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Public Affairs - Monthly Newsletter July 2017

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The July edition approaches the denunciation against the President Michel Temer from a legal-political point of view, the perspectives for the 2018 electoral race in account of the ex-president’s Lula conviction and the tools for the economic team in order to guarantee the public accounts balance.

Publicada em: Notícias e política
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Public Affairs - Monthly Newsletter July 2017

  1. 1. MONTHLY NEWSLETTER Burson-Marsteller July 2017
  2. 2. Index Year 1 l #6 June 2017 Burson-Marsteller l Public Affairs An intersecting agency that, through the understanding of the political environment, assists clients of different sectors in the protection and/or promotion of their businesses, managing their influence in a sustainable way. The Burson-Marsteller standard is responsible for the development of highly customized projects, according to the needs of each client, developing strategies for various economic sectors, especially those heavily regulated by the government. Contributors to this edition Ricardo Almeida Anna Paula Losi Carlos Eduardo Ferraz Allana Rodrigues Hugo Leal Luciana Lemgruber Fernanda Xavier Giulliana Zorzi 03 Dialogue and Conjuncture Henrique Meirelles: stronger than ever 05 Politics The accusation against Michel Temer under the vision of the Constitution, Justice and Citizenship 11 Economy Economic Data 07 Politics The condemnation of former President Lula and the implications on the 2018 electoral race 08 Politics The National Congress beyond the Janot x Temer Dispute 10 Technology The National Connectivity Plan and the new directions of the Broadband Access Infrastructure National 09 Economy Tax increase: an inevitable alternative 12 Agenda Events Calendar
  3. 3. Like the market, the political environment also sees one detachment between politics and economic management of the country. This is the conclusion of a survey of 182 parliamentarians on 4 and 5 July made by the firm Factual Information and Analysis. While President Temer's political assessment has suffered a lot since the open investigation by the Attorney General's Office – 53% of representatives said they believed that Mr. Temer would complete his term compared to the 75% positive replies in May – the prestige of the Minister of Finance, Mr. Henrique Meirelles, remains high. Asked if they are optimistic about Meirelles' management, about 68% of the representatives said yes. The result is 12 points higher than the one found in the May survey and returns the minister's assessment to a range higher than the 60% he had obtained earlier in the year. Among the representatives of the ruling base, the optimism index reached 87%. The result has practical consequences for both the economy and the outcome of the current political crisis. On the one hand, the economic team sees its autonomy strengthened, as evidenced by the reduction of the inflation target, one of the most daring moves in Brazilian economic policy in more than a decade. More than discussing numbers, a whole political strategy called attention that put the developmentalist mentors in the economy in the spotlight. In a single move, Mr. Meirelles and Mr. Ilan Goldfajn, the chairman of the Brazilian Central Bank, overcame this economic dispute, with a strong political influence, to impose ambitious inflation targets. More than that: not only did they interfere with the goals of the current presidential term, but also progressed in two years of power by the next president to be elected in 2018 - if the Brazilian electoral calendar is fulfilled in its original design. The finance minister left no doubt about the strategy behind this decision: constrain the next president-elect to meet the reduced goals now set. Mr. Meirelles cited "the relevant cost" that would involve shifting those goals to higher numbers. The cost to which he refers is the erosion that Michel Temer's successor will suffer in the financial market if he/she tries to return the inflation target to the level of 4.5%, which was in effect since 2005. Optimism about Meirelles' management at the same time helps and engenders President Temer. Insofar as economic administration is preserved, part of the sense of urgency to solve the political crisis is gone, given that the general conditions of the economy remain more or less stable and the market does not increase the pressure on parliamentarians to a fast outcome. The side effect is that Mr. Temer sees his ability to interfere in economic policy limited, since any shake of Mr. Meirelles' position could end what exists of confidence in the economic agents in the government. The limit of interference of political management over the economy is constantly being tested and has as a recent episode with the new orientation in the National Bank for Social and Economic Development (BNDES) by its new president, Paulo Rabello de Castro. Dialogue and Conjuncture Henrique Meirelles: stronger than ever
  4. 4. In a short time of management and despite his remarkably liberal profile, he went through one of the main proposals of the Meirelles-Ilan duo, which is to reduce the level of Treasury subsidies to BNDES loans. In a movement that indicates the search for support from the businessmen of the productive sector for the maintenance of Mr. Temer, Paulo Rabello criticized the creation of the TLP (Long Term Rate), which would replace the subsidized TJLP (Long Term Interest Rate), contrary to Meirelles and two directors of the bank, who resigned. As Mr. Meirelles became a kind of password to calm both the market and Congress - given the rush of supporters of the alternative Rep. Rodrigo Maia to say that he would maintain the economic team in an eventual transition - today he is able to conduct in the way he thinks best for the solution to any controversies that may arise along the way. The proof of this was the unconditional withdrawal of the president of the BNDES in relation to the proposal he initially defended. Mr. Rabello even declared himself a mere technician under the orders of the ministers of the economic team. Clearer than that, impossible. Leonardo Barreto Factual Informação e Análise PhD in Political Science from the University of Brasília, expert in researches with authorities and partner of the Factual Information and Analysis, a political research and analysis company. Dialogue and Conjuncture Henrique Meirelles: stronger than ever
