Guedes: Bolsonaro once endorsed 98% of the liberal agenda, now he’s supporting 65%

RIO DE JANEIRO, BRAZIL – Economy Minister Paulo Guedes said that tax and administrative reforms will be passed this year, as well as bills enabling the progress of more privatizations.

The head of the economic team gives a straightforward assessment of his two-and-a-half-year relationship with President Jair Bolsonaro: the two trust each other and continue to work for important structural reforms, but the president’s support for the pro-market agenda has waned.

Economy Minister Paulo Guedes told Bloomberg News on Thursday that proposals to reform the country’s tax system and reduce civil service spending will be passed this year, as well as bills that enable further privatization to advance.

However, challenges abound, considering that there is a CPI (parliamentary inquiry committee) investigating how the government is dealing with the pandemic and consuming the energy of the legislature.

Moreover, in a few months, legislators’ attention will shift to next year’s presidential election, while Bolsonaro is increasingly forced to give in to the demands of the centrão voting bloc in exchange for support in Congress.

“I intend to help him fulfill that commitment. As long as this is working, it’s all right,” he said during an interview in his office in Brasilia.

Guedes himself faces 2022 with openness, leaving room for the possibility of supporting a candidate who fully subscribes to his market-pleasing proposals. “If a Brazilian Reagan or Thatcher came along, willing to privatize everything? I would say to him (Bolsonaro): would you mind if I helped them?”

Strengthened real

Guedes estimates that the real should strengthen as privatizations, investment and structural reforms turn Brazil’s cyclical recovery into a sustained one.

“As the reforms proceed, everybody will see that the exchange rate is out of place, that it will drop,” he said. “I think it has already overshooted and will pull back to an equilibrium exchange rate. Will it be R$5.00, R$4.80, R$3.00, I have my guess, but I’m not going to say it.”

The Brazilian currency lost about a quarter of its value in 2020 amid investor concerns about excessive public spending during the pandemic. A recent rise in commodity prices, along with aggressive interest rate hikes by the Central Bank and a better fiscal outlook, have helped support the real in recent weeks. It has stood at about 5.8% since the end of March, the world’s best-performing major currency.

Guedes projects that Brazil, after suffering a less painful recession than its neighbors last year, will surprise again in 2021 with the creation of 1 million jobs in the first four months of the year.

“Many countries are still grounded, but Brazil is on its feet and has started moving fast,” he said.

The better-than-expected performance is due in part to government programs to help the vulnerable and protect jobs during the pandemic, according to Guedes. Together, these programs blew a hole in Brazil’s budget, but what matters is that the government managed to keep recurrent spending under control, he said.

Source: Exame