What to make of Brazil’s Conservative Political Action Conference

eduardo bolsonaro cpac brazil Onyx Lorenzoni, Chief of Staff to the president (L), and Eduardo Bolsonaro

Good morning! This week, we’re covering CPAC Brazil—a conservative event imported by the Bolsonaros. And the crypto-gold rush taking Brazilians to Paraguay. Lower tariffs pushing more Brazilians towards credit. Also, what you should be looking out for this week—and the most important facts of the previous seven days. (This newsletter is for platinum and gold subscribers only. Become one now!)

What to make of CPAC Brazil

Amid a war within his own party, member of Congress Eduardo Bolsonaro was the star of the first edition of the

Brazilian Conservative Political Action Conference (<a href="https://www.theamericanconservative.com/events/">CPAC</a>). The event, aimed at &#8220;thinking and discussing conservatism,&#8221; included several senior members of the Bolsonaro administration, including Foreign Minister Ernesto Araújo, Human Rights Minister Damares Alves, and the Chief of Staff, Onyx Lorenzoni.&nbsp;</p> <p>The event pushed the textbook points of contemporary far-right conservative rhetoric: lashing out at &#8220;the threat of communism,&#8221; pro-LGBTQ policies, the press, and climate change.</p> <p><strong>Why it matters.</strong> CPAC Brazil consolidates Eduardo Bolsonaro as his father&#8217;s political heir for the long haul. At ease in his role as the keynote speaker, he benefits from having more charisma and better looks than his father, making him more appealing to a broader range of voters. At the end of the event, those in attendance dubbed him the &#8220;Little Legend,&#8221; referring to the nickname by which supporters call President Jair Bolsonaro.</p> <p>It is also further proof that Brazil&#8217;s far-right is using the same playbook as its American counterparts. These similarities were already picked up in discussions over gun rights and abortion laws.</p> <p><strong>Context.</strong> CPAC was founded in 1974 by American conservative groups, growing to become a hugely influential event. Its inaugural address was given by Ronald Reagan—then Governor of California, who would run for president two years later. This year, the U.S. version of the conference had Donald Trump as its keynote speaker, as well as hosting speeches from VP Mike Pence and Brexit poster boy Nigel Farage.&nbsp;</p> <p>In recent years, CPAC has struggled to distance itself from the so-called &#8220;alt-right,&#8221; a fringe of the far-right linked to white nationalism. In 2016, it turned away controversial former Breitbart editor Milo Yiannopoulos (after initially inviting him to speak), as well as neo-Nazi Richard Spencer in 2017, due to his &#8220;repugnant&#8221; opinions.&nbsp;</p> <hr class="wp-block-separator"/> <h2>Crypto-gold rush takes Brazilians to Paraguay</h2> <p>The Paraguayan city of Ciudad del Este is known for its megastores which sell imported goods at cheaper prices, due to Paraguay&#8217;s unofficial tax haven status. However, a new trend is emerging in the city: bitcoin mining farms. Largely owned by Brazilian entrepreneurs, these farms benefit from the country&#8217;s cheap energy costs: one kilowatt/hour in Paraguay costs only USD 0.04—3.5 times less than in Brazil.</p> <p><strong>Why it matters.</strong> Cryptocurrency mining—that is, the process of adding transaction records to Bitcoin&#8217;s public ledger of past transactions or &#8220;blockchain&#8221;—requires intense energy consumption, as it takes billions of computational processes. Researchers from the University of Oxford estimate that bitcoin mining consumes more energy worldwide than the entire country of Switzerland.</p> <p>Moreover, these entrepreneurs are highly exposed to the risk of the bitcoin bubble popping. The cryptocurrency has already lost a lot of its value—and has been compared to a Ponzi scheme.</p> <p><strong>Energy.</strong> These massive investments in servers, ventilators, and electricity (costs can reach USD 100,000 a month) come at a time when relations between Brazil and Paraguay have been rocked by the agreement on fares for the energy generated by the binational Itaipu hydroelectric plant. Asunción recently backed down to Brazil&#8217;s complaint that the country pays less than it should for electricity from Itaipu, promising to compensate Brazil with USD 200 million. The deal nearly brought down President Mario Abdo Benítez, who eventually backed down from it.</p> <p><strong>Deal. </strong>But the truth is that the Itaipu deal is up for renewal in 2023, and new terms must be laid down. If Paraguay agrees to pay more for its electricity, Brazilian bitcoin miners seeking a fortune across the border could see their monthly costs balloon very quickly.</p> <p><strong>Bitcoin in Brazil. </strong>According to Cointrader Monitor, Brazil has seen over BRL 10 billion in bitcoin negotiations in 2019, breaking the previous record of BRL 8 billion in 2017. Brazil is the biggest market for cryptocurrencies in Latin America, having transferred over 301,000 bitcoins so far in 2019, a figure which is set to surpass 400,000 by the end of the year.</p> <hr class="wp-block-separator"/> <h2>Markets</h2> <p>Shares of JHSF—the company behind the luxury restaurant and hotel chain Fasano—jumped over 4 percent on Friday (+100 percent over the year), after the announcement of an expansion to New York City. The Fasano Fifth Avenue will have a private club (with suites and a lobby bar), a residence club, and private apartments. JHSF will get 2 percent of the units&#8217; sale value, plus a minimum annual management fee of USD 500,000. Fasano also intends to launch a restaurant in the city by April 2020, for which it has secured a USD 40 million investment by the Vornado Realty Trust.</p> <p style="text-align:center"><em><strong>Natália Scalzaretto</strong></em></p> <hr class="wp-block-separator"/> <h2>More Brazilians looking for credit</h2> <p>With benchmark interest rates at their lowest-ever rates—and set to be lowered even more in the next few months—Brazil has seen an upward trend in individuals and companies looking for credit. Between January and August, credit concession for debt renegotiation grew 33 percent, according to the Central Bank. Credit in August reached the December 2018 levels—a month usually boosted by holiday spending. A welcome piece of good (but not great) news for the Brazilian economy.