Weekly Brief

Ángel Gurria, Secretary-General of the OECD. In a visit to Brazil earlier this week he said that of all countries it is in the best position to gain a membership in the organization.
  • Brazil exits recession.
  • Job creation balance on the positive side after January’s report.
  • Increased efforts towards joining the OECD.
  • Trump’s trade war an economic setback.
  • Roger Gallério’s new Federal Police leadership is taking shape.

Brazil’s economic recovery

Brazil’s GDP grew by 1% in 2017 meaning that its economy is no longer in recession. It is a positive sign after it plunged by almost 8% in 2015 and 2016. The agricultural sector recorded a 13% growth which is the most on record.

Despite positive signs, growth was lower than hoped for as government and financial analysts were expecting 1.1%. Investments only make up 15.6% of GDP which is the lowest percentage since 1996, the year when the Brazilian Institute of Geography and Statistics (IBGE) began to record such statistics.

Job creation

The Ministry of Labor released data showing that 77,800 job openings were created in January in the formal sector.

The largest gain was made in the manufacturing sector where 49,500 formal jobs were created. It was closely followed by the service sector where 46,544 such jobs were created. The final numbers were dragged down by commercial goods where 48,747 jobs were lost.

Brazil’s richest state, São Paulo, gained 20,300 jobs overall. But Rio de Janeiro, where the president recently announced a federal intervention, is still struggling with a negative balance of 9,800 jobs lost.

The hunt for an OECD membership

The pension reform promoted by Michel Temer’s government will be one of the most important steps to improve the economy and eventually gain a membership in the Organization for Economic Co-operation and Development, the said organization made clear in a report released Wednesday. The OECD also wants to see Brazil improve the state’s efficiency and business environment, open up its economy, develop its financial market and reduce corruption.

Brazil first made an official request to join the organization in June last year but had not received a response until now. It is considered beneficial to be part of the organization as it would raise Brazil’s international reputation, making it more attractive to investments.

Brazil will send an ambassador to the OECD in the coming week, Folha de S. Paulo reported today. The ambassador, Carlos Mário Cozendey, will be stationed at the Brazilian embassy in Paris. Three additional diplomats will be sent from Brasília, two of which will join the OECD ambassador’s team at the embassy in Paris.

The ambassador was appointed despite Brazil not being a member of the organization, in an attempt to build momentum for future membership in the organization. Itamaraty (the Brazilian Foreign Affairs ministry) said that the move was made to better monitor Brazil’s interests within the OECD.

According to Itamaraty, the Brazilian presence in the OECD is today equivalent to, or even larger than, some countries that are already members of the organization.

The OECD’s Secretary-General, Ángel Gurria, visited Brazil earlier this week and said that it is the country best positioned to begin the OECD’s member initiation process. However, he clarified that the analysis period preceding such a process usually takes three to four years and the OECD will first need to give a green light which it has not yet done.

The OECD economist designated to the Brazilian case, Jens Arnold, was in São Paulo on Thursday. There he said that the welfare program Bolsa Família is the only public spending that truly reaches the poor.

“It is truly progressive spending because 83% of it reaches 40% of the poorest. And Brazil spends only 0.5% of its GDP on this program,” he said according to Folha de S. Paulo. He recommended that money generated from changes to the pension system should be transferred to the welfare program.

Trump’s trade war

At the same time that news of the recession ending reached Brazilians, Donald Trump announced that the US will impose a 25% import tariff on steel and a 10% tariff on aluminum.

The US is the largest steel importer in the world and Brazil is its second-largest source country after Canada. Brazil stands for 13% of the US’s steel imports (Canada represents 16%) according to a December 2017 report from the US International Trade Administration.

Brazil will try to approach the US individually with a request to be excluded from the list of countries to which the tariffs will apply. Brazil reasons that it will be easier to achieve its interests by approaching the US alone. If this does not work, Brazil will join the complaint of a larger group of countries.

Federal Police’s new leadership is revealed

The new head of the Federal Police (Polícia Federal), Rogério Galloro, revealed the organization’s new leadership on Thursday.

Raul Jungmann, head of the ministry to which the Federal Police is subordinate, told journalists in Brasília the day before that he would discuss appointees with Galloro. It was not clear if the new leadership was actually chosen in conjunction with Jungmann.

Among the appointees was Silviana Helena Vieira Borges, who will lead the executive directorate (diretoria-executiva). She was previously superintendent of the Federal District (Distrito Federal) –– the police agency’s largest unit –– which includes the capital Brasília. Fabrício Schommer Kerber will be responsible for logistics.

Élzio Vicente da Silva is the only appointee who was trusted by both Galloro’s predecessor –– the controversial Fernando Segovia who lead the agency for only 110 days –– and the man in charge before him, Leandro Daiello. da Silva will head the Directorate for Investigating and Combatting Organized Crime (Dicor), one of the most important positions within the Federal Police.