August 7, 2020


1. New tax could have a rate less than 12%, says Economy Minister

Economy Minister Paulo Guedes said he could change the aliquot for the Contribution on Goods and Services (CBS) from 12% – as proposed by the administration – to “10%, 9% or 8%,” depending on how much tax is collected. During a debate with the Mixed Committee for Tax Reform in the legislature, Guedes said he has no plans to increase taxes. “We want [the new tax] to be the smallest possible. If we increase tax collection and collect more than we believe we will, we will reduce the aliquot,” he said. Members of Congress interviewed the minister for nearly six hours. The minister and his aides defended the new taxes and the changes planned by the government. During the meeting, the minister was asked to submit a complete plan to Congress instead of in installments, as he has been doing. According to Guedes, it is better to make the changes in parts so “everyone can understand” the package. He did not deny the possibility, but said that many actions must be discussed. As an example, the minister discussed the increase in the tax exempt floor for Individual Income Taxes from R$ 1,900 to R$ 3,000. This measure alone could reduce the federal tax collection by R$ 22 billion (USD $4.05 billion), according to him. “Politicians must decide. Are we going to give the money to FUNDEB (the basic education fund)? Are we going to offer exemptions? Are we going to give them both? Increase taxes to offer both?” he said.

Valor Econômico: Guedes tenta convencer Congresso sobre novo imposto
Folha de S.Paulo: Ministro promete reduzir despesas públicas
Folha de S.Paulo: Guedes critica desoneração e sonegação dos mais ricos

2. Official inflation rate gets cut again and reaches historic low of 2% per year

The central bank has decided – for the ninth consecutive time – to reduce the basic interest rate (SELIC) by 0.25% to 2% per year. The financial market was expecting a cut, but this represents a historic low. In a press statement, the central bank said that there is still room in the Brazilian economy for new cuts, but that if it happens, reductions will be smaller. According to the bank, optimistic projections predict there will be 2% inflation this year, 3% in 2021 and 3.4% in the following year. Their report also indicates that there are signs of “a partial recovery” in Brazilian economic activity, even though some sectors are still affected by social distancing rules. The statement also mentions that uncertainties about the rhythm of recovery is “higher than usual”, especially due to the suspension of emergency aid. However, according to analysts, it is necessary to act carefully as the country’s fiscal trajectory depends on the central bank to maintain low interest rates.

Valor Econômico: Banco Central corta taxa de juros para 2%
Folha de S.Paulo: País passa a ter juro negativo de 0,71%
Valor Econômico: Novo corte não é consenso entre analistas

3. 8.9 million Brazilians have lost their jobs in the second quarter of the year

An official study reveals that 8.9 million Brazilians lost their jobs between April and June. According to the Brazilian Institute for Geography and Statistics (IBGE), the largest such drop since 2012. The study shows that between April and June of this year Brazil had 83.3 million people employed, which was also a record low for this period, with 12.8 million people out of work. The unemployment rate increased by 1.0% to 13.2% due to the coronavirus pandemic, according to data from the National Household Sample Survey, which takes place every month. The number of people who have given up on looking for a job – due to the coronavirus or lack of opportunities – has also increased significantly. According to IBGE, the number of people in this situation at the end of the second quarter increased by 19.1%, or by 5.7 million Brazilians. The stratification of the poll reveals that 3.1 million people were let go in the private sector in the second quarter. Among those who were not registered workers, 2.9 million people have lost their jobs, while 2.4 million people have left their jobs of their own accord.

Folha de S. Paulo: Quase 9 milhões ficam sem emprego no país
O Globo: Taxa de desemprego sobe para 13,3% no segundo trimestre

4. The pandemic will lead to a steep drop in standard of living, according to studies

Brazilians are set to face the steepest drop in the standard of living since the 1940s. A range of studies from different sectors show that the crisis caused by the pandemic will be harsh. An analysis by consulting company Tendências estimates that 3.8 million families will experience a decrease in their incomes. This means 41 million people or 56% of households will become poorer. this would be the largest rate since 2009, when 60% of people were classed as having low incomes. The GDP retraction could be around 8.2%, while it grew 28% in the previous decade, according to a study by the National Confederation of Commerce of Goods, Services and Tourism. The concentration of wealth for each Brazilian – a hypothetical annual average – will be R$ 32,200, while last year it was R$ 34,500 (USD $5,933 vs. USD $6,356). “Before COVID-19 the low growth between 2017 and 2019 already led people to perceive that their lives had not improved,” says Fabio Bentes, senior economist at the confederation. “What people earned, they lost. It is like paying installments for a car that was stolen and has no insurance,” says Renato Meirelles, president of Instituto Locomotiva, which recently revealed in a study that over half (54%) of Brazilians have experienced a decrease in their standard of living. The study also shows that a third of people interviewed who had health insurance, children studying in private schools and domestic workers have said they will no longer be able to continue paying for all of these services.

O Estado de S. Paulo: Padrão de vida do brasileiro deve ter queda recorde
Valor Econômico: Classes D e E recuam para padrão de 10 anos atrás

5. Brazil registers nearly 100,000 deaths and the administration offers R$ 1.9 billion for vaccine

Yesterday, President Jair Bolsonaro released R$ 1.9 billion (USD $350.09 million) to manufacture 100 million doses of the coronavirus vaccine, which is currently being tested by Oxford University in partnership with Brazilian scientists at Fiocruz. The administration expects to begin a mass vaccination campaign in 2021. In a ceremony to grant the funds, the president said that the vaccine could be a reality in December or January and that, weeks later, “the problem will be defeated. We can really say we’ve done the possible and impossible to save lives, contrary to those who continue to be in opposition since 2018,” said Bolsonaro. Another vaccine, under development by Chinese pharmaceutical company Sinovac, in partnership with Instituto Butantan, might also be available next year. The state government of São Paulo plans to make 30 million doses of this this vaccine available by January. Brazil has registered nearly 100,000 deaths from to the coronavirus with almost 3 million people infected. In the last 7 days the daily average rate of deaths was 1,038, a 2% drop in cases registered in the last 14 days. The average number of daily infections was 43,396 new cases a day, a 1% increase, indicating a plateau in comparison to the previous week.

O Globo: Bolsonaro libera R$ 1,9 bilhão para vacina contra Covid-19
Folha de S.Paulo: Bolsonaro diz ter feito o impossível para evitar mortes
O Globo: SP espera ter vacina chinesa no ano que vem
G1: Acompanhe notícias sobre a pandemia
IRRD Covid-19: Veja o mapeamento de casos no Brasil e no mundo