Brazil Predictions – 2019

Handwritten text showing word 2019 Predictions. Business concept writing Forecast Predictive Written on sticky note paper, wooden background with space office view with folded yellow paper

After reviewing and grading my predictions for last year (https://allabroadconsulting.wordpress.com/2019/01/10/2018-e-as-previsoes-passadas/), I want to put forth a new set for 2019 before the month of January comes to an end.

This year, to me at least, seems particularly convoluted and difficult.  President Bolsonaro is trying to get a grip as are the members of his cabinet.  Thus far, things have been following a zig zag course with the Bolsonaro sons suspected of corruption and nepotism or perhaps just doing business as usual in spite of the moralistic tones that helped the president get elected.  Because people have bought into the Bolsonaro presidency with their emotions, they will accept and rationalize pretty much anything for the time being.  However, it seems likely that the exposure of corrupt actions by Bolsonaro family members and associates will show that honesty and uprightness were only a campaign façade and that the clan is part of the cheating that has long been considered normal among politicians, especially in Rio.

People will also have some forbearance with cabinet members such as Ernesto Araujo in the Foreign Ministry and Judge Sergio Moro in Justice.  In the long run, Moro, in particular, must show that he can deal with official corruption and organized crime.  This is a big order as he no longer occupies a judgeship but instead has become a political appointee subject to whims and pressures.  By trading up, he has lost authority.

Araujo too, has declared that he wants to help rid Brazil of globalism, socialism and cultural Marxism through an affirmation of Christian values.  This is another immense challenge. He has set up straw men to destroy but his work most likely will be futile.

So let’s start our predictions here, beginning with the political:

  1. While Araujo may survive one year as Foreign Minister, his crusade against the “plot” of globalized economic growth will enter into shock with the Finance Ministry policies and either he will change his tune or he will not last at the top of Itamaraty. Furthermore, it is less and less likely that Brazil will actually move its Embassy to Jerusalem, in spite the President’s declarations and Nethanyahu’s presence at his inauguration.  Also, Araujo’s admiration of Trump will look less and less favorable legal difficulties increase and the threat of impeachment hovers.
  2. Justice Minister Sergio Moro will step down to preserve his standing as a possible presidential candidate and because he will not be able to escape the corrupt actions of the Bolsonaro clan and his government. He will not be able to tolerate such cognitive dissonance if he is honest with himself.
  3. Finance Minister Guedes will continue preeminent and will push through some social security reform still in 2019. However, if this reform does not go through or seems too little, Guedes will be fired or will resign.
  4. The Social Security reform itself will be approved but only in a weakened form that preserves the perks and benefits of the military, judges, politicians and other high level public servants. Congress continues subject to the pressure of these entrenched castes.
  5. Some analysts on the left have suggested that Bolsonaro will not finish his term. I disagree and predict that he will not be removed from office before the end of his term.
  6. Vice-President, retired General Mourao, will not be the President of Brazil except as permitted by the Constitution. Although he has been a loose cannon, his objective is not to be President, nor do his military colleagues seek this.  They prefer the current situation with a President favorable to their interests without having all the burdens of power, which have heavily strained the military during the dictatorship (1964-1985).

The Economy

  1. With some pension reform and the natural upswing of the economic cycle, Brazil will grow at 2.2% (plus or minus 0.2).  This rate is not spectacular but an improvement over last year and should set the stage for higher growth in 2020 and 2021.  It most likely will not be higher because the government will not discretionary funds to invest.
  2. Last year, I expected inflation to rise to 8% and according to official data, I was wrong. The Central Bank’s Focus prediction for 2019 is slightly above 4%.  My guess is something above 6% as the economy improves.  New Central Bank President, Roberto Campos Neto will be under pressure not to inhibit growth.
  3. The Selic interest rate is currently at 6.5% and should rise to 8% by the end of the year. This will be needed to help keep inflation in check.  It remains to be seen how much independence the Central Bank will maintain.
  4. Foreign direct investment will continue above 60 billion dollars per year with new investments from China in spite of Bolsonaro’s stated objection that the Chinese are buying everything. New US investors will remain wary and have other options.
  5. Under Bolsonaro and Guedes, inequality will increase as measured by the Gini index.

Social Policies:

  1. Bolsonaro’s policy of loosening firearm regulations will not reduce violence in Brazil and again there will be over 60 thousand homicides and over 5000 killings by police forces. Violence will not diminish.
  2. President Bolsonaro has started his term by putting at risk the preservation of Indian and Quilombola lands but will be forced to backtrack by pressure from civil society and international organizations. This prediction will be difficult to measure but it may be ironic that Bolsonaro’s policies actually help indigenous and minority communities better define their resistance, goals and means.
  3. Brazil will not withdraw from the Paris Agreement as has been threatened.
  4. Social mobilization and opposition with civil society will grow as Bolsonaro’s flaws and lack of political skills become apparent and this will lead to the decline of his popularity. His latest approval ratings are above 75% and will fall to less than 50%.
  5. The pendulum has swung from left to right in Brazil and it will swing back again and eventually become more centered as Brazil slowly develops its institutions and democratic process. This will be shown in the 2020 mayoral elections.
  6. Brazil’s infrastructure, especially basic provision of water and sewage, will improve, if for no other reason that it makes economic sense. Currently, almost 50% of Brazil’s population is not connected to sewer system. This has to get better.
  7. Brazil’s evangelicals will continue to increase their numbers in the so called Bancada da Biblia (Bible caucus) but aside from espousing anti-corruption, anti-abortion, anti-secular and critical of homosexual behavior, there will be an increase in violence with the rejection of identity politics. This increase will be noted in the press and evangelical leader Damares Alves, the Minister of Women, the Family and Human Rights will be replaced.

Steven Pinker, the forward thinking optimist and Harvard profesors states that “knowledge, prosperity, connectivity will not go into reverse” and that a “richer world can better afford to protect the environment, police its gangs, strengthen it social safety-nets and teach and heal its citizens.”  Brazil’s leadership and its most selfish elites will try to prove him wrong by bucking world trends.  They will not be successful in the long term.

My friend Benicio Schmitt, a political scientist from the University of Brasilia recently quoted Francis Fukuyama, who wrote, “Our present world is simultaneously moving toward the opposing dystopias of hypercentralization and endless fragmentation…”  Indeed, Bolsonaro would like a strong central government but given Brazil’s size, its democracy and the federal system, the institutional framework is not there to support this desire.

Social fragmentation is present and an ever increasing individuation exists as people engage in the freedom and restraints of the modern world.  But in spite alienation and anomie, Brazilian society will not break down like Venezuela nor will it revert to a right wing military dictatorship.

So maybe outside of Brazil, the perception of dystopia will prevail but Brazilians themselves still have their elected change of leadership, the tropical land of sun, beaches, beer and beauty, and they can say “carnaval” is coming and we have “futebol” so screw the rest and let us muddle through.

 

 

 

One comment on “Brazil Predictions – 2019

  1. Colltales says:

    Thorough analysis as usual, Steve. Happy New Year. Cheers

    Like

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