November 29, 2019


1. Value of dollar hits record high after Guedes’ speech

Statements made by Economy Minister Paulo Guedes led to the dollar exchange rate hitting a record high not seen since the beginning of the Real Plan in 1994. On Monday, the American currency hit R$ 4.2771 and ended the day at R$ 4.2394. The peak happened soon after a speech by Paulo Guedes during a visit to Washington. When questioned about the value of the real against the American dollar, Guedes said: “With a stronger fiscal policy and lower interest rates, the equilibrium exchange rate is higher” and that Brazilians should get used to this variation. The Minister’s statement immediately hit the press and was taken as a sign that the administration is not worried about changing the devaluation of the real. During the same trip, Guedes also compared the Brazilian situation to the protests happening in Latin American countries. He said that the call for protests against the government is unreasonable and that “no one should be surprised if anyone demands a new AI-5,” referring to a measure by the military regime that ended political and civil rights in Brazil. “We don’t build a future with failed experiences from the past,” said Federal Supreme Court President Dias Toffoli in a press statement. Read the analysis on the impact of Paulo Guedes’ speech at Brasília Report.

O Estado de S. Paulo: Escalada do dólar pode afetar preços e juros
Valor Econômico: Fala de Guedes faz dólar bater recorde nominal
Folha de S.Paulo: Fala de Guedes cria instabilidade de curto e longo prazo
Valor Econômico: Guedes pede “democracia responsável”

2. Federal Supreme Court authorizes use of confidential data without prior judicial order

Yesterday, the majority of the Ministers of the Federal Supreme Court decided that investigations into corruption and money laundering do not need prior judicial authorization to use confidential financial information obtained from government institutions for financial control. Now, institutions can share data with the Public Prosecutor’s Office with no restrictions. The new decision changes an order from the Federal Supreme Court President Dias Toffoli, who – in July – had suspended investigations that lacked previous authorization. One of the suspended cases was an investigation of Flávio Bolsonaro, the eldest son of the President. In a trial that has been going on since last week, Toffoli said that he is against sharing confidential data. Only on Wednesday the Ministers will decide how the data will be shared, discussing possible limitations and exceptions.

Folha de S.Paulo: STF libera dados sigilosos sem ordem judicial
Uol: Decisão do STF pode comprometer filho do presidente

3. Interest rate on overdraft will be limited to 8% a month

This week, the National Monetary Council changed the rules for overdrafts in Brazil to drop monthly interest rates from 12% to a maximum of 8%. Bank account overdrafts are the most expensive line of credit available in the country, with interest rates of 305.9% a year. With these changes, the annual rate will drop to around 151%. Banks can charge monthly fees for clients who want access to overdrafts. The new cap for interest rates will come into effect on January 6th and it will be valid for people who are already clients of Brazilian banks. The fee for clients that request the overdraft emergency fund will be valid from June 1st 2020. Banks will not be allowed to send clients into overdraft unless the client requests it. Clients with an overdraft of up to R$ 500 will be exempt from the fee. If a client wants a R$ 2,000 overdraft, they will pay a fee of 3.754% on R$ 1,500 as the exempt R$ 500 is deducted. When a client uses the overdraft, they will pay interest rates deducted from the fee. According to the Central Bank, around 19 million people will be free from a monthly fee. The overdraft credit is currently available to 80 million people in Brazil.

Valor Econômico: Banco Central cria novas regras para o cheque especial

4. Bolsonaro criticizes the environmentalist policy in Amazonas

President Jair Bolsonaro criticized the “environmentalist policy” of Amazonas during a sustainability event in Manaus, the state capital. According to him, demarcations of indigenous land harm economic development in the region. The President said that the majority of the territory in Amazonas is dominated by reserves, protected areas and national parks, leaving very little to improve the local economy. According to Bolsonaro, the interest of foreign corporations in the Amazon region is notable. He argues that the occupation of the land must change, as indigenous people live like “cavemen”. “How many of you here are descendants of indigenous people? Why reserve a space in a piece of land in which you can’t do anything? We want indigenous people doing with their land exactly what the farmer does with the nearby land. We want them to mine as well,” said the President.

O Globo: Política ambientalista atrapalha o desenvolvimento no Amazonas

5. New financial management helps Flamengo win two titles

The popular Brazilian soccer team Flamengo has just won two championships – Copa Libertadores and Campeonato Brasileiro – which caught the attention of economists. They see the team’s achievements as the first benefits of a financial restructuring. Six years ago, Flamengo changed its management and lowered its debts from R$ 750 million to R$ 460 million. Last year, the team invested a total of R$ 190 million. In 2014, investments were around R$ 22 million. “Other clubs grew their revenue by trading players, but decided to spend the money on soccer. That is the difference with Flamengo. While they organized themselves for the future, others were thinking of the present,” said economist Cesar Grafietti, a consultant at Itaú BBA, who analyzed the financial situation of 20 teams of Series A of the Campeonato Brasileiro.

Folha de S.Paulo: Campeão, Flamengo colhe frutos da reestruturação financeira
Valor Econômico: Projetos preveem mudar gestão de clubes de futebol

Brasilia Report

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