“Brazil is Broken”: Bolsonaro, COVID, and the Looming Return to Austerity

As the New Year begins and Brazil officially passes 200,000 COVID deaths, far-right Brazilian president Jair Bolsonaro announced with his characteristic bluntness: “Brazil is broken. I can’t do anything.” While blaming the media for exaggerating the threat of the coronavirus, Bolsonaro complained that COVID had prevented him from further pursuing the structural adjustments and austerity policies that characterized the pre-COVID phase of his presidency. At the same time, Bolsonaro’s economic team, led by Chicago Boy economist Paulo Guedes, has been projecting optimism, claiming that the Brazilian economy will recover, thereby allowing the government to steam ahead with plans for further spending cuts and privatizations. The optimism coming from Guedes and his team is, however, fundamentally erroneous. Without a fundamental change in governing priorities, Brazil will enter into a very difficult period in the coming months and years. Indeed, the economic policy “solutions” that Bolsonaro and Guedes are determined to implement are no cause for optimism. Rather, they are likely to lead to far greater levels of suffering for ordinary Brazilians.

The Bolsonaro-Guedes spate of neoliberal economic measures is not unique to this government. Brazil’s recent return to austerity, after more than a decade of relatively robust public sector investment, began decidedly in 2015, following the tight and contested reelection of Workers’ Party (PT) President Dilma Rousseff.Facing a recession and attempting to accommodate her increasingly aggressive opposition, Dilma embarked on “belt-tightening” and wide-ranging austerity programs, by, for instance, cutting unemployment benefits, raising taxes, and postponing a major government housing initiative, leading to an overall and significant decline in public spending. These efforts failed to lift Brazil out of recession before the opposition — unmoved — impeached and removed Rousseff on minor charges of budget tampering, actions which themselves were not of a criminal nature and were widely viewed as spurious and politically motivated (several of her predecessors used the same budget maneuvers without impeachment charges ever having been considered). Even the impeachment’s greatest beneficiary, her successor Michel Temer, later referred to the process as a “coup.” Indeed, those who sought to remove Rousseff did so in part to advance a series of far deeper, significant, and painful series of neoliberal reforms, as well as to try to reverse anti-corruption efforts that Rousseff had allowed to move forward.

Following Rousseff’s removal, Temer launched a significantly more substantial and profound austerity push, freezing Brazil’s discretionary spending levels for 20 years with a constitutional amendment (PEC 241), while enacting sweeping labor reforms that seriously weakened both the labor movement and workers’ rights across Brazil. Bolsonaro and Guedes have only continued this process, accelerating privatizations and enacting a major cut to public pensions. Both have announced their intention to go further: Bolsonaro wants to go so far as to achieve the total privatization of the publicly held oil company Petrobras, not long ago an unthinkable move for any Brazilian leader.

These plans were largely put on hold, however, due to COVID. In fact, Bolsonaro and the Brazilian Congress actually went in the opposite direction fiscally, enacting a monthly payment to the unemployed known as the auxílio emergencial (“emergency aid”), which in its original form paid out R$600 per month (roughly $115 in a country where the minimum wage is about $200 a month). Originally, the auxílio was even more generous than the widely praised Bolsa Familia program instituted by President Lula da Silva in the early 2000s, as it provided over 67 million people with over R$1 trillion ($200 billion) in less than nine months. But, though it was hailed as one of the most generous economic responses to COVID employed by any country, and even referred to as Bolsonaro’s “greatest success,” it has just been allowed to expire.

Bolsonaro’s announcement that “Brazil is broken” comes as Brazil’s debt-to-GDP ratio has jumped over 10 percentage points in 2020 alone, the single largest annual increase in recent memory. Despite calls from legislators within his own party to renew the auxílio, Bolsonaro has said he has no plans to do so, announcing “they want us to renew the auxílio, but our debt levels have reached their limit.” This resistance from Bolsonaro comes at a time when Brazilian interest rates and the cost of borrowing are at their lowest level in decades, while Brazil has roughly $340 billion in foreign exchange reserves. Brazil is not, in fact, literally broken or broke, fiscally speaking, but Brazilian voters will nonetheless be told that redoubling austerity is a solemn and unavoidable imperative.

This ominous change in economic policy comes at a time when the Brazilian government has yet to approve any COVID vaccine nationally (although there are talks to soon begin imports of the Oxford vaccine, and the Sinovac vaccine, despite having lower efficacy rates, has the potential to help fight the pandemic). COVID deaths have just surpassed 200,000 — second only to the US. The lack of a strong and coordinated response to the pandemic by Brazilian authorities has proven nothing short of catastrophic. While the scale of the tragedy is astonishing, it is perhaps unsurprising given that Bolsonaro has downplayed the severity of the pandemic (calling it a “little flu”) from the earliest days of its arrival in Brazil. With the intense international competition that exists for a still very limited supply of vaccine doses, and Brazil being outbid by wealthier countries as well as large developing nations like India, widespread vaccination of the population is a long way off. This comes after months of Bolsonaro casting doubt over both the necessity and efficacy of the vaccines, mocking the use of face masks, and downplaying the severity of the virus at every turn (despite catching it in July of 2020).

Likewise, Bolsonaro has repeatedly claimed that any vaccines from China will be ineffective, casting doubt on the only currently in-use vaccine in Brazil. Just recently, Bolsonaro made a great show of diving into the water at a popular beach on the coast of São Paulo State to wade into throngs of maskless supporters. The fact that Bolsonaro has repeatedly rejected the use of vaccines to combat the pandemic may well have contributed to a huge rise in the number of Brazilians unwilling to take a COVID vaccine, from 9 to 22 percent between August and December 2020.

The Bolsonaro government’s inability to manage the pandemic along with a renewed push to return to austerity together mean that Brazil could soon enter a severe economic, humanitarian, social, and political crisis, one that goes well beyond the economic crisis Brazil has experienced since 2014. If this were to occur, it seems highly unlikely that Bolsonaro could be elected to a second term in 2022. His poll numbers have risen recently — seemingly thanks primarily to the auxilió — but the continued recession, austerity, and vaccine mismanagement can be expected to significantly dampen his popularity.

But, while the prospect of Bolsonaro’s electoral ouster may represent a glimmer of hope for both his domestic and international opponents, there are signs that the incumbent, with inspiration from his ally Donald Trump, may cast doubt on the integrity of the upcoming vote. Bolsonaro is now claiming that “fraud exists” in Brazil’s voting system, and that “without printed ballots … we’re going to have bigger problems than the United States.” These comments, taken in context with Bolsonaro’s prior calls for the military to establish a new dictatorship and shut down Congress, suggest that he is not committed to democracy (to put it lightly), especially if an electoral defeat appears likely. In the face of a protracted and perhaps unprecedented crisis, as well as a leader with authoritarian aspirations, allies of Brazilian democracy — domestic and international — must remain vigilant in the years to come.

This first appeared on CEPR’s Americas blog.

Jeremy Ross is an International Program Intern at the Center for Economic and Policy Research.

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