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Weekly Political Landscape – 10/30 to 11/03

WEEKLY POLITICAL LANDSCAPE
Scenarios, Analysis and Political Projections in the Federal Capital
Week 30/10/2017 to 03/11/2017

 

EXECUTIVE SUMMARY

Special:

  • SPECIAL TEMER GOVERNMENT: The PGR denouncement was rejected, but the President left political weakened. He will never be a “Queen of England”, but the political agenda should from now on be guided by the Congress and not by the Government. The year is political over and the presidential race has already started.

Legislative Branch:

  • After the denouncement – Maia travels with leaders and Lower House has emptied week – After a stressful week at the Lower house, which rejected the proceedings against the President of the Republic, the House Speaker, Deputy Rodrigo Maia (DEM-RJ), traveled on an official mission to the Middle East and Europe, together with leaders of the government’s allied base. With an extensive agenda, parliamentarians met with authorities and participated in meetings at the Brazilian embassies with local businessmen.

Executive Branch:

  • Executive Branch changes the 2018 budget forecast and reduces the minimum wage The Ministry of Planning announced last Tuesday (31st) the 2018 budget forecast, which contemplates the second decline in the minimum wage forecast this year.
  • Government assesses that the pre-salt auction overcomes the expectations – The president Michel Temer declared that the revenue is R$ 6,15 billion on the first auction to oil exploration on the pre-salt layer brokered by the new regulatory mark that exceeds the government expectations.

Judiciary Branch:

  • Gilmar Mendes suspend the Cabral transfer to the Federal Prison – The Justice Gilmar Mendes, from STF, suspended this Tuesday (31), the transfer of the ex-governor from Rio de Janeiro, Sérgio Cabral to the federal prison in Campo Grande/MS.

 

 

Special Temer Government / The PGR denouncement was rejected, but the President left political weakened. He will never be a “Queen of England”, but the political agenda should from now on be guided by the Congress and not by the Government. The year is political over and the presidential race has already started. 

Temer Government on the powders complaintThe ruling coalition set up by President Temer in May 2016, with nearly 400 MPs in the House, is something that will not be repeated for the remainder of his term. Although being one of the most skillful politicians to negotiate and articulate in the National Congress – the fruit of a decades-long political experience, including a constituent mandate and four terms of office as a federal deputy, in which he has held the presidency of the House on three occasions – of the audios related to the JBS delinquency constitutes a point of no return in the transition management of President Temer. The political sensitivity acquired by the president in the course of his experience as a parliamentarian was fundamental in order to stop the allegations of corruption presented by the Attorney General’s Office (PGR). His, like no one else, was able to interpret and meet the physiological needs of Members to maintain the necessary support in the House. Temer thus avoided entering into the list of presidents of the Republic who terminated their mandate in advance. However, the last vote, of 251 votes in favor of the president and 233 votes against, reflected something that everyone already perceived: the base of the government is in process of dissolution.

 

Difficulties in regrouping the base in Congress – predictably, once the denunciation was buried, the government quickly presented a proactive speech, supposed to return to normalcy, leadership, and control of the political agenda, in an effort to signal to the market that reforms would be resumed in Congress. To this end, the Temer government should begin the agglutination of its legislative coalition, but several factors conspire against this possibility. Despite the President’s mentioned odd ability in the dialogue with Parliament and a few positive figures on the performance of the economy – lowering inflation and interest rates – unemployment is still very high and the loss in consumer power of the majority of the population still has not recovered. Unemployment must be added to Temer’s high unpopularity, even worse than the extremely low numbers of former President Dilma Rousseff before suffering impeachment. Without any trace of charisma, this negative image of the president and his government can hardly be recovered, independent of an improvement in the economy, since the corruption agenda – with audiences, donations, and money bags – has filled Temer and his main ministers with a seat in the Planalto. To make matters worse for the government, there is no incentive for most MPs to remain subordinate to the interests of the government. In turn, it tends to a process of gradual dissolution, especially linked to the dates of the electoral calendar. The possibility that Congress approves unpopular measures decreases every week. The pension reform may eventually be approved, but in a diluted way, without achieving the goals and objectives initially presented by the economic team in favor of fiscal balance.

