Bolsonaro year 1: Economy

. Dec 18, 2019
brazilian economy Photo: Bianca Kida

Despite political hiccups, the government managed to oversee the approval of the boldest pension reform ever passed in Brazil. That was only possible thanks to the alignment of Economy Minister Paulo Guedes and House Speaker Rodrigo Maia (who controls the House’s agenda-setting powers), which will be key to the future of Mr. Guedes’ proposals, as most of them call for constitutional changes.

</p> <p><strong>Privatizations.</strong> The Economy Minister intends to privatize 138 federally-owned companies. While that is impossible in just four years, the government managed to continue projects <a href="">inherited from the Michel Temer administration</a>, selling off 35 assets in 2019 for a total of BRL 90.7 billion in auctions, and BRL 442 billion in future investments. The government now hopes to privatize Correios (postal service) and Eletrobras (energy).</p> <p><strong>Oil &amp; gas. </strong>November&#8217;s <a href="">transfer of rights oil auctions</a>, advertised as the biggest in the world, ended as a political flop. Expected revenue was of BRL 106 billion, but sales only generated BRL 69.96 billion—of which 90 percent came from state-owned company Petrobras. That made the Economy Ministry rethink <a href="">the &#8220;sharing&#8221; model </a>created in 2010, which forces companies to share their profits with the Brazilian state throughout the term of the project.</p> <p><strong>Telecoms.</strong> After over three years of stalling, the <a href="">new legal framework</a> for telecom companies has finally passed in Congress. It replaces the <a href="">current model</a>, which is based on public concessions for landline telephone operators, for one of operating authorizations, which would give companies more freedom to set prices and choose the regions in which they want to work.</p> <p><strong>What&#8217;s to come? </strong>Proposals such as the overhaul of the state, or even a tax reform, are perhaps too contentious to pass in an electoral year such as 2020. But a few regulatory changes are considered urgent by the political establishment:</p> <ul><li><strong>5G.</strong> Expected for <a href="">late</a> 2020, the <a href="">auction of 5G frequencies</a> could put Brazil in an uncomfortable position between its two main trading partners: China and the U.S. The White House wants Brazil to ban <a href="">Chinese giant Huawei</a> from the auction—saying it poses a security threat.</li><li><strong>Sanitation.</strong> <a href="">Only half of Brazilians</a> have access to proper sanitation services, and many defend opening up the market to private players—which could bring <a href="">BRL 700 billion in new investments</a>. A bill to update regulations is <a href="">currently processing in Congress</a>.</li><li><strong>Energy.</strong> The lower house has created a special committee to propose a new, comprehensive regulation for the energy sector, in order to foster investments and lower costs. In 2019, the committee held several public hearings and is expected to continue its work in 2020.

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Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Before joining The Brazilian Report, she worked as an editor for Trading News, the information division from the TradersClub investor community.

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