Brazil’s New Leader Strives to Break Old Patterns

Jair Bolsonaro hopes to pull the country out of economic crisis and political scandal with ambitious reform initiatives. It won’t be easy.

 

by Allison Fedirka
November 8, 2018

Summary

Brazil punches well below its weight class in the geopolitical ring. It is the world’s fifth-largest country by landmass and by population, and at $1.91 trillion, its economy ranks ninth globally. But political turmoil and structural economic issues have prevented the country from making the most of its size and abundant resources. Though high commodity prices fueled a boom in its economy during the 2000s, Brazil failed to turn its financial gains into a more prominent role in international affairs. Instead, it has found itself embroiled in a protracted political and economic crisis that drove some observers to speculate that this year’s elections could be a turning point for the country.

The recent presidential elections in Brazil did, indeed, bring a change. Jair Bolsonaro, a right-wing candidate, won the race in a runoff Oct. 28, having campaigned as an alternative to the status quo and a repudiation of traditional political parties. His fiery rhetoric, including derogatory comments targeting various groups in Brazil, made a name for Bolsonaro in and beyond Brazil. And in the end, his promises to reform security, the government and the economy and to redirect foreign policy brought him to victory in the presidential race.

But winning an election and governing are two different things. Now that he has secured the presidency, Bolsonaro will face the challenge of bringing his reforms to fruition, while Brazil’s future hangs in the balance. This Deep Dive takes a look at the obstacles that lie ahead of the Brazilian president-elect and his prospects for overcoming them.

 

Making Good on Campaign Promises

Bolsonaro’s campaign focused on economic, governmental, security and foreign policy reform. To address the structural economic problems that have slowed Brazil’s recovery from a two-year recession, he has embraced policies to open up the economy, boost investor confidence and consolidate the government’s finances. Bolsonaro wants to support businesses by reducing bureaucracy, eliminating non-tariff trade barriers and simplifying Brazil’s cumbersome tax code. He also intends to cut down on government expenses by privatizing state-owned companies, reducing obligatory spending, introducing capitalization into the pension system and raising the retirement age. In the domestic political arena, meanwhile, Bolsonaro advocates a leaner government, with a smaller presidential Cabinet and Congress, and rejects the use of political appointments to build alliances. He has called for a tougher stance on crime – including corruption, which hamstrung the last two governments – as well. To that end, he has vowed to support measures to crack down on graft and violent crime and to loosen gun control laws so that citizens can better protect themselves and their property. As for foreign policy, Brazil’s new president-elect wants to facilitate his country’s economic goals by engaging more with open market economies, such as the United States and Chile, and less with longtime political allies like Venezuela and Cuba.

However promising these initiatives sounded to his supporters, Bolsonaro will be only as successful in realizing them as the rest of the country allows him to be. Governing in Brazil is not the exclusive province of the president, but a joint effort with the legislative branch, state governments and civil society. Presidents’ relationships with and influence in each of these areas largely define their ability to govern. And the deck is stacked against Bolsonaro on at least two fronts: Brazil’s public is polarized and its political system fractured.

Many of the reforms Bolsonaro wants to enact risk provoking public backlash – and jeopardizing his ability to maintain and expand his support among Brazilian voters. Appealing to a wider voter base would be an uphill battle for Bolsonaro under the best of circumstances because of long-standing rifts in the country based on wealth and geography. For over 200 years, Brazil’s wealth has been concentrated in its southern half, particularly in the southeast region. (The difference was so pronounced that political parties during the First Brazilian Republic in the late 19th and early 20th centuries centered on geographic location.) Mineral deposits and agricultural production in the area initially explained the disparity in wealth distribution, but industrialization and the discovery of oil deposits in southern Brazil widened it. Declining public investment in the 1980s, on the heels of an economic boom during the previous decade, exacerbated the income and social inequalities between north and south, which manifested unmistakably in election results starting with the 2006 presidential vote.