 

The Eletrobras privatization reflects the Government difficulties on the Congress – If the Brazilian productive sector had important achievements in the Temer government with the approval of outsourcing and labor reform, the financial sector is still waiting to see their demands met, within the framework of the tacit pact with Temer before the start of Dilma Rousseff’s impeachment process. The approval of the Expenditure Ceiling was important for the financial agents, but the fiscal adjustment promoted by Meirelles and his team did not have the expected results, making the legal limit of expenses an innocuous piece. Faced with the difficulty of advancing the welfare reform and cutting costs, the economic team reinforced the discourse of privatization to maintain the expectations and confidence of the economic establishment. Airports and energy would turn out to be great business opportunities for the private sector and at the same time a fresh injection of capital into Minister Meirelles’ shrinking coffers. However, political barriers have come complicating the economic team objectives. In the case of the airport’s privatization, Congonhas, the main terminal of the country, was excluded from the process from the demand of PR deputies, the party of Temer base that commands the transport sector from the PT governments. INFRAERO is part of this package of the PR and the privatization of Congonhas would end up politically emptying said the public company. In the case of Eletrobras, a similar process has been taking place, which places on opposite sides the political and economic wing of the government. While the economic team pressure to privatize the Eletrobras by provisional measure – accelerating the negotiation process n Congress -, the Government political wing is aware of the problems this entails, and may lead to a hard defeat in Congress. Several base parties have political interests within Eletrobras companies, which would be directly affected by privatization. To make matters worse for the government, the issue is not only partisan, but also regional, since the companies that are the object of the privatization are based on Rio de Janeiro (headquarters of Eletrobras and subsidiaries), Minas Gerais (FURNAS), as well as the North and Northeast (Eletronorte and CHESF, respectively), a fact that leads deputies from several banks to openly confront the privatization defended by the minister Meirelles. In a recent debate in Congress, Mine and Energy Minister Fernando Bezerra Coelho Filho had to deal with friendly fire coming from various parties at the base of the government, opposed to privatization, including the PSDB. Last week, both the minister and the executive secretary of the MME, Paulo Pedrosa, insisted that the Privatization of Eletrobras would leave next week via a provisional measure, while President Temer received warnings about the possibility of defeat if the Government opted for sending from a MP to Congress. Before the holiday, the government unofficially signaled that the privatization of Eletrobras would be sent to Congress via a bill and no longer in the form of a provisional measure, a decision that will increase indefinitely the deadlines for proceedings in Congress, a fact that decreases the chances of success in the privatization process. Apart from the negative impact on the value of Eletrobras shares on BOVESPA, President Temer’s decision represents a new defeat for the economic team of the Ministry of Finance, which strives to maintain a discourse pleasing to the financial sector, but which in practice suffers from its limitations of the political fragility of the government, controlled by the allies in Congress. The president Temer, experienced politic, will not personify the role of “Queen of England” in the remainder of his term, but it is a fact that the country’s political agenda will not be controlled by the Government, much less by the demands of the economic team. Temer was politically adept and managed to be saved by his support base in the face of the threat posed by the Public Prosecutor’s Office, but at the same time, the focus correlation between Executive and Legislative was altered, reaching the Government capacity of government. This scenario further reinforces the transitory nature of the Temer government, which despite having succeeded in reshaping the dialogue between the government and Congress and stagnating the economic recession, has failed in the larger challenges, such as the approval of a full social security reform and the promotion of a structural fiscal adjustment. The new leader of the nation, elected in 2018, will inherit a complex and unpopular political agenda left by President Temer.

 

Legislative Branch

 

After the denouncement – Maia travels with leaders and Lower House has emptied week – After a stressful week at the Lower house, which rejected the proceedings against the President of the Republic, the House Speaker, Deputy Rodrigo Maia (DEM-RJ), traveled on an official mission to the Middle East and Europe, together with leaders of the government’s allied base. With an extensive agenda, parliamentarians met with authorities and participated in meetings at the Brazilian embassies with local businessmen. The trip, lasting nine days, counting with periods reserved for walking and rest, classified in the official schedule as “private agenda”. The tour has been seen as pleasing the government to the leadership of the base, after the victory in the Plenary that barred the progress of the complaint against Temer. In recent weeks, the Government also accelerated the release of parliamentary amendments to deputies and senators, as well as the appointment of political godchildren to positions of the second and third levels of the Executive, which guaranteed a favorable vote to the President of the Republic. Obstruction in the MP of Fies – With Rodrigo Maia out of the country, the Plenary, chaired by the first vice-president, Deputy Fábio Ramalho (PMDB-MG), voted the Provisional Measure reformulating the Fund for Student Financing (Fies). The low quorum, due to the holiday on Thursday (2nd) and the weakening of the government, favored the obstruction of the opposition, during the beginning of the session, that managed to reach an agreement with the other leadership to change the text that follows the Federal Senate. The session was interrupted to discuss the agreement, which allowed for progress on points raised by the PT and the PSB, which decided to remove the obstruction by the Executive’s promise not to veto “Students’ Refis” – refinancing of debts of the students who contracted until 2015. Even so, some opposition parties (PSOL, REDE, and PDT) kept obstruction and critical speeches to the Measure, already without much force to prevent the voting of the matter.

