Public Affairs - Monthly Newsletter | July 2018

1. Monthly
Newsletter
Burson-Marsteller
July
Public Affairs
2018

2. 02 Elections | The elections and the many tiny candidates
03 State Elections | 2018 Brazilian Gubernatorial Elections Panorama
05 Infografic | 2018 State Elections
06
Politics | Political Reform and its consequences:
the performance clause
07 Politics | The thirty years old Constitution
08
Politics | Corruption in the Ministry of Labor and the profile of the new
minister
09
Economic | Route 2030: the new policy of incentive to the automotive
sector
11 Economic Data
12 Events Calendar
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Index
Year 2 | Nº 07 | July
Contributors to this edition
Luciana
Lemgruber
Andressa
Mont’Alvão
Isabela
Girotto
Anna
Paula Losi
Mikael
Victor
Leonardo
Brito
Renata
d’Aguiar
Fernanda
Xavier
Camila
Lisdalia

3. With the proximity of the elections, diverse political panoramas begin to appear presenting their main
actors: the candidates for the Presidency of the Republic. The scenario of political uncertainty in the
country has led to a sense of need for change; to date, approximately 30% of the Brazilian electorate is
willing to annul their votes or still do not know who to vote for. With this, many believe that they may
become the face of this new moment of transformation.
Between July 20 and August 5, party conventions are being held to define the candidates for the election.
So far, 18 politicians have expressed their willingness to run for the most important position in Brazil. In
the conventions the names will be evaluated by the party of each candidate and by the parties willing to
establish coalitions in this year’s contest.
In March 2018, the scenario of uncertainty – compared only to the 1989 contest when 22 candidates
participated in the electoral race – presented 21 possible candidates. However, because of partisan
pressure or after observing an inexpressiveness in the polls, some of them ended up giving up over time.
Now, in the convention period, they are 18.
In the latest polls, five candidates stand out with some difference in voting options. Lula (PT), Bolsonaro
(PSL) – which appears first in the scenarios where Lula is not considered – Marina Silva (Rede), Geraldo
Alckmin (PSDB) and Ciro Gomes (PDT) are the names that still maintain a certain portion of the voting
intentions. Henrique Meirelles (MDB) and Rodrigo Maia (DEM) appear with less than 1% of the
indications.
However, what stands out in this pre-campaign period of the 2018 elections is the large number of
candidates considered "tiny", who, in the majority of polls, appear with 1% or less of the mentions. They
are, so far:
Elections
The elections and the many tiny
candidates
02
• Afif Domingos (PSD)
• Álvaro Dias (Podemos)
• Guilherme Boulos (PSOL)
• José Maria Eymael (PSDC)
• João Amoêdo (Novo)
• Levy Pidelix (PRTB)
• Manuela D’Ávila (PCdoB)
• Paulo Rabello Castro (PSC)
• Vera Lúcia (PSTU)
• João Goulart Filho (PPL)
Without engagement, three pre-candidates who were considered "tiny" ended up giving up the election
last month: former President and current Senator Fernando Collor (PTC), Flávio Rocha (PRB), owner of
Riachuelo, and Federal Representative and current chairman of the House of Representatives Rodrigo
Maia, although it was not considered a tiny candidacy.
Tiny candidates can face major challenges throughout the campaign period. As they will represent smaller
parties, it may not be entitled to radio and TV time or financial resources like those of larger parties.
The large number of potential candidates can also disrupt the entire electoral process. The coalitions
between parties is a factor that can define how the campaign will be for a competitor. With them, it is
possible to acquire more time for free electoral propaganda on radio and TV, a greater share of resources
from the party fund, among other benefits. Once many parties choose to present their own candidates,
there is no more space to form alliances and these resources will be dissolved between them.

