1. With sights set on re-election, Bolsonaro threatens to leave his party

President Jair Bolsonaro publicly voiced his dissatisfaction with the PSL (Social Liberal Party). Bolsonaro was elected president as a member of the party and his reputation led to the election of 53 party members as federal representatives. Bolsonaro told a supporter to “forget the PSL”, as party president Luciano Bivar’s reputation “is not doing well” in the state of Pernambuco. Party leaders reacted immediately, with some showing support for the president and others defending Bivar. At the end of the day on Tuesday, after Bolsonaro’s team tried to drown out the matter in the press, it still wasn’t clear when Bolsonaro will leave the party or to which party he’ll pledge allegiance next. However, PSL leaders said they will meet with the president to “clear things up” and calm down the situation. Bolsonaro’s influence in the party goes beyond politics. Thanks to the favorable election results, PSL received R$ 110 million (USD $25.2 million) from the electoral fund, up from the R$ 9 million (USD $1.5 million) it had received during last year’s elections. Read the analysis of Bolsonaro’s conflict with his party at Brasília Report.

Folha de S.Paulo: PSL tenta conter racha com Bolsonaro
O Estado de S. Paulo: Bolsonaro busca saída jurídica para deixar PSL
Valor Econômico: Para presidente, partido está estagnado 
Folha de S.Paulo: Saída de Bolsonaro pode fortalecer o Centrão
O Estado de S. Paulo: Bolsonaro quer auditoria nas contas do PSL

2. September inflation lowest in the past 21 years

According to the Brazilian Institute of Geography and Statistics (IBGE), the Brazilian Extended Consumer Price Index (IPCA) – the official Brazilian inflation rate – reached its lowest number in the past 21 years last month. September registered deflation of 0.04%, as opposed to August where a 0.11% inflation rate was recorded. Food and household goods had the lowest prices. According to IBGE, inflation over the past 12 months is at 2.89%, while the month before stood at 3.43%. So far this year, the inflation rate stands at 2.49%. The IPCA index takes into consideration the price of basic items found in the household of families with a monthly income 1 to 40 times the minimum wage. The index looked into families living in 10 of Brazil’s largest cities and five smaller state capitals. According to the index, the lowest inflation rates can be found in São Luis (-0.22%), Belo Horizonte and Brasília. The drop was less significant in São Paulo (-0.02%).

Valor Econômico: Inflação oficial é a menor desde 1998

3. USA withdraws endorsement of Brazil OECD membership

The United States government withdrew its endorsement of Brazil’s entry to the Organization for Economic Cooperation and Development (OECD), the group of the world’s richest countries. President Jair Bolsonaro was counting on Donald Trump to endorse Brazil, but Secretary of State Mike Pompeo said that the U.S. will first support Argentina and Romania. The U.S. made the decision on August 28th but was only revealed this week. Back in March, Trump said that he would support Brazil becoming an OECD member, which resulted in Brazil putting an end to tariffs on ethanol exported to the U.S. Brazilian government sources say that the attitude of the U.S. is frustrating. Behind the scenes, officials in Washington said that the U.S. will still endorse Brazil in the future, but Argentina and Romania will come first. Business leaders were cautious to comment on the matter but said that Brazil joining the OECD is a priority with regards to foreign policies affecting the financial market.

Valor Econômico: EUA mudam de posição e apoiam Argentina na OCDE
Folha de S.Paulo: Empresários se frustram com recuo norte-americano

4. Public sector salaries 96% higher than those of workers in the private sector

This week, a report by the International Bank for Reconstruction and Development (IBRD) revealed that public officials in the federal government earn 96% more than people with similar jobs in the private sector – the highest such among 53 other countries examined in the report. The IBRD claims that the way salaries are structured, combined with the policy to increase salaries according to time on the job, leads to professionals reaching the top ranks without necessarily being the most qualified. The financial institution also claims that more qualified and experienced individuals should be enticed towards jobs in the public sector in more strategic roles and not just at the beginning of their careers.

O Estado de S. Paulo: Servidor ganha o dobro do que é pago na iniciativa privada

5. Brazil climbs one position in competitiveness index

This year, Brazil climbed one spot  to 71st place in the global competitiveness index. The index was created by the World Economic Forum in 1997 and takes data from 141 countries in 12 different categories including infrastructure, the financial system, the job market and capacity for innovation. Even though Brazil’s result is positive, the country is still behind on the administration’s goal to reach the 50th position on the index by 2022. According to the Special Secretary for Productivity, Employment and Competitiveness Carlos da Costa, it is possible to climb 21 positions on the list following six pillars of growth: removing regulatory and legal barriers for businesses, increasing qualified employment, increasing market competitiveness, investing in construction works, modernizing the industry and fostering small and medium enterprises.

O Globo: Brasil melhora no ranking de competitividade

Brasilia Report

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