Bolsonaro’s performance in this year’s election reflects the enduring divisions between north and south, rich and poor. But more than that, it reflects the unique considerations that drove voters to the polls, or kept them away, in this year’s race. Disappointment with traditional politics and concerns about safety were the primary factors weighing on the Brazilian electorate this year – to the extent that most voters claimed they didn’t care about candidates’ platforms. Just two weeks before the second round of elections, a Datafolha survey revealed that only 13 percent of Bolsonaro’s supporters were voting for him because they agreed with his proposals. Another 18 percent said they supported Bolsonaro because they wanted better security, while 10 percent cited his stance on corruption. At 30 percent, however, the largest share of his supporters said they backed him because they wanted a change and rejected the Workers’ Party, the party of Bolsonaro’s opponent in the runoff, Fernando Haddad. By the same token, one in five Haddad voters said they had chosen him as their candidate simply because they didn’t want Bolsonaro to win.

Despite earning 55 percent of the vote, Bolsonaro won a closer race than it might seem at first glance. The valid vote failed to account for the 20 percent of Brazil’s voting population that abstained from the elections. With those voters factored in, Bolsonaro earned the support of about 40 percent of the electorate. Furthermore, he lost ground to his opponent in the second round of voting, capturing only about one-third of the 26.4 million votes that were up for grabs from other candidates. Haddad, by contrast, picked up nearly 16 million more votes in the second round than he did in the first – still not enough, of course, to beat Bolsonaro. More important, Bolsonaro’s voter base has little to no overlap with that of Haddad; winning over the other side, then, will be no small feat for the president-elect.

Winning allies in the government won’t be much easier. In Brazil’s multiparty system, where more than a dozen political parties are represented in governorships or in the National Congress, coalition-building is a necessity for successful governing. Some political parties base their entire strategy off this reality, working to become an invaluable coalition partner, and not the ruling party itself. The sheer number of political parties represented in Brazil – and Bolsonaro’s pledges on the campaign trail not to use political favors to win allies – has cast doubt on the president-elect’s ability to achieve his agenda.

Although he has the support or cooperation of governors in 15 of Brazil’s 27 states – including the three largest, Rio de Janeiro, Minas Gerais and, with some reservations, Sao Paulo – Bolsonaro could have a harder time with the Congress. The 513-member Chamber of Deputies will contain representatives from 30 parties next year, a record number since the Third Republic began in 1985. Similarly, 21 parties will have representatives in the Senate, up from 15 after elections in October. Bolsonaro’s Social Liberal Party, or PSL, lacks a majority in both houses of Congress; even counting its allies from other parties, the PSL is one vote shy of a majority in the Chamber of Deputies, and it’s a full eight seats short in the Senate. Members of Congress can change parties once in office or break with party lines during a vote. Nevertheless, the PSL’s numbers will make passing legislation – already a lengthy, convoluted process in Brazil – all the more difficult for the incoming president. For example, to enact some of his proposed reforms, such as certain changes to the penal code, Bolsonaro will first have to pass a constitutional amendment, requiring at least 60 percent approval in two rounds of voting in both the lower house and the Senate.

No matter what he said on the campaign trail, Bolsonaro cannot govern without building alliances and already has taken steps to curry favor with other parties. The president-elect, for instance, has backpedaled on a plan to merge the Agriculture and Environmental ministries after it caused an uproar. He also appointed Sergio Moro – the judge famous for overseeing the corruption investigation that ensnared much of the Brazilian political establishment – as minister of justice in a likely bid to appeal to the public and to other parties. Perhaps more telling, Bolsonaro has indicated that his party would not seek to lead the lower house of Congress and would instead leave that role to a more experienced party, setting the stage for alliance-building. The president-elect, having held various political offices with eight different parties since 1991, is no stranger to coalition dynamics.

 

The Challenge of Reform 

But then there are the reforms themselves. Realizing the vision that he campaigned on will be difficult for Bolsonaro – and not just for political reasons.

