Post Election — Where to next for Brazil?
‘We are going to change the destiny of Brazil,’ says the new Brazillian president, Jair Bolsonaro. After one of the most divisive election campaigns in Brazillian history, Bolsonaro was victorious after securing 55.1% of the votes in October’s election, giving him victory over his rivals.
During the campaign, Bolsonaro was responsible for a social media campaign, not too dissimilar to that of Donald Trump’s, where he promised to attack the corruption of the politic elites, and help to reduce Brazil’s crime rate. His history of disparaging women, gays and minorities has made him one of the most controversial candidates in recent history, but his campaign has helped him to win the hearts of many, and get ahead of the Workers’ Party’s Fernando Haddad.
With the country braced for unprecedented change, where does that leave businesses and the economy, and what can entrepreneurs do to protect their brands? Below, I investigate…
Big businesses may benefit
Perhaps one of the reasons why Jair Bolsonaro has performed so well amongst upper class is in his attitude towards businesses. Bolsonaro has said that his administration would always side with businesses, saying that “the press must stop looking at you as the bad guys. Being a business owner in Brazil is to be the bad guys”. Indeed, the controversial figure has said that, should he be elected, workers would have to choose between fewer rights or unemployment.
This is great news for big businesses, who have expressed their concerns against more workers rights, arguing that the country’s current worker’s rights were already restrictive. At present, the country has a strict social security policy, where workers pay between 8 and 11 per cent of their income towards their social security, with employers adding a further 25 to 28 percent on top. It is employers that are also responsible for contributing to the Federal Severance Pay Fund (FGTS), corresponding to 8 per cent of an employee’s monthly salary. Minimum wage within the country is currently at BRL 937,00, and employees are entitled to benefits such as 30 days of paid vacation after a year of employment, a Christmas Bonus (known as the thirteenth salary) and prior notice pay when dismissing employees without prior notice or without cause.
It remains to be seen what changes will be brought into play when Bolsonaro takes over, but it will no doubt favour large businesses to the detriment of workers. Opposition in the Workers’ Party will be fighting to protect the rights of workers and everyday citizens, so new legislation will take time to be passed through and scrutinized if everything is done to the letter.
Startups may thrive
Brazil is still recovering from one of the worst recessions in recent times. Entrepreneurs and those from the business community hope that Bolsonaro will be able to kickstart growth within the country, despite the fact he admitted he “does not understand much about economic matters”. Bolsonaro has, however, promised to work with Paulo Guedes, a banker and University of Chicago-trained economist, on helping to grow the economy and bringing it back to success. As Latin America’s largest economy, some expect to see the privatization of many state-owned companies and the opening up of the economy thanks to lower import tariffs.
If this does come to fruition, it will be great news for startup businesses looking to grow their brands internationally — and foreign investors who want to enter Brazil and make a splash. We have already seen a number of Brazillian startup success stories, and we will no doubt see new players enter the field and get started on launching their own businesses as they begin to see how easy it is to apply for and secure a Brazil company incorporation. Indeed, once you have incorporated a company within the territory, you can begin trading in just a day or two and enjoy access to the ninth largest economy in the world, and a country with the highest GDP in LATAM.
The workforce may increase
If workers rights are diminished and businesses are able to fire or reduce the working hours of their staff at a moment’s notice, then we’ll no doubt see an increase in unemployment, and a larger labour pool for new businesses to take advantage of. A pension overhaul is also expected — especially after President Michel Temer failed to make his promised changes to the system. At present, the Brazilian pension system allows workers to retire too early and get access to an ‘overly generous pension’, which has contributed to the governments’ deficit. Bolsonaro has proposed to introduce private accounts pensions, where people would be responsible for saving for their own retirement. The changes will likely mean that workers have to spend longer in employment, giving businesses access to a larger pool of talent, including workers over 55.
How to protect your business
Whenever a new leader enters the government, it’s natural to feel concerned. However, if you are fully compliant with the government’s current working regulations, then you shouldn’t have to worry too much. Indeed, new legislation often takes years to come into practice, especially if the opposition fights back, so I recommend that you stay up-to-date on the latest news and follow business and worker’s rights closely. It may be that Bolsonaro will implement changes that have a positive impact on your business — indeed, the new government wants to increase investment and generate more trade, so if you’re on the ball, you’ll be able to take advantage. Be proactive, have contingency plans in place when the government announces new legalisation or changes, and if you’re a small or medium-sized business, be prepared to work harder to fight for your customers, particularly if big businesses are given more powers and increase their dominance.
We can do little other than speculate as to the changes the new government will make over the next four years of Bolsonaro’s term. Whatever industry you’re in, work hard, keep your eyes on the news, and you’ll be able to navigate the waters and find success. I wish you the best of luck!