Brazil’s Financial Elites Are Losing Faith In The Authoritarian They Helped Put In Power

Jair Bolsonaro may have pitched himself as a populist savior, but in winning the Brazilian presidency last October, the right-wing authoritarian relied heavily on the support of Brazil’s wealthy classes and financial elites.

Less than six months into his presidency, however, the elites’ elation and optimism has given way to anxiety, as they’ve begun to lose the faith they never should have had.

The Brazilian economy shrunk 0.2% in the first quarter of 2019, according to official data released at the end of May, pushing the country to the edge of a double-dip recession. The slight decline was expected amid a spring filled with disasters and poor crop returns, economics minister Paulo Guedes told reporters.

But it was another negative sign for a country where more than 13 million people remain unemployed after a mid-decade economic collapse from which Brazil still hasn’t recovered. And it all but ensures that Brazil will fall far short of the lofty expectations economists and market interests set for the country when the right-wing president and his cast of reform-minded, neoliberal economic ministers took power in January.

Even more worrying for the market elites is Bolsonaro’s inability and seeming unwillingness to follow through on the ambitious and market-friendly economic reform agenda that he promised to deliver.

“Things are moving slower than we expected,” said Thiago Figueiredo, a Sao Paulo-based analyst who even before the election was more skeptical about Bolsonaro than most in the financial sector. That’s especially true for a proposed overhaul of Brazil’s generous public pension system, a priority of the reformers but clearly an afterthought for the president himself.

As a result, Bolsonaro’s approval rating among the financial elite has plummeted. Just 14% of financial managers approved of Bolsonaro’s government in a May poll conducted by XP Investimentos, which surveyed 79 Brazilians in the finance industry. More than 40% said his government was bad or awful.

That’s a far cry from how the industry viewed Bolsonaro in January, when he took office after riding a wave of discontent ― caused by rampant corruption, high rates of violence, a poor economy and declining faith in the political establishment and democracy itself ― to an improbable victory. At the beginning of the year, 86% of the finance professionals surveyed by XP saw him favorably. Just 1% rated him bad or awful.

Brazil’s market and business interests ― including its nascent libertarian movements, influential agribusiness sector and financial elites ― had looked past his inexperience, his authoritarian tendencies and his homophobic, sexist and racist language and policy preferences in the belief that he’d serve their interests.

They flocked to Bolsonaro’s side after he aligned himself with Guedes, a University of Chicago-educated economist who promised a slate of reforms that included a revamp of the tax code and the pension system, reductions in regulation and the privatization of dozens of state-owned industries. 

It was a familiar tag team in South America: Bolsonaro and Guedes, the authoritarian-in-waiting and the Chicago Boy, ready to reshape an economy the way Chilean dictator Gen. Augusto Pinochet and his team of Chicago-educated economists once had. (Guedes has praised Pinochet’s economists and promised “Pinochet-style” reforms for Brazil; Bolsonaro’s main criticism of Pinochet, whose regime killed and tortured thousands of people, was that he wasn’t murderous enough.) And while Brazil certainly needs some reforms to bolster its economy and reduce its sky-high rates of inequality, there are also concerns that the market-friendly path of the Chicago School could only further tilt the balance of any future prosperity toward the rich and away from the poor and the middle class, just as it did in Chile.

But even if they didn’t share the worries of those who saw Bolsonaro as a danger to human rights, Brazil’s marginalized populations and potentially even its democracy, the financial elites’ optimism was always a little too eager and much too misplaced.

“For anyone who follows politics,” Bolsonaro’s lack of interest in economics and his shortcomings as a political leader “were quite obvious,” said Thomas Traumann, a business consultant and former communications minister in ex-President Dilma Rousseff’s government.

“The markets were so happy that Paulo Guedes became the economic minister, but it was just the way Bolsonaro was trying to seduce the markets. And they bought it,” Traumann said. “It was like ‘The X-Files’ ― ‘I want to believe.’ They wanted to believe.”

Guedes may be a true believer ― in late May, he threatened to quit his job and “live abroad” if Brazil’s Congress watered down his pension reform proposal.

But Bolsonaro never has shown as much investment in the country’s economic path. He shocked American business interests early in his campaign when he admitted he was totally ignorant of economic matters, and his stance as a supposed liberal reformer hardly masked a past spent as a more statist right-winger who’d once suggested a former centrist president should be shot.

Like Donald Trump, the American president to whom he has earned comparisons, Bolsonaro was always likely to run a haphazard and unfocused government, always guaranteed to spend more time focused on the red meat his rabidly conservative base covets than on the economic preferences of the elites whose acquiescence played a vital role in propelling him to power.

Outraged tweets and cries of “fake news” come naturally to Bolsonaro, a former army captain and federal deputy who has never shown a particular affinity for democracy. So it’s no surprise that in a government made up of three loosely aligned factions ― right-wing “anti-globalists,” career military men and neoliberals ― it’s Guedes’ team that has routinely failed to win Bolsonaro’s ear. Guedes seems to realize it too: The liberal economist bowed to the conspiracy-driven “anti-globalist” wing of the government during a state visit to Washington in March, when he told Bolsonaro’s right-wing “guru” that he was “the leader of the revolution.”

Bolsonaro, whose 27 years in the legislature were spent as a largely uninfluential member of largely uninfluential right-wing parties, has shown little appetite or ability for the sort of legislative outreach and coalition-building required to move anything through Brazil’s Congress ― especially a pension reform effort even more unpopular with Brazilians than he is. Until recently, when he has made surprise visits to the legislature, Bolsonaro had spent more time insulting both his supposed friends and enemies in Congress than he had wooing them. And unlike in the United States, there’s no unified movement akin to the Republican Party spearheading an agenda in Congress for Brazil’s distracted authoritarian.

Instead, he’s governed by decree and eagerly pursued only the most discriminatory and destructive policies that he promised as a candidate. Bolsonaro’s government has rolled back protections for LGBTQ and indigenous Brazilians, loosened gun laws in a country where there are roughly 40,000 shooting deaths each year, given police more leeway to kill (and watched as they have in record numbers), pushed draconian reforms to the criminal justice system and enacted policies that promote deforestation in the Amazon.

Many experts still believe some sort of pension reform will pass Congress this year, largely because Rodrigo Maia, the leader of Brazil’s lower house but hardly a natural Bolsonaro ally, sees it as his own priority. But the prospect of the other reforms that led the elites to so giddily support a potential authoritarian in the election seems slimmer by the day, as does the outlook for Brazil’s still-ailing economy and the millions of people it’s left jobless.

“I think Brazil is going to do what it does best, and what it does best is muddle through,” said Monica de Bolle, the director of Latin American studies at Johns Hopkins University. “Brazil is a champion at muddling through. We’ve made an art of muddling through.”

As predictable as this outcome was, Brazil’s elites will almost certainly remain exempt from the harshest consequences of their decision to help empower a strongman. Even if ― unlike their counterparts up north ― they never get their tax cuts.