Brazil Economy Chief’s Cringeworthy Remarks Rekindle Reform Push
(Bloomberg) -- President Jair Bolsonaro’s show of support for his controversial economy minister is quickly translating into an unexpected political boost for Brazil’s investor-friendly agenda.
Economy Minister Paulo Guedes has faced criticism in the past few weeks after comparing public servants to parasites, appearing to back a weak real and sneering at maids who were able to travel to Disney World thanks to the past strength of the Brazilian currency. That uproar is prompting President Jair Bolsonaro to boost support for Guedes and his policies, according to three government advisors who aren’t authorized to speak publicly on the matter.
The president’s actions have been swift and unusual: he publicly praised Guedes, 70, late Tuesday and immediately after forged an agreement to send congress one of his economy chief’s key reform bills, a proposal to cut spending on public servants that has been delayed due to concerns of stoking push-back, as soon as this week.
To do so, Bolsonaro had to stare down opposition from members of his own inner circle. Put together, those actions have revitalized political will for the investor-friendly agenda, according to two officials from the presidential palace.
Read more: Stronger Budget Result in 2019 Masks Brazil’s Harsh Debt Reality
Nicknamed by Bolsonaro as a “one-stop shop” for all economic matters, Guedes is one of the president’s most influential cabinet members. Trained at the University of Chicago, he runs a ministry that oversees finance, planning and trade portfolios and is also the main architect of pro-market reforms including a pension overhaul passed last year.
“For now, as Bolsonaro likes to say, the marriage is staying together,” analysts from consultancy XP wrote in a research note. “Bolsonaro and Guedes never hid the fact that they were together more out of convenience than for love. For that reason, the marriage will remain as long as it’s convenient for them both.”
Brazil’s presidency didn’t immediately replied to a comment request, while the Economy Ministry’s press office declined to comment.
Administrative Reform
Both Bolsonaro’s economic team and Lower House Speaker Rodrigo Maia have defended an administrative overhaul to boost fiscal accounts by cutting spending on government salaries, which alone gobble up 14% of the country’s gross domestic product. Meanwhile, a quarter of obligatory spending goes toward payroll and social expenditures, according to the Economy Ministry.
Brazil’s loose spending and rising debt are seen as top hurdles to regaining the investment-grade status that it lost in 2015. Still, the proposal to rein in salary costs has irked Bolsonaro and military members of his staff, given that public servants are among the president’s strongest supporters.
While still uneasy about the administrative reform, Bolsonaro softened his views this week as Guedes came under fire from government supporters who said the comments were classist and discriminatory. On Tuesday, Bolsonaro said Guedes will remain in his cabinet until the end of his term in 2022 and referred to his minister’s comments as “one-time problems” and “possible slips.”
After the show of support, Bolsonaro canceled a separate event on company productivity to finalize the administrative reform proposal with Guedes. The minister then had dinner with the heads of the lower house and the senate on late Tuesday to organize voting.
Read more: Ten Bills Test Brazil’s Congress Appetite for Economic Reforms
This is far from the first time Guedes has drawn scrutiny with his blunt remarks. In June, he said proposed changes to a pension reform bill at that time showed that lawmakers weren’t “committed” to future generations. Two months before, he exchanged insults with legislators at a public hearing on the same bill.
To contact the reporters on this story: Martha Beck in Brasilia at mbeck96@bloomberg.net;Simone Iglesias in Brasília at spiglesias@bloomberg.net
To contact the editors responsible for this story: Juan Pablo Spinetto at jspinetto@bloomberg.net, Matthew Malinowski
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