Brazil’s President-elect Jair Bolsonaro signaled Monday his administration would make tackling the country’s budget-crushing pension system a top priority, doubling down on a campaign promise that made him the choice of the business community despite frequently saying he doesn’t understand the economy.
The tough-talking former army captain cruised to a 10-point victory Sunday by capitalizing on widespread frustration in Latin America’s largest economy, which has fallen on hard times less than a decade after being a darling of investors among emerging markets.
Bolsonaro’s victory moved Brazil, the world’s fourth-largest democracy, sharply to the right after four consecutive elections in which candidates from the left-leaning Workers’ Party won.
Perhaps more than belief in Bolsonaro himself, his victory represents a widespread rejection of the Workers’ Party, which was at the center of a massive corruption investigation and oversaw both Brazil’s boom and its bust.
Like other right-leaning leaders who have risen to power around the globe, Bolsonaro, who takes office Jan. 1, built his popularity on a mixture of often outrageous comments and hard-line positions, but he consolidated his lead by promising to enact market-friendly reforms.
In the end, many outside his base in Brazil accepted the bargain he offered: Swallow his more extreme views and his crude way of expressing them in exchange for economic policies they hoped would put Brazil on the path to recovery.
In the face of what’s expected to be stiff resistance, Bolsonaro will have to move quickly to reassure international investors that he’s up to the job of righting Brazil’s finances.
A looming $34 billion deficit in 2019 has economists warning that without drastic spending cuts or substantial tax increases the country is only a year or two away from a full-blown crisis, which could include run-away inflation and soaring borrowing costs.
Reducing the deficit will be especially hard because Brazil has only slowly begun to grow again after a punishing recession in 2015 and 2016, and unemployment remains high.
In the face of this, Bolsonaro has said adviser Paulo Guedes, a University of Chicago-educated economist, would oversee the privatization of many industries and a reform of the pension system.
“The first big item: pensions. We need a pension reform,” Guedes said late Sunday after Bolsonaro’s victory, adding that the next item would be selling off state companies to reduce Brazil’s debt and associated interest payments.
“It is not reasonable that Brazil spends $100 billion every year on debt interest payments,” he said.
Congressman Onyx Lorenzoni, tapped to be Bolsonaro’s chief-of-staff, said Monday the administration would submit a pension reform proposal early next year.
Bolsonaro must also address many other issues with no easy solutions: high unemployment, increasing crime in a nation that is already the world leader in total homicides, and deep divisions after years of political turmoil and a punishing election campaign marred by violence. Bolsonaro himself was stabbed and almost died while campaigning in early September.