BRAZIL’S CURRENT AND LIKELY FUTURE POLITICS AND ECONOMY David Fleischer and Prof Alfredo Saad-Filho 25 November 2020 Beazley Political Risks Emma Whiteacre

25th November 2020

2 Political Risk and Trade Credit

• Protection provided for companies’ investments and other assets located in foreign countries against political perils (PR/WL/TO/W/AW risk codes) • Protection against non-payment or non-performance arising from trade-related contracts, trade-related and secured loans, and project finance (CF/CR risk codes)

• Political Risk Insurance (PRI)

“Political risks are arbitrary, discriminatory, enforcement or hostile actions taken by governments and non-state actors that have an adverse impact on international trade or investment transactions”

• Contract Frustration Insurance (CF)

“Contract frustration is the inability or refusal of a sovereign (or related entity) to perform their contractual obligations when due”

• Trade Credit Insurance (CR)

“Credit risks are the possibility that a counter-party will not pay or perform their contractual obligations when due whether for political or commercial reasons” Our geographical coverage

Brazil, 4%

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7 SPEAKERS

David Fleischer — a US-Brazilian dual national since 1995 has lived and worked in Brazil for over 50 years — had a long and distinguished academic career in the Political Science departments of three leading Brazilian universities. He was also a visiting professor in three US universities. He is actively involved in political risk analysis and has published the weekly Brazil Focus reports — which are essential reading for anyone seriously interested in Brazilian politics — since 1996. One of David’s current research interests is comparative political corruption, and he is the president of TCC-Brazil (Transparency, Consciousness and Citizenship) which joined other NGOs to found Transparency Brasil. He is married to Edyr Resende and they have two children who are both anthropologists.

Alfredo Saad-Filho is Professor of Political Economy and International Development at King’s College London and incoming Chair of Department of International Development (2021-24). Previously, he was Professor of Political Economy at SOAS University of London, Chair of the SOAS Department of Development Studies (2006-10), Head of SOAS Doctoral School (2018-19), and Senior Economic Affairs Officer at UNCTAD (2011-12). He has degrees in Economics from the Universities of Brasília (Brazil) and London (SOAS), and has taught in universities and research institutions in eight countries. His work has been published in two dozen countries and in 15 languages, and presented over 200 academic events in 30 countries.

8 2020 MUNICIPAL David Fleischer, Political Science Inst. University of Brasília 25 November 2020 OVERVIEW

As in 13 American colonies, there have been local city council elections in Brazil since the 1600s

Since 1946, elections have been held every 4 years . Governor, Senator, State & Federal Deputies, Mayor & City Council

BUT, since 1972, municipal elections became two years out of phase with the general elections. There have been: . General elections in 2010, 2014, 2018 . Municipal elections in 2012, 2016, 2020

10 OVERVIEW 1988 Constitution

. 16-17 year olds allowed to vote . Absolute majority criteria for executive offices - President, Governor & Mayor . Winner with 50%+1 of valid vote but if not achieved there is a 2nd round runoff election . Municipal runoff in cities with more than 200,000 voters  25 state capital cities (excluding Palmas)  70 other larger cities

Re-election

. For Executive Offices (1996)  One immediate re-election, but could be elected again 4 years later  For municipal elections, as of 2000

11 OVERVIEW Electronic voting machines Used since the 2000 municipal elections

12 2020 MUNICIPAL ELECTIONS

Normally, elections are in October (on 1st & 3rd Sundays)

With COVID-19 in 2020 . 5th and 29th November . Macapá – 6th and 20th December

Brazil population in 2020 = 212,307,653 . Municipal elections in 26 states, 5,568 cities . No municipal elections in Brasília

13 2020 MUNICIPAL ELECTIONS

Year Electorate Turnout Abstention

2012 140,646,446 (+7.2%) 115,607,514 22,736,804 (16.14%)

2016 144,088,912 (+4.0%) 119,015,885 25,073,027 (17.40%)

2020 147,918,483 (+2.7%) 113,281,200 34,121,874 (23.68%)

14 2020 MUNICIPAL ELECTIONS

Eligible to vote 2016  2020

52.53% women & 47.47% men

Illiterates 4.8%  4.4% ‘Read and write’ [only] 10.6%  7.4% Eighth grade complete 7.0%  24.0% High school completed 19.2%  25.5% College education completed 6.9%  11.0%

15 2020 MUNICIPAL ELECTIONS

Fewer younger voters (age 16-17)

2004  3,609,241 2008  2,923,485 2012  2,913,627 2016  2,600,000 2020  1,030,563

16 2020 MUNICIPAL ELECTIONS

City Council (Candidates)  City Council (Elected) 2008 345,397 (21.40% women)  6,503 women (12.53%) 2012 435,800 (31.20% women)  7,630 women (13.32%) 2016 436,376 (32.79% women)  7,803 women (13.50%) 2020 518,328 (34.00% women) 

