Economic measures hope to plant Bolsonaro’s flag in the Northeast

Bolsonaro northeast economy Photo: Marcos Corrêa/PR

When Brazil’s new ultra-reformist, ultra-liberal Economy Ministry took charge in January, many analysts correctly pointed out that much of the effects of its economic agenda would take time to reflect on the Brazilian population. Reforms to the pension, tax, and public service systems have to be made via constitutional amendments, which involve long and complicated legislative procedures. As an example, nine and a half months into the administration, the government’s number one priority—an overhaul of Brazil’s pensions—has yet to be sanctioned.

And even once these changes are made official, in-built transition periods mean they are unlikely to have any direct effects on the Brazilian economy any time soon.

This was hardly the &#8220;shock therapy&#8221; economics that Minister Paulo Guedes&#8217; fellow Chicago School alumni introduced to <a href="https://new.brazilian.report/money/2018/11/29/chicago-boys-chile-brazil-paulo-guedes/">Chile in the 1970s and 1980s</a>; the goal here is more to do with investor confidence—showing foreign players that Brazil&#8217;s economy will become more liberal in the medium- and long-term, as a bid to convince them to bring in their money now.</p> <p>However, the meteoric spike in market optimism expected from these reforms has ended up as a little more than a mild hop, and Brazil&#8217;s economic recovery remains <a href="https://new.brazilian.report/newsletters/daily-briefing/2019/08/29/expect-brazil-gdp-numbers-q2-2019/">desperately sluggish</a>. As a result, the government has issued a series of decrees this month to boost spirits in the short-term, and potentially apply a salve to President Jair Bolsonaro&#8217;s struggling approval ratings.</p> <h2>Bolsonaro and Bolsa Família</h2> <p>Fulfilling one of his campaign promises, Jair Bolsonaro has <a href="http://www.in.gov.br/en/web/dou/-/medida-provisoria-n-898-de-15-de-outubro-de-2019-222055793">instated</a> the payment of a &#8220;Christmas bonus&#8221; in 2019 for the famous cash transfer program. Inextricably linked with the Workers&#8217; Party governments of Luiz Inácio Lula da Silva (2003–2010) and Dilma Rousseff (2011–2016), Bolsa Família is a world-renowned initiative which helped combat extreme poverty in the country, being introduced as part of Lula&#8217;s &#8220;Zero Hunger&#8221; campaign.</p> <p>Bolsa Família consists of a small monthly stipend paid to low-income families; if these households have children, they can receive extra money if they prove their child is attending school and has an up-to-date vaccination card.&nbsp;</p> <p>Now 16 years old, the program still has huge symbolism in Brazil&#8217;s poorest regions, which overwhelmingly support the left-wing Workers&#8217; Party—&#8221;sworn enemies&#8221; of far-right President Bolsonaro.</p> <h2>Debt relief</h2> <p>On Wednesday, the government issued what it has titled the &#8220;Legal Taxpayer&#8221; decree, which promises to rectify the debts that 1.9 million taxpayers—among them individuals and corporations—hold with the federal government.</p> <p>The initiative takes debts classified as categories C and D—for liabilities deemed as &#8220;hard to recoup,&#8221; where debtors are in financial difficulties or have been declared bankrupt—and provides discounts starting at 50 percent on fines and interest, as well as offering lengthy repayment plans. For individuals and small businesses, these discounts may reach 70 percent and debts can be paid off in 100 months.</p> <p>The Ministry of the Economy estimates that these 1.9 million taxpayers owe something in the region of BRL 1.4 trillion to the federal government. Jair Bolsonaro has highlighted that this measure is unlike ones that have occurred in previous years, which offered refinancing options to large corporations. The plan here is to provide relief to small-time debtors and encourage them to consume once again.</p> <h2>Rural producers</h2> <p>One of Jair Bolsonaro&#8217;s major support bases lies in agribusiness, from major corporations all the way down to simple rural producers. Another debt relief measure issued this week by the government promises to allow rural producers with federal debts of up to BRL 3 million to roll over these liabilities, taking out new loans to pay off outstanding debt.</p> <p>In order to apply for these special conditions, however, producers will have to prove that their default is down to issues with sales or the annual harvest.</p> <h2>Bolsonaro plants his flag</h2> <p>Besides being measures to spark a short-term wave of optimism in the economy, this series of decrees also has political aims for the sitting government. In the most recent study from respected pollster Ibope, Jair Bolsonaro&#8217;s rejection rates rose to 34 percent, while his approval ratings stand at 31 percent. While hardly a cause for desperation in regular circumstances, these figures become all the more disappointing when you consider that this is the first year of his presidency. No previous head of state has had such low popularity within their maiden 12 months.</p> <p>His stock is lowest in the <a href="https://new.brazilian.report/newsletters/daily-briefing/2019/04/10/jair-bolsonaro-strategy-win-over-northeast/">Northeast region</a>, home to some of the poorest populations in Brazil and the main electoral stronghold of the Workers&#8217; Party. The move toward providing relief for less-wealthy individuals is an attempt to gain some purchase among these demographics.</p> <p>There is little chance of Mr. Bolsonaro being able to &#8220;steal&#8221; the Northeast away from the Workers&#8217; Party, as the region saw such dramatic improvements under Lula&#8217;s government and the party has an established grassroots militancy in the area. The president&#8217;s realistic expectation is to plant a flag in some poorer communities, which is where his Bolsa Família measure comes in.</p> <p>The matter is all about optics. What is today known as Bolsa Familia is in fact a set of programs originally brought in by the establishment center-right President Fernando Henrique Cardoso, who handed over the presidential sash to Lula in 2003. The unification of the initiatives led to the <a href="https://new.brazilian.report/power/2018/10/26/bolsa-familia-brazilian-elections/">Workers&#8217; Party scooping up all of the credit</a> because, as one party member said at the time, &#8220;Brazilians don&#8217;t care about who invented football, they just want to know who won the World Cup.&#8221;</p> <p>Adding this bonus payment to Bolsa Família could work in a similar manner for Jair Bolsonaro. Lula&#8217;s government takes all the plaudits for the cash transfer program, but someone else is in power now. As political scientist Alberto Carlos Almeida told <strong>The Brazilian Report</strong>, &#8220;the most important organ on a Brazilian&#8217;s body is his pocket.&#8221; Clear, tangible gains for poor families can result in electoral support.</p> <p>Mr. Almeida is the author of the book &#8220;The Brazilian Presidential Elections,&#8221; which highlights that <a href="https://new.brazilian.report/power/2018/08/20/roadmap-brazils-presidency-minas-gerais/">the Workers&#8217; Party&#8217;s electoral map has a significant correlation to the distribution of Bolsa Família benefits</a>. Wrestling some of the credit for the program away from previous governments could be Jair Bolsonaro&#8217;s way into these segments of the population.

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