September 3rd, 2021


1. Protests scheduled for September 7th are worrying institutions and state governments

After months of promoting motorcycle parades all over Brazil, President Jair Bolsonaro will hold the largest pro-government demonstration on September 7th, with events planned in many state capitals. Concern has been expressed that these events could lead to an institutional disruption. Many also fear the prospect of violent clashes with anti-administration protesters demonstrating on the same day.

The Senate, the Chamber of Deputies and the Federal Supreme Court called for reinforcements to security at the Esplanade of Ministries in Brasília, where ministries are located. Ibaneis Rocha (MDB) – the governor of the Federal District – declared that September 6th will be an optional workday to minimize crowds.

Bolsonaro supporters will begin their demonstrations during the weekend, while an ultraconservative event – the Conservative Political Action Conference – takes place in the capital.

In São Paulo, state governor João Doria (PSDB) announced that every person participating in marches or protests will be frisked. The protests against the administration will take place at Vale do Anhangabaú, while pro-Bolsonaro marches will take place at Avenida Paulista at a different time.

Correio Braziliense: Protestos em 7 de setembro: Congresso e STF pedem reforço na segurança
Veja: Bolsonaristas terão ‘esquenta’ do 7 de setembro em evento de direita no DF
Portal IG: Doria: manifestantes, inclusive policiais, serão revistados no 7 de setembro

2. Institutions issue statement in response to crisis

Government and business institutions have issued statements in response to the ongoing institutional crisis between President Jair Bolsonaro and the Federal Supreme Court (STF).

On Monday, the National Front of Mayors (FNP) published an “Open letter to Brazil,” calling for dialogue: “Brazil needs its institutions to be guided by diplomacy and common sense and to follow the Federal Constitution. The country and its people deserve respect, peace and prosperity.”

The Federation of Industries of the State of São Paulo (FIESP) had collected 200 signatures in a statement calling for peace between powers. However, there is now a debate over whether to release the statement, with FIESP president Paulo Skaf under pressure due to personal ties with Chamber of Deputies president Arthur Lira.

In the state of Minas Gerais, the Federation of Industries of the State of Minas Gerais (FIEMG) did not hesitate and published a statement condemning the Federal Supreme Court for “threatening individual liberties”: “In the last few weeks, we have seen a series of decisions in the Judiciary Power that are dangerously close to limiting freedom of expression in the country,” it said.

The agribusiness sector was represented by Brazilian Agribusiness Association president Marcelo Britto, who said that the image of Brazil has been corroded, causing harm to the competitiveness of national products.

FNP: Prefeitos defendem diálogo federativo em Carta aberta ao Brasil
Metrópoles: Análise: Paulo Skaf deveria mostrar nome das 200 entidades de manifesto pela democracia
Poder 360: Federação das Indústrias de MG emite nota a favor de sites bolsonaristas
UOL: “Imagem corroída do Brasil no exterior tira valor dos produtos”, diz presidente da Abag

3. GDP drops in second quarter of 2021 

The Brazilian Gross Domestic Product dropped 0.1% during the second quarter of 2021, showing that economic recovery still has a long way to go. The largest drop was observed in the farming sector (-2.8%), followed by the industrial sector (-0.2%). The service sector, on the other hand, grew 0.7%. The drop came after a positive surprise in the first quarter, when the GDP grew 1.2%.

Economists say that the recovery is facing problems primarily due to the persistence of inflation, the political and institutional crisis, the water crisis and the high unemployment rate.

The Ministry of Economy published a statement saying it is more focused on quality than quantity: “In the accumulated GDP of the past four quarters, Brazil surpasses developed countries such as Germany and the United Kingdom. In comparison to developing countries, it is only behind China and Chile.”

The statement also claims that “the negative result was registered in the quarter in which the largest number of COVID deaths took place, which affected many sectors.”

The ministry, which is the responsibility of Paulo Guedes, believes reforms planned for the next few months could change Brazil’s economic situation.

Agência IBGE: PIB fica em -0,1% no 2º trimestre de 2021
Estadão: Com queda no PIB, Economia diz que ‘mais relevante que número de crescimento, é analisar qualidade’
G1: PIB em queda no 2º trimestre: entenda os motivos e veja 10 riscos que podem frear retomada

4. Water crisis worsens economic forecast 

On Tuesday, the Brazilian Electricity Regulatory Agency (ANEEL) announced that they will be charging an extra R$ 14.20 for every 100 kW/h consumed in September. Electricity bills are expected to increase by over 7%.

The water crisis could also affect the Brazilian GDP and increase inflation. The worst drought period in 91 years could increase inflation rates to 8% in 2021 and 2022, says Gabriel Leal de Barros, economist at RPS Capital.

Experts say that Brazilian governments – both past and present – have made strategic errors. According to Paulo Arbex, president of the Brazilian Association of Hydroelectric Plants, “the country spent 20 years building hydroelectric plants without reservoirs [e.g., Belo Monte – a run-of-river plant that operates according to the water in the river]. In 20 years, the demand for energy almost doubled and yet we continue to have the same number of water reservoirs.”

Renato Queiroz, a researcher at the Economy Group for Energy at the Economic Institute of the Federal University of Rio de Janeiro (UFRJ), says the current administration is taking too long to increase the usage of thermoelectric plants.

In August, the Committee for Participatory Legislation in the Chamber of Deputies said that the constant increases in electricity prices are the consequence of poor management of hydroelectric plant reservoirs.

Correio Braziliense: Crise hídrica deve manter inflação em alta e frear atividade econômica
G1: Crise hídrica se agrava e vira mais um entrave para o crescimento da economia brasileira
Câmara dos Deputados: Crise hídrica é resultado de má gestão dos reservatórios das usinas, dizem debatedores

5. Chamber of Deputies approves bill altering income tax

September 1st was an important day for the Chamber of Deputies. Representatives approved the bill to alter income tax rules for both companies and individuals by 398 votes to 77 (with 5 abstentions). The results show that even members of the opposition voted in favor of the changes.

The bill reduces the income tax aliquot for companies from 15% to 8% and determines a 15% tax on profits and dividends.

“Voting in favor of this bill today means voting in favor of maids, teachers and people who work independently. It means voting in favor of many Brazilian workers. Not only half of them will be exempt, but every other bracket will see a reduction in Income Tax for Individuals,” said Celso Sabino (PSDB-PA), the representative responsible for the bill.

According to the Brazilian Association of Machinery and Equipment president José Velloso, the bill could lead to an increase in the tax load: “with the new Income Tax aliquot, the Social Contribution on Net Profit and the added value will have a bigger tax load than the 34% we have at the moment.” 

Poder 360: Câmara aprova reforma do IR com acordo costurado em cima da hora
Valor Econômico: Reforma do Imposto de Renda: Veja os principais pontos da proposta aprovada pela Câmara
Agência Brasil: Texto-base da reforma do Imposto de Renda é aprovado na Câmara