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The end of the “superministers”? Will Guedes part ways with Bolsonaro?

and . Apr 26, 2020
The end of the "superministers"? Will Paulo Guedes part ways with Jair Bolsonaro? Jair Bolsonaro places the keys to his administration in the hands of the military. Photo: Anderson Riedel/PR

Brazilians have barely come to terms with the resignation of Sergio Moro from the Justice Minister before rumors of another imminent cabinet exit started: Economic Minister Paulo Guedes, Jair Bolsonaro’s other “superminister.” Mr. Guedes is reportedly fuming over the government’s recently-presented Pro-Brazil Plan, dubbed by the local press as “the Brazilian answer to the Marshall Plan.”

The Pro-Brazil Plan is based on restoring economic growth through significantly increasing public investment through various infrastructure projects —the exact opposite of Mr. Guedes’s liberal brand of economics and it reportedly does not even include a timetable or even accurate amounts. The plan infuriated Mr. Guedes, who is against elevating the public deficit by carrying out such projects — and he boycotted its launch.

</p> <p>According to Brasília insider Fernando Rodrigues, Mr. Guedes told his fellow members the plan is a <a href="https://www.poder360.com.br/economia/guedes-e-equipe-economica-veem-pro-brasil-como-novo-pac-e-politica-dilmista/">throwback to the Workers&#8217; Party</a> developmentalist days: &#8220;This is like Dilma [Rousseff&#8217;s] Growth Acceleration Program. Brazil has sunk because of this kind of project left unfinished. So we&#8217;re getting out of the hole by digging deeper?&#8221;&nbsp;</p> <p>However, this harkens back on closer inspection to the type of largesse that was the mainstay of economic policy during Brazil’s military dictatorship and previously supported by Mr. Bolsonaro, before his short-lived conversion to liberal economics under the influence of Mr. Guedes.</p> <p>Brazil’s first economic strategy to counter the economic impacts of Covid-19 was a relatively orthodox one. Many of the <a href="https://brazilian.report/power/2020/04/05/brazil-moves-protect-companies-during-covid-19-pandemic/">measures initially announced</a> by the Economy Ministry and the Central Bank — such as postponing taxes, providing credit liquidity, guaranteeing working capital for entrepreneurs, and making labor contracts more flexible —&nbsp;were a clear bet in the private sector’s ability to recover and sustain the country’s economy. Even with a more conservative approach, the Covid-19 bill to the federal government amounts to BRL 568.6 billion — or 7.8 percent of the country’s GDP according to <a href="https://valorinveste.globo.com/mercados/brasil-e-politica/noticia/2020/04/13/plano-de-ajuda-soma-78percent-do-pib-mas-ainda-gera-duvidas.ghtml">estimates</a>.&nbsp;</p> <p>Dramatically increasing public spending marks an unprecedented about-turn for an administration that elected under the promise of zeroing public debt. Mr. Guedes’s brand of libertarian economics is in large part what convinced large sections of Brazilian capital to back Mr. Bolsonaro in the first place.</p> <p>With those measures, the government was trying to socialize the losses with workers and companies. “However, the effect of reduced working hours and employment contracts can be huge on the worker&#8217;s income, and this will have an impact on the consumer market and on the economy itself. This measure is palliative because it seeks to preserve jobs, minimizing losses, but will not guarantee the pattern of consumption and income that existed before the crisis,” economist Bruno Carazza told <strong>The Brazilian Report</strong>.</p> <h2>The hand is no longer invisible</h2> <figure class="wp-block-image"><img loading="lazy" width="1024" height="683" src="https://brazilian.report/wp-content/uploads/2020/04/49814534993_a5b33cd19e_k-1024x683.jpg" alt="No jacket, no shoes — and a mask. Paulo Guedes stood out during Jair Bolsonaro's televised address. Photo: Alan Santos/PR" class="wp-image-37238" srcset="https://brazilian.report/wp-content/uploads/2020/04/49814534993_a5b33cd19e_k-1024x683.jpg 1024w, https://brazilian.report/wp-content/uploads/2020/04/49814534993_a5b33cd19e_k-300x200.jpg 300w, https://brazilian.report/wp-content/uploads/2020/04/49814534993_a5b33cd19e_k-768x512.jpg 768w, https://brazilian.report/wp-content/uploads/2020/04/49814534993_a5b33cd19e_k-610x407.jpg 610w, https://brazilian.report/wp-content/uploads/2020/04/49814534993_a5b33cd19e_k.jpg 2048w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>No jacket, no shoes —&nbsp;and a mask. Paulo Guedes stood out during Jair Bolsonaro&#8217;s televised address. Photo: Alan Santos/PR</figcaption></figure> <p>Efforts centered on the private sector&#8217;s ability to lead a recovery, however, <a href="https://brazilian.report/business/2020/04/01/pandemic-or-economic-collapse-are-these-brazils-only-choices/">don&#8217;t seem to be nearly enough</a> in the face of a global economic crisis that may be worse than the Great Depression. Small- and medium-sized companies have complained that they cannot gain access to credit, as banks simply don&#8217;t want to take the risk. As we&#8217;ve shown in our <a href="https://brazilian.report/newsletters/brazil-daily/2020/03/31/brazilian-companies-hold-out-against-covid-19/">March 31 Daily Report</a>, small companies face a grim scenario. Most of them can withstand a downturn of business only for about 27 days, on average, without any credit injection.