4. What can be observed at the moment is that the real possibilities can only be analyzed in
fact after August 5, with the end of the conventions, when the candidates are defined, and
the coalitions are formed. Only then the population will have access to the information of the
real candidates and their political platforms. The greatest goal will then be to conquer the
millions of voters still undecided and willing to invalidate their votes.
Renata d’Aguiar
Elections
03
)
2018 Brazilian Gubernatorial Elections
Panorama
Political disputes in the Amazonas, Ceará, Goiás, Rio de
Janeiro, Rio Grande do Sul states and at the Federal
District
In our second edition about state elections, the Burson Marsteller team investigates the main pre-
nominations for the gubernatorial disputes in six other states of the Federation. Even though we are still
months apart from the first round and despite the different levels of clear definition, several tickets seem
to be establishing themselves, especially as the negotiations surrounding the presidential race intensify.
In the northern region of the country, the dispute for governor of Amazonas state had an important
preview with last year’s supplementary election. The state went to the polls extraordinarily after the
2014 winning ticket, composed by José Melo (PROS) and Henrique Oliveira (at that time in the
Solidariedade party), was put out of office by the Superior Electoral Court on account of vote-buying. On
that occasion, the winner was current governor and pre-candidate for re-election, Amazonino Mendes
(PDT-AM), who had already held the position between 1987-1990 and 1995-2003.
In 2017, the governor received 68.94% of the tally (a little more than 28,000 votes) in a run-off against
Senator Eduardo Braga (MDB). And, so far, Mendes seems inclined to guarantee his 5th term in 2018, as
he is the isolated frontrunner in the polled scenarios, reaching 24% of the voting intentions, according to
a survey conducted by the Centro Integrado de Pesquisa e Comunicação (CIPEC) from July 5th to 8th. On
his path stands the current Speaker of the state’s Legislative Assembly, David Almeida (PSB); TV host,
Wilson Lima (PSC); and Senator Omar Aziz (PSD), who appear, respectively, with 16%, 12% and 8% of
voting intentions.
In Ceará, a December 2017 survey, by Instituto de Pesquisa Paraná, also indicates a well-established
leadership of current governor, Camilo Santana (PT). At the time, it registered about 45% of the vote
intentions for the petista against 33.8%, for Senator Tasso Jereissati (PSDB). Supported by a broad
coalition that brings together more than 20 parties from across the political spectrum (including PT, PDT,
MDB, PR and DEM), the governor appears in a comfortable position, but a recent change on the board’s
pieces might require further analysis.
Senator Tasso Jereissati’s PSDB party (a three times governor of Ceará (1987-1991 and 1995-2002),
recruited Guilherme Cals Theophilo, a four-star Army general who has not yet been evaluated in the polls.
The recently departed military officer proclaims himself a centrist and says he is ready to endorse PSDB’s
presidential candidate, Geraldo Alckmin, and campaign for him in the state, in opposition to the
presidential candidacy of Ciro Gomes (another old time Ceará governor who is endorsed by governor
Santana). The strategy seems to be to aim at Public Safety, an area recognized as a thorn in Camilo's side.

