Brazilian Real Tumbles After Senate Rejects Landmark Labor Reform Bill

Brazil"s landmark labor reform bill, intended to relax the country"s restrictive labor laws and a main plank of embattled President Michel Temer"s efforts to bolster investment and pull the economy out of its worst recession ever and widely seen as the country"s second most important reform agenda after the Pension bill, was unexpectedly rejected by a special committee in Brazil"s senate, with 10 votes against it, 9 in favor and 1 abstention. 

Prior to the vote, local newspaper O Globo reported that the government believed text of the labor reform will be approved in Senate’s Social Affairs Committee in a tight vote of about 11 in favor vs 8 against, setting market expectations.

In immediate kneejerk reaction, stocks dropped as much as 1.4%, while the BRL is leading declines among major currencies, down 1.6%, from drop of ~0.8% before vote. The committee was 2nd of the 3 bill had to clear before going to Senate floor vote. The failure to pass, strikes a major blow to Temer"s reform policy and puts into question whether Brazil will be able to "sell" its economic improvement to potential investors.

According to Citi, the rejection could result in the reform effort being delayed. However Committees have no terminating character, Senate general secretary Luiz Fernanddo Bandeira de Mello noted. The bill will now go to the Senate Constitution and Justice Committee and then the Senate floor"s assessment.  Nevertheless the rejection is likely to be a further blow to the government, amid other political noise embroiling President Temer.

The labor bill is fiercely opposed by unions because it would abolish mandatory payment of union dues by Brazilian workers.

In April, Brazil"s lower house approved the labor bill, seen as a barometer of support for Temer, two days before a national strike and demonstrations called by labor unions and leftist parties to protest Temer"s reform program that they say undermines workers" rights to the benefit of business interests. Backers of the labor bill say it will modernize employment rules that date from the 1950s and encourage investment by lowering labor costs for businesses.

If it had been passed by the Senate, the measure would relax restrictions on temporary workers, introduce guarantees for outsourced work and let collective bargaining agreements between unions and employers override some rules of the labor code. Now that it has failed to gain passage, Temer"s entire economic agenda is suddenly in limbo.

Path To Le Pen Victory: What Would It Take?

Authored by Mike Shedlock via MishTalk.com,

Recent opinion polls for round two of the French election on May 7 show Emanuel Macron with 59-60% and Marine Le Pen 40-41%.

Le Pen is trending up from April 24 results that were as low as 36-37%.

Still, Le Pen has a long way to go. Can she close the gap? How?

French Election Polls

The above from French Election Polls on Wikipedia.

Results show the two candidates combined only got 45% of the vote in the first round. Apathy and distrust are strong.

Political Ambush

On Wednesday, April 27, Macron met with striking Whirlpool workers at a planned event in Amiens, Macron’s hometown. In a surprise political ambush, Le Pen showed up first and was greeted with cheers and selfie opportunities.

Macron Faces Hostile Crowd

The most recent poll show Macron falling below 60%. There may be more fallout from the ambush coming up. Even if one believes that support for Le Pen is a bit understated, picking up another 7-9% is a tough act to expect.

Close the Gap? How?

It’s possible Le Pen closes the gap, in a roundabout way: abstentions. Eurointelligence explains.

The researcher Serge Galam confirms what we suspected all along: it does not take much for Marine Le Pen to win if voters abstain. Galam looked into what it takes for her to win under different abstention scenarios. He starts with the vote intentions as suggested by the polls, 42% for Le Pen and 58% for Emmanuel Macron. Then, if 90% of the FN voters go to vote but only 65% of those for Macron, Le Pen would end up winning with 50.07%. For Macron the threshold to win is thus 65.17%. This threshold is even higher the closer the two get in the polls. Assuming Le Pen wins two points in the polls and gets 44% of voters intentions, then the threshold for Macron would be 70.71%. So for 2 extra points in the voters intentions for Le Pen the barrier for Macron to win rises by 5 percentage points. We know that the voters behind Le Pen are much more loyal and steadfast than the votes for Macron. Many backed Macron unenthusiastically to block Le Pen. Since the first round, there is a clear rise in aversion against Macron. The absence of a clear backing from Mélenchon and the hashtag #SansMoiLe7Mai on twitter give solidarity to those who consider abstaining, Le Figaro explains. Students from schools and universities mobilized yesterday for a ni-ni: a no to Le Pen and her nationalism, and a no to Macron as a “boss”.

Ni-Ni Mobilized, SansMoiLe7Mai

A ni-ni is “neither nor”. SansMoiLe7Mai translates as “Without Me May 7”.

Abstentions

An amazing 71-80% of those who supported Benoît Hamon are for Macron, with as low as 1% for Le Pen. But Hamon only received 6.36% of the vote in round one.

Jean-Luc Mélenchon received 19.58% of the vote while François Fillon received 20.01%. Those are the votes that will matter most. It is difficult to judge the likelihood of that combined 39.58% block of disenfranchised voters does indeed vote in round two.

Looking at the first set of polls at the top, somewhere between 17% and 29% of the electorate plans to abstain. The average of 22%, 29%, and 17% is 22.67%. Those abstainers are already factored into the 59-41% poll estimate for May 7.

Voting Intention Averages

• On average, 39.33% of Mélenchon supporters claim they will abstain. 39.33% of 19.58% is 7.66%.


• On average, 30.67% of Fillon supporters claim they will abstain. 30.67% of 20.01% is 6.14%.


• On average, 24.33% of Hamon supporters claim they will abstain. 24.33% of 6.36% is 1.55%.

Curiously, the combined abstainers from the Mélenchon plus Fillon plus Hamon camp is only 15.35% whereas the average overall abstention percentage is 22.67%.

That margin says suggests there is an extra pool of voters who intend to sit this out. Assuming Le Pen supporters are more enthusiastic, the extra block of abstainers must come primarily from those who voted for Macron but now intend to sit it out.

Determining Questions

1. Will enough weak Macron supporters turn up to vote?


2. Will the “ni-ni” campaign have an impact that does not show up in the polls?


3. Is there a pool of Le Pen supporters who simply do not tell pollsters their intention?


4. Will Macron’s Whirlpool gaffe be a factor?

To win, Le Pen needs to capitalize on Macron’s gaffe. She also needs low turnout and a ni-ni impact that affects Macron more than it does her.

This is an uphill battle, but possible, and more likely than most expect.