Image copyrightReuters Image textsSupporters of Jair Bolsonaro have trusted him but will he be able to deliver? If stock markets…
If stock markets and currencies are something to go for, Brazil’s economy at first glance would seem to be one of the best investments for investors at the moment.
While global markets have experienced sharp downturns since September, Brazil’s stock market and currency have both increased by 1
3% over the same period.
Market analysts say that this is just the beginning of the “Bullsonaro wave”, the hausful trend of Brazilian shares driven by the right-wing right-wing president Jair Bolsonaro. 19659007] On January 1, Bolsonaro will be sworn as president of Latin America’s largest economy, but will he be able to keep that feeling in business?
Saying that the views of Jair Bolsonaro are shared is a bit of an understatement. His views on women, race, religion, gun control and LGBT rights have caused anxiety during the campaign.
But among market players, the 63-year-old former captain of the army is much less controversial. The vast majority of members of business and financial society would see him defeat Fernando Haddad, his rival from the left-wing party, at the vote.
The Labor Party ruled Brazil for 13 years and had power for a time of great prosperity. However, there is a broad consensus among the business community that the party was almost alone responsible for the country’s worst recession in history.
The hardest criticism is directed against former president Dilma Rousseff and her spending principles, making Brazil’s tax surplus a balloon deficit that now complicates growth and employment.
Business leaders historically faced pro-market center-right party PSDB, which worked poorly this year. When Jair Bolsonaro appeared to be the strongest anti-Workers Party candidate, companies enthusiastically embraced their campaign.
Now that Bolsonaro has been chosen, optimism marks skepticism. 19659022] Media playback is not supported on your device
Mediaskrift The right-hand right-wing Jair Bolsonaro has won Brazil’s presidential election. But who is he?
To lead the economy, Bolsonaro – who himself has said he does not understand much about the economy – has chosen Paulo Guedes, a successful banker with a long history in the financial markets.
Guedes has promised a variety of pro-market reforms – the central bank’s formal independence, privatization, reduction of tax exemptions to industries, tax simplification and pension reform.
But it will require a hard job to reform Brazil’s economy.
Brazil is still one of the world’s most closed economies and many of the industries that support Bolsonaro’s rise to power are likely to resist reforms that eliminate state subsidies, increase international competition or promote tax increases.
Bolsonaro and Guedes also promise a new comprehensive reform of the pension system, a system that strongly contributes to Brazil’s fiscal problems.
The Brazilian Congress has previously resisted some profound changes in pension rules, even in times when the current President Michel Temer could wave the promise of protection and other benefits in front of Congress members in exchange for the votes.
Bolsonaro is likely to face an upward battle to review its reforms. Not only has he yet come up with a new pension plan, he has to push it through a congress where he lacks the majority. And he has promised to do so by introducing a new approach to negotiating with legislators and judging the old ways of swarm policy.
To make matters worse, before his victory in the Sunday election, there was infighting in his camp.
During the campaign, several of his allies suggested that Bolsonaro adopt policies such as collecting new taxes or stopping wage bonuses at the end of the year.
Bolsonaro had to come out and refrain from his allies but
Shortly after the election, Paulo Guedes spoke to the press about his plans to privatize companies and to reduce Brazil’s budget from the current deficit of $ 37 billion (29 billion) “to zero” 2019 through cuts. Again there were no details.
“We have got an overview but we have not received any details,” said Zeina Latif, economist at XP Investimentos.
International market analysts note. “Uncertainty remains on the pace and depth of reform at a time when deficits and debt pressures are high,” wrote the rating agency Fitch on Monday.
“How effective can the new administration use the honeymoon to prioritize and pass The economic agenda is still uncertain.
” The presidential elections’ ability to form an effective coalition to pass key economic bills at the beginning of the period will be one important early meter for the overall commitment …
The exact details of how his administration plans to achieve these goals is limited, “concluded Fitch.
Moody’s vice president Samar Maziad also secured his bets:” Even if we expect a wide political continuity, the ability to build support in Congress to approve tax reform is still untested. “
Brazil’s economy has deep economic problems. GDP declined by almost 8% during the recent recession and recovery is still very modest.
More More than 12 million people are out of work and informalism is growing labor market.
It will take a lot of work for “Bullsonaro wave” in the financial markets to produce ripples in the real economy.