The Brazilian business community’s honeymoon with President-elect Jair Bolsonaro will be short-lived, pressured to deliver campaign promises to tame the country’s bureaucracy and zero the huge public deficit.
Bolsonaro takes office on Tuesday, and businessmen and bankers say they are watching Bolsonaro and his economic team impatiently, seeking signs that he will deliver on his promised revision.
The biggest challenges – fiscal and pension reforms – cannot be addressed until Congress returns in February.
But Bolsonaro’s team must aggressively prepare the ground for these reforms, even before lawmakers return from recess, business leaders say.
“It would signal faster approval if Bolsonaro and his team made a commitment to change the pension reform bill that is in Congress a few months ago,” said Ricardo Lacerda, founder, and partner of investment bank BR Partners.
Changing the current law instead of proposing a new version would increase the chances of approval in the first half of 2018, Lacerda said, adding that the welfare watchdog is the most urgent reform that needs to be addressed by the Bolsonaro team to stop the growth of the deficit of 130 billion reais.
Bolsonaro also promised during his campaign to tackle the endemic corruption of the political milieu, in part by ending the “take it, give it” with lawmakers from all 30 congress parties to get their laws passed.
When lawmakers return, he will have to show that he has found a way to work with them to approve the reforms. It is not clear how Bolsonaro’s team will do that.
The new government will also need to prove itself skillful in dealing with the judiciary if it wants to succeed in the plan to pass on government assets.
“Negotiations with the Supreme Court are important to accelerate the pace of privatization,” said Samuel Oliveira, a partner in investment bank North Stone.
For example, Supreme Ministers Ricardo Lewandowski and Marco Aurélio Mello approved separate injunctions blocking Petrobras’ sales program. The sale of other assets will depend on how Bolsonaro will resolve tensions with his own team.
The Minister of Economy is in favor of selling all state-owned enterprises.
But it will have to compete with the nationalist visions of several ministers of Bolsonaro, who are former high-ranking military men. They consider that many state-owned companies, such as Eletrobras electric, as strategic assets that should not be auctioned.
The future Minister of Economy, Paulo Guedes, foresees the sale of up to 300 billion reais per year in state assets.
Elite bankers expect the conservative figure of 50 billion reais a year if the Bolsonaro government can reverse the Supreme Court’s orders.