August 16, 2019


1. Crisis leads government to sell dollars for the first time in 10 years

The crisis created by the ongoing trade war between the U.S. and China – which caused losses in stock markets all over the world – led the Brazilian Central Bank to sell dollars in cash to try and control the value of the currency, which hasn’t occurred since February 3rd, 2009. Next week, the Central Bank will sell USD $550 million in cash every day. Simultaneously, the bank will buy the same amount in the futures market, through a bank operation known as a reverse swap. The Central Bank’s reserve currently amounts to USD $388 billion. Since the dollar sale will be limited to USD $3.8 billion, the offered amount will not represent more than 1% of reserves. By increasing the offer of dollars in the market, the administration is hoping to bring prices down.

Valor Econômico: BC volta a vender dólar à vista para conter moeda
Folha de S.Paulo: BC fará primeira venda de dólares desde a crise de 2009

2. GDP preview indicates Brazil is in a technical recession

The Central Bank’s Economic Activity Index (IBC-BR), considered to be a “preview” of the Gross Domestic Product (GDP), dropped by 0.13% in the second quarter of the year compared to the three previous months. The result indicates the possibility of a technical economic recession in Brazil, in other words, when there is a decline for two quarters in a row. In June, the IBC-BR grew by 0.30%, but when compared to the same month in 2018, there was a drop of 1.75%. According to President Jair Bolsonaro’s economic team, there is no risk of a technical recession. However, the forecast for economic growth has been repeatedly lowered. Beginning the year at 2.5%, it was subsequently lowered to 2.2%, then 1.6% and now 0.8%.

O Estado de S. Paulo: PIB recua no 2º trimestre e indica recessão técnica
Valor Econômico: Para governo, PIB ficará no terreno positivo

3. Chamber approves new labor rules and market rules

This week, the Chamber of Deputies approved the Economic Freedom Provisional Measure. The 20 approved articles alter rules for civil law, administrative law, business law and, most importantly, labor law. According to the administration, which put the measure forward, the goal is to reduce the bureaucracy in private businesses and bring more legal security to economic activities. The measure allows work on Sundays, penalizes public administration for keeping new national and foreign competitors out of the market, regulates the probative value of digital documents and removes restrictions on banks working on Saturdays, among other changes. The measure must be voted on in the Senate by the 27th so it doesn’t lose its legal validity.

O Globo: MP da Liberdade Econômica é aprovada na Câmara
Folha de S.Paulo: Entenda o que pode mudar no trabalho e nos negócios

4. Bolsonaro criticizes the return of the Argentine ‘criminal left’

This week, President Jair Bolsonaro once again talked about internal problems facing neighboring countries. After the results of the Argentine primaries revealed Bolsonaro’s ally and current President Mauricio Macri was defeated by the ticket of Alberto Fernández and Cristina Fernández de Kirchner, Bolsonaro said: “Argentina is starting to follow in the footsteps of Venezuela because, in their primaries, criminals from the left are starting to get back to power.” Alberto Fernández responded to the comment and said the Brazilian president is violent, racist and misogynistic. According to Bolsonaro, if Macri does not win the presidential elections, Argentina will become a new Venezuela and Rio Grande do Sul will receive an influx of refugees.Read the analysis on Bolsonaro’s reaction to the Argentine primaries at Brasília Report.

Folha de S.Paulo: Bandidos de esquerda estão voltando’, diz presidente

5. Former actor, supporter and friend of President Bolsonaro expelled from PSL

Alexandre Frota, a former actor, former member of the administration’s so-called “shock troops” in the Chamber of Deputies, former supporter and former friend of President Jair Bolsonaro – was expelled from Bolsonaro’s Partido Social Liberal (PSL). The political breakup was due to a series of complaints about how the administration deals with Congress, the nomination of Eduardo Bolsonaro as ambassador to the U.S. and the influence of writer and Bolsonaro family “guru” Olavo de Carvalho in the administration. Frota participated in the negotiations between the government and Rodrigo Maia, President of the Chamber of Deputies, during voting on the pension reform. PSL argued that the politician was “unaligned with the party.” When questioned on the expulsion, Bolsonaro was brief, “I don’t even know who Alexandre Frota is.” The former PSL politician might join DEM or PSDB. – will join PSDB.

O Globo: Alexandre Frota é expulso do PSL
Valor Econômico: Nem sei quem é Alexandre Frota’, diz presidente

Brasilia Report

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