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Brazil front-runner’s privatization vows ‘unclear’ but favored over
rival’s
RIO DE JANEIRO, Oct 20, 2018 (BSS/AFP) – Investors in Brazil are cheered by
the prospect of far-right presidential candidate Jair Bolsonaro winning power
because of his privatization promises that — though still unclear — are
regarded far more favorably than the status quo offered by his leftist rival.
The country’s stock market has soared and declined on Bolsonaro’s
indications of how he plans to turn around a fragile economy that is barely
managing to rise out of a record-bad recession that ended just two years ago.
Much of the investor enthusiasm lies with Bolsonaro’s pick for economy
minister if he wins: his advisor Paulo Guedes, a respected, US-trained
liberal economist who has proposed a sweeping shake-up to do away with
Brazil’s protectionist traditions.
But Guedes has contemplated measures going far beyond what Bolsonaro — a
veteran politician who long backed Brazil’s statist model — has finally said
he is willing to implement.
Most notably, Bolsonaro last week said he would only allow non-core units
of both state oil company Petrobras and electricity group Eletrobras to be
sold off, warning that foreign investors — especially China, which he
accused of “buying Brazil” — were not welcome in strategic businesses in the
energy sector.
Shares in Eletrobras, which generates around a third of Brazil’s
electricity, plunged more than eight percent the next day.
– ‘Flip-flopping’ –
“Bolsonaro’s flip-flopping on privatization probably reflects his lack of
knowledge and a clear position on energy policy and his populist bent,” said
an analyst, Lisa Viscidi of the US-based think tank The Dialogue, focused on
the Americas.
But she added that overall it seemed evident that “Bolsonaro would
continue with a general policy toward opening the oil and power sectors to
private investment.”
That makes him an investor darling when compared to Fernando Haddad, his
leftwing rival for the presidency who wants a ban on new privatizations and
greater state intervention in debt-laden Petrobras.
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Investors are taking Bolsonaro’s free-market tilt “seriously,” said
another US-based analyst, Roberta Braga of the Atlantic Center.
Guedes’s vision “would mean a significant if not shocking shift for Brazil
if it were to go through,” she said. But even if it didn’t, “we are more
likely to see a mild set of business-friendly policies” still aimed at
trimming Petrobras’s debt of over $70 billion.
In contrast, “Haddad’s still vague and unclear economic plan has left
investors apprehensive, and questioning whether he could take Brazil down a
more competitive route.”
Investors are worried Haddad will extend measures implemented by leftist
former president Luiz Inacio Lula da Silva to keep assets in government
hands.
Brazil, Latin America’s biggest economy, is ranked 153 out of 180
countries in the Economic Freedom index calculated by the Heritage
Foundation, a conservative US think tank.
This year’s World Economic Forum’s Global Competitiveness Report ranked
the country 72 out of 137, below South Africa and Turkey.
– Big lead –
Bolsonaro — a former army captain and pro-gun veteran congressman who
fondly remembers the authoritarianism of Brazil’s 1964-1985 military
dictatorship — is easily outpacing Haddad in the competition to be Brazil’s
next president.
He scored 46 percent of votes in a first-round election, to 29 percent for
Haddad. And polls suggest he could win around 58-59 percent in an October 28
run-off.
In his near three decades in congress, Bolsonaro had sided against
attempts to sell off state enterprises. But he admitted he knew almost
nothing about economy and tapped Guedes to guide him on how to bring down
Brazil’s public debt.
Part of the plan is to extend privatizations initiated under outgoing
center-right President Michel Temer, an unpopular figure whose reforms have
run up against vested interests and regulatory hurdles.
Nevertheless, Boslonaro has said “what is strategic cannot be privatized,”
specifically saying state-owned banks would not be ceded. For others he has
suggested so-called “golden shares” which allow the government to keep
control even with a minority stake.
“Investors will be watching closely. What is certain is that under
Bolsonaro Brazil will not return to the strategy of resource nationalism
employed by Lula and for which Haddad would surely advocate as president,”
Viscidi said.
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