17 POLITICAL PARTIES

NAME ACRONYM ALIGNMENT NAME ACRONYM ALIGNMENT

Avante Centre Partido Renovador Trabalhista Brasileiro PRTB Far-right Centre-left to left- Cidadania Centre-left Partido Socialista Brasileiro PSB wing Right-wing to far- Democracia Cristã DC Right-wing Partido Social Cristão PSC right Democratas DEM Right-wing Partido Social Democrático PSD Centre

Movimento Democrático Brasileiro MDB Centre to centre-right Partido da Social Democracia Brasileira PSDB Centre Right-wing to far- Partido Novo NOVO Centre-right to right-wing Partido Social Liberal PSL right Patriota Right-wing to far-right Partido Socialismo e Liberdade Psol Left-wing to far-left Partido Socialista dos Trabalhadores Partido Comunista Brasileiro PCB Far-left PSTU Far-left Unificado Centre-left to left- Partido Comunista do Brasil PCdoB Centre-left Partido dos Trabalhadores PT wing Centre-right to right- Partido da Causa Operária PCO Far-left Partido Trabalhista Brasileiro PTB wing Partido Democrático Trabalhista PDT Centre-left to left-wing Partido Trabalhista Cristão PTC Right-wing Partido Liberal PL Centre-right Partido Verde PV Centre Partido da Mulher Brasileira PMB Right-wing Rede Sustentabilidade REDE Centre-left Partido da Mobilização Nacional PMN Left-wing Republicanos Republicanos Right-wing PODE Right-wing Solidariedade Centre PP Right-wing Unidade Popular UP Far-left

Partido Republicano da Ordem Social PROS Centre

18 FIRST ROUND RESULTS

In 25 State Capital Cities there were seven 1st Round Victories

Belo Horizonte (PSD) Reelected Campo Grande (PSD) Reelected Curitiba (DEM) Reelected Florianópolis (DEM) Reelected Natal (PSDB) Palmas (PSDB) Salvador (DEM)

19 NINE CAPITAL CITY 2ND ROUND RUNOFFS

Aracajú (PDT vs. Cidadania) Belém (PSoL vs. Patriota) Boa Vista (MDB vs. SD) Cuiabá (Podemos vs. MDB) Fortaleza (PDT vs. PROS) Goiânia (MDB vs. PSD) João Pessoa (PP vs. PSB) Maceió (MDB vs. PSB) (Podemos vs. Avante)

20 SECOND ROUND RUNOFFS (9)

Porto Alegre (PCdoB vs. MDB) Porto Velho (PSDB vs. PP) Recife (PSB vs. PT) (DEM vs. Republicanos) Rio Branco (PP vs. PSB) São Luís (Podemos vs. Republicanos) São Paulo (PSDB vs. PSoL) Teresina (MDB vs. PSDB) Vitória (Republicanos vs. PT)

21 22 PARTIES WILL DISPUTE THE 2nd ROUND

PT 15 PSoL 3 PSDB 14 Cidadania 2 MDB 12 PL 2 PSD 10 PROS 2 Podemos 9 PSL 2 DEM 8 SD 2 PSB 8 Patriota 2 PP 5 Novo 1 Repbublicanos 5 PCdoB 1 PDT 4 Rede 1 PSC 3

22 MEMBERS OF CONGRESS

2020

. 69 Candidates for Mayor . But only 4 were elected in the 1st round . 4 will dispute 2nd round

2016

. 83 Candidates for Mayor . 20 were elected

23 FOUR IMPORTANT 2nd ROUND ELECTIONS

São Paulo B. Covas (PSDB) vs. G. Boulos (PSoL)

Rio de Janeiro E. Paes (DEM) vs. M. Crivella (Republicanos)

Porto Alegre M. D’Ávila (PCdoB) vs. S. Melo (MDB) . Only PCdoB in 2nd Round

Recife J. Campos (PSB) vs. M. Arraes (PT) . Two cousins, Miguel Arraes’ grandchildren

24 PARTY PERFORMANCE

The traditional parties did well: DEM, MDB, PP, PSDB & PSD . So-called ‘Centrão’ advanced

The left-wing parties did less well PT, PDT, PSB, PV & PCdoB

PT – In 2016 it elected less than half of the mayors that it had in 2012, and this number halved again in 2020

25 CANDIDATES SUPPORTED BY PRESIDENT BOLSONARO

As Donald Trump says – He supported ‘losers’

. São Paulo  C. Russomanno (came 4th)

. Rio de Janeiro  M. Crivella (can a very distant 2nd)

