29 October 2018

What to expect from Brazil’s authoritarian who ‘doesn’t understand economics’


For the first time in more than two decades, Brazil has a right-wing politician as its head of state. Jair Bolsonaro’s victory is not just a devastating defeat for the Worker’s Party (PT), which has won four consecutive presidential elections since 2002 — it represents the ascent of Brazil’s “new right” (labelled by some as “far-right”), an ideology characterised by its supporters as a blend of economic liberalism and social conservativism.

With an anti-establishment and anti-corruption message, the ex-military man channelled voters’ unhappiness with the PT, the party of the ex-president Lula da Silva, who is in jail for corruption and money laundering.

After 14 years in power, the PT has left behind a country in moral, social and economic decline, with unemployment at 13 per cent and criminals running riot. The party also oversaw one of the biggest corruption scandals in Latin American history, involving funds being diverted from the state oil company Petrobras to the PT and its allies.

This is the biggest turning-point in Brazilian politics since the end of the military dictatorship and re-democratisation in 1985. As well as the presidential result, there has been a sea change in Congress and experts say this will be the most conservative national legislature in almost 30 years. The party Bolsonaro is affiliated to, the PSL, has gone from just a handful of representative to being the second largest party in the Chamber of Deputies, with 52 seats to the PT’s 56.

The perception of a seismic change is reinforced by the worrying return of the military to the centre of politics, which has understandably struck fear in voters who still remember the dark days of the junta with its censorship, repression, tortures, and extrajudicial murders of dissidents and journalists. Bolsonaro has no such compunction about those years, arguing that military rule was “necessary to prevent the country from becoming a communist dictatorship”. Bolsonaro’s Vice-President is the General of the Army Reserve Hamilton Mourão, and the future government may end up with several other officers in ministerial positions.

For the political scientist Eliezer Rizzo de Oliveira there is a real risk that partisan politics will return to the “military quarters”: “There is a difference between a government with members of the military and a military government. But we have a new situation, which is the emergence of a charismatic leadership.”

Among his supporters, expectations of the new president are undoubtedly high — many voters see Bolsonaro as the answer to the country’s economic woes, while others are understandably worried about an authoritarian leader clamping down on civil liberties.

It remains to be seen how Bolsonaro will approach the economy. He supposedly converted to “classical liberalism” on the eve of the presidential campaign, despite having held nationalist positions (associated with the left) in economic matters throughout his career as a federal deputy. Now his economic utterances sound like Ronald Reagan with promises to “get the state off producers’ backs”.

Part of his agenda looks clear already. As he tweeted in September: “I made a commitment to reduce the number of ministries, extinguish and privatise a large part of the state ministries that exist today. These are unnecessary expenses that must attend to the population.”

After the somewhat startling admission that he “does not understand economics”, Bolsonaro appointed as Finance Minister the renowned economist Paulo Guedes, one of the founders of the investment bank Pactual. A self-defined classical liberal, Guedes supports privatising state-owned companies at an unprecedented pace.

He will have plenty of work to do: Brazil currently has 151 state-owned companies, which together made a loss of some R$19.1 billion in 2016 and a projected loss of R$15 billion last year. But there are still doubts as to whether Bolsonaro’s “conversion” to liberal economics is serious and whether his government will genuinely be for economic freedom. He has already said, for instance, that he will not sell the “strategic” public companies like Petrobras, Eletrobras, Caixa Econômica, and Banco do Brasil.

In order to become more competitive, the new government will have to get to grips with a thicket of backwards legislation that stifles innovation. The Washington DC-based Heritage Foundation has noted the so-called “Brazil Cost” — a complex and unjust tax system, bad infrastructure and other distortions that make entrepreneurs’ life more difficult. Reducing that cost will mean broad tax reform, which makes payment similar and brings rates into line with other developed economies.

Desperate to pay down public debt, successive governments have relied too much on consumption and labour taxes. According to the OECD data for 2014, Brazil taxes goods and services at an average of 16.28 per cent of the . well above most developed countries. In the United States, for instance, the average is a mere 4.5 per cent.

As for workers’ rights, Bolsonaro has characterised his approach as “fewer rights and employment, or all rights and unemployment”. He has not yet set out in detail what changes he has in mind, aside from his campaign promise to establish a “green and yellow” work permit. Under his plans, the new permits will have their own legal system.

The policy proposal explains it as follows: “Any young person entering the labour market will be able to choose between an employment contract based on the traditional work permit (a blue document called the CLT) — maintaining the current legal system — or a green and yellow work permit (where the individual contract prevails over the CLT, maintaining all constitutional rights).”

Among Bolsonaro’s other proposals are a markedly harsher approach to law and order, including legalising the carrying of weapons, protecting police and prison officers from charges of unlawful conduct and ending “temporary departures” granted to prisoners in low-security jails.

One of the major novelties that Bolsonaro will bring (and that worries a large part of the population), is the introduction of moral conservatism in public policies, a reaction to the “progressive” agenda associated with the left.

Social conservatism has been on the back foot since re-democratisation and has never had a government explicitly supportive of such policies. However, Bolsonaro has managed to capture popular antipathy to the “progressivism” of the left — associated with policies such as defending gay rights, abortion rights and the protection of minorities, and claims that genders are a social construct, and the defence of human rights (seen by the new right as a soft judiciary taking the side of criminals instead of victims).

Given the serious problems facing Brazil and the concerted opposition he will face from the PT and its various allies, Bolsonaro’s job will be far from easy. He is tasked with restoring confidence and prosperity to a deeply divided nation — only time will tell if his new-found support for liberal economics can co-exist with his deeply authoritarian instincts.

Jorge C Carrasco is a journalist based in Brazil.