5. Elections
04
On the other hand, the race to the Piratani Palace (seat of the Rio Grande do Sul state government)
seems to be heading for a different outcome, since the current governor José Ivo Sartori (MDB) appears
tempted to corroborate the state’s tradition of never re-electing its governors. By July (about three
months before the first round), he hadn't confirmed or discarded his run for re-election.
The dispute there has also presented candidates Jairo Jorge (PDT), who announced a coalition of six
parties representing a series of presidential candidacies (including Ciro Gomes, Álvaro Dias and Aldo
Rebelo); Eduardo Leite (PSDB), representative of the tucano candidate, Geraldo Alckmin; Luis Carlos
Heinze (PP), who declared support for Jair Bolsonaro, a far-right presidential candidate; and Miguel
Rosetto (PT), former minister at the Lula and Rousseff’s administrations.
Given the relative lack of definition in this race, few electoral surveys were carried out. However,
according to a poll by the Instituto Methodus (June 28th), Governor Sartori still appears competitive,
leading with 17.5% of the voting intentions, followed by Jairo Jorge (10%), Miguel Rosetto (8.1%),
Eduardo Leite (8%) and Luis Carlos Heinze (5.1%).
At Distrito Federal (that holds a special place among the other Brazilian states as it is the seat of Brazil’s
three branches of government), the core of the dispute for the Buriti Palace is marked by uncertainty.
Jofran Frejat (PR) was the frontrunner in the polls, accounting for 25.4% of voting intentions, as stated
by the latest survey by Paraná Pesquisas. The former Health Secretary, however, has announced his
withdrawal from the election on July 24, after weeks of contradictory signs.
Furthermore, the polls showed that current governor, Rodrigo Rollemberg (PSB), reaches 11.5% as he
seeks to overcome high rejection rates and to gather support from other parties for his campaign. Other
candidates, such as Eliana Pedrosa (PROS) and General Paulo Chagas (PRP), appear with 9.8% and 5.1%
respectively. In spite of having already launched a candidacy in its regional convention, the Novo party’s
candidate, Alexandre Guerra, comes up with low voting intentions, reaching just over 3%.
The situation in Goiás state indicates current senator Ronaldo Caiado (DEM) as the frontrunner in the
polls. In the latest poll, the congressman adds 37 percentage points of voting intentions. Despite the
good results, however, figures show a recent drop in the candidate’s voting intentions, who previously
registered at 49.3%, signaling changeability in the dispute. Following his lead, we find the current
governor, Jose Eliton (PSDB), with 15% of the voter intention. According to a Power360's poll (July
2018), other candidates, such as Daniel Vilela (MDB) and Kátia Maria (PT), come up with less than 5% of
the state's voting intentions.
In Rio de Janeiro state, the carried-out research indicates similar characteristics as mentioned above: a
candidate with a higher preference among interviewed voters. In it, the scenario favors the former
soccer player and current senator Romário (PODEMOS), with 24.3%. Former mayor of Rio, Eduardo Paes
(DEM), who appears competitive with 15.1% of voting intentions, followed by former governor, Anthony
Garotinho (PRB), with 13.1%.
With just a month to go before the beginning of official election campaign, negotiations to close the
state tickets within the broader general election articulation shall intensify strongly from now on,
towards the 15th August, the deadline for candidate’s registration. Until then, parties may still step back
from current pre-nominations, test other names and form different compositions to state governments.
Mikael Victor e Leonardo Brito

6. Infografic
05

7. Politics
06
Political Reform and its consequences:
the performance clause
At the end of last year, a number of measures in the framework of Political Reform were approved in time
to be put into practice in the 2018 elections. In this scenario, performance clauses, also known as barrier
clauses, were created for parties and candidates who impose various rules, regarding access to the party
fund, time of party propaganda and minimum number of votes for a candidate to be considered elected.
For parties, Constitutional Amendment (EC) 97/2017 establishes criteria for having time for party
propaganda and using the party fund. The requirements are gradual until the elections of 2030 and the
rules must be fulfilled by the number of deputies elected or by percentage of votes obtained.
Thus, for example, only the party who received at least 1.5% of the valid votes in the 2018 elections for the
House of Representatives, distributed in at least 9 states, with a minimum of 1% of the votes valid in each
of them. If the party can not comply with this parameter, it can have access if it has elected at least 9
Federal Representatives, distributed in a minimum of 9 units of the federation.
Already in the 2030 elections, the clause is more rigorous: from 2031 the percentage of valid votes is
raised to a minimum of 3%, distributed in at least 9 states, with 2% of the votes valid in each of them. If
you can not meet this requirement, the caption can also be accessed if you have elected at least 15
Representatives distributed in at least 9 states.
In the case of candidates, the Law 13.165/15 provides for a minimum number of votes for a candidate to
be considered a federal, state or district representative. In this scenario, the new rule establishes 10% of
the electoral quotient, which is the number of valid votes divided by the number of seats in each state.
In this scenario, the hardening of electoral rules is noticeable. It is worth mentioning that a decrease in the
number of associations in the National Congress is expected, which may facilitate the formation of
consensuses. Brazil, according to studies, is the country with the largest number of parties in the world.
Currently, there are 35, registered in the Superior Electoral Court, which represents an intense party
fragmentation and hampers governability.
With regard to Constitutional Amendment 97, a merger of parties is expected, since, because of the
spraying of parties, many would not meet the criteria and thus, would not have access to the party fund
and electoral propaganda. In a hypothetical scenario in which the results of the 2018 elections are the
same as in the 2014 election, as early as this year, 14 parties would not meet the new rules of
performance.
From this point of view, the uncertainty of the 2018 elections is visible in general, permeated not only by
the uncertainty of the candidates, given the political instability but also, by the real consequences, the
results of the new rules.
Isabela Girotto

