September 4, 2020


1. Administration submits administrative reform to Congress

This week, President Jair Bolsonaro submitted the highly anticipated administrative reform bill to Congress. If the reform is approved, changes will be valid only for new public servants, which could reduce resistance to the proposal. The text submitted to representatives puts an end to benefits due to time of service and creates more restrictions on becoming a public servant. The administration is aiming to eliminate some issues in public service, such as people who have committed disciplinary infractions being “punished” with compulsory early retirement, while still receiving benefits. The economy team is also discussing the possibility of cutting work hours and salaries for new public servants during this period of fiscal difficulties with Congress. They argue that employees in the private sector provide this contribution when companies are going through difficulties so public servants should do the same. However, the reform proposal does not cut benefits for the so-called “elite” in public service: judges, members of the Public Prosecutor’s Office, military personnel and representatives, all of whom get paid high salaries. The government’s proposal also determines protective measures for tax auditors, diplomats and police officers. The suggested measures will come into effect in states and cities that are willing to follow the new guidelines. The reform also proposes the creation of five new types of work in federal public institutions. Only one of the five new work types – a common position at the state level – provides job stability after three years. The reform also proposes work contracts for an unlimited amount of time. These employees will be hired following a test, which is how public servants are currently selected. However, before being hired, these professionals will work for a probationary period, which will replace the probationary internship. The administration said that it is not possible to determine the financial impact of the reform, as it will depend on the final approved text. In 2019, the government spent R$ 319.5 billion (USD $60.3 billion) on public servants, the second highest expense, behind pensions. For the past three years, there have been more retired and out of work public servants than active public servants. There are currently 600,000 active public servants and 720,000 public servants out of service or retired.

Folha de S.Paulo: Reforma Administrativa protege elite dos servidores
Valor Econômico: Reforma amplia margem para reorganização administração
Valor Econômico: Reforma cria novas modalidades de emprego público
O Estado de S.Paulo: Veja os privilégios que reforma quer extinguir

2. Weak domestic demand drops Brazilian GDP to its lowest level since 1980

The Brazilian economy had a historic drop in the second quarter of 2020: -9.7% in comparison to the previous three months. According to the Brazilian Institute of Economics at Fundação Getúlio Vargas (IBRE-FGV), It was the largest GDP drop since 1980. With the long period of social isolation and restrictions on economic activities, domestic demand was the driver of the negative result, combining a reduction in family consumption, smaller investments and a reduction in government consumption. The manufacturing and service sectors experienced a steep drop, while the agricultural sector registered an increase. Although results were disappointing from April to June, experts believe the next quarter will register an uptick in the GDP of 7%. According to Economy Minister Paulo Guedes, the disappointing GDP was the aftermath of “the lightning” that struck the country in the past. “This happened in the past. This is the result of something from the past. We are taking off in a V. This is the thunder after the lightning from April,” he said. Even though the market is expecting a recovery, there are still doubts on how fast progress will be, especially due to the job market and the financial situation in the country. In a press statement, the Ministry of Economy said that the economic activity in Brazil dropped less than in other countries currently reopening their economies. Still, the year could register a GDP drop of between -6.5% and -4.5%. A study by IBRE indicated that the GDP drop in 2020 will be the worst in the past 120 years. They expect a contraction of -5.4% in 2020. The study also suggests that the GDP will have a per capita drop of -6.1% – the worst result since 1981. Therefore, the GDP per capita will be R$ 30,135 (USD $5,692), similar to what was registered in 2007.

Valor Econômico: Economia encolhe 9,7% com colapso da demanda doméstica
Folha de S.Paulo: ‘Esse é o barulho de raio que caiu em abril’, diz Guedes
O Globo: Recuperação ainda deve ser lenta

