Bolsonaro takes an isolationist approach to economics and tries to avoid IGO sponsored multilateral agreements. Similarly, he has expressed strong opposition to the economic implications of globalization. This stance puts him in a difficult position because globalization is, by nature, increasingly difficult to isolate from. As a result, Bolsonaro makes exceptions for engaging in international trade and multinational agreements made on Brazilian terms in the absence of IGOs such as the UN or WTO. Ultimately his approach to the economy is to protect Brazilian interests and domestic industries. That said, Bolsonaro has openly admitted to having a limited understanding of economics, stating he will appoint someone knowledgeable on the topic to be his economic minister so they will make those decisions for him. Paulo Guedes, his economics minister, has filled that role as a respected and well-known Brazilian economist.
Pension Reform Bill
In 2019, Bolsonaro passed the Pension Reform Bill. This piece of legislation was passed by a supermajority in Congress. Expensive pension programs had been the cause for the country’s large fiscal deficits in the past. This new piece of legislation creates an actual retirement age in Brazil: 65 for men and 62 for women. It also includes an increase to workers’ pension contributions and the mechanism to calculate benefits. This is expected to save 800bn reais ($195bn; €174bn) in government spending. In response to the passing of this bill, markets celebrated as stocks hit an all time high. Brazil’s previous pension system was extremely expensive with weak growth and falling tax revenues making national savings increasingly important. This pension reform prevented Brazil from experiencing spiralling costs; resulting in a major economic and political victory for Bolsonaro.
Economist Minister Paulo Guedes
Despite the success of the Pension Reform Bill, Bolsonaro’s economic prowess is limited. During his campaign, when asked questions pertaining to economic policy, he openly admitted to knowing little about the subject. Bolsonaro added that he does not concern himself with knowing about a wide rage of issues because he can appoint people to deal with them. He did exactly that when appointing Paulo Guedes as “super-minister” of the economy. Guedes clashed with Bolsonaro in the first few months of the administration, even threatening to resign. However, Guedes has made it clear he is in the Bolsonaro administration for the long run. He stated that he has waited too long to be given the opportunity to make change in Brazil. Guedes has made clear his personal crusade to implement free-market economic practices in Brazil; lessons he learned from Milton Friedman in Chicago. Guedes is passionate about his role and has more nationalistic motives rather than partisan ones. He said that “as long as the president trusts me, I’ll be there.” This is a big commitment considering Guedes has endured pressure from economists and business owners, the Brazilian people, and Bolsonaro himself to generate large scale economic change in Brazil.
Trade Relations with the US
Bolsonaro’s stance on international trade is heavily influenced by his sociocultural background and policies. In accordance with his affection for other populist, right-wing leaders, Bolsonaro has bolstered trade with the US with reciprocity from US President Trump. In spite of their leaders similarities, this relationship has passive aggressive undertones due to trade complications and tariffs. For example, the US raised tariffs on Brazilian meats due to blood clots and tumors found on the meat. This move was largely made by Trump to attempt to benefit the meat industry in the US. Exports as a whole are extremely important to Brazil as they account for 12.5% of Brazilian GDP. Due to such an export dependence, Bolsonaro has had to stave off threats of US tariffs on Brazilian steel (and meat) as such economic actions would further depreciate Brazilian currency and threaten US-Brazilian relations.
Another key aspect of US-Brazil relations is Brazil’s bid for the OECD. President Trump tweeted that he would be supporting Brazil as a potential addition to the organization. In a leaked letter months later, it was revealed the US Secretary of State Mike Pompeo had only mentioned the sponsorship of Argentina and Romania to be admitted. Bolsonaro softly responded, elaborating on the admittance process and stating that Brazil was behind Argentina and Romania on the list, but they still have the US’ full support. This fervent interaction with the OECD is notably contradictory to both Trump and Bolsonaro. Both men have expressed an unwillingness to work with IOs and that they have no interest in multilateral interactions. Nonetheless, Brazil joining the OECD seems to be a priority for both nations; a pedigree of acceptance rather than an opportunity for international coordination.
Trade Relations with China
China is Brazil’s largest trading partner and as such, investment from China has been extremely important for Brazil’s economic growth. Brazilian infrastructure has received significant investments from the Asian superpower that it was short of in previous years. Moreover, domestic businesses have benefited greatly from trade with China; especially beef, agriculture, and mining. As a result, Bolsonaro has recognized the increasing importance China will have in Brazil’s future, stating that he hopes to diversify his trade with China in decades to come. The two nations began their partnership before Bolsonaro as both countries are a part of the BRICS organization (Brazil, Russia, India, China, and South Africa). On the sidelines of the most recent BRICS summit, Bolsonaro and Chinese President Xi Jinping have signed a trade deal that focuses on economic growth and innovation.
Bolsonaro’s booming relationship with President Trump is tested by his growing relationship with Xi. That said, in adherence to his ‘Brazil First,’ pro-domestic business approach, Bolsonaro is listening closely to Brazil’s beef, agriculture, and mining industries when deciding who to trade with. China has been extremely helpful lately to all three industries in Brazil; incentivizing Bolsonaro to further embrace Xi and ignore any sentiments Trump might have about their relationship.
Bolsonaro’s attitude towards China has not always been so open. During his campaign in 2018, Bolsonaro accused China of “buying Brazil.” His abrasive rhetoric led to speculation that if elected, he would struggle to maintain a fruitful relationship with Xi. This has proven the opposite thanks to the behind-the-scenes work of Brazilian Vice President Hamilton Mourão. Mourão; alongside Minister of Agriculture Tereza Cristina, worked to strengthen ties with China by securing trade agreements and Chinese FDI early in the Bolsonaro administration. Bolsonaro frequently attacked the Chinese for their communist ideology yet was forgiven due to the hidden work of his cabinet.
In recent months, more fluctuation in Brazil-China relations has occurred due to the coronavirus pandemic. Federal Deputy Eduardo Bolsonaro; the third son of the President, referred to COVID-19 as the “China virus,” echoing the rhetoric of US President Trump. China’s consul general in Rio de Janeiro, Li Yang, came back at the son’s comment, slamming Brazil for their response to the virus. Li added that Bolsonaro is “brainwashed by the United States” and “should any country insist on being China’s enemy, we will be its most sophisticated enemy!” In the end, this superficial spat between China and Brazil did not have a large effect on their trade relationship. Weeks later, Bolsonaro asked China for help and resources in fighting the crisis and received assistance from two Chinese firms who lent assistance; further highlighting Brazil’s growing need for positive Chinese relations with the US absence on the global stage.
Income inequality in Brazil is a major issue. Despite making enormous strides in alleviating poverty; pulling 28 million people out of poverty in the last 15 years, Brazil is still considered one of the most unequal nations in the world. To demonstrate, the six richest men in Brazil have as much money as the poorest 50% of the nation. Consequently, economic growth in Brazil in recent years mainly benefited the upper 1% in Brazil; once again endangering the progress the country has made regarding alleviating poverty. The World Bank predicts that 3.6 million Brazilians will fall back into poverty this year. This estimation was made before the COVID-19 pandemic, which means 3.6 million is likely an underestimate. In spite of staggering statistics, large, detailed, and comprehensive legislation regarding income inequality has escaped Bolsonaro and his administration. The issue of income inequality is not popular amongst his core voting base, specifically the wealthy section of his constituency, which gives Bolsonaro little incentive to address wealth gaps and poverty struggles.