November 8, 2019


1. Jair Bolsonaro sends reform package to Congress

Following the final approval of the pension reform, the administration has submitted to Congress three proposals containing a broad set of measures aimed at restructuring the Brazilian government. The three proposals for constitutional amendments would grant states, cities and the federal government greater budgetary flexibility, the ability to implement measures to control public expenditure during economic crises and the reassessment of public funds to increase investments. The package was delivered to Congress by President Jair Bolsonaro himself, along with Economy Minister Paulo Guedes. Among the proposals is the distribution of R$ 400 billion (USD $96.3 billion) to states and cities over the next 15 years through oil royalties from the federal government. However, the proposals forbid states and cities from receiving loans after 2026. To get a constitutional amendment approved in the Senate, the administration needs 49 of 81 votes in two rounds of votes. Then, the proposals are sent to the Chamber of Deputies where they must be approved by 308 of the 513 representatives in another two rounds of voting. According to Congress, the large volume of proposals will require a long period of analysis. “This transformation shows faith in the strength of the federation. It is the first administration in 40 years to discuss the de-centralization of resources,” said Minister Guedes. Read the analysis of the reform package sent by Bolsonaro at Brasília Report.

Folha de S. Paulo: Ministério Público diz que porteiro mentiu em depoimento
Valor Econômico: Presidente diz que reportagem da TV Globo é canalhice
Folha de S.Paulo: Promotoria não averiguou se provas foram adulteradas

2. Federal Supreme Court decision allows Lula to be released

The defense team of former President Luiz Inácio Lula da Silva (PT) have demanded his release. The request comes after the Federal Supreme Court decided that defendants cannot be imprisoned until all possibilities of appeal have ended. The decision was celebrated among supporters of PT. Lula has been in prison since April 2018 following his conviction in two lawsuits for which there are possibilities of appeal. He is also a defendant in seven other lawsuits and has been mentioned in another one, all revolving around corruption scandals. Lula will talk to supporters – who have been camping outside the Federal Police headquarters – before meeting political leaders. His release will only require a simple judicial agreement in light of the Federal Supreme Court decision. Car Wash prosecutors released a statement criticizing the decision. According to the statement, the decision will affect the results of Operation Car Wash and “it goes against the call for fighting corruption and ending impunity.”

Valor Econômico: STF proíbe prisão antes de réu tentar todos os recursos
O Globo: Procuradores criticam decisão do Supremo
Folha de S.Paulo: Após decisão do STF, defesa pede a libertação de Lula
O Estado de S. Paulo: Entenda a situação de Lula
O Globo: Decisão pode favorecer outros presos da Lava Jato

3. Auction attracts bids for only three out of nine pre-salt oil fields

This week, due to the lack of competition in an auction for the exploitation rights of pre-salt oil fields, the government received substantially less than expected. Out of the nine fields that were auctioned off in the past two days, only three were sold. Petrobras was the major stakeholder to buy all three fields, with a minimum bid and no competition. The other six fields didn’t even receive bids. The sales resulted in R$ 75 billion (USD $18.1 billion) for the administration: 65% less than what was expected. The largest auction took place on Wednesday. The government expected to raise R$ 106 billion (USD $25.5 billion) for the exploitation of a field in Búzios, but only got R$ 69.9 billion (USD $16.8 billion) through a bid by Petrobras in partnership with two Chinese state-run companies. The field in Búzios is the largest oil reserve discovered in the country. The administration claimed the auction was successful. “It was lower than what we expected, but the most important reserve was sold. It was a success,” President Bolsonaro stated. On Thursday, there was no competition again and only one of five pre-salt oil fields were sold. Once again, the only bid – of R$ 5 billion (USD $1.2 billion) – was offered by Petrobras and a Chinese state-run company.

O Estado de S. Paulo: Petrobras arremata maior campo de pré-sal
UOL: Leilões ofertam nove áreas, mas só vendem três
O Estado de S. Paulo: ‘Não tem frustração nenhuma’, diz presidente
O Globo: Novo leilão termina com quatro blocos de pré-sal encalhados

4. Inflation for October is the lowest since 1998

In October, The Extended National Consumer Price Index (IPCA) – Brazil’s official measure of inflation – reached its lowest point since 1998, a rate of 0.1%. 21 years ago, the rate was 0.02%. In 2019, the inflation rate stands at 2.60%. Year-over-year inflation stands at 2.54%, well below the administration’s goal of 4.25%. Bank analysts expect 2019 to end with an inflation of 3.29%. According to the Brazilian statistical institute, responsible for calculating the IPCA, three out of the nine sectors and services assessed registered price deflation. The price of electricity dropped 0.13%. However, the price of clothes increased by 0.63% in October, the highest sectoral inflation rate registered that month.

O Globo: Inflação oficial é a mais baixa em 21 anos

5. Brazil registers the highest rate of extreme poverty in the last seven years

Last year, Brazil registered the highest percentage of its people living in extreme poverty. According to the Brazilian Institute of Geography and Statistics (IBGE), 13.5 million – or 6.5% of Brazilians – live on less than R$ 145 (USD $35) a month. This is the highest percentage since measurement began in 2012. The data collection follows World Bank’s parameters. The total number of Brazilians living in poverty is larger than the entire population of countries like Portugal, Belgium, Bolivia and Cuba. In 2012, the number of Brazilians living in poverty represented 5.8% of the population, dropping to a low of 4.5% in 2014.

Valor Econômico: Pobreza extrema aumenta no Brasil

Brasilia Report

Click here for the Brasilia Report, a weekly analysis prepared by JeffreyGroup Senior Advisor in Brasilia, Gustavo Krieger.