8. Politics
07
Considered the "Citizen Constitution", with an extensive list of regulations and "guarantees" of
fundamental rights, the Brazilian Major Law was elaborated after a long period of restriction of rights and
absence of democracy. Thus, the constitutional text emerged as a way of establishing democracy and
ensuring that crises were passed without retreat.
A bill was drafted by a committee of notable jurists and presented to the Constituent Assembly of
parliamentarians, the Constitution took almost two years to be drafted. Among the constituents were the
presidents Fernando Henrique Cardoso, Luiz Inácio Lula da Silva and the current President Michel Temer.
In the end, with 79 texts rejected and 49 thousand amendments presented (rejected in their great
majority), the constituents arrived at the text that we know today. Not to the rights we know today,
because, once enacted, Brazil has accumulated more than a hundred amendments to the Constitution,
which alter its original text.
Critics of the text point out that, among the many guarantees that the Constitution provided citizens, a
true dictionary of utopias was created, with unattainable goals, which hampers its application. Already for
its advocates, the legal text is only misunderstood, which justifies the excessive number of amendments.
The great fact, acknowledged by all, is that the Constitution inaugurated a new phase, initiating the
concept of Democratic Rule of Law, and ensuring that, regardless of political crises, the State would remain
firm. That is the great intention of the norm.
Near the 30th anniversary of the Constitution, Brazil has experienced its greatest constitutional crisis since
1988. It is therefore necessary to understand the dimensions of the crisis, the prospects for the future and
the alternatives available.
The very concept of crisis is not easy and has been banalizing over time, it is spoken at all times in political
crisis, economic crisis, crisis of values, crisis of civilization. It is not always easy to separate the normal from
the extraordinary, and living under the built institutional model necessarily means being subject to crisis.
It is natural, and even predictable, that contemporary democracies experience situations of uncertainty
and instability. At the outset, constitutions are solutions to political crises, they indicate the power space of
powers and establish limits and forms of control among them. However, under certain circumstances,
political crises can lead to a constitutional crisis.
This occurs when the constitution is put to the test, and the procedures available are not sufficient to
resolve the political impasse. With the persistence of the conflict situation, new possibilities are considered
by actors, institutions and even by civil society.
In other words, crises like the one we are facing will always occur. And in a democratic space, your chance
increases. We need to have a solid legal basis, that does not allow loopholes, and that sustains unstable
moments. Emotions aside, we have a strong text that needs to be applied, before being renewed.
The thirty years old Constitution

9. Politics
08
Thirty years later, we visualized significant social advances, certainly with a great participation and support
of the Constitution. Despite this, there is still much to develop in this field, especially with the creation of
feasible goals to achieve.
Luciana Lemgruber
Corruption in the Ministry of Labor and the
profile of the new minister
In a recorded conversation, two lobbyists ask for R$ 4 million to unlock a professional activity registration
in the Ministry of Labor. They affirm to be connected to Jovair Arantes, federal deputy who was president
of the commission that approved the Impeachment of Dilma Rousseff. His nephew and former director of
the National Institute of Colonization and Agrarian Reform, Rogério Arantes, is also investigated for
authorizing the bribe payment.
The Spurious Registration Operation began with a complaint of Afonso Rodrigues de Carvalho, who was
trying to legalize the Goiás Union of Small and Micro-Enterprises of Road Transport of New Vehicles
(Sintrave) since 2012. The registration would be approved by the Labor Relations Secretariat, whose
leader was appointed by the President of the Solidariedade Party, Paulinho da Força. The operation
targets are investigated for criminal organization, passive and active corruption and money laundering.
Not long ago, the federal deputy Cristiane Brasil (PTB/RJ) was appointed by her father, Roberto Jefferson,
to be ahead of the Ministry. Her nomination was forbidden by the Federal Supreme Court (STF) due to
issues in labor courts. Before, the General Controller identified overbilling and non-execution of services
in the Ministry in the management of the former minister and current federal deputy Ronaldo Nogueira
(PTB/RS).
Photo: Agência Câmara – moment of the promulgation
of the Constitution, announced by Ulysses Guimarães