</p> <p>Two months into the coronavirus crisis, the liberal approach championed by Jair Bolsonaro&#8217;s economic team is set to be abandoned in favor of a more Keynesian Pro-Brazil Plan, sponsored by the government&#8217;s increasingly powerful military wing. This type of approach falls in line with global trends as governments across the world unveil historic stimulus plans aimed to counter the economic damage wrought by the pandemic.</p> <p>While Mr. Guedes has so far been silent about it, his underlings have taken repeated jabs at the plan. &#8220;What they are calling the &#8216;Brazilian Marshall Plan&#8217; is an embryonic idea that is different from the Economy Ministry&#8217;s plans. The original Marshall Plan depended on money from the U.S., but Brazil has no money anymore,&#8221; said Privatization Secretary Salim Mattar, for instance.</p> <p>One of the criticisms of the plan is that it would flout the limit of public expenditures imposed on the federal government by the Fiscal Responsibility Law, which prevents expenses above the budget forecasts without authorization from Congress. This rule, for example, was used to impeach former President Dilma Rousseff, in 2016.</p> <p>However, fiscal limits have been relaxed after Brazil declared a &#8220;public calamity&#8221; in March. &#8220;There is a loophole in the Fiscal Responsibility Law. Governments can overspend <em>if</em> they get a greenlight from Congress. That is what happened over the past two years. If lawmakers played ball in normal circumstances, I have no doubt they would repeat that attitude in exceptional circumstances such as the ones we have now,&#8221; says Mr. Carazza.</p> <div id="buzzsprout-player-3212182"></div> <script src="https://www.buzzsprout.com/299876/3212182-102-brazil-facing-a-job-apocalypse.js?container_id=buzzsprout-player-3212182&amp;player=small" type="text/javascript" charset="utf-8"></script> <hr class="wp-block-separator"/> <h2>Is this the end of the &#8220;superministers&#8221;?</h2> <p>When Jair Bolsonaro won the election, he anointed a status of &#8220;superministers&#8221; to add political legitimacy to his government Sergio Moro and Paulo Guedes. Mr. Moro is already out, and Mr. Guedes, judging by his appearance at the press conference called by Mr. Bolsonaro after Mr. Moro’s resignation — he was the only minister wearing a mask and was not wearing shoes —, may have one foot out the door already.&nbsp;</p> <p>The <a href="https://brazilian.report/power/2018/10/31/business-elites-jair-bolsonaro/">idea behind appointing superministers</a> is that Mr. Moro and Mr. Guedes would respectively institutionalize anticorruption and liberal economics through Mr. Bolsonaro’s government, this would provide credibility to those put off by Mr. Bolsonaro’s culture wars. Now, the anti-corruption agenda is out and seemingly the liberal agenda too, but the culture wars are still raging with more intensity than ever.</p> <p>Mr. Bolsonaro has bet his political future on handing over more of his government to the military and reverting to the type of “old politics” of pork-barrel spending and horse-trading in regards to the “Big Center.” Faced with an unprecedented global crisis, the military is simply reverting to what they know — growth through public investment in infrastructure.&nbsp;</p> <p>The president and his military allies were never strong converts to liberalism and Mr. Guedes cannot blame anyone, but himself for his political isolation, he never tried to build the type of political alliances necessary to pass his agenda and consistently chose truculence as his default response to those who questioned his actions whether they were from the media or Congress.&nbsp;</p> <p>Business elites saw Messrs. Moro and Guedes as &#8220;adults in the room,&#8221; men who could control the president&#8217;s worst impulses, but Mr. Bolsonaro chose to protect his children even if it meant Mr. Moro leaving the government. Now, he appears to have chosen his political forefathers by placing Brazil’s economy in the hands of the military instead of Mr. Guedes.

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Brenno Grillo

Brenno has worked as a journalist since 2012, specializing in coverage related to law and the justice system. He has worked for O Estado de S. Paulo, Portal Brasil, ConJur, and has experience in political campaigns.

Benjamin Fogel

Benjamin Fogel is a Ph.D. candidate in Latin American History at New York University and a Contributing Editor to Jacobin Magazine.

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