Washington trip highlights strains within the government

Author

Gustavo Ribeiro
March 18, 2019 • Reading Time: 6 minutes

In today’s issue: Washington trip highlights strains within the government. 

Washington trip highlights strains within the government

President Jair Bolsonaro arrived yesterday in Washington for his first official foreign visit since flopping at the World Economic Forum in January. He will meet with U.S. President Donald Trump tomorrow—and today he will take part in a meeting with businessmen. Meanwhile, seven of his cabinet members have their own commitments, trying to increase cooperation and investment between the two countries. So far, the trip has also exposed the strains within the administration.

On Saturday, Olavo de Carvalho—the “ideological guru” of Bolsonarism—called the government’s military wing “a bunch of pansies,” and described Vice President Hamilton Mourão, who takes over as the acting head of state while Mr. Bolsonaro is abroad, as an “idiot.” Mr. Carvalho also said that, unless the government shifts its direction radically, “[this administration] will be over within six months.”

One of the staples of this government has been the fierce opposition between the early, more ideologically radical supporters of the president, and the group of more pragmatic generals he later surrounded himself with. “While [VP] Mourão will not be [in Washington], it wouldn’t be surprising to see him publicly contradict Mr. Bolsonaro while the president is traveling, as he has done time and time again over the past few months,” wrote Oliver Stuenkel, a professor at think tank Fundação Getulio Vargas.

The limits of Bolsonaro’s strategy toward Congress

Upon taking office, President Jair Bolsonaro said he would not negotiate with parties, but rather with issue-based caucuses—parliamentary fronts representing groups such as agriculturalists or Evangelical Christians. The strategy disgruntled many parties, and the government has yet to obtain full support from the groups it once coveted. Congress evangelicals, for instance, have decided to keep their distance from the administration—a reflection of its dissatisfaction with the limited role they were given among top cabinet jobs.

Many groups—especially among the left—are trying to block the government’s efforts to approve its pension reform bill. Right now, there has been little done in order to create a pro-reform momentum in Congress. Some centrist parties are even starting to talk about an exit of Economy Minister Paulo Guedes, who was seen by markets as the government’s surety. Last week, he made a light-hearted threat that, should the reform be watered down, he’d have no business to stay in his position.

The government is set to present its bill to reform military pensions by this Wednesday. It is rumored to include changes as harsh as those found in the general pension reform—which would help the government’s case. But the president himself said he hasn’t read it yet, which makes congressmen unsure of how committed he is to the issue.

Brazil caught between Beijing and Washington

Yesterday, President Jair Bolsonaro and his delegation attended a dinner hosted by Brazil’s ambassador to the U.S. The president was sided by his ideological guru, Olavo de Carvalho, and ultra-right agitator Steve Bannon—who talked about Brazil’s need to end its dependence on China. The Asian giant was the most-talked-about subject, with Economy Minister Paulo Guedes repeating a catchphrase the president loves: “China can buy in our country, but not buy our country.”

When it comes to agricultural exports, part of the administration argues that Brazil should create more cooperation deals with the U.S., in order to gain leverage in the global arena. U.S. producers, however, are some of Brazil’s fiercest competitors. The dissonant voice was Agriculture Minister Tereza Cristina, a member of the rural lobby in Congress. She is set to head to China in May, in a bid to increase exports.

Another hot-button issue regards 5G technology and the aggressive dispute between American producers and Chinese giant Huawei. Brazilian diplomats following the presidential delegation fear that Mr. Bolsonaro would be susceptible to a request from U.S. President Donald Trump to ban Huawei’s 5G equipment and infrastructure in Brazil (as Australia and New Zealand have done), which would create tensions with Beijing. Brazil is expected to auction 5G frequencies in March 2020. Huawei’s main competitors right now are Sweden’s Ericsson and Finland’s Nokia.

What else you need to know today

  • Politics. On Saturday, House Speaker Rodrigo Maia hosted a barbecue at his Brasília residence. The event included President Bolsonaro, Supreme Court Chief Justice Dias Toffoli, Senate President Davi Alcolumbre and 15 members of the cabinet. Mr. Maia called for a “pact” between all branches of government in the name of a reformist agenda. In the capital, the feeling is that Mr. Bolsonaro travels to the U.S. enjoying a favorable moment. 

  • Central Bank.On Wednesday, the Central Bank’s Monetary Policy Committee will decide on Brazil’s Selic benchmark interest rate for the next 45 days. It will be the first meeting under Roberto Campos Neto, who took over as the bank’s president last week. The Selic rate has been at its lowest ever, at 6.5%/year, and could suffer further cuts this year due to the still-sluggish economic activity.

  • Car Wash.After the Supreme Court decided to send election-related cases investigated by Operation Car Wash to the slow-paced Electoral Justice system—possibly jeopardizing the future of the probe—several demonstrations were held in 13 states on Sunday. None, however, had much more than 1,000 people, showing how the investigation’s momentum has waned after five years.

  • Investments.As Brazil’s economic activity remains low, multinational companies have needed bailouts from their headquarters. The so-called “intercompany loans” jumped from a combined USD 6bn in 2017 to USD 32bn last year. Meanwhile, American giants Walmart and CVS Pharmacy have decided to leave the Brazilian market altogether.

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