Opinion – Vinicius Torres Freire: Bolsonaro begins his reelection war

The effects of the world disorder will hit Brazil at least in the form of higher inflation until the eve of the election, close to 9% a year until August. If the crisis or inflation stops there, it will be cheap. But Jair Bolsonaro will not stand still, as it should be easy to see.

While it won’t be able to drive growth much beyond zero, it may save some votes that would go down the drain in a recession. More importantly, it can distribute localized, “personal” benefits that can at least make a good impression, even if it doesn’t take into account the high cost and the drop in wages.

Bolsonaro starts by spending R$ 20 billion on fuel, actually failing to collect such an amount of taxes in order to make diesel cheaper. Who knows how much of this discount will reach the tanks, but it’s a small fiscal boost (government spending that stimulates the economy) and a “gesture”.

The government intends to allow withdrawals from the FGTS, something that can put between R$30 billion and R$40 billion in the pocket of people who live between penury and stress. It’s not public spending. The government opens a forced private savings vault. But it’s another small boost, around 0.3% of GDP, that will surely be noticed by whoever gets the cash.

It is also possible to bring forward the 13th payment of INSS retirees and pensioners by six months. There is a small expense built into it, but for the most part it is a matter of anticipation of expenditure, which will have some effect on the economy, although it will soon dissipate after the election. It’s another direct message from the government, to some 30 million people: “Bolsonaro thought of you.” There will be debt forgiveness and cheaper credit for small businesses.

Calculating the political balance of these benefits is mere speculation: how much of this will compensate for the revolt of those who now reject Bolsonaro and the new hardships of the world crisis? It is difficult to say that they will have no effect.

There will still be a lot of hardship. In yet another of his idiotic comments from a sordid tavern, Bolsonaro joked about the drop in oil prices this Tuesday, asking our “dear Petrobras” to reduce prices. It was an illusory lull. While the best price-punters are getting it wrong more than ever about oil or whatever, the war in Ukraine has already unleashed enough viruses to infect the world economy for many months to come, even if a miracle of pacification happens soon.

Even if it goes back to the immediate pre-war period, the price of oil, grains and other materials will continue at levels of extra inflationary pressure. Even before this disaster, US and EU central banks were predicting some financial tightening. Some will come or there will be more lasting world inflation. BCs are between a rock and a hard place, risk of stagnation or more inflation. But credit, in practice, in real life, has already become more expensive in the rich world.

The great instability of prices and interest rates is a reason for companies to withdraw and increase the risk of financial accidents. Growth estimates for the US and Europe are revised downwards, although they are still very good.

In addition to the scarcity of basic materials (energy, food, ores), there must still be disorder in the transport and supply of parts and other inputs for the world industry. The problem caused by the epidemic was not even resolved, it worsens with the war and with the Chinese reaction to its Covid outbreaks.

The more trouble there is, the more Bolsonaro will be tempted to spend to buy his votes. It may do it less crudely, with subsidies and tax breaks. It can even implode, taking the country with it, inventing calamity expenses or something similar. But it won’t stop.