To everyone who appears, in Jair Bolsonaro (PL), to represent an obstacle to him in the 2022 presidential election —including the press, the STF (Supreme Federal Court) and liberals—, the Brazilian right-wing leader has an answer: ” Only God can get me out of here.”
But Bolsonaro’s attempt to reappoint him could end up being threatened by an unexpected problem, for which his policy manual offers no easy answer: inflation.
Prices are rising faster than in nearly two decades in Brazil, a country with a relatively recent history of disastrous inflationary episodes. The real has been constantly losing value, having fallen around 10% against the dollar in just the past six months. And the Brazilian economy, the largest in Latin America, has just registered two consecutive quarters of retraction.
This complicates life for people like Lúcia Regina da Silva, 65. A retired nursing assistant and former supporter of the president, she has spent the last year watching rising prices erode the purchasing power of her modest monthly pension.
“I believed that this government would improve our lives,” said Lúcia one recent morning, pushing an almost empty shopping cart through the aisles of a Campeão supermarket in Rio de Janeiro. His money was just enough to buy some vegetables and personal items. “But it was a mistake.”
Bolsonaro is part of a generation of right-wing populist rulers who have come to power over the past decade and a half in democracies like Turkey, Brazil and Hungary, and whose governments have coincided, at least initially, with periods of solid economic performance in those countries.
They remained in power at the expense of inflaming nationalist tempers and using divisive cultural issues to provoke deep rifts in the electorate. In the process, they co-opted the press and frightened their opponents.
Now, those authoritarian leaders — who include Hungarian Prime Minister Viktor Orbán and Turkish President Recep Tayyip Erdogan — are facing price hikes as they face national elections over the next two years. Inflation, a new and unexpected danger, threatens to mobilize opposition in the countries of these three leaders in ways that few would have predicted a few months ago.
In Hungary, where consumer prices have been rising at the fastest pace since 2007, opinion polls suggest Orbán will face the toughest election of his political life next year as the cost of living and low wages become the biggest concerns of voters.
In the neighboring Czech Republic, which faces rising inflation and rising energy costs, voters have just ousted Prime Minister Andrej Babis, a billionaire right-wing populist leader.
Already hampered by the mismanagement of the Covid-19 crisis, Bolsonaro is seriously weakened. Opinion polls indicate that he is far behind his likely opponent in 2022, former President Luiz Inácio Lula da Silva (PT).
Anticipating what could happen, Bolsonaro has already begun laying the groundwork to contest next year’s election result — which polls indicate he would lose by a large margin if the election were held today. “I want to tell those who want to make me ineligible in Brasília that only God can get me out of there,” he told a crowd of supporters in São Paulo in September.
But Lula has already incorporated the economic crisis into his recent campaign. “The Bolsonaro government is responsible for inflation,” he said in an interview. “Inflation is out of control.”
The worst situation is in Turkey, where Erdogan’s unorthodox economic policies have unleashed a large-scale currency crisis. The Turkish lira lost about 45% of its value in 2021. And prices are now rising at an official rate of more than 20% a year — some unofficial estimates come even higher.
Countries ruled by right-wing populists are not the only ones to be weighed down by inflation. In Joe Biden’s United States, prices are rising at the fastest pace since 1982. And left-wing populist leaders like Alberto Fernández in Argentina are also facing fierce inflationary currents that have put them on the defensive.
Rising inflation represents a sudden break from the trend of slow growth and lukewarm inflation that dominated the global economy for about 12 years before the pandemic hit. This low-growth backdrop allowed powerful central banks such as the US, the European Union and the UK to keep their interest rates low. And these decisions had important consequences for the poorest countries around the world.
This is because the low interest policies set by central banks like the Federal Reserve reduce the return that rich country investors can earn from buying safe government bonds in their own countries, a fact that encourages them to make riskier investments in emerging markets that promise greater returns.
Economists say the flow of money towards developing countries may have been an unnoticed factor in the success enjoyed by right-wing populist leaders in recent years, as it guaranteed them a consistently favorable economic wind that coincided with their passage through the power.
