Vargas, the drop is of 10.5% when compared to the same period in 2019. Economist Claudio Considera says that economic activity decreased by 6.5% in June when compared to the same month last year, but seems to be recovering with a 4.2% increase in comparison to May. According to the study, the GDP in April, May and June was 14% below the first quarter of 2014, when the country entered a period of recession that only ended in 2016. “At the end of last year, the level of consumption of Brazilian families was the same as it was in the first quarter of 2014. Now – in the second quarter of 2020 – it is 14% lower,” says the economist. According to the Central Bank’s Focus Report, market analysts believe the Brazilian GDP will grow by 3.5% in 2021, with the official inflation rate projected to hover around 3%. Next year, the goal will be to keep inflation below 3.75% – within the government’s prediction of inflation between 2.25% and 5.25%. According to analysts from the 100 largest financial institutions in Brazil, expectations for the trade balance this year are positive at USD $55 billion. Foreign investments have decreased from USD $53.7 billion to USD $51.2 billion, but the projection for 2021 is stable at USD $66 billion.

Valor Econômico: Queda do PIB no segundo trimestre bate recorde
O Globo: Estimativa para 2021 é melhor, segundo Banco Central

3. Defense budget will be 49% higher while Health and Education will face cuts

The federal government plans to increase the budget of the military next year. This is the opposite of what is planned for the ministries of Education and Health. According to an official prediction of the budget, the Ministry of Defense will receive 49% more than what the department received this year, going from the current R$ 73 billion (USD $13 billion) to R$ 108.56 billion (USD $19.37 billion). The Ministry of Education, on the other hand, will essentially maintain the same budget with a 0.19% reduction – going from R$ 103.1 billion (USD $18.38 billion) to R$ 102.9 billion (USD $18.4 billion). This is the first time in ten years that the ministry responsible for the armed forces will have a bigger budget than education. The Ministry of Health will also face cuts according to government estimates for next year. The department received R$ 134.7 billion (USD $24.02 billion) before the pandemic and could receive R$ 127.75 billion (USD $22.78 billion) in 2021 – a decrease of R$ 7 billion. During the pandemic, the department received emergency funds to fight the coronavirus in Brazil. The debate on how the administration is going to distribute the money is also guided by the spending ceiling, determined by law. According to estimates, out of the R$ 134.7 billion available to the Ministry of Health, R$ 110.14 billion (USD $19.64 billion) is already earmarked for paying government employees.

O Estado de S. Paulo: Defesa terá mais dinheiro do que a Educação
O Estado de S. Paulo: Mesmo com pandemia, Saúde terá menos verba

4. Four out of every 10 companies still negatively affected by the pandemic

Four months after the first case of coronavirus was reported in Brazil, nearly 1.25 million companies are still struggling due to the economic crisis caused by the disease. Data from the Brazilian Institute of Geography and Statistics shows the state of the economy at the end of the first 15 days of July. Out of 2.8 million companies, 44.8% were facing difficulties. According to the study, 380,000 non-financial companies (13.5%) had fired people in the first 15 days of July. By the end of June, 410,000 companies had suffered personnel cuts. The majority of companies (70.8%) have laid off 25% of their work forces. In 10.7% of companies over half of the employees were fired. Another study by the Brazilian Institute of Economics (IBRE) at Fundação Getúlio Vargas indicates that 42% of companies believe they will only recover to pre-pandemic levels starting in 2021. More pessimistically, 10% of companies say that they cannot estimate when they will be back to normal. The study, which took place in the first week of July, indicates that 25% of companies are working normally and 22% hope to get their activities back to normal by the end of the year. According to IBRE, data shows that the service sector has been more affected than the manufacturing and retail sectors. In the service industry, 47% of companies believe things will improve from 2021 and 15% are not expecting improvements.

5. Mortality rate in Brazil surpasses the US and social isolation drops

This week, Brazil surpassed the U.S. in mortality rate due to the coronavirus. On Wednesday, when 1,170 people died and 48,541 new cases were confirmed, 53.1 out of every 100,000 inhabitants have died. The number is now higher than the American rate of 52.9 deaths per 100,000 inhabitants. So far, 112,000 people have died and 3.5 million cases of the disease have been registered. Still, according to a Datafolha poll conducted on August 11th and 12th, the number of Brazilians willing to maintain social distancing in order to slow the spread of the disease has dropped. 8% of the people interviewed by phone say they are in isolation and 43% say they are avoiding going out. In April – the peak of social tensions due to the pandemic – 21% of people were in isolation and 51% said they were only going out if extremely necessary. The change in behavior is mostly due to a sense of safety. The poll shows that, for the first time this year, more Brazilians (46%) believe the pandemic will ease. In July, only 28% of people believed as such. The same poll also questioned people about wearing masks and revealed interesting results. When questioned, 92% of people said that they wear masks every time they go outside. However, 48% of those polled said that people in their cities are not wearing masks in public areas. According to psychologist Vera Iaconelli, this indicates that people interviewed were ashamed to admit they are not always wearing masks or that they are exaggerating about how many people they see not wearing masks.

Folha de S.Paulo: Adesão ao isolamento cai, segundo pesquisa
Folha de S.Paulo: Brasil ultrapassa a taxa de mortalidade dos EUA
Jornal Nacional: Governo gasta 57,5% da verba na pandemia
O Globo: Acompanhe notícias sobre a pandemia
IRRD Covid-19: Veja o mapeamento de casos no Brasil e no mundo