10. Politics
09
On July 10th, Caio Vieira de Mello was designated to replace Helton Yomura, who requested exoneration
after being removed from office by the STF for being suspected of acting in the corruption scheme. The
Minister of the Civil House, Eliseu Padilha, temporarily took charge of the position. Caio Vieira de Mello,
lawyer and retired debtor, took over with experience as magistrate in Labor Justice. He was also vice-
president of a labour court in Minas Gerais, between 2008 and 2009. His father, Luiz Philippe Vieira de
Mello, who passed away, also has a history in the court and was Superior Labour Court (TST) minister
from 1985 to 1990. His brother, Luiz Philippe Vieira de Mello Filho, has been a TST minister since 2006.
During the nomination ceremony, Vieira de Mello, appointed by Michel Temer, stated that he would will
do a technical job ahead of the Ministry, created in 1930 to establish job policies and dialogue with trade
unions. Despite the curriculum, he was booked 24 times for labor violations at his farm in Minas Gerais.
The last years of the Ministry were marked by major changes such as the Labor Reform and the Law of
Outsourcing, as well as reputational crises and many leaders’ exchanges (four ministers formally took
office in 2018).
Andressa Mont’Alvão
Route 2030:
The new policy of incentive to the automotive sector
After about a year of discussion, President Temer finally signed the Route 2030 Program, which
establishes incentives for the automotive sector, through Provisional Measure (MP) 843/2018, published
in the Official Gazette on July 6. The plan was announced the day before in a hurry, due to the closing of
the deadline for the launch of programs by the government, according to the electoral calendar.
It is worth noting that the text is the result of a great impasse between the Ministries of Industry, Foreign
Trade and Services (MDIC) and the Finance (MF) one, mainly regarding the amount of credit provided by
the program, R$ 1.5 billion annuals. In contrast to the amount granted in loans to companies, the
government estimates the investment of at least R$ 5 billion, in total, in research and development, by
the entrepreneurs.
Route 2030 will last 15 years, divided into three five-year cycles, and establishes mandatory
requirements for the commercialization of vehicles in Brazil, as well as dealing with the tax regime of
non-produced auto parts. According to the MP, to commercialize vehicles nationally, regardless of
whether it is imported or not, companies must meet the labeling criteria; observe the schedule of
mandatory safety items, setting labeling that will indicate to the customer what items they have in the
vehicle; and meet an energy efficiency goal.
Also, the program brings the reduction of the Tax on Industrialized Products (IPI) that focuses on hybrid
and electric cars, which, according to Antonio Megale, President of the National Automobile
Manufacturers Association (ANFAVEA), is something that can bring the decrease of the value of those
vehicles. However, Megale points out that for other cars, the price is expected to fall only in the long
term, since no tax reduction is foreseen in commercialization, and that the focus of the program is to
ensure investment in research and development in the country.
Economic

