MONTHLY NEWSLETTERBurson-Marsteller

August 2017

IndexYear 1 l #8

August 2017

Burson-Marsteller l Public Affairs

An intersecting agency that, through the understanding of the political environment, assists clients ofdifferent sectors in the protection and/or promotion of their businesses, managing their influence in asustainable 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, especiallythose heavily regulated by the government.

Contributors to this edition

Ricardo Almeida

Anna Paula Losi

Allana Rodrigues

Isabela Girotto

LucianaLemgruber

Fernanda Xavier

Nara Andrade

03 Dialogue and ConjunctureTemer is back to the game

04 PoliticsThe End of The Environmental Reserve Of Renca In The Amazon Forest And

The Environmental Agenda of Temer’s government

09 International RelationsA step from protectionism to compelled free trade, Brazil's condemnation in the WTO

05 Politics

Temer Government's Privatization Program: Positive Economy or political articulation?

06 Politics

Political reform? The Status Quo Remodeling Moves

07 PoliticsElections 2018 - Reconstruction and internal duel mark the PSDB for the

presidential race

06 Politics

Public funding of campaigns: new alternative or regression?

10 Economy

Economic Data

11 AgendaEvents Calendar

About 20 days after the vote that ended the complaint against Michel Temer, it can be said that thepresident has returned to the game and has enough strength to continue his economic agenda.

At least three signs given this week attest to this assessment.

(i). The government has announced an ambitious privatization program. For purposes of evaluatingthe strength of the president, more important than the extent of the announcement itself was themarket reaction, which denoted believing in Temer capacity of set in motion at least part of thesubmitted plan;

(ii). The plenary of the House of Representatives approved Provisional Measure 777/2017, whichredefines the long-term interest rate practiced by BNDES. This was the first important vote after thearchiving of the complaint made by the Attorney General's Office because, in addition to indicatethe resumption of the economic agenda, the approval of the measure overcome the resistance ofpart of the productive sector, always well represented in the House.

(iii). Survey conducted by Factual Informação e Análise with 183 representatives on the 15th and16th of this month showed that 74% of representatives believe that President Temer will fulfill hismandate until the end. Among the pro-government, the percentage is 83%; And among theparliamentarians of the so-called "center", 79% agree with this statement.

All this is a preamble to the return of the Social Security reform agenda. The advisory service of theGovernment leadership scheduled for September 1st a workshop with journalists in the presence ofMarcelo Caetano, Secretary of Social Security of the Ministry of Finance.

Currently, the parliamentarians still do not believe in the viability of the reform. In the surveyconducted by Factual Informação e Análise, on a scale of zero to ten, where zero means NOCHANCE and ten means WITH CERTAINTY, the average chance of passing the current report is at3.48. However, the percentage of representatives who scored between 7 and 10 (very high odds)increased from 8% to 15% between July and August.

The government has recovered most of its legislative force, continues in an upward movement with the representatives and senators and maintained its influence next to the market. All this leads to a second semester with the reformist agenda quiet hectic.

Dialogue andConjuncture

Temer is back to the game

Leonardo BarretoFactual 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.

Last Thursday (24), President Michel Temer published the decree that extinguishes the National

Reserve of Copper and Associates (Renca). On the day of its publication, the new rule, already in

force, received little attention; However, after repercussion in the media and positioning of public

figures, it caused great commotion among environmentalists in Brazil and in the world.

Renca was created in 1984, with the main objective of protecting mineral goods in order to avoid

future shortages. Within the reserve, exploration and mineral exploration would only happen if they

met specific regulations. Per an official publication in “Portal Brasil”, the reserve extinction would be

justified by the need for knowledge of the geological and mineral wealth of Brazilian subsoil,

besides the fact that the impediment of regular activities would have motivated illegal and harmful

exploration in the region.

The Reserve delimits a protected area of nearly 47 000 km², located in a region between the states

of Pará and Amapá. Mineral research and economic activity in the area are responsibility of

Companhia Brasileira de Recursos Minerais (CPRM - Brazilian Geological Survey) or companies

authorized by the company. The President insists that the end of Renca only implies the extinction

of a mineral reserve, not affecting any environmental or indigenous reserve, since the decree

establishes that the legislation on protection of native vegetation, conservation units and

indigenous lands would be respected.

