Brazil's Covid Response Brings Out Bolsonaro's Inner Leftist

(Bloomberg Opinion) -- When he took office early last year, Brazilian President Jair Bolsonaro had what looked like a plan: Crush corruption, rescue Brazil from social liberalism and revive the economy from the worst recession in a century. Nineteen months on, that bold agenda is mostly history.

It’s tempting to blame the flop on the coronavirus pandemic — a “meteor strike,” in the words of economy minister Paulo Guedes — and its devastating toll on lives and livelihoods.

But that gets the story backwards. The virus is shaping up to be Bolsonaro’s unlikely salvation, allowing his government to swap out the errant reform agenda it never quite believed in for political deflection and the magic of emergency cash — that is, until the arrival of the inevitable ugly post-Covid fiscal reckoning.  

A demagogue, denialist and illiberal provocateur — Bolsonaro’s adversaries have called him many names. He’s also a crafty politician. The right-wing culture wars he waged ran afoul of Congress, the courts and a public weary of vitriol. Sketchy dealings on his watch provoked the resignation of the corruption-busting Justice Minister Sergio Moro, and turned the First Family and cronies into persons of criminal interest. Headline market-friendly initiatives — privatization, administrative reform, economic opening and a foundational tax reform — have mostly gone nowhere.

But the pivot from disaster has given Bolsonaro’s flailing administration a second wind. A recent poll found that 37% of Brazilians rated his presidency good or great, compared with 32% in mid-June, his best showing since taking office in January 2019. None of this owes to a change of heart by Bolsonaro, just damage control and a big checkbook. With little aptitude for reforms and even less for leadership, Bolsonaro has addressed the ravages of the pandemic by turning to the oldest Latin American expedient: government cash.

“Brazil’s self-described political outsider is looking more like an insider every day,” said Fernando Schuler, a political analyst who teaches at Insper, a Sao Paulo business school. “He has no recognizable project beyond the traditional one of transferring public revenues and bargaining with traditional clusters of power.”

Of course, ramping up spending to mitigate the global economic collapse was the right call. But leave it to Bolsonaro to add a populist flourish. Trumping the normally profligate congress’s best offer, Bolsonaro is sending emergency assistance checks averaging 600 reais ($109) per capita to 59 million Brazilians. A recent study by the Federal University of Pernambuco found that the stimulus bump nationwide reached to 2.46% of national gross domestic product through July. That’s the centerpiece of Latin America’s most ambitious pandemic response, totaling 11.8% of Brazilian GDP.

More impressive than the lump sum is how the windfall is being shared out, with the humblest homes in the least developed regions collecting the biggest payout. The emergency assistance kicks in better than 8.5% to the GDP of Maranhao state and 7.9% of GDP to neighboring Piaui state, two northeastern stragglers that traditionally trail the national human development index. Even as the Covid cash has boosted Brazilian household incomes by 7% nationwide this year, the chronically neglected north and northeast have seen double-digit increases (24% in Maranhao, 20% in Piaui and 14.3% in Amazonas).

The result: Unemployment may be soaring and the national economy set to contract by more than 5% this year, but some regions are thriving. “A big part of Brazil has yet to feel the economic crisis,” said Federal University of Pernambuco economist Ecio Costa, who co-authored the impact study. Retailers in the northeast are seeing surging sales of refrigerators, washing machines and microwaves.

Poverty has hit a 16-year low nationwide, with extreme poverty down by 41% from a year ago. The political dividends for Bolsonaro include a big approval bump from the northeast, long the comfort zone of his left-wing archrival, former Workers Party President Luiz Inacio Lula da Silva. Since mid-June Bolsonaro’s rejection rate had tumbled the most (52% to 35%) in the northeast and among the poorest voters (44% to 31%).

Whether the good feelings can last is another story. “It’s part of Bolsonaro’s strategy to avoid the sort of chaos he feared could bury his government,” Marcus Andre Melo, a political scientist at the Federal University of Pernambuco, told me. But under the health emergency pact passed in early April, the spigot runs dry on December 31, well before the pandemic ends and with the economy still reeling. “Brazilian society is on ventilators and the government will have to turn off the oxygen,” said Melo.

Unfortunately, Brazil cannot keep doling out aid without running the economy aground. Brazil’s internal debt is on track to hit 100% of gross domestic product, up 20% from December, and breach the government spending cap that the legislature wrote into the constitution after fierce floor battles in 2016. “Without the budget cap, there’s little to constrain interest groups from competing to outspend one another, so draining the country’s productive sector, the only source of wealth,” Costa said.

Breaching the spending ceiling is also political folly. Former President Dilma Rousseff was impeached in 2016 for gaming the budget in 2016. Guedes has proposed a less costly workaround, Renda Brasil (Brazil Income), for 21 million families at risk. Yet even that more modest alternative would require approval from a fractious congress and some complicated fiscal engineering, the budget and details for which are still a mystery. Bolsonaro himself has been evasive, now flirting with extending the generous stipend, now swearing parsimony.

Brazilians would be forgiven for doubting. Given Bolsonaro’s dismal record on reforms and public health, and spendthrift bureaucrats flogging a “war budget” of public works, renewing the promise of emergency assistance could be just another way to kite a check.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Mac Margolis is a Bloomberg Opinion columnist covering Latin and South America. He was a reporter for Newsweek and is the author of “The Last New World: The Conquest of the Amazon Frontier.”

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