11. The new tax incentive policy for the sector was designed to replace the InovarAuto Program, a measure
implemented under Dilma Rousseff's government, which covered the period from 2013 to 2017. One of
the main points of InovarAuto was the so-called "Super IPI", which consisted of payment by companies of
a 30% rate on the normal value of vehicles imported outside Mercosur and Mexico, after extrapolation of
the limit of the import quota determined for each brand. This incentive led Brazil to be condemned by the
World Trade Organization (WTO), which criticized rules less favorable to imports. Thus, in compliance
with the contested points in the WTO, the Route 2030 Program brought the end of the "Super IPI"
incident on imported vehicles in the criteria mentioned above.
The MP 843/2018 is in force until November, with the extension of the deadline due to the parliamentary
recess of July, and currently awaits installation of the Joint Commission to examine the subject, although
no start is expected, but it is already known that the rapporteur will be a representative, and the
president, a senator. Following this, the text will be appreciated by the plenary of the House of
Representatives (CD) and the Federal Senate (SF) and, if approved, will follow the presidential sanction to
become law. If it is not deliberated within the period prescribed, the measure will lose its effectiveness,
and its effects will no longer be valid.
Due to the approach of the elections in the second semester to the reduction of the rhythm of the
activities of the National Congress, the discussion of the MP should be restricted to the periods of
concentrated effort foreseen (CD: 7, 8, 13 and 14 of August, and 4 and 5 of September, SF: 7, 8, 9, 28, 29,
and 30 of August, and 11, 12 and 13 of September). Thus, the government will have to demonstrate the
strength to be able to approve the MP in this period.
Fernanda Xavier
Politics
10

12. Economic Data
11
MONTH DOLAR
IPCA
(12 month
cumulative)
SELIC IBOVESPA
GDP
PROJECTION
2018
OCT.2017 3,26 3,08% 7% 73.323 0,73%
NOV.2017 3,27 3,08% 7% 71.971 0,73%
DEC. 2017 3,31 2,79% 6,9% 75.996,68 0,98%
JAN. 2018 3,17 3,95% 6,75% 85.329,20 2,66%
FEB. 2018 3,24 2,84% 6,75% 86.000,80 2,89%
MAR.2018 3,33 2,68% 6,50% 82.956,10 2,89%
APR.2018 3,46 2,76% 6,25% 86.127,86 2,75%
MAY.2018 3,86 2,86% 6,50% 76.753,62 2,37%
JUN.2018 3,84 4,00% 6,50% 71.766,52 1,55%
JUL.2018 3,72 * 6,50% 79.559,98 1,50%
*Closing Pending
Source: Focus Report / Central Bank

13. Events Calendar
12
DOM SEG TER QUA QUI SEX SAB
29 30 31 1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
Public Ordinary
Meeting of
ANVISA
Local: Brasília/DF
69th CONITEC
Meeting (August)
Local: Brasília/DF
69th CONITEC
Meetng
Local: Brasília/DF
308th Regular
Meeting of the
National Health
Council
Local: Brasília/DF
308th Regular
Meeting of the
National Health
Council
Local: Brasília/DF
Parliamentary Recess
21th COSAÚDE
Meeting (ANS)
Local: Brasília/DF
ANATEL Board of
Directors Meeting
Local: Brasília/DF
I Brazilian Congress of Prevention and Health Promotion
Local: Brasília/DF
IX Seminar on Protection of Privacy of Personal
Data
Local: São Paulo/SP
I Inter-institutional Symposium on Biosafety and
Bioprotection
Local: Brasília/DF
17th Congress of Responsible Action
Chemistry of the Future: Universe of Possibilities and Challenges
Local: Brasília/DF

14. Events Calendar
13
DOM SEG TER QUA QUI SEX SAB
19 20 21 22 23 24 25
26 27 28 29 30 31 1
Ordinary Internal
Meeting of
ANVISA
Local: Brasília/DF
Public Ordinary
Meeting of
ANVISA
Local: Brasília/DF
139th Meeting of
the Board of
Directors of the
National Health
Council
Local: Brasília/DF
139th Meeting of
the Board of
Directors of the
National Health
Council
Local: Brasília/DF
ANATEL Board of
Directors Meeting
Local: Brasília/DF
2nd Meeting of the Task Force for Digital
Economy
Local: Salta/Argentina
70th CONITEC
Meeting
(September)
Local: Brasília/DF
70th CONITEC
Meeting
(September)
Local: Brasília/DF