The issue was further aggravated when society gained knowledge that in March of this year, during

the "Prospectors and Developers Association of Canada (PDAC)" in Toronto, the Minister of Mines

and Energy announced the end of the Reserve, along with a package of measures for the

reformulation of the Brazilian mineral sector. After the media reaction and pressure from

personalities of the artistic world on the subject, President Michel Temer published a more detailed

decree on the subject on Monday (28), repealing the previous legislation and explaining the real

intentions.

The reserve remains extinct. However, the new text has introduced a restriction on mineral

exploration where there is partial overlap with nature conservation units or demarcated indigenous

lands, except if it is provided in the management plan. In areas where there is no overlap,

exploration is open to meet the knowledge interests of Brazilian wealth, but must consider aspects

such as environmental impact and sustainable use of the area.

PoliticsThe End of The Environmental Reserve Of Renca In The

Amazon Forest And The Environmental Agenda of Temer’s

government

The government's environmental policy guidelines have been criticized both externally and bymembers of the own government, especially in the current scenario of seeking parliamentarysupport in both Houses of the National Congress. In this sense, the environmental agenda wouldhave been used to gain support from the ruralist group, which has 211 representatives in the Houseof Representatives, 41% of the parliamentarians.

The government has been making timid advances in the environmental agenda. The expansion ofthree conservation units in June of this year, one of which is the National Park of Chapada dosVeadeiros, and the veto of the Provisional Measure that reduces the Jamanxim Forest, made as aresponse to criticism from Norwegian authorities, are the few examples of advancement. Theunfolding of Renca's extinction and the response to pressures made by civil society seem toindicate new steps in this agenda, leaving open, however, if there will be more detailed clarificationsand decrees only when celebrities and media figures show some interest in the agenda.

PoliticsTemer Government's Privatization Program: Positive Economy or political articulation?

After taking over the presidency over a year ago, Michel Temer announced the InvestmentPartnership Program (PPI). Dubbed as "Growing," the program promises to get the country backinto a positive economy. With a "bloated" state, the concessions aim to transfer the responsibility ofmanaging public services to private entities. The idea is that the concession generates profit for thestate and that it foments the economy, besides offering better infrastructure to the individuals whouse of the services.

The main criticism is not in the concessions themselves, but about the way they are given. In themidst of political chaos, partnerships with private enterprise cease to be an economic solution forBrazil and become a political solution for the President himself. With low-cost sales and the alreadyestablished figures, the concessions are a very effective way to keep the sponsored quiet and toplease them. The truth is that little is known about these privatizations, but the scant debate on thesubject and the rush to carry out the Program scares the population, which disapproves thepresident more and more.

In the first phase of the program, 39 decentralizations were authorized, including concessions andprivatizations. In the second phase, the Board of the Investment Partnerships Program has alreadyapproved a list of 57 assets that can be offered to the private sector, such as Eletrobrás, CongonhasAirport and Casa da Moeda, among the selected state-owned companies.

It is worth noting that the Concessions have been authorized by law in Brazil for more than thirtyyears, and have always been carried out. However, the package is the largest in twenty years, sincethe Fernando Henrique Cardoso’s administration, and the deadline is less than two years for itstotal application. The problem is that these processes take time and that the chance to theeconomic impact expected is minimal. Besides, the little information released on the subject makesthe program more like government marketing, which will hardly be applied.

PoliticsThe End of The Environmental Reserve Of Renca In The

Amazon Forest And The Environmental Agenda of Temer’s

government

After the whirlwinds that surrounded the impeachment process of former President Dilma Rousseff

and the peak of Car Wash Operation investigations, the debate on the political reform, a package of

three proposals which aims to reorganize the Brazilian political system, comes back to the scene. In

addition to PEC 77/2003, PEC 282/2016 and the bill of political reform, are parliamentary initiatives

that demand political changes without, however, changing politicians.

Reform without change?

