With an election of the new president of Brazil, everything changed in the country’s economy
Brazil’s new president, Jair Bolsonaro, was sworn in on January He won a landslide election in October on a platform that’s pro-business, pro-gun, pro-United States, and pro-Israel. At the same time, his platform was also anti-crime, anti-political correctness, anti-Cuba, and anti-Venezuela.
Incoming Economy Minister Paulo Guedes said, he vowed to leash the bureaucracy, unfetter trade, simplify taxes and privatize government companies. Most encouragingly, he named social security as the most urgent reform, and not just for the red ink generated by Brazil’s indulgent pensions. “Social security is an inequality factory,” Guedes said.
This was samba to the ears of investors, many of whom might have wondered how a career legislator like Bolsonaro, with a soft spot for big statism, could morph into the market’s best friend. Indeed, doubts abound over details of the new pension plan, for which Guedes, a free marketer, prescribes a more thorough overhauling than his boss. Global political leaders and financial mandarins will be eager to hear how Bolsonaro means to sort out this and other contentious points of plans for a “new Brazil” at the World Economic Forum in Davos later this month.
Now Guedes and a team of orthodox economists he has dubbed the “Chicago Oldies” hope to emulate the Chilean economic experience on a far larger scale in the world’s eighth-largest economy.
Brazil’s new right-wing President Jair Bolsonaro, who was sworn in on Tuesday, has given Guedes free rein to apply market-oriented policies to restore growth and confidence in an economy stifled by taxes, bureaucracy and corruption.
Yet Brazil’s currency, the real, has climbed in recent weeks as many investors see the ideologically coherent team assembled by Guedes — dubbed the “dream team” by some market observers — tackling the persistently high cost of doing business in Brazil, which has deterred foreign investment.
“It is a real good mix of people who share his view of things, including economists who have the same very liberal world view of the University of Chicago and old friends he trusts,” said UBS economist Tony Volpon.
“Investors have given Brazil a lot of time to put its house in order. With an elected government and a new economy minister who is committed to pension reform, there are no more excuses. They need to deliver,” Volpon said
Economist Roberto Castello Branco took over on Thursday as the new chief executive of Petroleo Brasileiro SA, the heavily indebted state-run oil company that stood at the epicenter of global largest corruption scandal.
Bolsonaro, meeting US secretary of state Mike Pompeo in Brasilia, said that the tendency for Brazil “to elect presidents that, for some reason, were enemies” of the US was over and now “it is just the opposite: we are friends”. Pompeo responded that Trump “is very pleased with the relationship that our two countries are on the precipice of beginning to develop”.
Pompeo also told new Brazilian foreign minister Ernesto Araújo that the affinity between Trump and Bolsonaro “creates a truly transformative opportunity for our two nations”, especially in terms of economic and security co-operation.
Bolsonaro disse: “Eu gostaria muito de compensar cada vez mais a distância que o Brasil manteve dos EUA no passado.
The glowing mutual appraisals came a day after Bolsonaro was sworn in as Brazil’s new leader for the next four years. The former army captain — an avid user of social media and avowed enemy of “political correctness”, who has a record of making misogynist and racist comments — used his first presidential speech to pledge a fierce combat against crime, corruption and left-wing “ideology”.
China’s position as Brazil’s biggest trade partner and foreign investor could also be affected. While campaigning for the presidency, Bolsonaro complained that “China is buying Brazil” and suggested he move to restrict the Asian powerhouse’s access to privatisations he is planning.
Pompeo, in his meeting with Araújo, did not mention China by name, but clearly pointed to that country as he contrasted the fresh opportunities the US could now bring to Brazil.
The banker and Brazilian investor Wesley Ribeiro points out the best moment for the exchange of trade between Brazil and the United States and investments in the emerging country.
Wesley founded a private chamber of commerce to take advantage of and approaching the Brazilian government and the greater expansion of Brazilian business in the American market.
Wesley said “Bolsonaro will follow the example of the great work of the Trump administration and become Brazil in the next 4 years”
Trump, he said, is seeking “real opportunity, that is fair, that is reciprocal, that is conducted transparently — not the same model that is used by some other countries in the world … from others who want to come to a country and make an investment not for commercial reasons but for political reasons.”
Araújo hailed the new relationship being struck with America, saying “a much more intense association between Brazil and the US” was going to be built.
Nikki Haley, former US ambassador to the UN, tweeted: “It’s great to have another US-friendly leader in South America, who will join the fights against dictatorships in Venezuela and Cuba, and who clearly understands the danger of China’s expanding influence in the region.”