20181113-法国巴黎银行-BRAZIL__POLICY_TRACKER_29页_979kb

Brazil Policy Tracker Summary (November 2018)

Core Content

This report provides an analysis of the political and policy landscape in Brazil following the 2018 elections, focusing on Jair Bolsonaro's administration and the new Congress composition. It outlines key political figures, the challenges of reform, and the economic and social policy directions proposed by Bolsonaro and his advisors.

Main Points

1. Two-Month Transition

• New Congress: A significant number of seats in the Lower House changed hands, exceeding initial projections.
• Bolsonaro's Position: Bolsonaro's government will need to negotiate with big-tent parties to secure support for its agenda.
• Senate Composition: Many newly elected senators lack political or business experience, increasing uncertainty around reform prospects.
• Congress Shift: Bolsonaro's political momentum shifted the Congress further to the right.

2. Next Four Years

• Key Names:

  • Jair Bolsonaro (President): Former army officer, elected with 55% of the vote, has no prior political experience but is expected to rely on his economic team.
  • Paulo Guedes (Economics Minister): Advocate for privatization and social security reform, has a strong influence on economic policy.
  • Antônio Hamilton Mourão (Vice President): Retired army general, known for his right-wing views and role in the 2015 political crisis.
  • Onyx Lorenzoni (Chief of Staff): Involved in anti-corruption legislation and seen as a key figure in Bolsonaro's administration.
  • Sérgio Moro (Justice Minister): Prominent figure from Operation Car Wash, known for his anti-corruption stance.
  • Eduardo Bolsonaro (Federal Deputy): Son of Jair Bolsonaro, known for his controversial views on social issues.
  • Flávio Bolsonaro (Senator): Eldest son of Jair Bolsonaro, elected in 2018 with 31.36% of the vote.
  • Major Olímpio (Senator): Known for his opposition to certain economic policies and his role in the 2015 political crisis.
  • Magno Malta: Member of the Party of the Republic, involved in several scandals but not yet condemned.

• Core Opposition: Left-wing parties, particularly the PT, represent the main opposition in Congress. Their influence has been waning over time.

3. Risks & Uncertainties

• Policy Tracker:

  • Pension Reform Challenge: A major hurdle for the new administration. The reform is unpopular and aims to ensure fiscal sustainability.
  • Reform Approval: Requires 308 votes in the Lower House and 49 in the Senate. Approval is uncertain due to political fragmentation.
  • Reform Details:
    • Minimum Retirement Age: 65 for both men and women, with a 25-year contribution requirement.
    • Automatic Adjustment: Based on life expectancy data.
    • Retirement Wage: Calculated using historical average contributions, with a minimum floor of the minimum wage.
    • Transition Rule: Workers close to retirement would need to extend their working period by 50%.
    • Rural Workers: Included in the new system, requiring contributions for benefits.

• Other Policy Areas:

  • Social Security Reform: Bolsonaro opposes both the original and diluted reform proposals. A full reform is suggested by Arminio Fraga and Paulo Tafner.
  • Fiscal Policy: Aims for a spending cap and reduction of fiscal imbalances. The goal is to achieve a primary surplus by 2020.
  • Taxation: Supports a radical tax simplification, reducing the tax burden, and eliminating certain taxes like those on inheritances.
  • Privatization: Bolsonaro has mixed messages on privatizing public banks and state-owned enterprises (SOEs), while his team advocates for significant privatizations to reduce public debt.
  • Labour Policy: Supports less stringent labour laws, including flexible contracts and reduced penalties for firing workers.
  • Foreign Policy: Focuses on bilateral trade deals, closer ties with the US, Israel, and Italy, and a critique of Mercosur.

Key Information

• Congressional Support: Bolsonaro's PSL became the second-largest force in Congress, with support from landowners, Christians, and pro-gun groups.
• Political Challenges: The fragmented Congress and lack of experience among new senators may hinder the implementation of reforms.
• Economic Team: Paulo Guedes and his team are expected to guide the administration's economic agenda, with a focus on fiscal discipline and privatization.
• Social Security Reform: The reform is a critical component of the government's agenda, but its approval is uncertain due to political and social resistance.

Summary Table

Conclusion

The new administration faces significant challenges in implementing its agenda, particularly in securing support for pension reform and navigating a fragmented Congress. Bolsonaro's team, especially Guedes, is pushing for market-oriented reforms, but the political landscape remains complex and uncertain.