The answer is as rudimentary as the reasoning that drives it. It would be naive, at least, to believe

that powerful parliamentarians of equally expressive parties would consider defending proposals

that would endanger their re-election and, in no less rare cases, their freedom.

The “Distritão”, which is the discussed point of the reformist package, foresees a change in the

system of proportional election of representatives (federal and state) and councilmen to a mixed

district system, that is, those who have more votes are elected, despite the party's performance.

Nowadays, the party is also voted, when reaching the electoral coefficient, it conquers a certain

number of seats and elect parliamentary ones that had smaller number of votes. Curiously, if there

wasn’t the proportional system, the current speaker of the House of Representatives would not be a

congressman.

Openly defended by President Michel Temer, as well as his party (PMDB), the Democrats, other

parties of the allied base and even the former representative Eduardo Cunha (while he was still the

speaker of the House of Representatives), the Distritão makes the voter understanding easier: the

one with the highest number of votes is elected. However, the opposition says, it would weaken

parties and give prominence to those who are already in office, securing them privileged forum if

re-elected.

With the end of private electoral funding, well-known politicians with more financial resources

would have an advantage, since in practice a small number of candidates concentrate money from

party funds. Yet, on the other hand, competition with candidates widely known to voters, as

religious leaders and artists, would increase.

Considering the projections based on the speeches of parliamentarians on the subject, the division

evidenced in the vote in committee (17 for and 15 contraries), in addition to the need for 308 votes

for approval in plenary, the chances of the proposal to be rejected are high.

It should be noted that, in addition to the use of regimental procedures as obstacles to the

approval of the proposal with the theme discussed, there is a lack of political will and proposals

designed to maintain and improve the democratic system, regarding the duties exercised and

demanded by representatives and senators. However, there are too much appreciation for power

and excessive attachment to positions rather than social welfare.

Politics Political reform? Status Quo Remodeling Moves

PoliticsPublic funding of campaigns: new alternative or

regression?

In the context of the 2015 electoral mini-reform, among several changes in the Electoral

Code, the Supreme Federal Court (STF), in relation to the financing of political candidacies,

prohibited the companies donations that were the main source of funds for the campaigns.

According to data from the 2014 elections, more than R$ 3 billion were donated by legal entities to

the electoral campaigns, while the parties used only R$ 72 million from the Partisan Fund.

PoliticsPublic funding of campaigns: new alternative or

regression?

The new rules for funding were valid, for the first time, for the 2016 elections. However, until the

last presidential elections, in addition to contributions from individuals, companies could donate the

limit of 2% of gross income of the previous year to plea. In the new Electoral Code, besides the

impediment of financing by legal entity, trade-union entities and organs of the direct or indirect

public administration, for example, are also not allowed to pay for the campaigns.

In this scenario, and with the approach of the 2018 elections, representatives and senators began

discussing new ways to fund election campaigns. The House of Representatives is currently

analyzing a proposal that creates the Special Fund for Democracy Financing, the "fundão". In order

for the proposal to take effect in the next elections, it will have to be approved by the House of

Representatives and the Federal Senate until October 7 of this year.

The new financing alternative was presented by Representative Vicente Cândido (PT/SP), and

proposes that 0.5% of the current net revenue of the government, in the last twelve months, be

allocated to political campaigns. Thus, in 2018, this amount would be around R$ 3.6 billion. The

approval of the "fundão" will represent a double public financing, whereas Brazil already foresees, in

the Federal Constitution of 1988, the Partisan Fund that promotes the financial autonomy of the

party organizations.

According to the International Institute for Democracy (Idea), from the analysis of the political

system of 180 countries, 24% already use public funding for parties and campaigns. However, given

the large amount allocated to the "fundão”, in a Brazilian scenario of political crisis and discussions

about representativeness, the proposal had a negative impact on the media and public opinion.

At this situation, and due to the short-term approval, Representative Ronaldo Caiado (DEM/GO)

presented an alternative draft regarding financing. The public resources for party campaigns would

be the fiscal compensation the government provides to broadcasters to transmit political

advertisements and fines imposed on parties. In summary, the Democrat argues that his measure

proposes a fund based on fewer resources.