</p> <div class="flourish-embed" data-src="visualisation/771640"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <hr class="wp-block-separator"/> <h2>Looking ahead</h2> <p><strong>Party wars. </strong>The war within President Jair Bolsonaro&#8217;s Social Liberal Party (PSL) continues. Now, the party has decided to allow 20-plus members of Congress—as well as the president and his sons—to leave the party without any legal battle (House members can only change parties and still keep their seats in specific circumstances). However, they want the defectors to waive any right to the party&#8217;s cut of a publicly-financed fund for parties and campaigns. As the House&#8217;s biggest party, PSL&#8217;s share jumped from BRL 9 million last year to BRL 110 million in 2020. Meanwhile, the president wants the party&#8217;s books audited—calling on the PSL leadership to step down in case of any irregularity.</p> <p><strong>BRICS. </strong>President Bolsonaro&#8217;s insistence on inviting Juan Guaidó—who proclaims himself as Venezuela&#8217;s legitimate president, as opposed to Nicolás Maduro—will turn the next BRICS Summit, to be held in Brasília on November 14, into a damp squib of an event. The choice enhances internal divisions, as all other BRICS members—Russia, India, China, and South Africa—back Mr. Maduro. It also scared away leaders of neighboring countries from attending the event. The big winner will be Chilean President Sebastián Piñera, who will host the Asia-Pacific Economic Cooperation Summit on November 16. With a more pragmatic agenda, Chile <em>will </em>have other South American leaders attending—strengthening the country as a diplomatic regional leader.</p> <p><strong>Banks.</strong> It is just a matter of time until the new XP bank is operational. The Central Bank has granted the brokerage firm the green light to operate, after the company complied with regulatory hoops such as incorporating a firm, paying up its capital, implementing an operational structure, and electing its board. The new bank is expected to increase competition in what is a highly concentrated market. XP will go public on the New York Stock Exchange in the coming months—and analysts expect it to be valued at BRL 60 billion, 30 times its annual profits projected for 2020.</p> <p><strong>Amazon.</strong> Illegal miners plan a series of protests this week—including blocking roads and even attacking branches of environmental agencies in the region. The reaction comes after authorities shut down two of the largest illegal mining camps in the country. This month alone, 30 mining camps located on indigenous reserves have been closed. Miners—who are, for the most part, extremely impoverished—demand help from the government, two weeks after President Bolsonaro declared his support to them.</p> <p><strong>Oil.</strong> After a deal among Congress&#8217; leaders, the Senate is expected to vote by tomorrow on the rules to divvy up the BRL 106 billion that should be raised in next month&#8217;s mega auction of oil reserves among states, municipalities, and the federal government. The money will be a much-needed cash inflow for near-bankrupt state- and municipal-level administrations, and will also lay foundations for future discussions on how tax revenue is split between the different levels of government.</p> <hr class="wp-block-separator"/> <h2>In case you missed it</h2> <p><strong>OECD.</strong> After promising to support Brazil&#8217;s inclusion to the Organization for Economic Cooperation and Development (OECD), Donald Trump&#8217;s White House added a caveat last week: Argentina and Romania come first. The OECD has often been called a &#8220;club of rich countries&#8221; and membership essentially serves the purpose of a <a href="https://new.brazilian.report/money/2018/03/01/joining-oecd-mean-brazil/">seal of good practices</a>, improving reliability and trust for investors. Brazil has complied with 72 of the OECD&#8217;s 248 legal instruments—more than any other candidate.&nbsp;</p> <p><strong>Oil spills.</strong> The mayor&#8217;s office in Salvador said on Sunday that at least 36 kilos of crude oil have been removed from the city&#8217;s beaches. Since early September, oil stains have been spotted in all nine Northeast states—and at over 150 locations. Last week, researchers said the oil comes from Venezuela, which Caracas vehemently denied. Environmental agencies count 13 sea turtles, one bird, and a dolphin among the animal deaths caused by this latest environmental disaster.</p> <p><strong>Brazilian Saint. </strong>Sister Dulce Pontes was canonized by Pope Francis yesterday, becoming <a href="https://new.brazilian.report/society/2019/10/13/sister-dulce-good-angel-bahia-vatican-saint/">Saint Dulce of the Poor</a>—Brazil’s 37th recognized saint. She was known for using her close relationships with powerful politicians and business owners to receive donations for her charity work. According to a recent biography of the now saint, she had a direct line with former President José Sarney (who was in office between 1985 and 1990).</p> <p><strong>Deflation. </strong>Prices in Brazil saw a decrease of 0.04 percent in September, representing the biggest deflation for the month since 1998. This drop was largely influenced by a 0.43 percent fall in the cost of food and drink, which decreased for the second month in succession, according to the Consumer Price Index (IPCA). This deflation is more a result of Brazil&#8217;s sluggish economy than anything else, and now provides conditions for even more radical cuts to the basic interest rate, in order to stimulate investment and consumption.

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Gustavo Ribeiro

An award-winning journalist, Gustavo has extensive experience covering Brazilian politics and international affairs. He has been featured across Brazilian and French media outlets and founded The Brazilian Report in 2017. He holds a master’s degree in Political Science and Latin American studies from Panthéon-Sorbonne University in Paris.