Can Brazil’s Bolsonaro deliver an economic miracle?
After 100 days in office, a look at Bolsonaro’s plan to lift a country still struggling to recover from a recession.
It has been more than 100 days since Brazil‘s right-wing President Jair Bolsonaro came into power.
In that time the stock market burst through the 100,000 point mark, which was an historic achievement, but one perhaps more in hope and expectation of what Bolsonaro could achieve. The reality is rather grim for the Latin American economy struggling to recover from the recession.
Bolsonaro has a plan to slash its social security and in particular its pension deficit, which economists believe is unsustainable. Efforts to save $260bn over the next 10 years are stuck in political wrangling. But there are other problems to consider; the economy is expected to grow at just two percent this year, less than the 2.5 percent forecast.
Unemployment is hovering around 12 percent and Bolsonaro’s approval rating is the lowest for a president since the country returned to democracy three decades ago.
”He
is at the lowest rate of popularity in the history of Brazilian presidents.”]
On a recent trip to the United States, Bolsonaro and Donald Trump promised to reset relations between the two countries. However, Bolsonaro conceded much and received little in return.
And the prospect of a trade deal between the US and China could actually be crippling for Brazil’s farmers.
Jairo Lugo-Ocando, resident professor at Northwestern University in Qatar, says Brazil’s farmers “must be very worried because one of the things is that agriculture in Brazil – in terms of employment, in terms of sustainability for poor people and for certain areas of the population – it’s very important. But in the overall economy, agriculture is not that important. It’s only six percent of the GDP [gross domestic product]. Meanwhile, you have 30 percent of the GDP from industry and 70 percent for the service. So for the current administration of Bolsonaro, this is one of the things they’re willing to sacrifice if they get more access for industry.”
Bolsonaro’s administration also wants to save money by cutting pensions, but according to Lugo-Ocando, the “huge public sector … is very powerful and influential within the administration. I am not sure how much luck Mr Bolsonaro will have in that sector, but for him, it’s crucial to cut the deficit.”
While Bolsonaro has only been in office for a little over 100 days, “he’s at the lowest rate of popularity in the history of Brazilian presidents,” says Lugo-Ocando.
“One of the things on the left is they feel cheated. They feel that they put Lula in prison so he couldn’t run again, so the left in Brazil is ready to mobilise itself, to really act quickly again. Bolsonaro won with a vote not only from the right, but he had a lot of appeal from the left, the popular sector, and many poor people voted for Bolsonaro, but they’re increasingly growing impatient with the administration’s economic growth.”
Uber’s public bid
Uber has plans to raise $10bn, according to media reports, when it floats on the New York Stock Exchange next month. In its prospectus, the ride-hailing company warned growth was slowing and it was unlikely to make a profit. But that’s unlikely to stop investors scrambling for a piece of the most sought-after initial public offering this year.
|
|
Last month, the company agreed to buy its rival in the Middle East, Careem, for $3bn. In many respects, this is a dream exit for investors and the entrepreneurs who started the company.
But what about the those behind the likes of Uber? Softbank of Japan and Saudi Arabia’s Public Investment Fund. What’s their end game? Are they now reinforcing the old world order of investments, which is dominated by mostly US behemoths like Amazon, Google, and Facebook?
Dominic Perks, cofounder of Hambro Perks, believes the sale of Careem to Uber is actually a good thing for the Middle East’s startup scene.
“There are a number of investors that have invested into the business and they’re going to yield fantastic returns, which will encourage them to invest in further start-ups,” explains Perks. “I think it will encourage entrepreneurship in the region hugely, and I also think that the people that are involved in that business will have learned so much and will be so confident that they may well then go and build their own companies.”
“It’s a good thing that Careem’s been set up by entrepreneurs, backed by angels and by institutional capital and has now scaled successfully and been exited to Uber – it’s a great move.”
Also on this episode of Counting the Cost:
India elections: Prime Minister Narendra Modi is widely expected to win another term in coalition with other parties even though his pledge to create 10 million jobs and increase manufacturing with his Make in India campaign has been a failure. In New Delhi, Sohail Rahman has been speaking to people about their hopes from the next Indian government.
Iraq’s jobless: Rising unemployment in Iraq is provoking demands for government action, particularly by young people. The International Monetary Fund says youth unemployment is more than double the government’s official rate of 20 percent. But is there an alternative to government intervention? Dorsa Jabbari reports from Baghdad.
Brexit: European Union leaders have given the United Kingdom six more months to find a measured way to leave the bloc. In a sense that solves the problem of the ticking Brexit clock or at least puts some more time on it, but the level of division within the British parliament and the British people still need a lot more work. Laurence Lee reports.