Brazil’s Bolsonaro: How’s He Doing After 100 Days? Part III – Economics

Opinion by Michael Royster

São Paulo, SP – It is almost ritualistic for pundits to analyze presidential performance and public opinion during a president’s first 100 days in office; the Curmudgeon has been unable to resist the temptation.

During his campaign, Bolsonaro repeatedly admitted he knows nothing about economics. So, as was the case with foreign affairs and education policy, Bolsonaro has delegated his policy-making power over a crucial part of Brazil’s economy to a guru: in this case his “one stop shop” Paulo Guedes, a Chicago School economist.

The new Finance “Superminister” adheres to a conservative economic theory, one that consistently applies economic liberalism and a free market approach to every aspect of the economy – even social security. Monetary control is key, rather than questions of taxation, pricing, or income inequality.

It is perhaps significant that Bolsonaro has already visited Chile. This country, assisted by Nobel Prize-winning economist Milton Friedman, wholeheartedly adopted Chicago School economics under Pinochet. While the Chilean economy has thrived, income inequality has also grown, and Chilean society is far from unanimous about approval.

The BOVESPA Stock Market index rose almost 20% between Bolsonaro’s election and his taking office; since then, it’s gone down around 10%. March and April have been a rollercoaster. The US dollar rose slightly to almost R$4,00 but has settled around R$3,80.  Unemployment remains stubbornly high, as growth projections decline and inflation projections increase.

Business seems largely satisfied so far but is still waiting on the fulfillment of the Minister’s two principal campaign promises: social security reform and privatizations. Both of those face increasing opposition from Congress, whose members know the measures will be unpopular with voters and with the military, upon whose support Bolsonaro’s government depends.

Previously scheduled for the first semester of 2019, social security reform now appears to have been pushed back by Congress until the second semester, as Congressional power brokers continue to seek benefits for themselves and their constituencies before they will agree to the reform.

The military, for its part, has been waffling in its attitude to the reform, because Minister Guedes’ draft foresees that their retirement benefits, which are now far more generous than those of private citizens or even civilian government officials, will be reduced. Indications are there will be generalized (no pun intended) pay increases for military personnel as a quid pro quo.

Privatizations were all the rage 20 years ago, but have not met with much popular support recently. There are many who believe that Vale S.A. would not have allowed its operations to cause the Mariana and Brumadinho disasters had it remained a state-owned company; tellingly, electricity is now more costly than before privatization of the utilities.

And, surprisingly, we have just seen Bolsonaro himself oppose one of Guedes’ market-based priorities – allowing Petrobras to set fuel prices at its refineries when and where it wishes. Last week, Bolsonaro “suggested” Petrobras should postpone a projected price increase for diesel fuel. As many observers have pointed out, Dilma did that so often that it became a reason for her impeachment.

RATING: (7- out of 10, tending sharply downward if Congress nixes the reforms)