Analysis: The ‘Posto Ipiranga’ imploded

At the launch of Jair Bolsonaro’s (PL) re-election candidacy on July 24, Economy Minister Paulo Guedes was not present. On the occasion, Bolsonaro promised to keep Auxílio Brasil worth R$ 600 for 2023, citing the Minister of Economy as an endorser of the proposal.

“I talked to Minister Paulo Guedes, this amount will be maintained next year”, declared the president, who was accompanied by Centrão leaders such as Arthur Lira (PP-AL) and Ciro Nogueira (PP-PI).

Guedes’ absence from the event did not surprise many political analysts. In recent years, the “super-minister” has been losing more and more space in the government. Fiscal responsibility and the liberal agendas he defended were replaced by public spending and an economic populism that has the Centrão as one of its main representatives.

According to analysts interviewed by DW Brasil, Guedes’ inability to implement a liberal agenda ended up undermining the financial market’s confidence in the Bolsonaro government. Even though he still enjoys a certain prestige among this public, few believe he will be able to change the populist bias that has marked economic decisions in the current administration.

broken promises

In the 2018 elections, Bolsonaro referred to Paulo Guedes as the “Posto Ipiranga”, which would have answers to all economic problems during his term. Among the promises of the current minister were the privatization of “all state-owned companies”, the collection of R$ 1 trillion from the sale of federal properties, structural reforms and zeroing the government’s fiscal deficit.

Four years later, little has been accomplished. Of the large state-owned companies, only Eletrobras was privatized. The sale of properties generated only R$ 675 million, about 0.06% of the total promised. Tax Reform did not get off the ground. On the other hand, the Social Security Reform, yes, but in molds very similar to those outlined in the Temer administration – and even its approval counted on the commitment of the leadership of Congress.

With the re-election campaign approaching, Bolsonaro decided to rely on public spending on aid as a way to reverse his disadvantage in polls. Articulated by the president and Centrão, the PEC Kamikaze was approved neglecting the spending ceiling. For this project alone, called “PEC of Kindness” by Guedes himself, the government expects expenditures of R$ 41.25 billion for next year.

The “Posto Ipiranga” imploded

Little is left of the 2018 “Posto Ipiranga”. Especially in recent years, the minister’s image has deteriorated. According to Bruno Komura, market analyst at Ouro Preto Investimentos, despite having managed to set some positive guidelines for the market, such as the Pension Reform and the freezing of civil servants’ salaries during the pandemic, the “Posto Ipiranga” imploded.

“It imploded, yes. There will be no going back. Given Bolsonaro’s attitudes, it is very difficult to reestablish that credibility he had in the beginning. As much as there is a renewal, we believe it will be much more of the same”, he says.

According to Komura, one of the biggest problems of Guedes’ administration was the flexibility of the spending ceiling and the increase in public expenditure. “It was a breach of expectation, and quite negative,” he says.

The chief analyst at the financial consultancy Goes Invest, Tatiana Goes, considers that the choice to burst the spending ceiling was necessary due to the impact of global inflation caused by the pandemic. She, however, says that Guedes’ political inability meant that Centrão figures began to dictate the rules in the economy.

“(Guedes) still represents this anchor of political credibility, because he has this speech of fiscal responsibility, of a solid monetary policy”, says Tatiana Goes. “But he lost a lot of strength during the last years of government and I don’t know if he has the same political representation from the beginning.”

According to the analyst, this credibility was maintained “despite the nonsense he talks about”. “Bolsonaro’s image is much worse without Guedes”, she emphasizes.

Effect in 2018 no longer works

For political scientist Carolina Botelho, Guedes simply lost the role he had for Bolsonaro in 2018. According to her, the fiscal responsibility agenda, which was in vogue in past elections, left the political debate.

“In 2018, there was an idea in the population that we needed to solve fiscal dilemmas and that we could not fall into the problem of spending, of the bloated public budget”, says the researcher at Doxa/Iesp (Institute of Social and Political Studies) at Uerj (University of from the State of Rio de Janeiro) and SCNLab from Universidade Mackenzie.

Although Bolsonaro has never defended fiscal responsibility, adds the professor, this banner and the association with Guedes made the then deputy fit the political situation. “The financial market and the economic elites understood that his figure (Guedes) would be able to give fiscal support to the government”, says Botelho. “But Guedes was never able to fulfill this role and I don’t even know if he is capable of doing that because he was showing himself to be totally unskilled”, he points out.

“If, in 2018, a lot of people were with him [Guedes]no matter how much money they have made, this exchange of his narrative – at one time he is liberal and at another time he gives everything in aid –, imposes a doubt and a political and legal institutional uncertainty that, in the medium term, brings problems”, he says.

In addition, Botelho underlines that Bolsonaro’s choice to “hide” the minister, as in the launch of his candidacy, has to do with the loss of prestige of the government. To try to strengthen himself, the president prefers to unite with the most radicalized sectors and with the Centrão, and not with a “liberal” wing that would not embark on a coup spree. “It makes more sense for him to spend cartridges with the group that still supports him than with the ones that are leaving,” he says.

Legacy?

For Komura and Goes, however, not all of Guedes’ work should be thrown away. Financial market analysts cite, for example, the freezing of public sector salaries and the Pension Reform as positive points of the administration of the Minister of Economy. “The Pension Reform was positive. He also managed to make many changes to the labor market. Today, it is less difficult for the entrepreneur”, says Goes.

“It was extremely important to freeze the salary increase in the public sector. We are now seeing the collection coming very strong, and the part of the costs did not rise much because salaries were not readjusted, and this adjusted Brazil a lot”, evaluates Komura.

Political scientist Carolina Botelho, however, recalls that the Bolsonaro government had little to do to approve the Pension Reform – which was already well-oiled by the Temer government, in an articulation between the then Speaker of the House, Rodrigo Maia, with Congress. “When Bolsonaro came in, he just had to press the button,” she explains.

Lula x Bolsonaro

According to Komura and Goes, the financial market still has a certain preference for Bolsonaro in these elections, even if small, because it already knows the economic paths of the government – ​​and for expressing doubts about the direction of an eventual Lula government. “The market is very apprehensive about Lula because it has a dark veil in relation to the policies that will come with the return of the left-wing government. We don’t know who will be Lula’s economic team, for example”, points out the chief analyst at Goes. Invest.

“I think the market does prefer Bolsonaro,” says Komura. He, however, does not believe that there is room for a “boycott” and that financial agents will welcome an eventual PT government with pragmatism.

Political scientist Carolina Botelho also believes that the market and financial elites will “turn the key” in the case of a change of government and respect the polls.

Botelho, however, says that maintaining a certain prestige, even if small, with important players in the financial market, is questionable given the country’s economic and social situation. “If there is an elite that still believes that Guedes is someone with credibility and capable of delivering something to the community, we have to think about what kind of elite this is. Perhaps he or this elite would not survive in a country with a minimum of civility greater than ours, because his priorities don’t leave for a collective and his delivery is meager”, concludes the researcher.