The alternatives on public funding caused several protests and the parliamentarians removed from

Vicente Cândido's proposal the margin of 0.5% of revenue. However, in the measure, the fund was

maintained.

It is expected the progress of the proposals. Although the parliamentarian's articulations on the

financing propagate the incoherence regarding the country's conjuncture, while, in addition to

political events such as impeachment and Operation “Lava Jato”, Brazil faces an economic crisis that

support the need to invest the amount allocated to the fund in other sectors.

PoliticsElections 2018 - Reconstruction and internal duel mark the PSDB for

the presidential race

Movements around the 2018 electoral race have begun and the major parties in the Brazilian

political scenario have two major challenges to overcome: the definitions of the names that will be

presented to run for the Presidency of the Republic and the high rates of rejection of its most vocal

politicians.

In the Brazilian Social Democracy Party (PSDB), one of the main allies in the Federal Government,accomplishing this mission will not be easy. The party's image was heavily shaken by the eventssurrounding Senator Aécio Neves (the party's licensed president) involving JBS's case. There is alsoa reflection on the support that has been given to the Planalto for the reforms and, internally, aveiled duel between the two important names to compete for the position: João Doria and GeraldoAlckmin, mayor and governor of São Paulo, respectively.

The political gravity of the Aécio Neves case had a negative impact within the party. Until then,considered by voters seeking a renewal, the PSDB lost much of its credibility with the case. Theinternal rift, led by congressmen who supported Aecio's staying in the party's presidency and thosewho demanded the exchange of command, claiming their unsustainability, also generated instabilityin the group.

The change of command interferes both in the future of the party and in the endorsement of thecandidate who will contest the plea. Sen. Tasso Jereissati (EC), acting party chairman until Decemberof this year, has already made it clear that Alckmin's name is the first on the list. In a recent visit tothe federal capital, Geraldo Alckmin was defined by Tasso as one of the main leaders of the partyand his performance is fundamental for the reconstruction of PSDB. However, a new president maybring a different configuration to this support.

Another issue that brings instability to PSDB is the maintenance of the party alliance with Temer´sGovernment. While Aécio Neves and his supporters defended the maintenance of that support atany cost, a portion of the party, especially in the House of Representatives, openly defended thatthe party should give away its positions, thus feeling free to vote according to the values of theparty.

In the midst of the vortex experienced in recent months alongside the PMDB and the internaldismantling observed in view of the maintenance of the coalition between the two parties, the PSDBsurvives, even if weakened, and may present a strong name in the context of the 2018 presidentialrace to face the interests of former President Lula (PT) in the dispute.

In this scenario, Doria´s appears as a strong option to combat Lula's growth in vote intentions. Inhis first foray into politics, João Doria has been calling attention to his administration as the headof the country's largest city and its high power of communication.

By positioning himself as a manager, the mayor of São Paulo managed to move away from theimage of a traditional politician and thus win over those voters who were looking for new options,including a distancing from Alckmin, who is his political godfather.

While the party does not have a defined position, both, however, already working on a nationalagenda of meetings with politicians and businessmen to garner support and present themselves asan option. The decision of the PSDB should be taken until December when it will probably beannounced the name of the candidate for the Presidency of the Republic.

Until then, "creator and creature" follow the formalities and, in their own way, continue to pave theway for a possible incursion into the dispute for the country's highest political office.

PoliticsElections 2018 - Reconstruction and internal duel mark the

PSDB for the presidential race

The national economic policy based on the protectionist model of trade is not strange to nationalcustoms, far from it, it has been in the praxis of the country for several decades. There arenumerous measures of tax incentives to industry to the detriment of free global competitionpublished or about to be published every year.

This was the context that led to the opening of a panel in the World Trade Organization (WTO) dueto claims of Japan and the European Union (EU). According to the complainants, Brazil uses a seriesof discriminatory rules, incentive programs for the domestic industry, which constitute taxexemptions or competitive advantages that emphasize the use of local resources and betterperformance of national exports, which, however, contradict international trade agreements trade.

