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Weekly Report - 07 October 2021 (WR-21-40)

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BRAZIL: New protests highlight inequality

Brazilians once again took to the streets to protest against President Jair Bolsonaro this week. As well as the usual calls for the president’s impeachment and criticism of his handling of the coronavirus (Covid-19) pandemic, which has now claimed almost 600,000 lives in Brazil, the demonstrations served to display Brazilians’ discontent with rising socio-economic hardship and inequality.

Thousands of Brazilians turned out in dozens of cities across the country’s 27 states to express their rejection of President Bolsonaro on 2 October. Following on from a series of anti-Bolsonaro protests organised by left-leaning movements between May and July, and a pro-impeachment mobilisation held at the initiative of right-wing groups in September, these latest protests were the first to succeed in bringing together representatives from across the political spectrum, albeit in a fragile display of unity.

From the Partido Comunista do Brasil (PCdoB) on the Left to the Partido Social Liberal (PSL) on the Right, 20 political parties were reportedly involved in the protests. The PSL is Bolsonaro’s old party, which has recently agreed to merge with the centre-right Democratas (DEM) – also present at the demonstrations – ahead of the October 2022 general election.

Perhaps most notable, however, was the presence of the centre-right Partido da Social Democracia Brasileira (PSDB) at events largely dominated by supporters of its historical rival, the left-wing Partido dos Trabalhadores (PT).

Rivals struggle to unite

Attempts at creating a broad political front to oppose Bolsonaro have been frustrated so far by the irreconcilable agendas of the PT and its allies on the one hand, and the parties of the right/centre-right on the other. The latter are often repentant Bolsonaro voters, having considered the far-right populist preferable to the PT in 2018. With PT member and former president Lula da Silva (2003-2011) currently the favourite to defeat Bolsonaro next October, the Right (and parts of the Left) are seeking a ‘third way’ alternative [WR-21-37], an approach criticised by the PT.

These persistent differences were on display last weekend, with PSDB members and Ciro Gomes, from the leftist Partido Democrático Trabalhista (PDT), booed by PT supporters at the protest in São Paulo. Gomes, who is endeavouring to fashion himself as a leftist alternative to Lula, as the PT remains discredited in the eyes of many due to corruption scandals, had recently called Lula a “denialist” after the former president criticised the search for a ‘third way’ on Twitter.

Discontent and destitution

Despite the protesters’ political differences, they found common ground in their criticism of Bolsonaro. The reasons for their discontent have been stacking up. When the opposition first took to the streets earlier this year, anger stemmed primarily from Bolsonaro’s mishandling of the pandemic, the extent of which was being laid bare in a congressional commission of inquiry (CPI) spearheaded by the senate (the CPI is expected to present its final report at the end of October).

Protests in September called for Bolsonaro’s impeachment over his frequent attacks on democracy and on the country’s electoral system. An opinion poll revealed that over half the population worried that he might try and pull off a self-coup.

These issues are still a source of concern; but the pandemic appears to be receding in Brazil and Bolsonaro has for now toned down his radical anti-democratic discourse. Now, the socio-economic hardships resulting from the pandemic and this year’s stuttering recovery are top of the list of grievances, with Bolsonaro and his government blamed by many for soaring inflation and rising inequality.

  • Covid-19

With Covid-19 infections and deaths steadily falling and vaccination levels advancing, there is a sense that Brazil is pulling through its Covid-19 epidemic, which has left the country with the second-highest official death toll in the world, behind the US. Public health experts remain wary, however. Some 148m people (around 69% of the population) have had at least one Covid-19 jab, while 96m (45%) are fully vaccinated. Booster jabs are beginning to be given to the elderly, and teenagers are being offered the vaccine. Although he has not contributed to it, Bolsonaro could benefit from this improvement – but the severe public health crisis Brazil lived through earlier this year could be brought back into the public eye when the CPI presents its final report this month.

The destitution that a growing number of Brazilians face was brought into sharp focus just three days before the protests, on 29 September, when Rio de Janeiro-based daily Extra ran on its front page a photo of people scavenging for food amongst discarded animal carcasses, under the headline ‘The pain of hunger’. The poignant image caused an outcry and has been seized upon by both protesters and politicians as a symbol of the socio-economic crisis afflicting Brazil.

Numbers back the image projected by these photos and other newspaper reports. Figures released earlier this year by the Rede Penssan, a network of researchers who are specialised in food security, found that as many as 116.8m Brazilians – over 55% of the country’s households – suffered from some level of food insecurity in 2020.

Amongst these, 19.1m suffered from severe food insecurity, that is to say that they go hungry – a figure that had risen from 10.3m in 2018. With a pandemic government handout for poor Brazilians having been cut this year and accumulated inflation of 5.67% in the first eight months of the year, these figures will only have risen further still in 2021.

