The week ahead in Brazil #18

What is happening in Brazil?

1. The President of Brazil, Jair Bolsonaro, has the highest ratings of approval since the beginning of his term. Datafolha, in line with the findings from other institutes, found that he is considered as excellent or good for 37% of the population, where before it was 32%. The gap between approval and rejection fell from 12 points in June to 3 points now.

On Wednesday (12), Mr Bolsonaro changed the leader of government at the Lower House. Deputy Victor Hugo was demoted to make room for Deputy Ricardo Barros, a former Ministry of Health and a member of “Centrão”. Mr Barros wants to increase the participation of politically appointed personnel within the administration and fight back public servants who are trying to block the administrative reform.

After the explosion in Lebanon, Mr Bolsonaro invited the former president Michel Temer to lead an aid mission to the country. Mr Temer has Lebanese origins and strong ties to the Lebanese community in Brazil.

On Wednesday (12), Congress appreciated presidential vetoes. Most of them were confirmed.

2. On Tuesday (11), the Minister of Economy, Paulo Guedes, recognised difficulties in pushing the economic reforms. On Wednesday (12), Mr Bolsonaro and Mr Guedes, along with the presidents of both Legislative houses, declared there is no chance of surpassing the government’s expending cap. There is political pressure to spend more, either through cash-transfer or infrastructure programmes.

3. Following the resignation of three key members of the economic team in previous weeks, two other secretaries of state announced their resignations. Mr Guedes called it a “stampede”. Mr Salim Mattar was in charge of privatisations, and Mr Paulo Uebel was responsible for the administrative reform. They were replaced in the same week by current government members.

Gen Pazuello, the acting Minister of Health, attended a virtual meeting with congress members to discuss the government’s management of the Covid-19 on Thursday (13). Mr Barros, the new government leader at the Lower House, argued that Mr Pazuello has been highly efficient in the pandemic management.

How to read it?

1. As noticed in previous weeks, Mr Bolsonaro is politically on the rise, mostly due to emergency payments and the absence of harsh declarations, providing him with solid support. On top of that, he made two very important moves politically: his proximity to the former president Michel Temer and the designation of Deputy Ricardo Barros as government leader. First, Mr Bolsonaro was grateful for Mr Temer’s political advice to stop daily interviews and to refrain from the institutional clash with the Supreme Court and the Legislative houses. Now, he can continue to benefit from Mr Temer’s vast political experience. Second, Mr Barros’ nomination has the potential to put the political negotiations between the Legislative and the Executive in a much smooth condition. 

The pitfalls of Mr Bolsonaro connecting his government with Mr Temer and Mr Barros, both charged by corruption practices in the past, are less important than the benefits that this proximity can bring. On one side, Mr Bolsonaro is likely to face a better political scenario, meaning he will have better chances of passing projects of interest to the current government. Nonetheless, Mr Bolsonaro’s high approval ratings require the government to increase public expenditure, which is against Mr Guedes’ plans. At this moment, the political trend is positive, and some important policies may pass, however the pressure to increase spending, to abandon the selling of public companies and to abandon the public service reform are evident.

2. For now, the economy continues to have a chance of delivering relatively good results, because the fundamentals remain somehow in order. Nonetheless, it is not in a positive trend as it could because chances of selling public-owned companies are slimmer now. Last week, Mr Guedes’ remarks to sell three or four big public companies or to push the administrative reform remained as far as ever to be true, confirmed by the resignations from his team.

The display of support and unity around the economy shown by Mr Bolsonaro and the presidents of the Senate and the Lower House was necessary to provide confidence to the markets. I don’t know for how long it is going to last or if it real at all. If the commitment comes to an end, the departure of Mr Guedes will be around the corner. That is why I assess it as uncertain.

3. The public management trend remains negative. The departure of five top aides from the Ministry of Economy is a bad sign. Regardless of how competent the replacement leadership might be, there is a pause due to the learning curve and changes in mid-level jobs, causing further delays in implementing policy in the economic area.

The fight to the pandemic continues to be handled by an interim minister of health. Although his presentation to congress members was considered good, the numbers of infected people and deaths tell otherwise. As for deforestation, it continues to raise concerns that the government is falling short from its promises.

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