1. Bolsonaro administration claims pension reform will save government billions

President Jair Bolsonaro’s economy team believes that pension reform – now approved by the Chamber of Deputies – will save close to R$ 900 billion (USD $240.1 billion) over the next 10 years, corresponding to the total that will no longer be paid to pensioners. The pressure of public debts on the Brazilian budget was the main argument used to convince representatives of the importance of the reform. To convince Brazilians, the government said they were putting an end to privileges. The original version of the reform proposed by the administration was expected to save R$ 1 trillion (USD $266.8 billion), but concessions made during negotiations in congress led to a lower estimated total. Before the reform is sent to the Senate, the Chamber of Deputies must vote once again on the proposal, which should happen after the legislative recess in the first week of August.

The Good, the Bad and the Ugly: read this week’s political analysis at Brasilia Report.

G1: Após Câmara aprovar, economia com Previdência recua para R$ 933 bi em dez anos, diz governo
Valor Econômico: Marinho: Economia com Previdência após 1º turno é de R$ 914,3 bilhões

2. Federal government announces release of funds from FGTS

The federal government announced that it will authorize Brazilian workers to withdraw money from their worker’s severance fund – the Fundo de Garantia do Tempo de Serviço (FGTS). FGTS is a mandatory savings account in which 8% of the employee’s salary is deposited every month. The fund was created to make sure people would have financial security after they had been laid off. It is also used to finance real estate investments and sanitation works. The government expects that releasing the funds will inject R$ 60 billion (USD $16 billion) into the economy. It is clearly a temporary measure, as expectations for this year’s economy are not optimistic. In order to generate long term sustainable growth, the administration’s economy team is awaiting the approval of structural reforms on pensions and taxes.

Valor Econômico: Governo vai liberar R$ 63 bi do FGTS e PIS
Folha de S.Paulo: Governo vai liberar até 35% do saldo das contas ativas do FGTS, diz Guedes

3. Federal Supreme Court president halts criminal investigations lacking judicial authorization

Federal Supreme Court President Dias Toffoli has halted criminal investigations that have used confidential financial data provided by financial control organizations such as the COAF – the Council for Control of Financial Activities – and the Department of Federal Revenue without previous judicial authorization. Toffoli’s decision was made in response to a request by Senator Flávio Bolsonaro (PSL-RJ), President Jair Bolsonaro’s son. The decision paralyzes investigations by the Rio de Janeiro Public Prosecutor’s Office into atypical financial transactions made by Flávio. All investigations and lawsuits that rely on this kind of information will now have to await a Supreme Court decision. The Prosecutor General of Brazil was not happy with the decision and released a public statement criticizing it.

Folha de S.Paulo: Toffoli atende a pedido de Flávio Bolsonaro e suspende inquéritos com dados do Coaf
G1: Toffoli suspende inquérito com dados do Coaf a pedido da defesa de Flávio Bolsonaro

4. Bolsonaro takes part in Mercosur summit

This week, President Jair Bolsonaro and his economy team took part in the 54th Mercosur summit in Argentina. Mercosur is a trade bloc consisting of Brazil, Argentina, Uruguay and Paraguay. One of the issues discussed during the meeting was revising tax tariffs for imports, the first change made to taxes in 25 years. South American leaders also discussed accelerating their trade deal with the European Union. They expect the deal to come into effect in the next two years. According to the Argentine Minister of Economy Nicolás Dujovne, another matter discussed was the possibility of a Mercosur single currency, similar to the Euro. One concrete decision that came out of the summit was a deal to end international roaming charges. The acceleration of the Mercosur – EU deal and the end of roaming charges will first have to be approved by the parliaments of all member countries before coming into effect.

Folha de S. Paulo: Bloco sul-americano deve eliminar tarifa de roaming
Valor Econômico: Bolsonaro: “Queremos um Mercosul de menos discurso e mais ação”

5. Ministry of Education launches private financing program

On Wednesday, the Ministry of Education launched “Future-se,” a restructuring program that will open the door for private financing in public universities. Minister of Education Abraham Weintraub announced that the new program aims to increase private participation in the budget of public higher education allowing universities to establish shared management of real estate assets, create patrimonial funds and concede naming rights of buildings, among other items. Weintraub summarized the program in four words: “sponsorship, sponsor, rent and partnership.” The announcement was made while the administration is under constant criticism for making cuts to education budgets, which have motivated protests from opposition parties, labor unions and students.

Folha de S.Paulo: MEC quer custear universidade com fundo na Bolsa e Lei Rouanet
G1: MEC lança ‘Future-se’, programa para aumentar verba privada no orçamento das federais

Brasilia Report

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