Analysts View Smaller Bolsonaro Base in Congress, Indicate Caution on Reforms

RIO DE JANEIRO, BRAZIL – Just before the return to work in Congress, the estimated base for Jair Bolsonaro’s government in both houses of the legislature has reached its lowest level, and political analysts are cautious regarding the progress of the package of economic measures forwarded to parliament late last year.

This is reflected in the 12th edition of the ‘Barômetro do Poder’ (“Power Barometer”), an InfoMoney initiative that every month compiles the expectations of the main political risk analysis firms and independent analysts active in Brazil on some of the main issues on the national political scene.

The survey, conducted between January 27th and 29th, shows that by splitting the 513 federal deputies and 81 senators into three major groups (aligned with the government, opposition and undefined), the average of experts’ estimates points to an allied base with 89 seats in the Chamber (17 percent) and 16 in the Senate (20 percent).

Estimates for legislators aligned with the current administration have been dropping almost uninterruptedly since January 2019 when they were 242 deputies and 38 senators.

At that time, speculation was still going on about the prospect of building an effective coalition in parliament, which ultimately lost steam in the first few months of the legislature.

The realization of fewer legislators willing to align themselves with the government is matched by an expected greater difficulty in advancing agendas promoted by the Planalto Palace in Congress. The Barometer shows that 57 percent of the analysts interviewed see the government’s ability to succeed with its proposals as only fair. Only seven percent believe in favorable conditions. For 57 percent, relations between the executive and the legislature are poor or terrible. None of the analysts expect improvement in the next six months.

“I believe there have been no significant changes in the relationship between the government and Congress since the end of last year. With the recess and the return to interaction, there may be some change in this scenario. However, since the government does not seem to have changed its strategy so far, it appears likely that the wear and tear will deepen, both because the convergences tend to be smaller, and because there will be topics that are more related to powerful pressure groups (in this case, public servants),” noted one of the analysts.

“Bolsonaro tests the institutions’ endurance all the time, straining relations with Congress and the Judiciary. The trend is that, with time, the relationship becomes more and more worn out,” says an analyst.

Ten political risk consultancy firms took part in this edition: BMJ Consultants, Control Risks, Eurasia Group, MCM Consultants, Medley Global Advisors, Patri Public Policies, Prospectiva Consultancy, Pulso Público, Tendências Consultancy, and XP Politics, as well as four independent analysts: Antonio Lavareda (IPESPE – Social, Political and Economic Research Institute); Professors Carlos Melo (INSPER – School of Business, Economics, and Engineering) and Cláudio Couto (EAESP/FGV – Business School) and journalist and political consultant Thomas Traumann.

Economic Agenda

The Barometer also showed that the Welfare’s “parallel PEC” (Proposed Amendment to the Constitution) is viewed with suspicion by political analysts, even if states and municipalities remain outside the general rules approved for federal civil servants last year.

Author of the proposal in Congress, Senator Tasso Jereissati estimates that the text will have a fiscal impact of R$126.7 (US$31.7) billion over ten years. The average projection of the analysts interviewed by the survey points to savings of R$90.57 billion. One of the analysts does not believe the text will be passed, five others have chosen not to assess the impact.

As for the package of measures submitted by the government in November, analysts prefer to adopt a more cautious stance. The Emergency PEC is the most likely to be passed. According to the survey, 43 percent believe the text is highly likely to be passed in parliament. As for the timing, 21 percent believe it will be passed in the first half of the year, while 35 percent project it in the third quarter.

The Federative Pact’s PEC (Mais Brasil [“More Brazil”]) is viewed with skepticism. Only 14 percent see a high probability of it being passed, while 57 percent think the probability is low. As for the timing, 64 percent believe that the debates will drag on to 2021.

In the case of the PEC of Funds, analysts are torn between approval in the second or third quarter. Most are optimistic about the proposal (36 percent see high or very high chances and 57 percent see an average probability).

“2019 was the last year of Temer’s government. The Congress passed the Welfare reform (which had almost been passed in 2017 and had gone through a major marketing campaign among society and political negotiation under Temer). The auction of the oil exploration rights was held, which was negotiated with the TCU (Federal Audit Court) and with Petrobras under Temer. The concessions carried out in 2019 were all organized (and some even marked!) under Temer”, one of the analysts points out.

“Now it is time for Bolsonaro’s government to start. Sending PECs and projects is easy. To pass in Congress – which is what matters – is something else entirely. A government lost in the midst of a dozen priorities, with a president who left his own party and with ministers creating a number of political embarrassments (Salles, Weintraub, etc.). Let’s see how this whole chaos is going to pass measures in 2020,” he adds.

Analysts were also interviewed about the tax reform, seen as one of the government and Congress’ priorities for this year. The most feasible proposal perceived by the analysts is PEC 45/2019, which is underway in the Chamber of Deputies. But only 14 percent see high chances of state and municipal taxes entering the debates.

The reintroduction of the tax on financial transactions, which has been considered again by the government in recent days, is currently assessed as having only remote chances.

Among the micro guidelines, the privatization of Eletrobras is among those that should face greater challenges. Some 57 percent believe the likelihood of the project advancing in Congress is low or very low. On the other hand, the sanitation legal framework and the Fundeb PL (Fund for the Maintenance and Development of Basic Education and the Valuation of Education Professionals) are seen as the easiest to be passed.

For analysts, the shorter calendar for Congress, due to the October municipal elections, may hinder voting on key issues on the economic agenda. “The window for measures to be passed is until May. After that, legislators’ time will be taken up by the elections. If the government does not focus its efforts on two or at most three points, it may end the year with hardly anything important being passed,” one of the respondents said.

Source: Infomoney