ECONOMY REGULAR BRAZIL
Election fever begins Political posturing is to the fore
B
razil’s sometimes seemingly never-ending election cycle is back in full swing ahead of the October 2022 presidential vote. As well as the top job of [resident, the vice-president, the national congress, the federal district legislative chamber, and some district councils are all up for election too. So, it’s time to start the debate about where Brazil’s economic policy is set to go. The far-right incumbent Jair Bolsonaro is looking likely to lose – his controversial response to Covid-19, double-digit inflation, and the strong possibility of economic stagnation in 2022 are all major issues. Many commentators’ money is on a third time win for his main opponent and political opposite, the 76-year-old former trade unionist Luiz Inácio Brazil: Energy consumption by fuel type Fuel Type
% of use
Petroleum
38
Hydroelectric
29
Renewables
16
Natural Gas
11
Coal
5
Nuclear
1
Other
5
Total
100
Source: US Energy Information Administration
ISSUE ONE 2022
Lula da Silva – aka “Lula” – who has been espousing a strongly left wing economic agenda of high taxes on the country’s wealthy. Though opinion polls seem to favour Lula, he is yet to officially declare as the Workers’ party, or PT, candidate for president. Most though expect the PT platform to include increasing public investment, stopping privatisations, strengthening labour laws and raising workers’ incomes. This means that predicting anything into late 2022 and 2023 is difficult. Lula’s last presidency ended with Brazil’s deepest recession on record and then a massive political-economic scandal that saw the end of Lula’s anointed successor Dilma Rousseff’s political career. So, all eyes are on the October polls. The Brazilian economy minister Paulo Guedes, an ally of Bolsonaro, is still in ebullient mood, and campaigning mood. Guedes has long been an advocate of fiscal sustainability and privatisation and is thought to oppose election friendly measures such as Bolsonaro’s pledge to lower fuel prices (which would, in a time of sharply rising prices, require government subsidy). As part of the surging inflation rate of the last year fuel prices have soared in recent months.
As far as Brazil’s exports are concerned some key areas appear to be losing ground. Brazil, a long-time leader in global beef exports, has been losing ground to the United States for some time. Multiple problems have occurred – a 7% drop in export volumes between September and mid-December 2021 due to China’s ban on beef imports from Brazil in a CJD-related scare. Last year, the United States exported 1.44bn tons, up 15% over 2020, with revenues reaching $10.58bn, up 38% (considering only fresh meat) while Brazil exported 1.77bn tons and earned $9.24bn, up 9%, including processed and fresh beef. America has clearly been the big winner, able to gain ground after Brazilian beef was excluded from China. Brazil is however doing well on building its market share in some smaller markets - diversifying its export destinations. For instance, Brazil’s sales to Arab countries saw exports reaching $14.42bn, the highest since 2012. Similarly with exports to Japan and Southeast Asia. By Q2 2022 it will be clearer who is running for the left and how Bolsonaro plans to win another term and hence, perhaps, the future way of the Brazilian economy in the next few years. ●
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