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Covid-19 inequality could strike down Brazil’s Economy Minister

inequality Economy Minister Paulo Guedes. Photo: Sérgio Lima/Poder360 Economy Minister Paulo Guedes. Photo: Sérgio Lima/Poder360

It is no secret that despite being a significant economy with medium-level GDP per capita, Brazil is one of the least equal countries in the world. This is a country where, according to a 2019 Oxfam report, the top 1 percent of wealthiest citizens controls 29 percent of the national wealth. This imbalance of income cleaves an immense opportunity gap, with a mere two-kilometer difference in a Brazilian’s address potentially implying a 20-year increase (or decrease) in life expectancy.

This malaise is shown in an even more real and morbid light by the coronavirus pandemic.

Looking at the megacity of São Paulo as an example: if the municipality were divided into 50 regions according to income, Covid-19 mortality rates jump fivefold from the top group to the bottom. Younger people are also at a much higher risk in lower-income areas, under 75s are twice as likely to die in the poorest third of neighborhoods.

</p> <h2>The vicious cycle</h2> <p>Several potential causes for this <a href="https://brazilian.report/society/2020/05/10/brazilian-data-shows-that-race-matters-in-the-covid-19-fight/">inequality</a> have been discussed, and there is no doubt that economic and sociological variables play a role. On the more palpable side, I believe that Brazil&#8217;s extremely regressive tax structure is decisive: 50 percent of tax revenue is charged on consumption, while only 25 percent is levied on income and wealth, creating an unfair system for poorer families.</p> <p>Brazil cannot even dream about entering the developed world without addressing these issues and breaking its vicious cycle of inequality fueling the opportunity gap, which then feeds inequality. A 2017 <a href="https://noticias.unb.br/117-pesquisa">study</a> from the University of Brasília showed that performance on national university entrance examinations is 85 percent determined by students&#8217; socioeconomic class.&nbsp;</p> <p>This vicious duet between inequality and opportunity is what has been driving me in recent years, not only out of social sympathy but, as an entrepreneur, out of self-interest. We are missing a great opportunity if we do not consider this potential market.</p> <p>The first challenge to address these problems is to help the Brazilian public become aware of the cause and effect of each issue. In opinion polls, corruption is consistently ranked as the country&#8217;s number one problem, while insufficient social problems rank low, around the fifth position.&nbsp;</p> <p>Part of this perception is linked to the success of the media-savvy Operation Car Wash investigation, which was able to tackle impunity but suffocated the debate about other major problems in Brazil, such as the inequality of wealth and opportunities. In the public eye, the country&#8217;s disease was corruption, pure and simple.</p> <h2>Inequality not on the agenda for Bolsonaro</h2> <p>The Jair Bolsonaro administration, a symptom of the Car Wash fallout, has made it clear that tackling inequality is not among its priorities. Some months ago, the ultraliberal <a href="https://brazilian.report/business/2018/11/29/chicago-boys-chile-brazil-paulo-guedes/">University of Chicago-trained</a> Economy Minister Paulo Guedes bluntly told reporters not to &#8220;count on us to lower inequality in Brazil.&#8221; And he meant it. As an example, the country&#8217;s pioneering Bolsa Família program — one of the most renowned income transfer initiatives in the world — has been suffering constant cutbacks since the sitting government came to power.&nbsp;</p> <p>The irony is that, due to the disastrous and slow coronavirus response, Jair Bolsonaro&#8217;s popularity is taking a very steep dip among the better-off, and growing among poorer populations, thanks to the BRL 600 (USD 112) <a href="https://brazilian.report/newsletters/brazil-daily/2020/05/20/emergency-salary-is-giving-jair-bolsonaro-extended-life/">monthly stipend being paid by the government</a> to the unemployed and the millions in the informal labor market.</p> <p>But while the president is battling for political survival, plans to extend this emergency payment are taking a back seat and coming up against Mr. Guedes&#8217; economic standpoint on wealth transfers.</p> <h2>Dilemma for the Economy Minister</h2> <p>During an infamous April 22 cabinet meeting — footage of which was made public as part of an investigation into President Bolsonaro — the economy czar said that the BRL 600 payment is making life &#8220;too easy&#8221; for these populations, arguing that the stipend should be reduced to just BRL 200 and extended for <a href="https://noticias.uol.com.br/colunas/reinaldo-azevedo/2020/05/20/guedes-admite-prorrogar-auxilio-emergencial-mas-por-r-200.htm">another three months only</a>. At the same meeting, Mr. Guedes stressed that his package of orthodox economic reform must continue one the coronavirus crisis passes.</p> <p>Mr. Guedes&#8217; slow response to the pandemic in terms of support of the Brazilian economy is deeply rooted in his economic beliefs. His first reaction was to keep pressing for reforms to shield Brazil from the crisis, a strategy that made no sense and was lambasted by Congress.</p> <p>The Economy Minister now stands at a crossroads. When high-profile cabinet ministers Luiz Henrique Mandetta (Health) and <a href="https://time.com/5840854/sergio-moro-brazil-interview/">Sergio Moro</a> (Justice) left the government last month, there were rumors that Mr. Guedes would be the next to jump ship before he was pushed. Now, his department may be used by President Bolsonaro as a means of political survival, with the suggestion that the government may recreate the Labor Ministry to appease new congressional allies, stripping Mr. Guedes of some of his power. Will he go back on his economic creed?&nbsp;</p> <p>Or will he be the next cabinet member to cut ties with President Bolsonaro?

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Paulo Dalla Nora Macedo

Paulo Dalla Nora Macedo is an entrepreneur in Brazil, a member of the Young Presidents' Organization (YPO), and co-founder of the non-partisan political movement Política Viva.

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