Read this Tuesday’s edition of the FolhaMercado newsletter (23) – 05/23/2023 – Market

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Record fine to Goal

Meta (owner of Facebook, Instagram and WhatsApp) was fined 1.2 billion of euros (R$ 6.4 billion) this Monday by the EU (European Union) for violating the bloc’s data protection rules.

• It is the biggest penalty of its kind ever imposed on a company on the continent.

Understand: Mark Zuckerberg’s company was condemned for having continued to transfer and store personal data of Facebook users in Europe in the US.

• The decision also requires Meta to suspend this practice within five months.

• The investigation began in 2020 after European Justice annulled a user data transfer agreement between the US and bloc countries.

The Goal states that the sanction is “unjustified and unnecessary” and will go to court to try to suspend it.

The company also said that “thousands of businesses and organizations depend on the ability to transfer data between the EU and the US” and that “there is a fundamental US government legal conflict over access to European data and privacy rights”.

The historic fine puts pressure on in the US government to expedite an agreement with the EU for the handling of European user information by US companies.

• Meta is not the only one to do this and other companies may also end up being penalized.

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State of emergency after cases of avian flu

This Monday, the Ministry of Agriculture decreed a state of zoosanitary emergency across the country in the face of cases of infection with the highly pathogenic avian influenza virus (H5N1).

• The ordinance must be in force for a period of 180 days, which may be extended for an indefinite period.

Understand: the decision serves to speed up monitoring actions and eventual mitigation measures.

• The ordinance, for example, has the effect of suspending poultry exhibition fairs. For the consumer, there is no change for now.

The ABPA (Brazilian Association of Animal Protein) reinforces that there are no changes in the Brazilian status of “free of disease” before the WHOA (World Organization for Animal Health), as there are no records in commercial production.

The disease: avian influenza is highly contagious and affects many species of domestic and wild birds and, occasionally, mammals.

• Its main transmission factor is direct exposure to infected wild birds, and it is not transmitted through the consumption of poultry meat or eggs.

Last week, Brazil registered the first case of avian flu in its territory. The disease appeared in two seabirds off the coast of Espírito Santo.

Confirmations have since risen to five – none in humans.

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Campos Neto warns of goal change without ‘calmness’

The president of the Central Bank, Roberto Campos Neto, stated that changing inflation targets during an economic turmoil could send the wrong message to the market: that one is looking for more flexibility and not more efficiency.

The subject returned to the agenda after the Minister of Finance, Fernando Haddad, commented on the possibility of changing the time frame for observing the inflation target, which would be disconnected from the calendar year and would move to a moving horizon.

• The change in the inflation target is defined by the CMN (National Monetary Council), with the votes of Haddad, Campos Neto and the Minister of Planning, Simone Tebet. The agency sets the 2026 target in June.

Campos Neto also countered the arguments of those who claim that current inflation is the result of a supply shock and not caused by demand – which, in the opinion of BC critics, would make raising interest rates ineffective.

• The president of the municipality mentioned that core inflation (which excludes volatile prices, such as fuel and energy) is at 7.3%, well above the target for the year, of 3.25%.

He spoke on the subject this Monday (22), during a seminar on the BC’s two years of autonomy promoted by the Sheetsponsored by Febraban (Brazilian Federation of Banks).

The main theme of the seminar was discussed by Campos Neto and also by the president of the Senate, Rodrigo Pacheco (PSD-MG), as well as by the head professor of the Department of Economics at USP, Leda Paulani:

Campos Neto: “The gains of autonomy are there. If we didn’t have autonomy, during the election period we would have had more volatility in the markets. It is important to separate the political cycle from the economic cycle”.

Rodrigo Pacheco: defended the decision, but was open to discussing the matter. According to the parliamentarian, “whether the decision was right or not, only time will tell”.

Leda Paulani: against autonomy, she said that the rule currently poses obstacles to the action of an elected government. The professor said that the BC can be independent of the government, but not of the financial system “which has enslaved Brazil for four decades”.

What else was talked about at the seminar:

• Pacheco: High interest rates inhibit projects by the Lula government, and the BC cannot limit itself only to technical criteria.
• Leda Paulani: It is not possible to say that BC was wrong for doing Dilma’s will.
• Campos Neto: Lula’s personal criticism shows a lack of knowledge about BC autonomy.

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Market sees lower inflation and higher GDP

Market analysts reduced their projections for this and next year’s inflation and improved expectations for GDP, but maintained their projections for the Selic rate at the end of 2023.

• The calculations are from the Focus survey, carried out weekly by BC along with market economists.

In numbers:

Inflation: the expectation for this year’s IPCA retreated from 6.03% last week to 5.80% in the current survey, while for 2024 the projection changed to 4.13%compared to 4.15% in the previous week.

• According to economists and the BC president himself, the new calculation for short-term inflation may be related to the drop in fuel prices.

Selic: Economists’ outlook for the end-2023 rate was maintained at 12.50% for the fifth consecutive week, which includes a drop of 1.25 percentage points in relation to the current base rate.

GDP: the market sees growth of 1.20% this year, against expansion of 1.02% calculated in the previous week. Campos Neto said that projections tend to stabilize around 1.5%.