 

Senate votes transport applications regulation and sends the text back to the Lower House – The Federal Senate’s Plenary approved, with changes, this Tuesday (31), the Project that regulates transport applications regulation – like Uber and Cabify, for example. However, the rapporteur of the matter on Plenary, the senator Eduardo Lopes (PRB-RJ),  accepted three of the twenty amendments presented, modifying the approved text, which should be returned to the Chamber of Deputies to analyze the amendments. The changes, the result of intense debate and agreement among Senate leaders, have made the text less negative for companies that offer transport services through applications. For example, devices such as the use of red license plates and the requirement that the driver owns the vehicle have been withdrawn from the text, which could lead to increased bureaucracy for company employees and costs for users of the vehicle service. Was also approved an amendment that restricts the competence of municipalities over the supervision of the service provided by the applications. Thus, municipalities would not have the role of authorizing the exercise of the activity as foreseen in the original text of the House, although they could establish the applied taxation on the service. The approval of the matter with amendments, forcing its return to the Lower House for a new analysis, can be seen as a maneuver of the Senate to avoid the weight of adopting an immediate decision on the polemic subject, which is being closely monitored by society. There is still no provision for further discussion and voting on the bill in the lower house, which may be delayed, depending on the position of the president of the House, Deputy Rodrigo Maia (DEM-RJ), who can postpone regulation and keep the current rules.

 

Executive Branch

 

Executive Branch changes the 2018 budget forecast and reduces the minimum wage The Ministry of Planning announced last Tuesday (31st) the 2018 budget forecast, which contemplates the second decline in the minimum wage forecast this year. On August, the estimate was reduced from R$ 979 to R$ 969. This week, they announced a reduction to R$ 965 next year. The Minister of Planning, Dyogo Oliveira, affirmed that the value still in definition, to appropriations budget, being fixed only in January by means of the publication of a decree. The portfolio led by Oliveira also reported that the increase in the salary bill, together with the decrease in the minimum wage, will result in a decrease of R$ 11.6 billion in the 2018 Social Security deficit. The Minister of Finance, Henrique Meirelles, responded to the criticisms made to the government by the reduction in the minimum wage, stating that the issue would be a legal and not a political decision, and the government would only adjust it to the economic reality of the country, in addition, Meirelles declared that the reduction of governmental expenses is necessary to carry out the tax simplification, with the Tax Reform. For this purpose, the government intends to approve the Pension Reform later this year, given the difficulty of setting the proposal in the electoral year and then reformulating the Brazilian tax system. Seeking to close the accounts in 2018 for cost containment, the government postponed, through a Provisional Measure published on Tuesday (31th), the adjustments to federal executive officials from 2018 to 2019, and increased the social security rate of the servers that receive more than R$ 5,300 from 11% to 14%. The expectation is that the government rack up around R$ 1,9 billion to the next year with the measures.

 

Government assesses that the pre-salt auction overcomes the expectations – The president Michel Temer declared that the revenue is R$ 6,15 billion on the first auction to oil exploration on the pre-salt layer brokered by the new regulatory mark that exceeds the government expectations. The second and third rounds of sharing took place on Friday of the last week (27th), raising R$ 3.3 billion and R$ 2.85 billion, respectively.  The second round offered four areas with adjacent deposits to fields with reservoirs that extend beyond the contracted area, in other words, unzipped deposits. The third round, in turn, offered four áreas in the Santos and Campos basins. The auction followed a system in which the winning company paid bonuses to the State at the time of signing the contract and, later, another part referring to the future production.

