Brazil’s Economy Minister threatens to quit

. May 24, 2019
economy minister paulo guedes brazil tax reform Economy Minister Paulo Guedes

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Brazil’s Economy Minister threatens to quit

Just two days before protests in support of President Jair Bolsonaro promise to escalate political tensions (more below), weekly magazine Veja publishes an interview with Economy Minister Paulo Guedes that could speed up this crisis. Here are the main takes from the interview:

</span></p> <p><span style="font-weight: 400;">If Congress passes a pension reform creating less than BRL 800bn in savings for the next 10 years, Mr. Guedes says he&#8217;ll resign. The move could irritate Congress and puts more pressure on Mr. Bolsonaro—as he was the president&#8217;s surety among markets.</span></p> <p><span style="font-weight: 400;">The Economy Minister said the pension reform </span><i><span style="font-weight: 400;">must</span></i><span style="font-weight: 400;"> pass in the lower house by the end of next month. Otherwise, Brazil will face an economic collapse as early as 2020.</span></p> <p><span style="font-weight: 400;">Mr. Guedes also suggested Brazil could follow in the footsteps of Argentina, which is undergoing a severe financial crisis (with a 55% inflation rate over the past 12 months), or even Venezuela, which is suffering from the worst humanitarian crisis of the Western Hemisphere.</span></p> <p><span style="font-weight: 400;">Mr. Guedes is right to defend the pension reform and insist on the risks Brazil takes if it stalls in overhauling an unjust and expensive social security system. The timing of such an interview could call his judgment into question. Going &#8220;all-in&#8221; by threatening to resign is a move that can only work when the minister has enough political strength. </span></p> <p><span style="font-weight: 400;">But that hasn&#8217;t been the case, not even within the administration—as Mr. Guedes has lost battles against the Agriculture Minister over protectionism and his ideas to open up the Brazilian economy to the world is not fully supported by big business in Brazil. Moreover, in an increasingly toxic political environment, such a threat could lead Congress to call his bluff.</span></p> <p><a href=";utm_campaign=news_veja_noticiasdamanha&amp;utm_medium=email&amp;mc_cid=bf055b6d1a&amp;mc_eid=3fe7a799a2">Read the interview, in Portuguese</a>.</p> <hr /> <h2>Political crisis: tensions rise</h2> <p><span style="font-weight: 400;">Jair Bolsonaro enjoyed a win in the lower house this week, with congressmen approving his provisional decree establishing the restructuring of his cabinet. But there remains a battle to be fought in the Senate—which must pass the measure before it expires on June 3. Party leaders believe that Sunday&#8217;s demonstrations against Congress and in favor of the president will worsen an already dysfunctional relationship between the two branches of government—no matter what happens on the streets.</span></p> <p><span style="font-weight: 400;">Leaders of the &#8220;Big Center,&#8221; a group of center-right parties which hold a majority in the lower house, have warned the government that, should its support base stick to its current demeanor, retaliation will be in order. They were particularly irritated by how members of Mr. Bolsonaro&#8217;s party were more worried about live streaming House proceedings to their social media followers than actually engaging in negotiations with their peers (photo).</span></p> <p><span style="font-weight: 400;">On Wednesday, a group of 15 senators met at the home of Senate President Davi Alcolumbre. Their diagnosis was that the country is heading toward an institutional deadlock. They believe President Bolsonaro &#8220;is not the kind who resigns,&#8221; but also don&#8217;t believe VP Hamilton Mourão has earned the trust of Congress yet.