Citing data from the government’s ‘Cadastro Único’ database of families living in poverty, news site UOL reported last week that 2m families fell into extreme poverty between December 2018 (a month before Bolsonaro took office) and June 2021. This brings the number of families living in extreme poverty – with a monthly per capita income of R$89 (US$16.20) or less – to 14.7m. This is equivalent to 41.1m individuals, the highest figure on available records which began in 2012.

Meanwhile, unemployment is high and expected to remain in the double digits until 2023 at least. The latest unemployment figures released by the national statistics institute (Ibge) show that unemployment fell in the rolling quarter ending in July. But this small improvement conceals the fact that 14.1m Brazilians are looking for work; that higher employment levels are sustained by precarious jobs in the informal sector; and that workers’ average real income has fallen 8.8% compared with a year earlier.

  • Unemployment

Unemployment fell in the rolling quarter ending in July to 13.7%, from a record 14.7% three months earlier, according to the national statistics institute (Ibge). Figures also show that over half the working age population is now employed for the first time since the pandemic hit.

Bolsonaro on the defensive

There is a degree of willingness on the part of the Bolsonaro government to address these socio-economic issues, if only for political reasons [WR-21-39]. But it is constrained by both congress and fiscal rules, which for example look set to delay the implementation of a new, supposedly more wide-ranging social programme, Auxílio Brasil [WR-21-32]. 

Bolsonaro is resorting to stop-gap measures in a bid to allay social discontent with the rising cost of living. This week he trumpeted on Twitter the various products on which federal taxes have been zeroed or reduced under his government; these include video games, as well as products for tackling Covid-19 and cooking gas.

During his weekly Facebook Live address on 30 September, Bolsonaro blamed high fuel prices on state governments, accusing them of levying too high taxes. A week earlier, at the United Nations General Assembly (UNGA) in New York, he had also attacked state governors, this time blaming inflation on their Covid-19 lockdown policies.

Guedes

The naming of economy minister Paulo Guedes in the Pandora Papers will likely add to the discontent with the Bolsonaro government, particularly given that Guedes, a millionaire former banker, has been known to be publicly dismissive of lower-income Brazilians. 

MTST protests

The Movimento dos Trabalhadores Sem Teto (MTST) homeless workers’ movement has been staging protests recently denouncing inequality and President Bolsonaro’s responsibility for current poverty levels. On 23 September, the MTST protested outside the São Paulo stock exchange; a week later, the social movement was outside a mansion in Brasília owned by Senator Flávio Bolsonaro, the president’s eldest son.

“While Bolsonaro’s son is buying, in a dubious way to say the least, a mansion worth more than R$6m, Brazilians are queuing for bones, they are going back to cooking with firewood because of the price of a gas cylinder,” Guilherme Boulos, a MTST coordinator, Partido Socialismo e Liberdade

(PSOL) member, and prospective candidate for the São Paulo gubernatorial race next year, denounced.

Brazilian public officials in the Pandora Papers

The most eye-catching Brazilian name to appear in the Pandora Papers is that of Economy Minister Paulo Guedes. A banker before he accepted President Jair Bolsonaro’s offer to lead the beefed-up economy ‘super-ministry’ in 2019, Guedes created Dreadnoughts International, an offshore company registered in the British Virgin Islands (BVI), in 2014.

According to revista piauí, one of the four Brazilian media outlets to have collaborated with the ICIJ on analysing the leaked documents, a total US$9.55m was deposited in the offshore account in the months that followed its creation. The company, which is also registered under the names of Guedes’ wife and daughter, was still active as of September this year. In local currency, Guedes’ assets in the BVI swelled from being worth R$23m in 2015 to R$51m today, due to the devaluation of the Brazilian real.

It is legal to hold offshore accounts in Brazil, as long as these are declared to the tax authority. But journalists, legal experts, and the political opposition have pointed out that Guedes’ offshore assets could represent a conflict of interest and a case of administrative misconduct. Article 5 of the code of conduct of the federal high-level administration stipulates that high-ranking officials cannot hold financial interests, in Brazil or abroad, which might be impacted by government policies on which the official in question has privileged information.

The ICIJ has highlighted that Guedes is responsible for a tax reform proposal which initially included a 30% tax on profits earned through offshore entities. However, after pushback from the business and banking sector, the levy on offshore profits was removed from this proposal, which is still under discussion.

Guedes has said that all his private assets were duly declared to the Receita Federal tax authority, as well as to the presidential committee of public ethics and other competent agencies, before he entered the government, and that he then withdrew from private sector activities when he became economy minister.

Central bank (BCB) president Roberto Campos Neto is also named in the Pandora Papers. He has similarly argued that all his offshore assets have been adequately declared and that he has not used the offshore accounts since taking public office.

Brazil’s federal attorney general’s office (PGR) has launched a preliminary inquiry into the Pandora Papers findings to establish whether Guedes and Campos Neto should be investigated for potential wrongdoing. Meanwhile, the chamber of deputies will summon Guedes to give explanations on his offshore activities. Even if the PGR inquiry leads nowhere, the issue could further damage the Bolsonaro government’s image.

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