April 22, 2019


The promise and perils of Bolsonaro's Brazil: Behind the populist tweets, important reforms are taking shape (Financial Times, 4/22/19)

While the Trump administration is the most protectionist in modern US history, Mr Bolsonaro has appointed economic liberals to the most important government posts. If those people -- above all, the finance minister, Paulo Guedes -- succeed in pushing through their programmes, they could do Brazil a lot of good. In an optimistic scenario, the wilder statements of Mr Bolsonaro could then be dismissed as drawing the eyes of the crowd -- while the real work is actually going on backstage.

There is a widespread consensus in Brazil that the most important single reform is to restore some sanity to the pension system. It is so generous that it threatens to bankrupt the state. Actually pushing through rises in the retirement age and contribution rates will be politically fraught. The chances are that only a relatively modest reform will get through this year. Even that, though, will start the process of getting Brazil's finances back in order.

Beyond pensions, Mr Guedes has other reform priorities. These include trade liberalisation through the pursuit of new regional accords. The University of Chicago-trained finance minister is also intent on a programme of privatisation and reducing energy costs by introducing greater competition.

While economic liberalism is going out of fashion in other parts of the world, Mr Guedes remains an unrepentant liberal. If he can retain Mr Bolsonaro's backing and secure necessary support in congress -- neither of which can be assumed -- then his reforms should help both to stabilise and reinvigorate the economy.

Brazil certainly needs a period of stability and good governance, after a deep economic and political crisis that has seen many members of the political and business elite driven from office and, in numerous cases, imprisoned. Economic liberals and technocrats, however, comprise only one grouping within the new government. They are having to work alongside a faction of populists, who are more interested in culture wars centred around Christianity, making gun ownership easier and the extirpation of alleged "cultural Marxism" from Brazilian education. This faction includes the ministers for foreign affairs and education, as well as Mr Bolsonaro's own sons.

Posted by at April 22, 2019 3:56 AM