Pro-Bolsonaro businessmen complain about high interest rates and see negative impact for reelection

Businessmen who supported Jair Bolsonaro (PL) complain, behind the scenes, that the rise in interest rates reduced the financial returns of the groups, compromising future expansion plans.

In private conversations, big businessmen assess that low interest rates were one of Bolsonaro’s few advantages in the economy in the face of the implosion of the liberal agenda, which promised a smaller state and less intervention in economic activity.

In 2019, the first year of Bolsonaro’s term, the Selic (basic interest rate) was 6.50%. In 2020, with the pandemic, the Central Bank cut to 2% as a way to stimulate the economy.

The deterioration of the domestic and global economic scenario, however, made the BC pass the rate from 2.75%, at the beginning of 2021, to 11.75% in March this year. The signal is that interest rates should continue to rise.

The impact of this increase on companies can be seen in the balance sheet of Rumo, for example, the logistics arm of businessman Rubens Ometto. The increase in the Selic rate made the group’s financial expenses with interest and monetary variations hit R$ 1.6 billion last year, directly impacting the net result – which was R$ 992 million.

In 2019, the first year of Bolsonaro’s term, these company expenses were R$687 million and the net result was R$1.2 billion.

The situation was even worse for Cosan, in the group’s energy sector, which saw the cost of net debt double to R$2 billion between 2020 and 2021.

Ometto is one of the businessmen with the most access to President Bolsonaro, according to Planalto advisers.

At JBS, the global giant in the animal protein market, it was no different. The rise in interest rates forced the company to seek financing and other private ways to raise capital abroad, so that the cost of debt was R$700 million above the 2019 level, according to the company’s balance sheet.

At Riachuelo, owned by businessman Flávio Rocha, the volume of loans and financing increased by R$ 800 million between 2019 and 2021, according to the company’s balance sheet. During this period, the group faced a severe consumption crisis due to the pandemic that led to a loss in 2020, which was reversed in 2021.

Recently, the businessman has been signaling that none of the current presidential candidates pleases him. In 2018, he supported Bolsonaro and was even quoted to occupy a ministry in his government.

Sought, Riachuelo, says in a note that it has never supported candidates or political parties and that in its 75 years of existence “it has preserved its non-partisan institutional value”. The company states that it ended the fourth quarter with a net income of R$304.6 million, totaling R$453.1 million in the year, reversing the loss of R$27.2 million in 2020.

“Riachuelo maintains a solid cash level of R$ 2.1 billion, which corresponds to 152% of its short-term debt, demonstrating adequate liquidity against the group’s future obligations”, says the note.

At Fiesp, the federation of industries from São Paulo, complaints against interest are frequent at board meetings, according to reports by its members.

When contacted, Fiesp replied in a note that “the high interest charged in Brazil is a structural problem and one of the main obstacles to economic activity, the country’s growth and social progress”.

The entity did not answer whether the rise in interest rates could impact business support for Bolsonaro, nor what weight it attributes to the current government in the recent increase.

The attacks, however, are aimed at the Central Bank, which anticipated the global rise in interest rates and quickly made the Selic rise by almost ten percentage points in just over a year.

A good part of the business community recognizes that the pandemic and Russia’s war against Ukraine have aggravated the global problem of scarcity of supplies (inputs and goods), which generated inflation and high interest rates.

Still, they believe that the scenario could weigh against Bolsonaro in the campaign. Former president Luiz Inácio Lula da Silva (PT), they say, will defend an agenda of support for workers and stimulus to the economy in an attempt to attack interest rates and stimulate the credit market.

Bolsonaro’s political advisors work so that this issue does not become a weakness of the president during the campaign, leading the business community to disembark from supporting the president.

Faced with the threat of erosion of his support for the campaign, the president is rushing to release two financing programs for the country’s companies, especially small and medium-sized ones, which have more difficulty in seeking resources in the financial market.

Bolsonaro’s focus will be on these companies because they account for more than 90% of the country’s formal jobs. The big companies, on the other hand, which have taken on debt abroad or launched papers on the market, are surfing this year with the devaluation of the dollar.

According to the consultancy Economatica, this drop guaranteed at least R$ 47 billion in financial gains in the results of the 100 largest publicly-held companies in the country in the first quarter of this year.

Bolsonaro had to convince the Minister of Economy, Paulo Guedes, to seek resources to make Pronampe again viable, a program that seeks to unlock credit with banks through guarantees granted by the government, and the PEAC (Emergency Program for Access to Credit).​

The project that extends Pronampe was approved by the Chamber of Deputies on Tuesday (12) and, for that, the federal government had to make a billionaire deposit in the FGO (Fund Guarantee of Operations), which will be responsible for honoring payments in in the event of corporate default.

It also injected resources into the FGI (Guarantee Fund for Investments), linked to PEAC, another credit program aimed at companies and coordinated by BNDES (National Bank for Economic and Social Development).

Both funds closed their contracts at the end of 2020. Current legislation requires that payments on loans already contracted return to the Federal Government. Therefore, the bills are necessary for a new round of financing.

The package should also have about R$ 600 million from Sebrae (Brazilian Service to Support Micro and Small Enterprises) at Fampe (Aval Fund for Micro and Small Enterprises).