. Of the 13 candidates he supported for Mayor, only 4 were successful

. Son ’02’ was re-elected to the Rio city council, BUT with 34% fewer votes than in he received in 2016

26 BRAZIL TODAY (2020) - PROBLEMS & PERSPECTIVES

President is a ‘denier’

Bolsonaro denies:

. Science . Coronavirus . Racism . Burning of Amazon . Deforestation . Climate Change (he is heavily influenced by Olavo de Carvalho)

27 RACISM

‘Does not exist in Brazil’

. Bolsonaro with G-20 on 20th November. Claimed that racism ‘Imported’ (from the USA)

. Vice-President Hamilton Mourão  ‘No racism in Brazil’  ‘During my high-school exchange in USA, I saw racism, segregation & discrimination of Blacks’

. Nasty murder of Black man by 2 security guards at Carrefour supermarket in Porto Alegre on 19th November

28 COVID-19

Brazil one of most affected nations.

. Comparisons with 1918 ‘Spanish flu’

. Denial by President Bolsonaro – ‘Just a little sniffle’  Back to work vs. isolation  Battle against Chinese CoronaVac vaccine  ‘Vaccine should not be obligatory’

29 FOREIGN POLICY

Destroyed Brazil’s Foreign Service . Follows Trump’s lead who is Bolsonaro’s ‘idol’  Like Putin he has not yet recognised Biden’s victory

. Rhetoric against WHO, WTO, Paris Accord, etc. . Contrary to International Organisations

. Will he move Brazilian Embassy from Tel Aviv to Jerusalem?

. EU-Mercosul Free Trade Agreement stalled because of Brazil

30 UNEMPLOYMENT

Continues to be very high because of COVID-19

. Increased by +27.6% in the past 4 months  14.4% in late October, 13.8 million  29.7%, 18-24 age group

. Create new jobs with new investments?  Tecnhology + Innovation

. Foreign investments ‘wary’ of Brazil

31 IMPLICATIONS FOR 2022 200th anniversary Brazil’s Independence

. Bolsonaro will run for re-election  He will have to choose a party (possibly PP)  Many economic & social problems

. São Paulo’s Governor João Doria – a strong candidate who is allied with DEM & MDB

. Increased GDP expansion in 2021 & 2022 ?

. Congress must approve essential reforms: Administrative reform, Tax Reform, etc.

. Privatisation of many state enterprises

32 BRAZIL: ECONOMIC AND POLITICAL CHALLENGES Alfredo Saad-Filho 25 November 2020 PRODUCTIVITY GAP

34 NEOLIBERALISM IN BRAZIL . Economic transition from ISI to neoliberalism:

 Neoliberal economic policies.  Global integration of domestic capital.  Growing significance of finance.

. Political transition from the military regime to democracy.

35 THE WORKERS’ PARTY (PT) GOVERNMENTS (2003-2016)

. Commitment to stability; path of minimal resistance.

. Neoliberal economic policies; macroeconomic policy tri-pod.

. Developmental neo-liberalism.

. Distribution at the margin.

. Limitations of the model.

36 AUTHORITARIAN NEOLIBERALISM

. Convergence of dissatisfactions.

. The rise of the right.

. Shift of the centre of gravity of politics.

. Lack of leadership.

. Drifting towards political gangsterism?

37 COVID-19

New South Brazil UK USA China Cuba Germany Taiwan Vietnam Zealand Korea Total cases 5,566,049 1,102,290 9,465,646 91,481 7,144 597,359 1,971 26,925 567 1,203 Cases per 26,185.8 15,818.9 28,350.2 63.51 621.1 6,893.8 334.91 525.2 23.8 12.4 million Total deaths 160,496 47,832 233,535 4,739 129 10,883 25 474 7 35 Deaths per 755.06 696.02 702.79 3.29 11.39 129.05 5.18 9.25 0.29 0.36 million Excess deaths 54,700 65,700 149,200 n.a. n.a. 9,800 n.a. n.a. n.a. n.a. GDP growth in 2020 -5.8 -9.8 -4.3 1.9 n.a. -6.0 -6.1 -1.9 0.0 1.6 (estimate)

38 PRODUCTIVITY GAP

GDP pc in US$ (converted at Geary Khamis PPPs). 3-year moving averages. Source: The Conference Board and Groningen Growth and Development Centre, Total Economy Database, January 2009, G. Palma 2009, University of Cambridge, mimeo.

39 GDP GROWTH AND SYSTEMS OF ACCUMULATION (1933-2019)

15

13 ISI Crisis 11 Transition Mature 9 Inclusive Developmental 7 Authoritarian

5

3

1

-1

-3

-5

40 PRODUCTIVITY GAP

41 Q&A

42 43