  5. 5. In order to guarantee the legal security of the Democratic State of Law, the process of removing a Federal President cannot be simplified. The population’s vote is the direct way of choosing the citizens’ representatives, and the Brazilian Constitution has mechanisms that make harder the trivialization of this suffrage. The cassation of the presidential term is an only legal procedure, judged by the Federal Supreme Court, a technical body and, in theory, impartial. Otherwise, impeachment is a juridical-political process, with proceedings in the National Congress and judgment by the Senate, an eminently political body. Following, for there to be presidential penalization with a cassation of the term, there are two circumstances: condemnation by the Superior Electoral Court for crimes related to the electoral process; and the condemnation by the Federal Supreme Court for common crimes. At this point, it is worth raising the difference between what are common and personal crimes. Common crimes are those that do not require any special quality, whether of the active or passive subject of the crime; anyone can practice or be a victim. The personal crimes of their own are those that demand special quality from those who practice it or are victims. The responsibility and electoral crimes are Personal ones, as described in their criminal type, are feasible only by some authorities and in specific situations. It was by a consequence of a legal-political conviction for the Crime of Responsibility that President Dilma Rousseff was removed from her post last year. Afterwards the acquittal of the President Michel Temer, for an electoral crime, we are left with an evaluation of the brazilian political scenario regarding the possibility of the Chief of the Executive leaving power after conviction for a common crime. Temer is suspected of practicing active and passive corruption, criminal organization and obstruction of justice, crimes that occurred during his term and because of his position, although they are not proper to the position, in other words, anyone can practice these crimes, they are common. If the crimes were related to other affairs or occurred before the beginning of the presidential mandate, the President would be suited only after the end of his period in Power, as determined by the Constitution. This is due to the "Relative Irresponsibility of the President of the Republic", which constitutes the President's prerogatives in relation to the practice of common criminal offenses. These prerogatives are provided by the Article 86 of the Brazilian Constitution, which says in its paragraph 3rd that "as long as there is no conviction, in common infractions, the President of the Republic will not be subject to arrest" and, following, in paragraph 4th, That "the President of the Republic, in the exercise of his mandate, cannot be held liable for acts unrelated to the performance of his duties." Therefore, as a logical consequence of the legal text, it is concluded that in cases of common crimes committed during the term of the mandate and because of the mandate, the President may be tried immediately. But it is not so simple to judge a President. Going back to the opening words of this letter, we recall that the Democratic State can only be strong if the elective mandates are strong and secure. In this sense, the current legislation requires that the Chamber of Representatives authorizes the opening of the case against the president. Politics The accusation against Michel Temer under the vision of the Constitution, Justice and Citizenship
  6. 6. Following the constitutional process, in the first analysis, the Commission of Constitution, Justice and Citizenship (CCJC) of the Representatives’ house, denied the report of Sérgio Zveiter (PMDB / RJ) authorizing the opening of criminal proceedings against President Temer. Thus, the decision goes to the plenary, which will vote on the final report of the Commission, prepared by Representative Paulo Abi-ackel (PSDB / MG), and contrary to the follow-up of the denunciations against the president. If the Plenary vote with two thirds of its members in favor of the following of the complaint, the proceeding goes to the Supreme Court which, accepting the denunciation, will make Temer defendant. The president must then depart from the power for 180 days to prepare his defense. If the Chamber decides not to authorize the process, Temer will be protected by the presidency shield until the end of his term, when he will be defendant in the common justice. Or until another complaint arises against him, and the process begins all over again. Politics The accusation against Michel Temer under the vision of the Constitution, Justice and Citizenship
