1. Federal Police pressure Bolsonaro’s ally in the Senate

On Thursday, the representative from Bolsonaro’s administration in the Senate said he will quit if Bolsonaro asks him to. Fernando Bezerra Coelho (MDB) is under investigation by the Federal Police on suspicion of receiving R$ 5.5 million (USD $1.3 million) in bribes from construction companies. The senator’s house and office have been searched by the police with authorization from the Federal Supreme Court. The senator and his son – a federal representative – are accused of having received money to favor construction companies for projects, such as the transposition of the São Francisco river when Bezerra was Minister of National Integration. The senator’s defense team denies all accusations. Chief of Staff Onyx Lorenzoni said that the administration will “wait for the facts.” The Federal Supreme Court’s decision goes against a previous decision by the Prosecutor General of the Republic, who ruled there was no convincing evidence against the senator. Bezerra is being targeted while Congress is considering an investigation into political bias in the Judicial System. Senate President Davi Alcolumbre (DEM) criticized the Federal Police’s actions against Bezerra and said that he will question the Federal Supreme Court. President Jair Bolsonaro needs approval from the Senate for the pension reform project and for his son Eduardo to become ambassador to the U.S.
Read the analysis of the relationship between the Three Powers at Brasília Report.

Folha de S.Paulo: PF mira líder de Bolsonaro no Senado
O Estado de S. Paulo: Ação da PF gera embate entre Senado e STF
O Globo: Operação da PF causa desconforto para Bolsonaro
Folha de S.Paulo: Senador foi ministro de Dilma e passou por 5 partidos
O Estado de S. Paulo: Investigação sobre o Judiciário é protocolada no Senado

2. Benchmark interest rate drops to 5.5% – the lowest since 1994

SELIC – the Brazilian benchmark interest rate – has been reduced to the lowest level since July 1994. The administration reduced the rate from 6 to 5.5% and indicated there might be new cuts in the next few months. The decision was announced on Wednesday and can be explained by a weakened economy, controlled inflation, and the current state of the international economy. President Jair Bolsonaro celebrated the announcement on Twitter: “For the second time in our administration we have the lowest interest rate in Brazil’s history. It means the economy is working.” Directors from the Central Bank, who meet monthly to discuss the country’s economic situation, highlighted the current administration’s advances in structural reforms, and also mentioned that the international economy favors developing countries. Despite the cut, Brazil is still among the nations with the highest interest rates in the world. According to studies by consulting companies, Brazil has the 8th highest interest rate among the 40 countries analyzed. Argentina, which is facing a serious economic crisis, is first on the list.

O Estado de S.Paulo: Selic tem a menor taxa da série histórica
Valor Econômico: Taxa de juros deve ficar abaixo de 5% até o final do ano

3. Mandatory expenses will represent 93% of the Federal Budget

The administration will use 93% of its 2020 budget on mandatory expenses such as payments to public servants and public health and education expenses. The Federal government will have R$ 105.3 billion (USD $25.3 billion) to invest, as opposed to R$ 1.48 trillion (USD $355.8 billion) for expenses. Expenses for public servants alone will take 22.7% of the total of the amount available, representing R$ 336.6 billion (USD $80.7 billion). The increase in expenses – which the administration must pay – may reach R$ 266.2 billion (USD $63.98 billion), well above the cost ceiling of R$ 230 billion (USD $55.3 billion). The increased cost of mandatory expenses could pay for nine years of Bolsa Família, a social benefit program. According to the Treasury Secretary Mansueto Almeida, if nothing changes, the increased cost of mandatory expenses might lead to more taxes in order to balance public spending.

O Estado de S. Paulo: Gastos obrigatórios consumirão 93% do Orçamento
Valor Econômico: Em artigo, secretário do Tesouro alerta para gastos

4. Brazil’s country risk drops to its lowest level in 6 years

This week, Brazil’s country risk dropped to 116 points, the lowest it has been in six years. According to data from the Credit Default Swap (CDS) – an investment that protects lenders from defaults – this is the lowest risk level since May 2013. However, reports show that the stock exchange and the price of the dollar do not reflect investors’ perceptions of the country. According to economists, this could indicate that potential investors believe there will be better opportunities in a couple of months but are waiting for the approval of other structural policies aside from pension reform, and the results of Brazil’s economic growth.

O Estado de S. Paulo: Risco país é o menor desde 2013

5. Bolsonaro says he will give “conciliatory” speech at the UN

Next week, President Jair Bolsonaro will give the opening speech at the United Nations’ General Assembly in New York. In an interview given to TV Record while he was recovering from a hernia surgery, Bolsonaro said he will give a conciliatory speech but will reiterate “defense of national sovereignty” when it comes to Brazilian environmental policies. The President’s speech on Tuesday will take place a day after the UN’s climate summit, which vetoed Brazil’s participation in the discussions. According to a UN representative, “Brazil did not present a plan to increase its commitment on climate issues.” Saudi Arabia, Australia, South Korea, Japan and the United States were also vetoed.

O Globo: Presidente diz que fará discurso conciliador na ONU
Folha de S.Paulo: Cúpula do clima veta fala do Brasil 

Brasilia Report

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