By Célio Yano
About to end, the government of Jair Bolsonaro (PL) brought advances in the economy, such as the improvement of the business environment, a series of concessions of infrastructure assets, a privatization agenda, in addition to the approval of the pension reform, Central Bank autonomy and important regulatory frameworks, such as sanitation and railroads.
On the other hand, conflicts with the Judiciary, Congress, governors and mayors, ministers and even within the Planalto itself have limited the positive legacy of the current president.
And fiscal management over the past four years divides analysts’ opinions. There are those who see improvements in this area, evidenced by the numbers of public accounts. On the other hand, there are those who remember the series of scams in the country’s main fiscal anchor.
Having Paulo Guedes as “Posto Ipiranga” since the 2018 campaign and as superminister of the Economy from the beginning of his term, Bolsonaro was elected with a government plan that sold itself as “conservative in customs and liberal in the economy.”
The expectation of the productive sector and the financial market was to continue the economic agenda of his predecessor, Michel Temer (MDB).
The government gave indications that it would continue in this direction, mainly in the first two years. But already in the course of the pension reform, the only major structural reform that he managed to approve, Bolsonaro gave up important points to Congress, such as the capitalization regime, which ended up discarded in the final version of the constitutional amendment.
In the same reform, the retired captain articulated to benefit the Armed Forces, which, in exchange for slightly stricter social security rules, gained a “counter-reform” that expanded other benefits.
“Part of the merit of the Social Security reform, which is a gain in the last four years, seems to me to be more associated with legislative leadership than with the political nucleus and the diagnosis of the economic team,” says Rafael Cortez, partner at Tendências Consultoria.
FISCAL MANAGEMENT OF THE BOLSONARO GOVERNMENT DIVIDES OPINIONS
The fiscal management of the Bolsonaro government is far from unanimous among observers in the area.
Those who see a positive legacy turn to numbers. After the explosion in spending during the pandemic, the government’s gross debt began to fall practically without truce, and is on track to close the year at the lowest level since 2017, according to the projection of the economic team.
In parallel, the Union should close the year in the blue for the first time since 2013, with a primary surplus estimated at just over R$34 billion by the Ministry of Economy.
Part of these results, however, has to do with non-recurring factors. One of the reasons for the drop in debt was the early return, by the BNDES, of resources that had been transferred by the Treasury.
And the positive primary result for 2022, in addition to being achieved three years late (Guedes promised it for 2019), had the help of extraordinary revenues – so much so that the Ministry of Economy itself prepared a Budget for 2023 predicting the resumption of the primary deficit, estimated at almost R$66 billion.
Samuel Pessôa, a researcher at the Brazilian Institute of Economics (Ibre/FGV) and partner at the Julius Baer Family Office (JBFO), argues that the structural primary result – which excludes cyclical factors – has improved a lot in recent years, reaching close to zero in 2021 and, possibly, 2022.
“To have an idea of the improvement that has occurred in the fiscal area, just remember that the Union presented a structural primary deficit of 2.4% of GDP in 2014, and, in 2018, a deficit of 1.6% of GDP and, by leaps and bounds, with many comings and goings, since 2015 we have been fixing the fiscal policy. There is still much to be done,” wrote Pessôa in a recent article.
He also considers that the 2023 Budget prepared by the current administration – much criticized by specialists and by the elected government for not providing enough resources for Auxílio Brasil and other social benefits – was feasible with small additions.
In contrast to the improvement in numbers, there is an assessment that Paulo Guedes’ management was persistently circumventing the spending ceiling.
In four years, the government made five exceptions to the ceiling, which allowed expenditures of almost R$840 billion above the constitutional limit. Even excluding the pandemic spending, it was still R$300 billion above the ceiling.
Part of that amount was spent in the second half of 2022, when the government enlisted the help of Congress to change the Constitution, creating some social benefits and boosting others in the middle of the election season.
“It was the government that will be remembered as the one that irreversibly dismantled the ceiling rule. And this happened every year, it was not just a consequence of the pandemic,” says economist Sérgio Vale, from MB Associados.
“The legacy is unfortunately not positive. It delivers a rather complicated inheritance for the next government, which would already have its difficulties inherent to the type of the PT government,” he says.
BUSINESS ENVIRONMENT IMPROVED WITH BOLSONARO GOVERNMENT’S MICROECONOMIC AGENDA
For Cortez, the successes of the Bolsonaro government are mainly linked to a microeconomic agenda, with the modernization of institutions that helped improve the business environment in the country.
