Bolsonaro’s radical neo-liberal offensive in Brazil

Bolsonaro and Trump

Jair Bolsonaro’s administration has wasted little time in advancing its project of systematically destroying the role of the state in Brazil’s economy. Bolsonaro’s radical neo-liberal offensive simultaneously encompasses drastic attacks on the economic and social rights of Brazil’s working class in addition to threatening the long term economic and social development of the country. Bolsonaro is effectively auctioning off Brazil’s future for the benefit of US capital and its allies.

The neo-liberal offensive is taking place on several fronts and includes a drastic attack on pensions, a huge programme of privatisation and the undermining of the technological development of Brazil’s economy.

Bolsonaro’s administration has embraced the era of ‘permanent austerity’ which was institutionalised by his predecessor Michael Temer who presided over Brazil from 2016-2018 following a coup that removed Workers Party (PT) President Dilma Rousseff.

Temer introduced a new ‘expenditure ceiling’ in December 2016 through a Constitutional Amendment which mandates a zero real growth rule for federal primary expenditures for the next 20 years. Temer’s harsh austerity programme made him extremely unpopular – his approval rating by the end of his Presidency was just 4% – and has left Brazil’s economy essentially stagnant, with growth of only 1% in 2017 and 1.1% in 2018 according to the World Bank.

Bolsonaro is attempting to deepen, accelerate and intensify the austerity offensive in Brazil. The project has been very bluntly described by Bolsonaro’s Minister of the Economy, Paulo Guedes, who said that he intends to “sell everything.”

Guedes has assembled a team which includes fellow University of Chicago trained economists and that is determined to systematically dismantle the state’s role in Brazil’s economy with a massive programme of privatisation and an almighty assault on the living standards of the overwhelming majority of the population.

A defining feature of Bolsonaro’s neo-liberal offensive includes the selling off of strategically important assets and industries that are crucial to Brazil’s future development to US corporations, in violation of Brazil’s national interests.

From the point of view of developing Brazil’s economy and raising the living standards of the population, Bolsonaro’s neo-liberal offensive is the exact opposite of what is required.

Bolsonaro’s drastic attack on pensions

The centrepiece of Bolsonaro’s neo-liberal offensive is a dramatic, vicious and politically unpopular attack on pensions.

Under Bolsonaro’s plan, which is currently under discussion in Brazil’s Congress, workers would lose $261 billion over the next 10 year as a result of their pension benefits being slashed and a drastic increase in the age of retirement. Under the current system men and women can claim pension benefits after 30-to-35 years of contributions respectively, which allows many to retire in their mid-50s. The proposal Bolsonaro has put to Congress would increase the minimum retirement age for both public and private sector workers to 65 for men and 62 for women.

Bolsonaro needs to persuade 308 out of 513 members of Brazil’s politically splintered lower house of Congress to vote for his Pensions Bill in order to get it passed. The unpopularity of the attack – a recent opinion poll from DataFolha showed that 51% of Brazilians are against the pensions ‘reform’ – and the resolute opposition from Brazil’s Workers Party (PT), other left wing political parties and the trade unions makes it difficult for Bolsonaro to win the necessary support in Congress to pass his proposals.

On Monday 15 April 2019, the Workers Party (PT) led the opposition political parties in the lower House in winning a majority to delay the pensions ‘reform’. Bolsonaro needs an additional 140 votes to push through his attack on pensions which would require him to build a coalition with the Brazilian Social Democracy Party and the Democratic Movement Party.

A recent article in the New York Times assesses the outlook of the Pensions Bill passing as “growing dimmer” and reports that “hearings on pension changes have devolved into shouting matches, frustrating proponents inside and outside the government, and leading even former allies to speak of Mr. Bolsonaro with open contempt.”

Bolsonaro’s team are proposing to launch a massive attack on healthcare and education should the attack on pensions fail to attract the support necessary to pass through Congress. The “Plan B” proposes to remove the constitutional guarantees which are currently in place for the funding for health and education and has been put forward alongside the Pensions Bill so that it can be used as a bargaining chip.

Radical privatisation agenda

Whilst Bolsonaro’s administration has disappointed US capital with its failure to launch a quick, successful, striking attack on pensions, it has succeeded in advancing an aggressive privatisation agenda.

In January, Bolsonaro’s Minister of Infrastructure Tarcisio Gomes de Freitas declared that the new government intended to privatise or liquidate about 100 state-owned companies during 2019, including the privatisation of key infrastructure such as railroads, ports and airports. The head of Brazil’s new Privatisation Secretariat, Salim Mattar, announced that Bolsonaro’s administration planned to raise $20 billion from the sale of state shares in public companies in 2019 alone.

Paulo Guedes reported on the progress of the Brazilian government’s privatisation programme at a recent conference in New York, stating that privatisation proceeds so far this year had reached £12 billion and expressed confidence that the goal of raising $20 billion from the sale of public assets this year will be exceeded by 40%. He also stated that the government intends to accelerate the pace of privatisation over Bolsonaro’s four year term.

In March 12 regional airports were sold off and now the Brazilian government are preparing to sell off a further 22 other airports later this year.

