Brazil: What lies ahead after Bolsonaro´s inauguration

The election of Jair Bolsonaro as the next Brazilian president is the prelude of an uncertain period in the country´s politics. Given its importance in Latin America, any abrupt change in Brazil is most likely to have repercussions in neighbouring countries. Worryingly, it is not just democratic rights that could be corroded under a Bolsonaro government. Perhaps more importantly, if he pushes forward with his agenda, the social crisis currently permeating the world´s fifth largest economy is most likely to escalate. It is clear to see that Bolsonaro’s first steps as President-elect indicate in that direction.

During the campaign, the former army captain promised to clamp down on corruption and violence with an iron fist. Undoubtedly, these two issues are major concerns for large segments of the Brazilian voters and, as a result, Bolsonaro has greatly profited from this intense desperation. On one side, Bolsonaro directed his attacks at “low-rank” street criminals, and on the other, at the Workers’ Party (PT) – that ruled Brazil from 2002 to 2016 -, portraying them as those responsible for this chaotic economic crisis. Additionally, his ideologues constantly whined about an allegedly wave of cultural Marxism that has spread over Brazil in the last decades. His economic plans are another reason for concern, as he aims to carry out an ultra-liberal agenda consisting of privatisations, austerity reforms and bilateral free-trade agreements à la Trump with countries such as the US and Israel.

Bolsonaro´s inauguration on Jan 1, 2019 Photo Credit: Roque de Sá/Agência Senado

Every year, Brazil´s wealthiest 1% take hold of approximately 30% of all income generated in the country — the wealthiest 10% control 55%.[1] The minimum wage does not reach U$250, and roughly half of the regular working force (44 million people) earn 15% less than that.[2] Whereas the upper class pay 7% of their income in taxes, the lower classes pay around 49%, making Brazil´s fiscal system one of the most regressive and unfair in the world.[3] According to the Brazilian Statistics Department (IBGE), almost 7 million families are homeless and more than 20 million people are unemployed.[4] Even with the most positive view, you would be right in thinking that Brazil’s social fabric is on the verge of collapsing. If the economy deteriorates further, the consequences could be disastrous.

The future cabinet

Bolsonaro´s future cabinet is in line with his campaign promises. Roughly speaking, it will comprise of three social groups. For the first time in 23 years – since the dictatorship was toppled in 1985 – the military will be represented in the government. Key positions – such as the Ministers of Defence, Security, Interior and Energy, as well as the Government Secretariat (Secretaria de Governo) – will be held by retired or active members of the armed forces. Bolsonaro himself and his Vice-President are retired army officers. The second group includes businesspeople, such as his “super” Finance Minister Paulo Guedes, a banker who made his fortune through a series of oddly fortuitous and well-informed decisions with the Brazilian Real during the 1998 currency crisis, and Salim Matar, the owner of a car rental company, who will be in charge of the Special Secretary for Privatisation and Demobilisation.

The third group is made of bureaucrats who have held management positions in top institutions like the Central Bank, the Brazilian Investment Bank (BNDES), Petrobras (the state-owned oil Company), and other financial institutions over the last twenty years. These technicians are well-known by national and international finance circles. They can be considered as non-partisan, almost “partyless” managers with great expertise in how financial institutions operate in the globalised economy. Completing this rather bizarre list, we find a number of ultra-conservative politicians and intellectuals – some of them coming from the Evangelical Church – occupying ministries such as Education and Foreign Affairs. This odd concoction of characters, coming from social and political layers that represent a minority of the Brazilian population, is unlikely to be able to devise policies that will benefit social improvement.

With this cabinet, Bolsonaro sends a clear message that national and international investors will have privileged access to Brazilian markets and assets. His nationalist outbursts during the campaign – one of his slogans were “Brazil above all” – ended up as nothing more than hot air. Furthermore, it is an indication that the future government will adopt an extremist far-right ideology aligned with some of most traditional social forces in Brazil, such as the big landowners and the Evangelical Church. The extended presence of military men (there are scarcely any women in his team) implies an escalation in the already high levels of repression existent in the country. All opposition forces, but especially social movements – such as unions, NGOs, women’s rights movements and indigenous peoples’ movement, among others – will face a much tougher time in the coming years.

Priority on tackling the deficit

The neoliberal vision adopted worldwide by politicians and mainstream economists do not see unemployment, low wages, or the state of public services as the most dramatic facets of a social crisis. For them, it is the balance of public accounts that are the strongest indication of an economy’s “health”. This strength can only be achieved through cutting social spending. During the campaign, both Bolsonaro´s advisers and international economists warned that the public deficit is the most urgent issue the next government must deal with. The British magazine The Economist, for instance, whereas criticising Bolsonaro for his racist and homophobic statements, praised his plans to carry out a social security reform. One JP Morgan executive agreed, declaring recently in an interview to a Brazilian newspaper that Bolsonaro should use his fresh political powers to approve this reform.[5]

Mainstream economists (and among them Bolsonaro´s economic team) agree that the Brazilian public deficit, which reached more than 7% of the GDP in 2017, is the result of irresponsible public spending and the excessive number of social and labour rights enjoyed by workers and pensioners. This is a wide spread idea in liberal circles. It underpinned a series of austerity plans carried out in countries such as Spain, Greece, Argentina and others. Austerity is the new economic dogma. If implemented in Brazil, a country in which the majority of the population has been living under “austerity” for most part of the last three decades, since neoliberalism became the hegemonic system of accumulation for Brazilian capitalism, it might have serious social consequences.