Also in 2019, the Economic Freedom Law was approved, which reduced bureaucracy in business activities. The legal framework for sanitation attracted more investments from the private sector in infrastructure, while the law on the formal independence of the Central Bank helped to attract foreign investment by generating more security for investors.
“The idea that political fluctuations and eventual populist decisions do not affect the conduct of monetary policy is always a favorable point”, says Cortez.
The transport infrastructure asset concession program is also seen as progress. With the elected governor of São Paulo Tarcísio Gomes de Freitas at the head of the Infrastructure portfolio, the government has guaranteed R$116.4 billion in private investments for the sector in the last four years.
In addition, with the new legal framework for railroads, which created the authorization model for the construction of new rails by the private sector, 32 projects have already been made viable, with a potential of R$149.6 billion in investments in the coming decades.
“We saw advances in ports, airports and highways, we started to have a greater process of concessions”, says Sergio Vale, from MB Associados. “Now, it had to happen. In a government that initially sold itself as liberal, at least the concessions had to go ahead,” he assesses.
PRIVATIZATION AGENDA ADVANCED, BUT WAS FAR BELOW WHAT WAS PROMISED
The privatization agenda, which had the capitalization of Eletrobras as its high point, left something to be desired, especially when compared to Paulo Guedes’ promise to raise R$1 trillion with these operations (and another R$1 trillion with the sale of properties in the government).
The privatization of large companies, such as Correios and Petrobras, remained on paper, while most of the sales were from subsidiaries, such as BR Distribuidora and TAG, both belonging to Petrobras.
“The privatization of Eletrobras was quite bad, because it was badly done, there was an attempt to speed up the process and, given that the government was very weak in Congress, a measure was approved that, in the end, will imply higher costs for the population,” explains the chief economist of MB Associados.
“The company will bear energy distribution costs that will end up increasing expenses, which will end up being passed on to the final consumer. There’s not much way out. I would say that in concessions there has been great progress, but in privatizations it has fallen far short of what would be desired,” says Vale.
RELATIONSHIP WITH CONGRESS MADE IT DIFFICULT TO IMPLEMENT AN ECONOMIC AGENDA
One of Bolsonaro’s great difficulties in carrying out his proposals in the economic area had to do with the relationship he established with the National Congress.
“The attempt to implement an economic policy agenda without adequate treatment from a political point of view, whether in relation to the allied base, or in relation to society and interested groups, left much to be desired in the Bolsonaro government,” says Cortez.
Much weakened in the relationship with Congress, Bolsonaro watched parliamentarians advance on the Budget, especially from the creation of rapporteur amendments, which started to make the execution of public policies even more difficult.
“This is reinforced when the president builds an allied base to survive the mandate, and not so much to organize a positive agenda,” says the Tendências partner.
The president’s conflicts were not restricted to the relationship with other Powers.
“There were several opportunities in which the president publicly went against the diagnosis and the agendas raised by the economic team itself, generating an overexposure of Minister Paulo Guedes,” recalls Cortez.
For him, the tax agenda was the one that most suffered from these inconsistencies within the government, since it faced resistance from the president himself.
The tax reform ended up being dominated by the Chamber and the Senate through the proposed amendments to the Constitution (PECs) 45 and 110, which, in turn, were not adopted by the economic team.
The government opted for a “sliced reform.”
First, it sent a project to merge PIS and Cofins into a Contribution on Goods and Services (CBS), but did little to advance it in Congress.
Afterwards, it sent to the Legislature a bill to change the Income Tax, with taxation of profits and dividends, which the economic team ended up abandoning.
The text was approved in the Chamber, more due to the efforts of the President of the House, Arthur Lira (PP-AL), and has been stuck in the Senate since then.
Another example of structural reform that has not progressed, and in this case due to lack of interest on the part of the government itself, is the change in public service rules.
The administrative reform was sent to the Chamber in September 2020 and was even approved a year later by the special committee of the House, but has not moved since then.
Arthur Lira said that the government lacked effort, and Paulo Guedes said that the “president’s surroundings blocked” the progress of the reform.
What the government did in this field was what Guedes called “invisible administrative reform,” with initiatives that did not depend on the approval of the Legislature to contain personnel expenses.