  7. 7. Politics The condemnation of former President Lula and the implications on the 2018 electoral race The conviction in the first instance of former president Lula in the case of the Guarujá beach apartment, one of the three cases of which he responds as a defendant in Lava Jato (Car Wash), is a watershed in the direction of his probable race to the presidency in the elections of 2018 and will have an effect in the whole framework of the political dispute. The sentence given by Judge Sergio Moro was received with apprehension by Lula and his supporters and reverberated throughout the political class. Added to the condemnation, other events make the Lula´s situation more difficult: the blockade and the seizure of some of his assets and the progress of four other lawsuits for which he is accused, two in Lava Jato and two others under the Zelotes operation. Which, theoretically, would weaken his image and, consequently, his political strength and the wear and tear of the party. In practice, however, what is seen so far is an inverse picture. Lula today is a leader in the research of intention of votes and, it is observed a continuous and notorious growth of the pro-Lula movement. It is public knowledge the strong passionate relationship between the Workers' Party (PT), Lula and his constituents. It is not yet possible to assess the impact of this conviction in the 2018 political scenario, as it will depend on the result of the appeal requested by the former president to the judges of the Federal Court of the 4th Region (TRF-4). If the judgment is maintained in the second instance, and the process becomes final, Lula becomes ineligible. This would completely change the definition of the roles of the other pre-candidates and the coalitions that would be formed. Experts in political analysis say that these circumstances would create a pulverized vote. It is worth mentioning that, even in the face of all the wear and tear suffered in recent years, the PT is still one of the largest parties in the context of national politics, and should play an important role in the 2018 elections, even if former President Lula is not the candidate. If Lula's appeal is accepted by the judges, the PT will continue in the electoral race and its main opponents will have a hard time trying to reverse or at least slow down the growth of the PT's preference for voters. By widening the prism of the dispute a little, we perceive a growing backstage movement to define who would be the possible presidential candidates with political capital to face PT. João Doria Jr (PSDB), mayor of São Paulo, has been emerging in the political field as an "innovative" option. However, the indication of his name is still uncertain and could weaken the PSDB since the presidential race has always been one of the objectives of the governor of São Paulo Geraldo Alckmin (PSDB), Doria's political godfather. In one of the hypothetical scenarios of the presidential vote intention, Federal Deputy Jair Bolsonaro (PSC) is another name cited, appearing in second place. The intention of the former environment minister, Marina Silva, former PT and current Rede Sustentabilidade party, is still unknown, but depending on the result of the intentions to vote, her presence is confirmed in third place. However, regardless of the results of the polls, an important factor that needs to be considered is the time that the TRF-4 judges will take to judge Lula's appeal, which is free and promising to play.
  8. 8. Politics The National Congress beyond the Janot x Temer Dispute The National Congress restarts its activities on August 1st already with a list filled with bills and legislative requirements. However, the meeting on August 2nd is the most awaited, as it will vote on the Application for Insertion of Process (SIP) 01/2017, of the Federal Supreme Court, which "refers the complaint filed by the Federal Public Prosecutor to the detriment of the Honorable President of the Republic, Michel Temer”. It is still not possible to guarantee a result, but it is known that opponents and allies of the government have been working on their strategies for days. The opposition will use all the procedural tools to extend the SIP's vote, including the lack of a quorum during meeting. The government base, meanwhile, wants to vote on August 2nd, as they believe it is still possible to guarantee victory in the Plenary. Despite the importance of this vote, there are still other priority issues for the government and, especially, for the country. Regarding to Pension Reform, government officials say that the discussion of PEC 287/2016 will be taken up again by the House of Representatives Plenary as soon as the Janot x Temer chapter ends. In addition, another relevant topic that will be discussed in the Legislative Branch will be the Political Reform, with some priorities on the agenda, such as party financing; The barrier clause; The system of election for the legislative; and the end of party coalitions. There are also several Provisional Measures (MPs) that are already blocking the agenda of the Plenaries of the /house of Representatives and the Federal Senate, and if not voted they will lose effectiveness, such as: MP 770/2017, which extends the deadline for using the tax benefit of the Special Taxation Regime for the Development of the Cinematographic Exhibition Activity (Recine); MP 771/2017, which creates the Governing Authority of the Olympic Legacy (Aglo), a temporary federal authority to replace the Olympic Public Authority (APO); MP 772/17, which increases from R$ 15 thousand to up to R$ 500 thousand the maximum value of fines to be applied to slaughterhouses that contravene sanitary legislation; MP 773/17, which authorizes states, the Federal District and municipalities to use money from the regularization of assets abroad to achieve the constitutional limit of education expenses; MP 775/17, which stipulates that in all transactions carried out within the financial market, there should be, as appropriate, the so-called liens and onus, currently limited to securities market operations and the Brazilian payment system. Although it has not yet been read in Plenary another MP that has the days counted is the MP 774/17, which ends with the exemption of the payroll for the majority of the sectors benefited. In addition to these MPs, there are other important ones being deliberated in Special Commissions, such as MP 778/17, which provides for the payment of the social security debt of states and municipalities; MP 782/17, which gives ministry status to the General Secretariat of the Presidency; And MP 783/17, which establishes a new tax regularization program (Refis).