In line with this idea, Bolsonaro´s economic agenda covers four main projects: a pensions reform, which is the priority as of yet, a tax reform similar to Trump’s tax deductions, as well as labour market deregulations and a program of privatisations. In the view of Paulo Guedes, a Chicago University-trained economist, the most effective way to reduce public spending is by privatising the pensions system and giving away state-owned companies to the private sector. The privatisation program – including regional banks, electricity companies and oil fields – was recently announced by the future economic team.

In a recently published study, the French economist Thomas Piketty argues that transferring public assets to private capital affects negatively a country´s levels of inequality, as it reduces a government´s capacity to use social programs to strengthen the purchasing power of low-income families.[6] Besides, the Jubilee Debt Campaign[7] argues that the public debt in Brazil, which reached an all-time high of 75% of the GDP in 2017, accounts for the incapability of the Brazilian government to invest in public services and social programs. In 2017 alone, approximately 50% of the government´s budget went to pay interests of the public debt and new loans made to cover the permanent default.

Curiously, the Brazilian law requires that the names of institutions (banks, and so on) and private investors who receive payments from the Brazilian treasury be kept in secret. This thwarts any attempt to break down the debt composition and consequently understand how it has been functioning for decades as a mechanism to transfer wealth from Brazil´s public finances to the private sector. Since the Brazilian public debt became an issue in the beginning of the 80´s (in the context of an international debt crisis in global south countries), the Brazilian Jubilee Campaign has been advocating for a transparent and democratic audit, yet it has not received any positive response from political authorities.

Brazil and the new right-wing axis

As we have discussed, the internal priority will be deficit reduction through the implementation of questionably effective neoliberal policies. On an international level, this means that Brazil under Bolsonaro is likely to become an active member of the new international right-wing axis formed by countries such as the US, Israel, Italy, Poland, Hungary and others. The contours of his foreign policy indicate in this direction.

The U.S. will once more become Brazil´s main political reference and preferred trade partner. In a meeting that took place a few days after the elections, Bolsonaro and US National Security Adviser John Bolton celebrated the beginning of a new era of relations between the two countries. Fernando Cutz, a former senior White House official, said to the New York Times: “Trump and Bolsonaro will really hit off. Their personalities are almost identical and their views are very similar.”[8]

Bolsonaro stated in several occasions his intention to distance itself from China and the Mercosur. In his view, these countries were chosen by previous governments as suitable political and trade partners based on ideological affinities. This movement, nevertheless, will not be a simple one, although the Brazil-US relations have not deteriorated to such a poor extent in the last two decades as some commentators suggested. China is currently Brazil´s leading trade partner (in 2017, 21.8% of the country`s export went there). Furthermore, Argentina and Chile, both members of the Mercosur, are important destinations for Brazil´s exports, apart from having strong cultural and historical connections with Brazil.

A shift will take place in Brazilian foreign policy. However, it is unclear the extent of it and how it will affect Brazil´s trade balance, which is a critical component of the country´s current account balance. Ernesto Araújo, the future Foreign Minister, declared his intention to “free Brazil from the globalist ideology” dominated by cultural Marxism.[9] In his (delusional) view, globalism is anti-human and anti-Christian.

Also, the announcement of a plan to move the Brazilian embassy to Jerusalem indicates that the relationship with Israel – not a key trade partner by the way – might undergo a decisive change. Bolsonaro´s ties with the neo-Pentecostal church in part explain the radical decision, but the reaction of Arab countries to the controversial plan, which as of yet is not clear what it will be, might influence the final decision.

Brazil´s top Imports Partner in 2017[10]Total of Exports
ChinaUS$47.5 billion (21.8%)
United StatesUS$27 billion (12.4%)
ArgentinaUS$17.6 billion (8.1%)
NetherlandsUS$9.3 billion (4.2%)
JapanUS$5.3 billion (2.4%)
ChileUS$5 billion (2.3%)
GermanyUS$4.9 billion (2.3%)
IndiaUS$4.7 billion (2.1%)
Mexico US$4.5 billion (2.1%)
SpainUS$3.8 billion (1.8%)

The Brazilian population, especially its most marginalised segments, will face difficult times in the coming years. Social conflicts will likely hasten in the context of a government that will use more repression to contain them. In this scenario, it will be critical that social movements with a progressive, transformative agenda converge in an attempt to create a unified resistance front. Besides, international solidarity will become a crucial factor in Brazilian politics, and we have to start discussing it forthwith.

____________________________________________________________

References:

[1] https://brasil.elpais.com/brasil/2017/12/13/internacional/1513193348_895757.html

[2] https://g1.globo.com/economia/noticia/metade-dos-trabalhadores-brasileiros-tem-renda-menor-que-o-salario-minimo-aponta-ibge.ghtml

[3] This information was found in an article from the Brazilian magazine Carta-Capital, which is not available anymore.

[4] https://www.bbc.com/portuguese/brasil-44028774

[5] https://www1.folha.uol.com.br/mercado/2018/12/bolsonaro-deve-gastar-bala-politica-para-aprovar-previdencia-diz-executivo-do-jp-morgan.shtml?utm_source=whatsapp&utm_medium=social&utm_campaign=compwa

[6] World Inequality Report: https://wir2018.wid.world/files/download/wir2018-summary-english.pdf

[7] A coalition of organisations active in various countries calling for the debta of the poorest countries in the world to be cancelled. For more information, see: https://jubileedebt.org.uk/

[8] https://www.nytimes.com/2018/11/20/world/americas/bolsonaro-brazil-trump.html

[9] https://www.bbc.com/portuguese/brasil-46229653

[10] (http://www.worldstopexports.com/brazils-top-import-partners/)

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