Among them, the reduction in the rate of replacement of retired civil servants, the advancement of the digitalization of public services and the freezing of salaries of the majority of civil servants throughout the management.
The result was that personnel expenditures, compared to GDP, fell to the lowest level in at least 25 years.
BOLSONARO’S HITS AND MISSES IN THE ECONOMY IN REACTION TO THE PANDEMIC
Some negative economic indicators, such as the recession in 2020 and record inflation rates in 2021 and 2022 – in some months the highest since the creation of the real – are directly associated with the impact of the Covid-19 pandemic.
“But the big problem with the pandemic was the way the government, especially the president, reacted,” says Vale. “In an extremely negative, inappropriate way. It took time to give answers and with incompetence in relation to economic policy,” he assesses.
According to him, the discussion with Congress regarding Emergency Aid was a sample of the government’s difficulty in dealing with the economic effects of the health crisis.
The original proposal by the economic team was for a monthly benefit of R$200, which was changed to R$500 in the Chamber. In the end, to have the last word, Bolsonaro said he agreed to pay R$600.
“It was a government that, from the point of view of the pandemic, was not the most effective at the beginning, because it did not know how to manage the conflicts that existed with Congress and make the correct analysis of what would be the necessary resources at that time. And it had the effect at the end, also because of political conflict with governors and Congress, of delaying measures in relation to vaccines, which ended up delaying the process of recovery of the country’s economy,” says the economist.
For Rafael Cortez, from Tendências Consultoria, the positive highlight of the government during the pandemic were the job protection programs, with flexible working hours with government subsidy, and credit policies, such as the National Support Program for SMEs (Pronampe).
“From the point of view of income transfers, these responses came with the contribution of legislators. A larger volume of the average Emergency Aid benefit came, in fact, as a political pressure from legislators, but, regardless of this origin, from the point of view of the Brazilian State, these were successful policies. They brought a very generous social protection response at this time of the pandemic,” he considers.
BOLSONARO’S POSITIVE NUMBERS IN THE ECONOMY ALSO HAVE TO DO WITH EXTERNAL FACTORS, SAY ANALYSTS
During the 2022 election campaign, Bolsonaro highlighted positive numbers, stating that Brazil did better than most other countries in the economic field. After growing 1.1%, 1.2% and 0.4% in the first three quarters of this year, the country should see its Gross Domestic Product (GDP) rise above 3% this year, according to economists’ projections captured by the Focus Bulletin, from the Central Bank.
After state-owned companies posted a net profit of R$187.7 billion in 2021, more than triple the previous year and the highest result since 2008, the Ministry of Economy is working with the possibility of ending 2022 with a primary surplus, the first in eight years.
The historic amounts of dividends paid by state-owned companies and the sale of Eletrobras’ controlling interest count for the result, which yielded R$ 26.6 billion to the Treasury.
But part of these numbers is the result of factors external to the government, such as the recovery of the post-pandemic economy and the appreciation of commodities, which benefited producing countries like Brazil.
“There is the effect of the end of the pandemic, there is an effect of the fiscal spending that was given in the period and there is the even stronger effect of commodities,” says Vale.
“Of course we have to celebrate positive numbers now, but the question of responsibility is a little dubious: was it the government in fact, or were elements external to the government that helped this happen? I think there are more external elements,” says the economist.
Despite more robust economic growth in 2021 (when the national GDP increased by 5%) and 2022, the country has maintained the routine over the last four years – which has been going on since the 1980s – of growing below the world average.
For Vale, the final balance of the Bolsonaro government in the economic area is negative. “A government that, even though it had been responsible for growth of 5% last year and 3% this year, still lost its re-election, is a sign that, in fact, it acted wrongly on several fronts,” he says.
Samuel Pessôa, from Ibre/FGV and JBFO, makes a more favorable assessment.
“Bolsonaro’s quadrennium growth legacy looks better than we imagined a short time ago,” he wrote in an article.
“The unemployment rate closed October at 8.3%, the lowest value since May 2015. Salaries have grown above inflation since July and were, in October 2022, 5% above the value of the same month in 2021. The real wage bill in October 2022 was 11.6% higher than in the same month of 2021,” listed the economist.
“Inflation is falling and, even with the reversal of exemptions in 2023, if any, nothing prevents the Central Bank from reaching the target in 2024, probably before the other emerging economies.”
With information from Gazeta do Povo