May 17, 2019


1. Government
lowers GDP expectations, stocks drop and exchange rate to USD rises

Economy Minister Paulo Guedes said that “the Brazilian economy has hit rock bottom” and that the pension fund has become a “fiscal black hole”. He asked Congress for supplementary credit worth R$ 248 billion (USD $60.5 billion), largely to pay for pensions and social programs. Adding to the feeling of pessimism was the unexpected lowering of GDP growth expectations to 1.5% from 2.5% (the figure predicted in the Federal Budget). The financial market was affected, causing stocks to drop and the U.S. dollar to rise. Yesterday the U.S. currency was valued at R$ 4.028 but earlier today it reached R$ 4.068 – the U.S. dollar’s highest value since October 1st, the last business day before the presidential election. According to Central Bank President Roberto Campos Neto, Brazil has been unable to stabilize and unpredictable economy, which helps explain the postponement of decisions concerning investments in the country. Learn more about the position of Minister Paulo Guedes in the Brasilia Report.

Folha de S.Paulo: Economia está no ‘fundo do poço’, diz ministro Paulo Guedes
O Globo: PIB vai cair e Previdência é buraco negro fiscal, diz Guedes
O Estado de S. Paulo: Dólar quebra barreira de R$ 4 diante de PIB menor
Folha de S.Paulo: Pessimismo com PIB e cenário externo faz mercado recuar

2. Cuts to public education stir protests

This week, Jair Bolsonaro’s administration faced its biggest protests yet, with people taking to the streets in over 170 cities. Teachers, employees at universities and students all protested budget cuts of 30% from federal universities. Unions and other organizations joined in and used the opportunity to criticize the pension reform. The President, during a visit to the U.S., said the protests were supported by “useful idiots” who are being used as pawns by “a clever little minority.” He also stated students attending the protests “don’t know the formula of water.” Minister of Education Abraham Weintraub is facing pressure from Congress to back down on the budget cuts, which will take R$ 7.3 billion (USD $1.8 billion) from investments into public education.

Valor Econômico: Contra cortes na Educação, protestos atingem 170 cidades
O Estado de S. Paulo: Presidente chama manifestantes de ‘idiotas úteis’
GloboNews: Protestos se espalharam por todos os Estados

3. Bolsonaro honored in U.S. while Mourão visits China

Even with the heated trade war between the U.S. and China, the Brazilian government is trying everything to attract foreign investment. President Jair Bolsonaro met with U.S. conservatives and received the “Person of the Year” award from the Brazilian-American Chamber of Commerce. Bolsonaro met with Senator Ted Cruz and Governors Greg Abbott (Texas) and Kevin Stitt (Oklahoma). They discussed trade partnerships and possible investments, particularly in the aviation industry. Vice President Hamilton Mourão was also abroad, visiting China and meeting with executives and politicians – including President Xi Jinping. The Vice President used the meeting to generate Chinese interest into Brazilian infrastructure projects.

O Estado de S. Paulo: Bolsonaro é homenageado em Dallas
O Globo: Presidente se encontra com empresários e conservadores
Revista Exame: Mourão se aproxima da China em busca de investidores

4. Congress moves forward with discussions about single tax

The Chamber of Deputies moved forward with the discussion of a tax reform. According to the bill, five taxes on consumption will be eliminated over a ten-year period. Out of these taxes, three are federal taxes (IPI, PIS and COFINS), one is a state tax (ICMS) and one in a municipal tax (ISS). Replacing them would roll them together into one: The Tax on Goods and Services (IBS in Portuguese). The new tax would be similar to the Value Added Tax used in other countries. The discussion on the tax reform has progressed at a quicker rate than the pension reform, even though they will both require constitutional changes. The representative responsible for the bill was chosen last week and it was presented to a committee on Wednesday. It was even supported by members of the opposition. Now the bill written by the committee will be voted on May 22nd before heading to Congress. Economy Minister Paulo Guedes is against eliminating state and municipal taxes.

UOL: Texto da Reforma Tributária tem apoio da oposição

5. Unemployment rate grows in 14 states during the first quarter of the year

The unemployment rate increased in 13 states and in the Federal District compared to Q4 2018. The total number of jobless individuals stands at 13.5 million. The highest unemployment rates were in Amapá (20.2%), Bahia (18.3%) and Acre (18%). Unemployment reached 15.3% in Rio de Janeiro, 13.5% in São Paulo and 11.2% in Minas Gerais. The study by the Brazilian Institute of Geography and Statistics also revealed that790,000 vacancies were closed. The number of seasonal jobs has also declined to 5.85 million from 6.64 million at the end of 2018. Among the people who had seasonal jobs and are now unemployed include many teachers who worked for the public education system. They are hired to work from March through December.

O Estado de S. Paulo: Desemprego aumenta em 13 Estados e no DF
O Globo: Demissão de temporários é a maior em 7 anos