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A ‘Burning House:’ Warnings About Brazil Worsen With Crisis

Bolsonaro Stirs New Controversy by Allowing Gyms, Salons to Reopen

(Bloomberg) -- Less than a month after Brazil President Jair Bolsonaro fired his health minister for resisting his push to reopen the country, the nation’s new top doctor is finding himself in the same awkward spot.

During a press conference late Monday, Health Minister Nelson Teich was caught off guard when a reporter asked him about Bolsonaro’s latest edict adding gyms, beauty salons and barbershops to the list of essential businesses that should immediately reopen.

Teich turned to his deputy and asked: “Was this announced today?” Clarifying for reporters, he added, “It didn’t go through the ministry.”

Bolsonaro’s order, part of a broader push to get Brazilians back to work, also deepened a clash with state governors who have been leading the way in implementing social distancing measures. It’s the latest in a series of political standoffs and turmoil that’s spooking markets. On Tuesday, a new poll showed Bolsonaro’s popularity dropped just as a Hong Kong-based advisory firm came out with one of the harshest verdicts yet against Latin America’s largest economy.

Brazil is “a burning house,” Armando Castelar, an analyst at Gavekal Research Ltd. who headed the economics department at Brazil’s national development bank, wrote in a report. “Right now, Brazil is best left to the specialists, crazies, long-term opportunists and those without other options.”

The Latin American nation is fast emerging as the new global hotspot for the coronavirus pandemic, trailing only the U.S. in daily deaths during some days last week. For many health professionals, the coronavirus’s spread is aggravating in its predictability. After more than a month of loosely enforced and scatter-shot local quarantines and lockdowns, Brazil has reported over 11,500 deaths and about 170,000 infections.

With most Brazilians backing social distancing guidelines, Bolsonaro’s popularity is suffering, according to a MDA/CNT poll that interviewed 2,002 people between May 7-10. The survey showed the president’s personal approval rating dropping 9 percentage points from the beginning of the year to 39%, and his disapproval rating hitting 55%.

The uncertainty and political chaos has translated into a painful market sell-off. The Brazilian real is down 30% this year, by far the worst among major currencies, and the benchmark Ibovespa index has lost more than half its value in dollar terms. No other gauge comes close.

The real fell as much as 1% Tuesday, touching a new record low against the dollar amid a fresh bout of political instability. Local media reported there’s alleged video evidence Bolsonaro tried to interfere in the work of the federal police, which is akin to the U.S.’s Federal Bureau of Investigations.

The video, which hasn’t been made public, is part of a probe into allegations made by former Justice Minister Sergio Moro that the president was trying to meddle in police investigations, a clash that led the ex-judge to quit the administration late last month. Bolsonaro, who has repeatedly denied wrongdoing, said the video doesn’t show him interfering and that he’s not concerned.

A ‘Burning House:’ Warnings About Brazil Worsen With Crisis

State governors leading the way on social distancing challenged Bolsonaro’s move to reopen more businesses, the latest in his push to get people back to work.

“Will Bolsonaro’s next decree determine that jet skiing is an essential activity?,” Maranhao Governor Flavio Dino said on Twitter, taking a swipe at the president’s weekend activities.

Bolsonaro isn’t alone in advocating business as usual to help economies recover from what early data signals will be a massive hit. But it’s still unclear how or when Brazil will get the virus and policy under control.

“It’s important for investors to know who is running the country,” Chris Taendler, the co-head of global emerging markets and G-10 linear FX at Barclays in New York. “Uncertainty is what investors don’t like.”

If Monday’s press conference is any guide, that uncertainty and unpredictability may continue.

After unveiling his first comprehensive plan to tackle the crisis and reopen the economy, Teich acknowledged that the guidelines are just suggestions. In the end, it’s up to governors and mayors to decide what’s best, he said.

Within hours, Bolsonaro criticized the country’s top court for giving local governments that authority. On Tuesday morning, he told a crowd of supporters, “If it were up to me, it would be different.”

©2020 Bloomberg L.P.