Take Bolsonaro’s economic reforms. The measures are among the most pressing for Brazil, where public debt is on track to reach 77 percent of gross domestic product by the end of the year, largely because of high government spending. Much of that spending is baked into the Brazilian political system; the country’s Treasury reported that 93.7 percent of expenses in the 2017 budget – the equivalent of 18.3 percent of GDP – were obligatory. (And that’s after Congress passed a measure in 2016 limiting increases in government spending to the current inflation rate.) While social programs and pensions account for about half of government spending, state-owned companies, many of them unprofitable, have started taking a larger share of the money. The Treasury said it spent 14.6 billion Brazilian reals ($3.88 billion) in 2017 to run 18 companies that together brought in only 5.5 billion reals.

Bolsonaro aims to cut federal expenses by privatizing state-owned companies and the pension system and by increasing the retirement age. Mustering support for these measures – some of which have been on the table since long before Bolsonaro ran for the presidency – won’t be easy, however. Whether Congress gets on board with privatization, for instance, will probably depend on the company in question, though the proposal would need only a simple majority to pass. Just 16 percent of lawmakers said they opposed any privatization – about the same share of the population that supports the initiative, according to Datafolha surveys. Pension reform and other changes to government spending would be more divisive, and, unlike privatization, these measures would require amendments to the constitution to take effect. Outgoing President Michel Temer has spent much of his time in office trying to pass a pension reform, to no avail. What’s more, a recent poll suggested that 84 percent of Brazilian voters opposed raising the pension age. As for Bolsonaro’s proposals to remove health care and education spending from the obligatory budget, a third of legislators reject the idea outright, while a mere 5 percent support it. Addressing these critical issues will exhaust much of the president-elect’s political capital. With that in mind, Bolsonaro is pushing Temer’s government to get some of its pension reforms through before leaving office.

Things look a little brighter for some of Bolsonaro’s security reforms. Though the proposed changes to the criminal justice system are among the most controversial of Bolsonaro’s policy priorities, some of them are already underway. Legislation to lower the age of adult conviction to 16 – a move that will take a constitutional amendment to accomplish – is making its way through Congress. Similarly, lawmakers are considering a bill to repeal a 2003 law that restricts gun ownership, a change that would take only a simple majority vote. Still other projects, such as measures to protect police officers who killed someone in an active operation and to classify the Landless Workers’ Movement, a radical left-wing group, as a terrorist organization, will face much steeper odds.

Political reform, meanwhile, is a mixed bag. Congress will almost certainly approve legislation to reduce the size of the Cabinet, as it did in 2016, when Temer proposed cutting ministries. Bolsonaro has already outlined which ministries he intends to eliminate and can implement the changes by provisional measure, a kind of executive decree, before Congress votes on the issue. Like the Cabinet revision, the president-elect’s planned anti-corruption legislation would need only a simple majority to pass. But the controversy surrounding the measures could drive lawmakers to try to amend them and water them down, dimming their prospects. The one political reform unlikely to pass is the initiative to reduce the number of seats in the Congress, which would need a constitutional amendment. Two similar proposals in recent history have failed, and legislators may well reject a third attempt as well, considering that fewer seats mean fewer offices and more competition for them.

 

Shifting Brazil’s Focus Abroad

Beyond domestic issues, some of Bolsonaro’s weightiest proposals pertain to Brazil’s foreign policy. The changes he has floated on this front may appear ideologically driven on the surface, but in reality each of them reflects the government’s economic goals.

For example, Bolsonaro has prioritized Brazil’s relations with Israel over its relations with the Palestinian Authority. Israel, in the view of the president-elect, simply has more to offer. For a start, it has developed advanced technology to facilitate agriculture in semi-arid climates and to remove salt from seawater. Bolsonaro hopes the innovations and Israel’s expertise could help mitigate the effects of drought and sustain the population in Brazil’s northeast region. These pragmatic considerations notwithstanding, the president-elect’s overtures to Israel have inevitably sparked political controversy. Good relations with Israel often mean bad relations not only with the Palestinians but also with the Arab world as a whole. Egypt, in fact, canceled meetings with Brazil’s foreign minister over Brasilia’s apparent shift toward Israel. If the trend continues, the Brazilian meat industry, which does a brisk business exporting halal meats to the Muslim world, may have to find a new market for some of its wares. (In the meantime, Bolsonaro has pulled back a bit from his Israel policy, wavering on his earlier plan to move Brazil’s embassy in the country from Tel Aviv to Jerusalem.) Trade complications aside, though, drawing closer to Israel stands to benefit Brazil both domestically and internationally, in no small part by helping put it in the United States’ good graces.

