Bolsonaro pleases market and should cut social benefits if reelected, says megainvestor

What do foreign investors, who always have the speech about fiscal rigor on the tip of their tongue, have to say about social benefits released during the administration of Jair Bolsonaro (PL) on the eve of the election?

Known as the “emerging markets guru”, mega-investor Mark Mobius says Bolsonaro “wants to be reelected and is doing these things”. However, he adds that, if he gets another term, Bolsonaro should “stop these spending or at least reduce them”.

Mobius has worked at Franklin Templeton Investments for over 30 years and in May 2018 launched his own investment manager, Mobius Capital Partners LLP. He was born in the United States to a Puerto Rican mother and a German father.

If the winner of the election is the PT candidate and former president, Luiz Inácio Lula da Silva, who today leads the polls, Mobius says the economy would do well because Lula “learned many lessons” during his administration and probably “he will do a better job because he is more experienced now”.

Less than a month before the first round, Bolsonaro appears in second place in polls of voting intentions. In this scenario, his allies are betting that measures such as income transfers and fuel tax reductions can increase his popularity.

Only the package of benefits that became known as PEC Kamikaze, approved by Congress with the support of the ruling base, released an expense of more than R$ 40 billion. There are, for example, a monthly benefit of R$ 1,000 for truck drivers and taxi drivers, and the increase from R$ 400 to R$ 600 in Auxílio Brasil.

Mobius gave an interview to BBC News Brasil by phone, from Dubai.

Lula could do ‘better job now’

Mobius is betting that the Brazilian economy will show good results next year, regardless of who is elected. He had already said that an eventual Lula government would not be “necessarily bad for the markets” and reinforced the view that the Brazilian economy will do well in an eventual Lula government.

“Even if Bolsonaro loses and Lula is elected, the economy will do very well because Lula learned many lessons during his administration and he will probably do a better job because he is more experienced now,” he said.

And he recognized that the Lula government was not bad for the market. “When Lula was going to be elected, we were always afraid that Lula wouldn’t be good for the economy, because he could nationalize big companies and that would be bad for the market. But it wasn’t like that. So we were all very surprised.”

“When Lula was in power, the market did very, very well, mainly because of what he was doing in terms of spending on the poor, which was very positive.”

‘Bolsonaro has been good for the market’

If Bolsonaro managed to reverse Lula’s favoritism to be reelected, Mobius says that his eventual victory “would be positive because obviously Bolsonaro has been good for the market so far”.

Asked about income transfer measures, which tend to be viewed with a critical eye by investors, Mobius launches the justification for reelection.

“Obviously, he (Bolsonaro) wants to be reelected and he’s doing these things,” he says, comparing it to attempts in the US to reduce fuel prices and adding that “it’s not good for the budget in the long run.”

And he adds: “But if he manages to stop these expenses or at least reduce them when he is re-elected, that would be positive.”

Asked if he believes that would in fact happen, he replied: “I hope that’s the case, because this kind of spending […] usually leads to a lot of inflation”.

Would this type of measure be expected considering the administration of Bolsonaro and his Minister of Economy, Paulo Guedes, who in 2018 had control of public spending as a flag? For Mobius, yes. “In any democracy where an incumbent government wants to get re-elected and wants to make sure it’s popular with voters, and they’re going to spend.”

The telephone interview took place before Bolsonaro’s electoral program presented, on Thursday (8), a promise to increase Auxílio Brasil to R$800 for beneficiaries who find jobs. The 2023 budget does not provide for the extra spending.

Questioned later by e-mail on the subject, Mobius began his response by saying that he was in favor of “Lula’s Bolsa Família program.” And he said that, although he does not have details of Bolsonaro’s proposal, he is in favor of transferring income to those who find work “as this would encourage people to enter the job market”. “I would not be in favor of transfers without performance criteria attached,” he said.

Difficult to question Brazilian voting system’

Asked whether the president’s own questions about the voting system could generate instability, Mobius compares the situation with that of former US President Donald Trump, but says that “it will be difficult to question the voting system in Brazil because it is more advanced than many other countries around the world because of the computerization of the voting system”.

“There will always be questions about electoral fraud in all countries, as I mentioned. But Brazil is in better shape in this regard,” he said.

Latin America less affected than Europe

Mobius says that, “taking into account the great tensions and problems we face globally”, the Brazilian economy is in “very good shape”. He justifies this comment by arguing that inflation “is not so bad” compared to the country’s history, that there is economic stability and that “companies are doing very well”.

He says that “the environment is very good for Latin America in general, and particularly for Brazil” because the region is not as directly affected by the war in Ukraine – compared to Europe.

This text was originally published here.