3. Bolsonaro reduces amount, but extends emergency aid until the end of the year

President Jair Bolsonaro has extended the payment of emergency aid to people in vulnerable situations during the pandemic through a preventive measure. However, he cut the amount by half, going from R$ 600 to R$ 300. According to the president, it is not possible to keep the current amount due to the country’s debts. “The Brazilian debt is at R$ 1 trillion (USD $188.9 billion) and therefore the emergency aid until the end of the year will have to be smaller. I know that R$ 300 is not much, but in Brazil, for those who pay, it is a lot. We couldn’t continue to create R$ 50 billion in debt every month,” he said. Bolsonaro mentioned that “not a single world leader” made decisions in the pandemic like he did. The president still denies that the pandemic is a serious issue and refuses to follow prevention protocols. “The virus issue was treated cowardly. Without the responsibility it was due. Panic was generated: stay at home or you’ll die,” he said. The president also said that, due to social isolation measures such as closing shops and stopping the manufacturing industry, “the side effects on the economy will be much worse than the disease” and continued to blame state governors and mayors for closing companies during the pandemic. “We must learn how to live with the virus, even with the vaccine that is coming,” he said. Bolsonaro’s preventive measure does not allow detainees who are currently in prison full time, people who are living abroad or dependants to receive the aid. According to the federal government’s estimations, new payments could represent an extra R$ 67.6 billion (USD $12.8 billion) in public spending.

O Globo: Auxílio menor será pago em quatro parcelas
Valor Econômico: Bolsonaro prorroga auxílio até dezembro

4. Experts say there are clear indications of pandemic declining in Brazil

The number of new coronavirus cases are dropping in 70% of the 324 Brazilian cities with over 100,000 inhabitants. In 12 states, COVID-19 has not been spreading as fast in large cities. The moving average of daily deaths has begun to drop and, for the first time in three months, the epidemic is showing signs that it is losing strength in Brazil. The moving average of daily deaths went from 1,000 people to 859, a high number, but one that still indicates a decline. The majority of experts do not see the drop in the number of deaths as a result of government actions. They are trying to confirm the hypothesis that the number of new cases and deaths is now permanently dropping. Indicators show that the virus is still very active in the Center-West and Southern regions. According to London’s Imperial College, the transmission rate of the disease in Brazil has dropped. The rate calculates how many people are contaminated by a single person with the disease. In Brazil, the rate was at 1 and it has dropped to 0.94, the lowest since April. When the rate is inferior to 1, scientists say that the uncontrolled dissemination of the coronavirus is slowly reducing. According to researchers, these signs of reduction do not mean that Brazil is in a “herd immunity” stage – when the vast majority of people have been contaminated by the virus and are protected against new contamination. “It might be that in some places that were significantly affected by the virus, such as Amazonas, Pará and Maranhão, people are now getting to a high percentage of immunity and therefore the contamination rate is lower, but that does not mean there is a herd immunity. In the entire country there are a lot of people who are still susceptible to the virus,” said Alberto Chebabo, Vice President of the Brazilian Virology Society. Brazil has over 4 million confirmed cases of the disease and 124,000 people have died.

O Globo: Mortes diárias pelo coronavírus caem 14%
Folha de S.Paulo: Casos de Covid-19 param de crescer nas grandes cidades
O Globo: Acompanhe notícias sobre a pandemia
IRRD Covid-19: Veja o mapeamento de casos no Brasil e no mundo

5. Large corporate groups are looking at the Amazon for investments

General Augusto Heleno, Minister in Chief of the Institutional Security Cabinet, has responded to foreign investors asking for the preservation of the Amazon rainforest in exchange for new investments. According to him, threats and criticism are only intended to harm the president and data published in other countries has been exaggerated due to ideological reasons. The government has created new ways of dealing with the Amazon, including the National Bank for Economic and Social development, which is listing forest stretches to be used by the private sector. Their goal is to sustainably develop the region. In exchange for the investment, companies can improve their reputations by preserving the rainforest. Companies in the private sector are also discussing the matter. Executives, researchers, military personnel and opinion leaders are discussing development strategies that would avoid having to resort to deforestation, improving the quality of life of the people in the region. In the financial sector, banks Bradesco, Itaú and Santander have created a multidisciplinary board to discuss preservation strategies. They have selected seven experts to coordinate the implementation of their proposals for sustainable development of the region. According to the leaders at the Brazilian Corporate Board for Sustainable Development (CEBDS), carbon credits resulting from preserving the Amazon could generate USD $10 billion for Brazil. The negotiation in buying and selling financial securities is a trend in taxation on emissions. In 46 countries and 28 subnational governments emissions are charged, according to a CEBDS report.

O Estado de S. Paulo: É possível melhorar a preservação, afirma general
Valor Econômico: Lideranças empresariais debatem alternativas para a região
O Estado de S .Paulo: Mercado de crédito de carbono ganha maior relevância entre empresas
O Estado de S. Paulo: BNDES estuda plano de concessão de florestas na Amazônia
Valor Econômico: Grandes bancos criam conselho consultivo para Amazônia