</span></p> <p><img loading="lazy" class="alignnone size-full wp-image-18114" src="" alt="brazil congress economy" width="1252" height="832" srcset=" 1252w, 300w, 768w, 1024w, 610w" sizes="(max-width: 1252px) 100vw, 1252px" /></p> <ul> <li><strong>Opinion:</strong> <a href=";id=730366e807&amp;e=3fe7a799a2" target="_blank" rel="noopener noreferrer" data-saferedirecturl=";source=gmail&amp;ust=1559138128028000&amp;usg=AFQjCNGMyQrC5dSEVAC2CWY32QeqUFWIzA">A government on the road to collapse</a></li> </ul> <hr /> <h2>Bolsonaro tries to win over the Northeast</h2> <p><span style="font-weight: 400;">President Jair Bolsonaro will visit Brazil&#8217;s Northeast for the first time today—the only region in which he didn&#8217;t win in the 2018 election, and where his rejection rates are highest (39%). The president will announce BRL 2.1bn for an infrastructure investment fund.</span></p> <p><span style="font-weight: 400;">Mr. Bolsonaro will also launch a development plan for the region—which is home to 55% of Brazilians living below the extreme poverty line and has the largest unemployment rates in the country. Government officials, however, have publicly expressed their concern about how to fund the plan, as public deficits have reduced the government&#8217;s investment power.</span></p> <p><span style="font-weight: 400;">Most of the state governors in the Northeast are members of the opposition. Earlier this year, President Bolsonaro said they shouldn&#8217;t ask him for money, as he wasn&#8217;t their president. &#8220;Their leader is in Curitiba,&#8221; he said, in reference to former President Lula—who remains highly popular in the region. Since then, governors have adopted a more diplomatic tone towards the administration.</span></p> <ul> <li><strong>Go deeper:</strong> <a href=";mc_eid=3fe7a799a2">How Brazil’s Northeast became Lula’s stronghold</a></li> </ul> <hr /> <h2>Also noteworthy</h2> <p><b>OECD, economy.</b><span style="font-weight: 400;"> The U.S. government has formalized its support to Brazil&#8217;s entry into the Organization for Economic Cooperation and Development (OECD)—also known as “the club of rich countries.” The move had been promised by Donald Trump in March, when President Bolsonaro visited him in Washington D.C. The Brazilian government believes joining the OECD will give the country an image boost among foreign investors.</span></p> <p><b>LGBTQ.</b><span style="font-weight: 400;"> The Supreme Court has reached a majority in favor of criminalizing homophobia and transphobia—with 6 of the 11 Justices defending the change in the legislation. The trial, however, has yet to be finished—and will resume on June 5. One it does, discriminatory actions could lead perpetrators to prison sentences of up to 3 years in jail.</span></p> <p><b>Pride.</b><span style="font-weight: 400;"> Fabio Coelho, CEO of Google in Brazil, will attend São Paulo&#8217;s LGBTQ Pride Parade on June 23, the first edition since the election of President Bolsonaro. The tech giant has a history of supporting minority causes.</span></p> <p><b>Protests.</b><span style="font-weight: 400;"> In 2016, Habib&#8217;s, a Brazilian fast food company specialized in Middle-Eastern cuisine, promoted several marketing actions inciting clients to join the protests for the impeachment of former President Dilma Rousseff—distributing signs and badges to customers who were &#8220;hungry for change.&#8221; Now, as supporters of President Bolsonaro prepare demonstrations of their own on Sunday, the chain has decided to remain silent on the issue.</span></p> <p><b>Christening.</b><span style="font-weight: 400;"> The new company created from the merger of Boeing and Embraer finally has a name: Boeing Brasil-Commercial. Executives chose a conservative name due to lingering doubts about the acquisition&#8217;s impact on the market and the fear of touching a nerve among Brazil&#8217;s political class. That explains the Portuguese spelling of Brazil (with an &#8216;s&#8217;), followed by an English word.</span></p> <p><b>Verbal abuse.</b><span style="font-weight: 400;"> A judge gave President Bolsonaro 15 days to pay BRL 10,000 in damages to Congresswoman Maria do Rosário. He was recently convicted for intentionally inflicting emotional distress after saying Ms. Rosário wasn&#8217;t &#8220;worth raping.&#8221; The president will also have to publish an apology on his social media channels and a nationwide newspaper.

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