Getting on Washington’s good side is a big priority for Bolsonaro. The U.S., after all, is still the world’s largest market and, relative to the second-largest – China – it offers Brazil several advantages. For one thing, it’s closer, meaning transportation costs are lower. For another, it has more of a market for the kinds of finished manufactured goods Brazil makes, products that tend to be too expensive to compete on the Chinese market. The country is on a quest to move its economy away from commodity exports and toward value-added goods, and by buddying up with Washington on the political front Bolsonaro hopes to grease the wheels for future trade negotiations. Investments from the U.S., moreover, come with fewer political strings attached compared with those from China, even if they typically require higher business standards. And since China still depends on Brazil for the raw materials it needs (especially in the midst of the trade war with the U.S.), it isn’t in much of a position to make major demands of Brasilia. Even so, Bolsonaro recently suggested that he would try to expand his country’s trade ties with China, as well as with the United States.

Closer to home, Bolsonaro intends to distance Brazil from two long-standing allies in the region, Cuba and Venezuela. The shift is the most ideologically charged part of the president-elect’s foreign policy plan, but it, too, has economic motivations. So long as its economy is still recovering from recession, Brazil just doesn’t have the money to keep funding projects in other countries, like the infrastructure endeavors the Brazilian National Development Bank historically has financed in Cuba and Venezuela. Beyond giving Brazilian construction companies some business, these projects offer little benefit for Brazil. They also constitute support for countries under U.S. sanctions – probably not the best way for Brasilia to ingratiate itself to Washington. And so, Bolsonaro plans to do away with these programs and to redirect the resources toward the local population.

Bolsonaro is using the same kind of cost-benefits analysis to re-assess Brazil’s role in the Southern Common Market, the trade bloc better known as Mercosur. To kick-start the economy, Brazil needs more than domestic consumption – it needs international trade. Membership in Mercosur may hold it back in that regard. Because the bloc will implement only policy changes that all its members approve, tariffs are still in place on select goods among participating states. The unanimity requirement, and Mercosur’s protectionist tendencies, has gotten in the way of making free trade agreements with countries outside the bloc as well. Now that its economy is large enough to hold its own in the global market, Brazil no longer needs backup from its fellow Mercosur members – including Argentina, a competitor in many sectors – to negotiate favorable terms with trade partners abroad. Brazil also wants to increase its trade with countries like Chile, which maintains far fewer trade barriers – a goal it can achieve without violating the Mercosur agreement thanks to their mutual membership in the Latin American Integration Association.

 

All Roads Lead to Economic Recovery

The Bolsonaro presidency is foremost about revitalizing the Brazilian economy in the short term and fixing structural problems to promote prosperity in the long term. Economic reforms are the cornerstone of the incoming government’s plans, but policies in other areas, such as security, politics and foreign policy, will support them. Although Bolsonaro will find it difficult to push his reforms through Congress, he will prioritize among them to pass at least some, even if it means settling for smaller-scale changes.

Securing and maintaining the public’s buy-in will be a bigger challenge. Bolsonaro doesn’t need the enthusiastic support of the whole electorate, but he does need enough cooperation to avoid a major backlash. Promoting anti-corruption measures, emphasizing unity and pursuing development projects in regions where he is less popular will help him in that endeavor. And if he succeeds in putting his agenda into action, Bolsonaro could help Brazil move past its political and economic crisis to give it a shot at a more active role in global affairs.

 

— Brazil’s New Leader Strives to Break Old Patterns originally appeared at Geopolitical Futures.