The President’s statement refers to the expectation of collecting this second part, which will only occur after the exploration. Previously the government had estimated that the auctions would yield R$ 7.75 billion to the government already at the moment of signing the contracts. The mismatch of this information ignited the criticisms of the sectors opposed to the concessions by the auctions to private companies. However, the government clarified that the drop in the initial value collected refers to frustration in the sale of two blocks, out of eight offered. Nevertheless, the surplus oil that will be transferred to the Union under the sharing regime had a premium of around 670%, which reflects that the amount to be received by the government will be higher than initially estimated.

 

Public Ministry extends the accession term to Refis to November 14th  – In a Provisional Measure, published on Tuesday (31st), the government extended the deadline for joining the federal government’s tax installment program, which ended this week. The Minister of Finance, Henrique Meirelles, announced on Monday (30th) that after a meeting with President Michel Temer, the deadline for joining the program would be lengthened. He pointed out that the expectation of government collection with Refis is R $ 7 billion, being essential to close the 2017 Union accounts. The Government has demonstrated a decline in the Refis collection expectations, which had been announced at R$ 13 billion in the first half. After extensive negotiation between parliamentarians and the government’s economic and political team, the structure of the program was implemented by the edition of Provisional Measure, sanctioned on the same day that the continuation of the second complaint against the President and two of his ministers were barred in the House Plenary. Refis offers a discount on the refinancing of corporate debts with the Union and was considered important in negotiations to prevent the continuation of the complaint against the president. In the text, legal and physical persons are allowed to join the refinancing of debts due up to April 30 of that year, including those in judicial recovery.

 

Judiciary Branch

 

Gilmar Mendes suspend the Cabral transfer to the Federal Prison  – The Justice Gilmar Mendes, from STF, suspended this Tuesday (31), the transfer of the ex-governor from Rio de Janeiro, Sérgio Cabral to the federal prison in Campo Grande/MS. The transfer request was made by the MPF after Cabral did reference, during an audience, to the fact that the Marcelo Breta’s family works on the same jewelry field. The magistrate replied that he understood the citation as a possible threat. In granting an injunction in the Habeas Corpus, justice Gilmar Mendes notes that inclusion in a maximum-security federal penal institution is an exceptional measure, imposing on the prisoner a more burdensome prison regime, with a greater restriction on freedom. Gilmar understood that there is no justification for the transfer of the former governor to the federal prison. The minister said that the information about the costume jewelry was given to the press by the family of the Federal judge.

               

STF judged unconstitutional standard from RJ which predict governors removals – Justice Luiz Fux, from STF, hosted declaration bans on ADIn 4.772 to recognize the unconstitutionality of the norm contained in the Constitution of the State of Rio de Janeiro that determines the automatic removal of the governor in case of receipt of a complaint by the STJ in the case of common criminal offenses. At the trial, filed by OAB, Minister Fux applied the understanding of the plenary in the judgment of other ADIns, at which time the Supreme Court established the thesis that it is forbidden to the federal units to establish norms that condition the opening of criminal proceedings against the governor authorization of the legislative house.

 

Dodge reinforces Janot’s complaint against Romero Jucá and Jorge Gerdau – Attorney General Raquel Dodge sent the STF a new demonstration on Monday (30th) in the case involving the senator and national president of the PMDB, Romero Jucá (RR), and the businessman Jorge Gerdau Johannpeter, presented in August by the then Attorney General, Rodrigo Janot, who pointed out that the Peemedebista was favored by the Gerdau Group in an interim measure in exchange for electoral donations. In the demonstration, which already contemplates the previous defense of the accused, Dodge requires the rejection of the preliminaries raised by the accused and the full receipt of the complaint, with the citation of the accused and the beginning of the criminal procedural instruction, until final condemnation. When he was denounced, Jucá said he had nothing to fear and stated that it was a “farewell act” of the then Prosecutor, Rodrigo Janot. The investigation was carried out under Zelotes Operation, under-reporter Ricardo Lewandowski, but was redistributed to Edson Fachin after Lewandowski stated that he did not see the connection with this operation. If the accusation of the PGR is accepted, the two will become defendants in the Federal Supreme Court. The senator is already the target of 15 inquiries, of which 8 are in the Lava Jato.

 

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