Turkey, which experienced a strong recession in 2009, managed to recover from it relatively quickly thanks to a wave of loans from foreign investors that boosted its growth. Bolsonaro’s election in 2018 coincided with a new push by the Fed to cut US interest rates, which prompted US investors to buy more emerging market debt, helping to shore up the real.
“Since the global financial recession, the macroeconomic environment has been a boon to authoritarian rulers,” says Daron Acemoglu, professor of economics at the Massachusetts Institute of Technology and a scholar of the deterioration of democracies. “Essentially, very low interest rates made many countries that had weak democracies, semi-authoritarian or even overtly authoritarian regimes still attractive to foreign capital.”
But this year, as the global economy began to recover from the pandemic, a combination of supply chain disruptions, money printing by central banks and government spending aimed at spurring the recovery triggered a sharp rise in prices across the world.
This has led the leaders of many developing countries to change their economic policy and global investors to review investments in these markets.
Claudia Calich, director of emerging markets debt at M&G Investments in London, has been investing in Turkish government lira debt for years. But, according to her, the public pressure that Erdogan has been putting on the Central Bank to lower interest rates led his fund to sell all its investments in that market.
“In 2021, as soon as we started to see changes going in the wrong direction – that is, further reductions in interest rates – we started to get worried about the lira,” says Calich. “We are delighted to have abandoned these investments.”
There are few politically palatable options for emerging market countries facing rising inflation and a weakening currency. But for a variety of reasons, high inflation is an especially tricky political terrain for populist leaders like Orbán, Erdogan and Bolsonaro, all of whom will face elections in 2022 or 2023.
Their personalized approach to politics, in addition to the fact that they’ve been in power for years — especially in the case of the Hungarians and Turks — makes it difficult to dodge the blame for the state of the economy. At the same time, their brand of populism, which emphasizes national rivalries and which has been effective in the past, may seem irrelevant or inappropriate to citizens whose standard of living has been plummeting.
The traditional remedy for inflation would include some combination of higher interest rates and lower government spending. But these two initiatives would likely hurt economic growth and employment, at least in the short term, potentially negatively affecting these leaders’ prospects for re-election.
In Turkey, Erdogan — who survived a coup attempt in 2016 and has since adopted an increasingly authoritarian leadership style — has ruled out such a conventional response. The Central Bank of the Republic of Turkey, essentially under Erdogan’s personal control, has lowered interest rates several times in recent weeks.
Most observers think Erdogan has made an already difficult situation much worse, with the prospect of further interest rate cuts and lira devaluations prompting foreign investors to take their money out of the country.
At the same time, political winds also seem to be blowing against it. The deteriorating economic situation sparked protests in different parts of the country. Opposition politicians are already calling for early elections to deal with the crisis and criticizing Erdogan for his management of the economy.
Orbán and Bolsonaro, both of whom had positioned themselves in the past as budget conservatives, abandoned the position. In the opposite direction, they are pushing a short-term increase in public spending to provide a cash flow to voters before the 2022 elections. But it is unclear whether this approach will help them, as it is likely to aggravate inflationary pressures.
Sitting on a bench at a local farmers’ fair in Budapest one recent afternoon, Marton Varjai, 68, laughed at the $250 check that Orbán recently sent him, part of a grant the Hungarian government authorized for all retirees, who represent about 20% of the population.
Varjai receives a monthly pension of around US$358 (R$2,033) and spends 85% of it to pay for his medication, as well as water and electricity bills. “I live on what’s left,” he said, explaining that he’s worried, not knowing if he’ll survive.
Feelings like these are gaining increasing traction among Hungarian voters. A recent study by Policy Solutions, a progressive think tank based in Budapest, found that Hungarians’ biggest concern is the cost of living and low wages.
“If these issues dominate the campaign, it will not be good for Fidesz,” said Andras Biro-Nagy, director of the think tank, referring to Orbán’s ruling party.
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