Five Issues to Watch in Brazil
A New Government in 2019. A New Era?
Brazil in 2019: Key issues for business and governments to watch
For the first time in fifteen years, the Workers´ Party (PT) has lost a presidential election. The country’s politics is shifting to a right-wing conservative administration.
Recent corruption scandals and increased investigative activity led voters to choose new leaders, rejecting traditional politicians and their allies. On January 1, Jair Bolsonaro and his team will take office. Here are key factors to watch for in 2019.
ECONOMY & INFRASTRUCTURE: Minister Paulo Guedes is an orthodox University of Chicago-trained fiscal conservative and so are the people he has named to manage macroeconomic policies. We expect to see spending cuts, major fiscal adjustments and a free-market approach. To promote infrastructure investment and improve competitiveness, privatizations and license auctions should take place in the fuel, energy and transport sectors.
Although reforms to the pension system are necessary and considered a priority — since this is the heart of the budget deficit — the new Administration will be challenged to secure the support in Congress necessary to pass a comprehensive measure. As a result, reform will likely be more limited than what is needed.
FOREIGN POLICY & TRADE: Brazilian exports to China, such as soy, were higher in 2018 because of the U.S.-China trade dispute. But analysts say continued global trade tensions are more damaging than beneficial to the Brazilian economy. The new government desires a closer relationship with the United States.
The incoming chancellor does not favor multilateralism and eastern alignments. China will likely remain Brazil’s largest commercial partner. China is also a key inward investor, as Chinese banks today are lending more money to Latin American governments than the multilateral development banks.
With regard to the future of Mercosur, Bolsonaro and President Macri of Argentina may adopt new rules to open trade and promote bilateral agreements. The first presidential visit is scheduled to Chile, which signals a shift in the tradition of prioritizing Argentina.
AGRIBUSINESS & ENVIRONMENT: After much criticism of a plan for a joint ministry to manage policy in both sectors, they will remain separate. However, the Minister of Environment will advocate for less stricter laws to promote increased productivity. Some of Jair Bolsonaro’s positions could impact agricultural exports, as many current buyers want strong sustainability standards.
Brazil has withdrawn its candidature for hosting the UN’s annual climate summit (COP-25) next year, citing a budgetary issue. President-elect Jair Bolsonaro says the Paris Climate Agreement endangers Brazil’s national sovereignty over the Amazon region, while the incoming Minister of Foreign Affairs calls climate change a “dogma” and a “Marxist plot.” Meanwhile, the future Minister of Agriculture says the Paris agreement is essential for local producers to maintain exports to global markets.
Analysts expect growth in agribusiness in 2019, especially for grains and a recovery of halal chicken exports after adjustments to a new set of requirements. They also envision benefits from IoT investments in agriculture.
TECHNOLOGY AND DATA: 5G auctions are expected in 2019, but it is unlikely this technology will reach the broader Brazilian market before 2020. The country will be a late entry to the new telecom standard while other markets move forward.
In 2018, President Michel Temer signed the General Law for Personal Data Protection and the next Administration is likely to implement a National Authority for data privacy issues. In some instances, such as healthcare development, data can be used for research without many limitations.
OTHER HIGHLIGHTS: The Brazilian Government signed an agreement with industrial firms to reduce sugar in several processed foods by 144,000 tons by 2022. The Bureau Director of the Chamber of Deputies has urged Brazil to sign the Madrid Protocol, an international agreement on trademark registrations.
At the end of his term, President Michel Temer changed by provisional measure the amount of foreign capital permitted for commercial aviation companies operating in the country — from 20 to 100 percent.
For additional information or analysis, please contact Luciana Barbetta, Managing Director & Head of Public Affairs in Brasilia at lbarbetta@webershandwick.com or +55–61–98276–0016
Edited by Jim Meszaros & Lexi Mondot
