Brazil’s free market agenda is questionable as the president seeks reelection

São Paulo — Brazilian Minister of Economy Paulo Geddes, who promised to lead the free market revolution in Latin America’s largest country just two years ago, is increasingly forced into damage management as President Jail Bolsonaro deepens his role in the economy. It came to be.

Geddes’ mission to reduce public debt and build investor confidence in Brazil was hit after a country’s right-wing leader nominated a new chief of a state-owned oil company on Friday.

Petroleo Brasileiro

SA, or Petrobras, has spurred investors’ escape from national stocks and currencies this week.

Former Army Captain Bolsonaro, who publicly said he knew nothing about economics, focused on next year’s reelection, said. Nominated fellow military personnel After the current CEO refuses to cut fuel prices, he steers the company.

Petrobras said it would schedule Tuesday Meeting to evaluate the nomination of the president Of the new CEO.

“It’s clear that the president himself doesn’t have the commitment to the liberal economic agenda that people once thought,” said Bernard Appe, a former economic secretary to the ministry.

Petrobras refinery in Rio de Janeiro. The company said it would meet to evaluate the nomination of President Jair Bolsonaro’s new CEO.


Andre Coelho / Bloomberg News

Gedes, a 71-year-old investment banker who first entered politics in 2019 when Bolsonaro took office, has been silent since the president nominated General Joaquin Silvaerna as CEO of Petrobras on Friday night. .. Mr. Bolsonaro and Mr. Guedes declined the request for comment on Wednesday.

A person near the minister said the University of Chicago-trained economist had no intention of abandoning Mr. Bolsonaro.

The minister knows that his departure will only surprise investors even more and will improve Brazil’s business environment, including simplifying Brazil’s Byzantine tax system and introducing new rules to curb government spending. We believe we have the opportunity to carry out a series of reforms for. A person familiar with the minister’s ideas said.

“Of course he wasn’t happy with what happened [at Petrobras]He added that because oil producers are under the jurisdiction of the Ministry of Mines and Energy, they felt less responsible to oil producers than other areas of the economy.

In an interview, Brazil’s Minister of Mining and Energy, Navy Admiral Bent Albukerk, said the government was only seeking greater stability in fuel prices, and the government would intervene in Petrobras and force subsidies to be paid. Denied to do.

“It’s the president’s privilege to appoint shareholders who like them,” he added, adding that the administration is looking at ways to avoid sharp fluctuations in fuel prices, such as creating a fund that can be announced within two months. ..

In an interview with The Wall Street Journal in October, Mr. Guedes explained how long he had planned to enter politics, and his expectations for what he can achieve are high.

Geddes, co-founder of BTG Actual, Latin America’s largest investment bank, said he was inspired by Ronald Reagan and Margaret Thatcher to reduce the size of Brazil’s bloated government.

“We unleash the power of the market,” Guedes said in defense of the president.

“Bolsonaro really wants to change the country,” he said. He explained that he sees the Bolsonaro administration as an alliance of economic liberals and conservatives and the best way to break the way of the two free-spend left-wing presidents who preceded Mr. Bolsonaro.

Guedes’ support during Bolsonaro’s campaign was essential to winning the votes of centrists and business leaders and sealing the conservative victory.

But others see Guedes’ promise as naive and unrealistic, a sign of the spirit of business leaders who previously did not have to work with politicians.

Luis Carlos Mendonsa de Barros, former head of the Brazilian national bank BNDES, told the Forya de São Paulo that “he created expectations for a liberal revolution that he had no way to do. ” “We stared and laughed. Anyone who has experienced the limits of politics knows what I mean.”

Mr. Bolsonaro’s administration has made a good start in the eyes of investors. In his first year in office, the country has gone through a long-awaited overhaul to reduce Brazil’s generous pension system and is estimated to save about $ 200 billion in public accounts over a decade.

The president appointed another Chicago graduate, Roberto Castello Branco, as Chief Executive Officer of Petrobras, filling the administration with market-friendly figures. Meanwhile, Guedes turned to the privatization of hundreds of state-owned enterprises, from banks and utilities to national post offices.

Progress was Pandemic hit..

Covid-19 hit Brazil, 250,000 people were killed, causing widespread criticism of Mr. Bolsonaro’s response to the crisis. Faced with increasing demands from political opponents for impeachment, fire department leaders returned to populist movements to please his political foundation. The strategy is that analysts have marked his almost 30 years as a member of parliament.

If successful, Mr Bolsonaro will ensure his short-term political survival and increase his chances of being reelected in next year’s presidential election, political scientists said.

Mr. Bolsonaro passed an executive order to relax gun ownership rules in favor of his conservative support, while supporting a generous payment program for the poor. Guedes strives to protect the country’s financial health and has offered to pay less than $ 40 per person per month. The administration has settled down to three times that number.

After spending $ 10 billion a month on payments during last year’s pandemic, the country is preparing to resume payments in the coming weeks. Brazil released figures on Wednesday showing that public debt broke the record in January, reaching about $ 930 billion.

However, many investors see Bolsonaro’s Petrobras nomination as the most daring move to date, responding to his administration’s promise to reduce the size of the nation in the economy and to state-owned oil companies in the international market. It is incompatible with the president’s own pledge to set prices.

On Monday, the first full day of the deal after Mr. Bolsonaro nominated General Silva Erna, investors fled Petrobras, clearing the company’s market value by about $ 13 billion. This is the second largest daily loss since the 1990s.

The nomination follows a dispute between Mr. Bolsonaro and current CEO Petrobras over rising fuel prices, raising concerns that the president intends to force the company to fund fuel subsidies. I did. Under the leftist regime.

Oil producers’ stocks have recovered to some extent since then, but economists said it would take a long time to repair damage to the company’s and country’s reputation.

“Which Brazilian or foreign investor would want to buy Petrobras shares?” Brazilian economist and former finance minister Mailson da Nobrega praised Geddes’ optimism. “I think [Mr. Guedes] He hopes he can push forward with reforms and leave his legacy, but it’s getting harder and harder. “

Write to Luciana Magalhaes at And at Samantha Pearson

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Brazil’s free market agenda is questionable as the president seeks reelection

Source link Brazil’s free market agenda is questionable as the president seeks reelection

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