The Brazil Business round-up – 15th March 2016

Brazil is a complicated market where the legal, business and political landscape can change rapidly. To help you navigate its many complexities, we provide a regular round-up of the most important business and political news that PR and marketing professionals need to know.

  • Speculation grows that former leader Lula will accept a key ministerial role in Dilma government, potentially shielding him from prosecution and lowering expectations of a change in government. State prosecutors have charged Lula with money laundering and hiding assets but, as a minister, Lula could only be tried by the Supreme Court, placing him out of the reach of the judge in the southern city of Curitiba responsible for the inquiry. An anonymous government source claimed Dilma is waiting for Lula to respond to her offer for him to join the cabinet. Lula would probably become Rousseff’s chief of staff, helping her ward off impeachment
  • Banks and consultancies predict chance of  impeachment rises to 70% after Sunday protests. An estimated three million Brazilians in 300 cities took to the streets this weekend to protest and show support for operation Lava Jato. Valor Econômico reports: for analysts, only this outcome can stop the paralysis that dominates Brasília and accelerate a solution for the crisis. “With the current situation, we would stay at rock bottom for a long time,” says Mauro Schneider, of MCM Consultores. “The popular support will increase the pressure on congressmen,” adds Luciano Rostagno, chief strategist at Mizuho Bank. Eurasia Group, a consulting firm specializing in political risk, believes that Ms. Rousseff will step down in May after the impeachment approval by the lower house
  • In a move following the countrywide blockage of WhatsApp in December, São Paulo police have arrested a senior Facebook exec for allegedly ignoring a judical order in a drug crime investigation – Diego Dzodan was taken into custody at Garulhos airport on 1st March and was questioned about Facebook subsidiary WhatsApp’s alleged non-compliance with a court order. According to the court, WhatsApp had been ordered for more than a month to reveal messages relating to a suspected drug-trafficking ring. After the company denied three related requests by federal police, the judge first imposed a daily fine on the US company of 50,000 reais (£9,000), then a daily penalty of 1m reais (£180,000), and finally ordered the arrest. Facebook called the police action “extreme and disproportionate”
  • Odebrecht ex-CEO sentenced to 19 Years in prison for role in Petrobras scandal. Marcelo Odebrecht, ex-CEO and heir of Brazil’s fourth largest private conglomerate, has been sentenced to 19 years and four months in prison for leading a massive bribery scheme in return for Petrobras contracts worth billions of reais. Odebrecht, who has been in custody since June 2015, was found guilty of bribery, money laundering and conspiracy by judge Sergio Moro. The former Odebrecht executives Alexandrino Alencar, César Rocha, Mário Faria and Rogério Araújo also received jail sentences. The sentences are subject to appeal
  • Formal hiring loses ground among higher-income workers. Valor Econômico reports that significant portion of formally hired employees in Brazil, those who are entitled to the Workers’ Severance Fund (FGTS) and contribute to the official social security, are starting instead to work as sole traders. This structural shift on the Brazilian labour market, more in evident among high-income workers, is intensifying with the recession and compromises the cross subsidy of the social-security regime, system under which higher-paid workers finance those of lower income latest available data, such share fell to 38.4%. In the same period, self-employed individuals grew to 24.5% from 23.2% of the total
  • Brazil has “bottomed out,” Development minister says – The government believes there are already signs of recovery in some industrial sectors, albeit tenuous, that indicate the worst would have been left behind. “We bottomed out, certainly,” the minister of Development, Armando Monteiro, said in an interview with Valor Econômico. “We will have in 2016 a still difficult scenario for the industry, but it will be better than 2015’s,” he said. Mr. Monteiro’s optimism is based mainly on Brazil’s trade balance and on the effect of the currency devaluation in import substitution
  • Brazil sugar and ethanol sector finally gears up for record season – Sugar and ethanol companies in Brazil have had six lean years as a combination of low sugar prices and a squeeze on ethanol margins sank several mills and led many more to bankruptcy protection however now, they are gearing up for possibly one of the best seasons ever in 2016/17 as weather conditions point to excellent cane volumes, while prices in local currency hover near record highs
  • Google installs private cable between Rio and São Paulo. According to information provided by Valor Econômico, after investing in submarine cables Monet, linking Brazil and the US, and Tannat, between Brazil and Uruguay, Google will install a third line. Named Júnior in celebration of Brazilian painter José Ferraz de Almeida Júnior, the new cable will link the states of Rio de Janeiro and São Paulo. It’s expected to go online in August 2017. Júnior is the second small-scale submarine cable built by Google. The other is located in Finland. The company has been investing in those networks to accelerate access to its services. In addition to the South American cables, it partnered with consortia to build three cables in Asia



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