Crucially, Bolsonaro’s team plans to diminish Brazil’s biggest state company, the oil giant Petrobras. Salim Mattar, the leader of Brazil’s Privatisation Secretariat, announced that the Brazilian government wanted Petrobras to sell most of its 36 subsidiaries within four years in addition to privatising the Brazil state-owned power company Electrobras.

Guedes has appointed a fellow University of Chicago alumni, economist Roberto Castello Branco who is a fierce critic of state intervention in the economy and a consistent advocate of the complete privatisation of state-owned companies, to run Petrobras.

From the moment he was appointed Branco has made it clear he intends to push forward a “divestment plan” which will entail the sale of mature oil fields in addition to opening the refining sector, which Petrobras currently has a monopoly over, to the benefit of multinational corporations. Branco considers it “inconceivable” that one state-owned company has 98% of the country’s refining capacity and declared that monopolies are “absurd.” Jose Maria Rangel of the Single Federation of Petroleum Workers (FUP) has criticised Branco’s plans, stating “Petrobras is going to move to sell its refineries and fields, moving forward to reduce our company to serve international capital.”

In April 2019 the Brazilian government announced that Petrobras intends to start selling 50% of its refining capacity in June 2019, which is equivalent to 1.1 million barrels of oil per day. Such a move would severely diminish Petrobras.

The Bolsonaro administration is also undermining Brazil’s state banks in order to diminish the role of state investment in the economy. The main target is Brazil’s National Bank for Economic and Social Development (BNDES), the largest development lender in the Americas which under the Workers Party financed projects in many Latin American and African countries. Bolsonaro opposes BNDES’ practice of lending money at low interest rates to build “national champion” companies which was done under the left wing Workers Party governments from 2003 to 2016. BNDES is currently in the process of reducing its stake in the state-controlled oil company Petrobras.

Undermining the technological advancement of Brazil’s economy

Another feature of Bolsonaro’s neo-liberal agenda is to undermine Brazilian science and national technological development.

A crucial decision was made by the Brazilian government in February 2019 to approve the sale of the majority of Embraer’s commercial division to the US corporation Boeing. Embraer is a huge Brazilian aerospace company which is the third largest producer of civil aircraft after Boeing and Airbus. 80% of Embraer’s profitable commercial division is being sold-off to Boeing.

This decision means that Brazil is losing its only large, high-tech, profitable company, which will have a negative impact on the development of new strategic projects.

Manuela D’Avila, the left’s Vice President Candidate in the Brazilian elections of 2018, and member of the Communist Party of Brazil has outlined the significance of the sale of Embraer in undermining Brazil’s development:

“When Embraer was founded during the end of the 1960s, it overcame the disbelief that Brazil could make planes that could fly the entire world. This is now a reality. Today, Embraer is a private, open capital company that is strategic to Brazil in terms of innovation, economics and national defense.

“Due to the strategic nature of Embraer, the Brazilian government – which is a shareholder in the company – has a special type of stock, called a golden share, which gives it veto power and the final word over negotiations that are considered strategic, so that it can avoid allowing international transactions like this to damage our national interests.

“It is an initiative of national betrayal. The main impact of the possible sale of Embraer, is loss of intelligence and restrictions on the nation’s technological development.

“However, the debate over Embraer is opportune because it reminds us of what we want to be as a nation. Do we want to be a nation that produces knowledge and products of aggregated value or one that merely exports commodities?”

In addition to selling off the majority of Brazil’s most successful high-tech company, Bolsonaro’s government has also announced that it has frozen 42% of the budget for the country’s Science and Communications Ministry. This freeze will further undermine Brazil’s scientific and technological development. The Brazilian Science Academy and five other scientific societies have condemned the decision stating, “it will take many decades to rebuild the country’s science and innovation capacity” unless this decision is reversed.

Bolsonaro’s rising unpopularity

Bolsonaro already has the worst approval rating of any elected President by this point in their first term since democracy was restored in the 1980s. 30% of the population regard Bolsonaro as “bad or awful”, 33% have a neutral view and 32% believe he is “great or good.” On the day of his inauguration on 1 January Bolsonaro’s approval rating was 49%. However, there remains some illusions in optimism for Bolsonaro’s Presidency – with 59% believing that his government will be “great or good.”

New economic data shows that unemployment is rising in Bolsonaro’s Brazil – it increased from 11.6% in November 2018 to 12.4% in February 2019. Meanwhile the Central Bank has released data indicating that GDP fell by 0.73% in February of this year, compared to the previous month.

The clear priority of the Bolsonaro administration is to pursue an aggressive neo-liberal agenda to maximise profits for US capital and its allies in Brazil whatever the costs to Brazil’s overall development or the living standards of the population. Such an agenda, which is against the interests of the overwhelming majority of the Brazilian population, is unlikely to improve Bolsonaro’s approval ratings as it involves such a tremendous attack on Brazil’s population.

The exact opposite approach to Bolsonaro’s neo-liberal offensive is required to develop Brazil’s economy, improve living standards and advance social progress for the majority of Brazilians. Increasing state investment to build “national champion” companies, using state banks as a channel to promote public investment and building rather than selling off high technology companies is a path to Brazilian development and independence. Bolsonaro’s approach is a path to dependency and subordination to the US.

This article was originally published here on Eyes on Latin America