  9. 9. Economy Tax increase: an inevitable alternative Despite the political crisis and its low popularity, President Michel Temer announced last July 20, a tax increase and a cut of expenses to close the accounts this year. As it does not depend on the endorsement of the National Congress, the government has already raised the PIS/Cofins tax rate on fuels and also announced a cut of BRL 5.9 billion in expenses. These measures are attempts to rebalance public accounts to achieve the fiscal target. To comply with it and not violate the Fiscal Responsibility Law, the government must close the year with a deficit of BRL 139 billion. This is the second action of the Government to try to balance the accounts.In March, the economic team of Mr. Temer’s administration sent a Provisional Measure that puts an end to the payroll exemption of almost all sectors of the economy, in addition to cutting BRL 42.1 Billions of public expenditures. According to economists, this government decision was taken at an appropriate time, when there is a very low inflation scenario and the need to sort the accounts. However, there is the assessment that there should be a "chain effect" on inflation, although this negative impact should not be extended. The measures announced are a response to the low-income scenario, which has been worrying the Presidential Palace and giving signs that the public machine may be near a collapse. One of the most recent repercussions of the fiscal tightening was the suspension, last month, of issuing passports after the Federal Police revealed that there were no more resources to cover the costs of the service. For some time, the government denied that it would raise taxes to reverse the situation of its accounts, concentrating the speech in the cuts of expenses. However the rise was inevitable given the fragility of revenues. President Michel Temer was very reluctant to opt for this action to avoid an even greater fall in popularity and especially not to conflict with the productive sector that has supported his Government. The measure now goes against one of its biggest supporters, the Federation of Industries of Sao Paulo (FIESP), which has issued a statement rejecting the action of the Federal Government. Last but not least, this week the Executive Branch has submitted four new MPs that are sure to be much debated by the Special Committees and the plenary of the National Congress: MP 789/2017, which deals with Financial Compensation for the Exploration of Mineral Resources; MP 790/2017 amending the special arrangements for the exploitation and use of mineral substances; MP 791/2017, which creates the National Mining Agency and extinguishes the National Department of Mineral Production, all three priorities for the mining sector and bringing changes pleaded for a long time by the sector; And MP 792/2017, which establishes, within the Executive Branch, the Voluntary Withdrawal Program, the reduced working day with proportional remuneration and the unpaid leave with payment of incentive, destined to the server of the federal public administration direct, autarchic and foundational, another measure to reduce the government spending. The agenda of the National Congress for this second semester is not simple, and it will certainly generate a lot of debate, but it can be even worse, since the General Attorney, Rodrigo Janot, promises to send at least one more complaint against President Temer before the end of his term, in August. Politics The National Congress beyond the Janot x Temer Dispute
  10. 10. Technology The National Connectivity Plan and the new directions of the Broadband Access Infrastructure National The telecommunications infrastructure, and more specifically, the broadband access, is far behind that expected for the world's ninth-largest economy, which is also known for having the world's busiest and most active Internet users. According to Anatel's latest survey, 40 Brazilian cities, or 0.007% of the 5,569 municipalities, hold half of the country's fixed broadband. It is almost a cliché to remember that half of these cities are in the southeast region. It is easy to infer that the distribution of Internet access in Brazil is at least very bad. However, there is no need to blame the companies in the sector for the situation. Taking into account the market rules, it is almost obvious that the places that have the highest demand and concentration of income will be the benefited. In addition, there are no laws that address the universalization of broadband service. In this sense, the Ministry of Science, Technology, Innovations and Communications (MCTIC) idealized the National Plan of Connectivity (PNC). The project, which replaces the National Broadband Program, aims to review public policies for expanding Internet access in the country. Therefore, all decrees on the subject since 2003 will be re-examined. The MCTIC agenda foresees that the PNC will be made available for public consultation in August of this year, and also depends on the elaboration of the Structural Plan for Telecommunications Networks (PERT), under the responsibility of the National Telecommunications Agency. PERT intends to make a diagnosis of the broadband infrastructure and suggest actions to increase access to the Internet. What, at first, may seem like a step back, in what concerns to change, albeit superficially, the National Broadband Decree, the PNC promises to bring a new methodology: the mapping of necessities by locality. It is worth noting that the new guidelines are not tied to Bill 79/2016, which foresees the adaptation of telecommunications service concessions for the assignment of maintenance capacity. In other words, the public power does not have the resources to afford such an ambitious project and, for this, it will use the TAC (Conduct adjustment Term) model, which has not yet been pacified, since Bill 79/2016 is still being processed in Congress National. The PNC intends to review and therefore readjust all existing directives, out of date, undoubtedly. It is also inferred that, in addition to the likelihood of the new project also becoming outdated (Executive branch models tend to remain only in the debate step), discussions regarding the losses of the concession model for telecommunications companies should reappear, since financial losses were found when the government reassumed the structure. Economy Tax increase: an inevitable alternative Despite all the negative repercussions, the Federal Governement assessment was that a few cents increase in the price of a liter of gasoline should not weigh heavily on the Brazilian consumer's pocket, but it will help a lot to boost the collection in a time of fiscal collapse. The government also claims that the impact of the tax increase will also not be as noticeable in the economic team's vision since Petrobras has debuted a new pricing policy since last year and has reduced the value of its refinery fuels.
