Never waste a good crisis? Someone should tell Jair Bolsonaro

. Mar 10, 2020
Jair Bolsonaro "Not politically correct," shows Jair Bolsonaro. Photo: Alan Santos/PR

The Brazilian economy took a pounding on Monday morning, with benchmark stock index Ibovespa tanking 10 percent and triggering a circuit breaker, before falling further to close out the day at 86,067 points—down 12.16 percent. The U.S. Dollar hit highs of BRL 4.79 against the Brazilian Real, now hovering around BRL 4.72. And to compound this perfect storm of instability, President Jair Bolsonaro has endorsed calls for street protests this Sunday, organized by groups that openly advocate for the closure of Congress and the Supreme Court.



The financial

plunge around the world can be credited to two factors: Saudi Arabia&#8217;s slashing of oil prices to around USD 30.00 a barrel, and the <a href="https://brazilian.report/newsletters/brazil-daily/2020/03/10/crisis-new-black-monday-react-oil-coronavirus/">continued widespread panic over the Covid-19 outbreak</a>. Such a crash is felt particularly hard in Brazil, which has an economy that is over-reliant on global trends and <a href="https://brazilian.report/business/2019/01/15/commodity-prices-crisis-brazil/">commodity prices</a>.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/1541104"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p>Amid the storm, however, Economy Minister Paulo Guedes pleaded for calm, saying that he treats the crisis with &#8220;absolute serenity.&#8221; He went on to suggest that Brazil is moving in the opposite direction to other markets around the world and that the country is in &#8220;full recovery&#8221;—an opinion which was hard to stomach for local economists, looking on agape as Brazil&#8217;s financial indicators plummeted.</p> <p>Meanwhile, House Speaker Rodrigo Maia—tweeting on Sunday evening as analysts warned of an incoming crash—declared that &#8220;the crisis could be an opportunity [for the Executive and Legislative branches] to join forces and seek necessary and urgent solutions.&#8221;</p> <p>So, with the <a href="https://brazilian.report/power/2020/02/27/congress-stronger-executive-gets-angrier-bolsonaro/">fraught relationship between the government and Congress</a>, could this latest Black Monday bring about a truce between these warring factions? Not quite, says Thomas Traumann, political commentator and author of &#8220;The Worst Job in the World,&#8221; the 2018 bestseller on Brazilian economic policy.</p> <div id="buzzsprout-player-2913238"></div> <script src="https://www.buzzsprout.com/299876/2913238-98-should-congress-impeach-jair-bolsonaro.js?container_id=buzzsprout-player-2913238&amp;player=small" type="text/javascript" charset="utf-8"></script> <hr class="wp-block-separator"/> <p>&#8220;Winston Churchill said to &#8216;never waste a good crisis,&#8217; and this is the rationale that Paulo Guedes and Rodrigo Maia are following,&#8221; Mr. Traumann tells <strong>The Brazilian Report</strong>. &#8220;It is that in times of great pressure, they should join forces and pull in the same direction.&#8221;</p> <p>However, Mr. Traumann—who served as Communications Minister under President Dilma Rousseff—points out one major flaw to this potential ceasefire. &#8220;The problem is you have a president who is openly campaigning against Congress, and his sons and supporters are doing the same thing.&#8221;</p> <h2>Reforms a bitter pill for Bolsonaro</h2> <p>The consensus among financial commentators is that foreign investors will only feel comfortable keeping their money in Brazil if they see some progress on the government&#8217;s promised wave of structural reforms. After approving a pension reform last year and seeing the stock market hit all-time highs—which have now been completely wiped out in the space of two weeks—the Bolsonaro government pledged to continue this agenda by overhauling the country&#8217;s tax system and its bloated public service.</p> <p>However, progress on both of these fronts has stalled, and the government has yet to submit either reform proposal to Congress for deliberation. &#8220;The Economy Ministry has had its public service reform ready since November,&#8221; explains Mr. Traumann. &#8220;Every week, the government says they will submit it in the next few days. Does anyone believe them? I don&#8217;t think so.&#8221;</p> <p>A widely held belief among political analysts is that President Jair Bolsonaro has no interest in putting forward structural reforms which—despite being demanded by the financial sector—are deeply unpopular in a number of important sectors for Mr. Bolsonaro&#8217;s popularity.</p> <div id="buzzsprout-player-1516360"></div> <script src="https://www.buzzsprout.com/299876/1516360-72-can-brazil-approve-a-tax-reform.js?container_id=buzzsprout-player-1516360&amp;player=small" type="text/javascript" charset="utf-8"></script> <hr class="wp-block-separator"/> <p>The public servant lobby is among the biggest in Brasilia, and there is widespread concern in industrial sectors over how they would be affected by altering Brazil&#8217;s tax system. As a result, the president&#8217;s office hasn&#8217;t lifted a finger to pursue these reforms, and investors are beginning to take note.</p> <p>Delays in the reform process are compounded further by 2020 being an election year. Brazilians will go to the polls on October 4 to choose their new mayors and city councilors, meaning the legislative calendar will be severely reduced.</p> <p>As of June, members of Congress begin to return to their constituencies and legislative work goes on its mid-year recess in July. When they return, all attention will be focused on campaigning for municipal elections, and no significant legislature will make it through Congress.</p> <p>Therefore, if the government wants to get anything done between now and next year, reforms have to be passed in under three months—a gargantuan and likely impossible task.&nbsp;</p> <h2>Tensions come to a head on Sunday</h2> <p>Amid this scenario of stunted financial recovery, <a href="https://asia.nikkei.com/Business/Markets/Black-Monday-2020-How-it-happened-around-the-globe">floundering stock markets</a>, and an inactive economic agenda, the situation has been aggravated even further by street demonstrations scheduled for this Sunday around the country. Supported openly by Jair Bolsonaro, the protests&#8217; only concrete demands come from authoritarian groups who argue in favor of shutting down Congress and the Supreme Court.</p> <p>What could have been fringe, <a href="https://brazilian.report/power/2020/02/26/bolsonaro-backs-anti-congress-protest-opponents-want-impeachment/">largely pro-government protests have now taken on monumental importance</a>, thanks to Jair Bolsonaro&#8217;s support and the current economic climate. If the demonstrations are a failure, with low turnouts, the president will lose a huge amount of influence. If they are large, Congress is unlikely to entertain any of the government&#8217;s proposals for the rest of the year. Conversely, if Mr. Bolsonaro were to retract his support for the demonstrations, he risks alienating his most dedicated supporters.</p> <p>&#8220;The best way to act against a crisis would have been to provide a minimum of political stability,&#8221; explains Mr. Traumann. &#8220;And that&#8217;s been canceled with these protests on Sunday.&#8221;</p> <p>&#8220;We&#8217;re going to have a dysfunctional government, with a dysfunctional Congress, in the middle of an economic crisis that is going to be very real indeed.&#8221;

 
Euan Marshall

Euan Marshall. Originally from Scotland, Euan Marshall is a journalist who ditched his kilt and bagpipes for a caipirinha and a football in 2011, when he traded Glasgow for São Paulo. Specializing in Brazilian soccer, politics and the connection between the two, he authored a comprehensive history of Brazilian soccer entitled “A to Zico: An Alphabet of Brazilian Football.”

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