Since the opening of the panel in 2013, the discussion on this type of subsidy has become moreevident without, however, limiting the propensity to create new models for the same goals. Nationalindustry is extremely dependent of government protection, so that whenever incentive programsare under threat of closure, it uses the power of pressure and constrains decision makers to createoutputs, ways to perpetuate trade stimulus devices.

Indeed, the dependence of the national industry is the result of a markedly victimistic stance,habituated to repeating maxims that even go back to the colonial period, to justify the inability tobecome more competitive and specialized. The outcome of this cycle of interdependence wasalready expected, WTO decided to condemn Brazil, the major service for the country until now.

The Organization gave a period of 90 days for Brazil to withdraw seven industrial subsidy programs,two of which are no longer in force, the PATVD (Support Program for the TechnologicalDevelopment of the Digital TV Equipment Industry) and the Digital Inclusion Program. The othersare the Inovar-Auto Program, which encourages the automotive supply chain; PADIS, in favor of thesemiconductor industry and displays; The RECAP and the PEC, programs that give benefits toexporting companies; and finally the technology information law.

The immediate benefit of the condemnation is clear and significant, the country, although bycoercive means, should give up tax incentives to compel its industrial park to become morequalified and competitive, although it cannot be said that this is an inevitable result. Still, the federalgovernment has the excuse that it hoped to reduce incentives and raise more funds in times ofdeficit, without, however, pressure from the productive sectors.

InternationalRelations

A step from protectionism to compelled free trade,

Brazil's condemnation in the WTO

EconomicData

MONTH DOLAR

IPCA(12-month

acumulatedperiod)

SELIC IBOVESPAGDP 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 2,71% 9,25% 65.316,30 0,34%

AUG.2017 3,14 * 9,15% 70.727,08 0,39%

*Closing PendingSource: Focus Bulletin/ Central Bank

EventsCalendar

SUN MON TUE WED THU FRI SAT

27 28 29 30 31 1 2

3 4 5 6 7 8 9

10 11 12 13 14 15 16

BRICS International Trade Defense Seminar

Local: China

Meeting at the Ludwig Boltzmann Institute for

Rare and undiagnosed diseases

Local: Australia

Ordinary Meeting of

the Board of

ANVISA

Local: ANVISA

Headquarters

Meeting of the

Thematic Chamber

of the Brazilian

System of

Inspection of

Agricultural

Commodities

Products of the

Unified System of

Attention to

Agricultural and

Livestock Health

Local: MAPA

Headquarters

ANATEL Board of

Directors Meeting

Local: ANATEL

Headquarters

World Food Moscow 2017

Local: Russia

XXVIII International Congress of the Latin Association for Health Systems Analysis

Local: Belgium

XI National Symposium on Biotechnology REDBIO

Local: Argentina

International Cooperation on Prequalification of

Medicines and Drugs of the World Health

Organization

Local: Denmark

International Symposium on Regulation of Herbal and Tradicional Medicines

Local: Germany

BRICS Summit

Local: China

II MERCOSUR-EFTA Round of negotiations

Local: Genebra

Ordinary Meeting of

the Board of

ANVISA

Local: ANVISA

Headquarters

International Cooperation on Prequalification of Medicines and Drugs of the World Health Organization

Local: Denmark

EventsCalendar

SUN MON TUE WED THU FRI SAT

17 18 19 20 21 22 23

24 25 26 27 28 29 30

Meeting of the

Sectorial Chamber

of the Produced

Chain of Planted

Forests

Local: MAPA

Headquarters

29th Pan American Sanitary Conference

Local: United States

VIII Seminar on Protection of Privacy and Personal

Data

Local: Sao Paulo

Ordinary Meeting of

the Board of

ANVISA

Local: ANVISA

Headquarters

ANATEL Board of

Directors Meeting

Local: ANATEL

Headquarters

ANATEL Board of

Directors Meeting

Local: ANATEL

Headquarters

Ordinary Meeting of

the Board of

ANVISA

Local: ANVISA

Headquarters

Meeting of the

Sectorial Chamber

of the Produced

Chain of Planted

Forests

Local: MAPA

Headquarters