  11. 11. Economic Data Another sensitive point regarding the PNC is the maintenance of the concentration of the oligopoly of the telecommunications sector. The public power does not have the financial conditions to build and carry a network infrastructure to the whole of the country, which will be in charge and under the aegis of large companies. Therefore, cell phone companies and small internet providers will not participate in the process, but will benefit from the infrastructure construction model. Technology The National Connectivity Plan and the new directions of the Broadband Access Infrastructure National MONTH DOLAR IPCA (12-month acumulated period) SELIC IBOVESPA GDP GROWTH PROJECTION 2017 JAN.2017 3,16 5,35% 13% 65.840,09 0,5% FEB.2017 3,05 4,76% 12,25% 67.417,02 0,48% MAR.2017 3,17 4,57% 12,25% 65.159,78 0,47% APR.2017 3,17 4,08% 11,25% 65.309,81 0,43% MAY.2017 3,26 3,77% 11,25% 63.906,99 0,5% JUN.2017 3,30 3,00% 10,25% 62.238,95 0,39% JUL.2017 3,15 * 9,25% 65.316,30 0,34% *Closing Pending Source: Focus Bulletin/Central Bank
  12. 12. Events Calendar DOM SEG TER QUA QUI SEX SAB 30 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 1 2 Florida International Medical Expo – FIME Local: Miami, FL - EUA Brazil Chocolate Exhibition Local: Frei Caneca Convention Center – São Paulo/SP 6th Congress of innovation of materials and equipment for health Local: Maksoud Plaza Hotel –São Carlos do Pinhal Street, 424, Bela Vista - São Paulo Local: ANATEL, Brasília/DF Feria del Mundo Digital Local: World Trade Center, Mexico City, Mexico Meeting of the National Commission for the Incorporation of Technologies in SUS Local: Frei Caneca Convention Center – São Paulo/SP Feria del Mundo Digital Local: World Trade Center, Mexico City, Mexico Congress Firefighter Brazil 2017 Local: Expo Center Norte – São Paulo/SP 14th National Congress of the Brazilian Society of Food and Nutrition Local: Maksoud Plaza Hotel, São Paulo/SP 5th World Cocoa Summit Local: Guayaquil Convention Center – Guaiaquil, Equador Workshop: Artificial Intelligence and Computing in Oncology Local: National Cancer Institute, Rio de Janeiro/RJ Albert Einstein Hospital Clinical Oncology Review Course Local: São Paulo/SP Congress INCA 80 years: challenges and perspectives for cancer control in the 21st century Local: Rio Othon Palace Hotel Av. Atlântica, 3264 - Copacabana - Rio de Janeiro Innovation Pay Local: Arts Theater, São Paulo/SP 7th Fecomercio Congress of Electronic Crimes Local: Fecomercio Doutor Plínio Barreto Street, 285, São Paulo/SP 152nd Meeting of the Committee on Financing and Guarantee of Exports – COFIG, CAMEX InnovaPack: national event on food packaging and labeling Local: Transamerica ExpoCenter, São Paulo/SP Digital Health Forum 2017 Local: WTC Events Center Avenida das Nações Unidas, 12551, Brooklin Novo, São Paulo/ SP

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