What businesses should expect from Brazil’s new government?

On March 20th, the chamber invited its members and friends to a networking and conversation event about the new government of Brazil. The event took place at the Brazilian Embassy in Oslo.

To give us an insight into what are the plans and intentions of the new government of Brazil, we  invited the ambassador of Brazil, HE Mr. George Monteiro Prata, to present President Bolsonaro´s proposals and actions during his first trimester in power.

The ambassador started giving an update about the economic situation of the country today. He stated that Brazil was recovering from its worst economic recession when the election was held last year. Also, he reminded the audience that during the election, Brazil was facing the fourth year of the investigations “Lava Jato” (Car Wash), which involves the huge state-owned Petrobras, other companies and groups of politicians. The combination of an economic, political and institutional crisis created a discontentment in society, and this was the pillar for Bolsonaro´s campaign and victory.

Jair Bolsonaro turned the crisis to opportunity, presenting him as the new face that would fight corruption and domestic violence,shifting Brazil to the right and away from the Workers’ Party electoral winning streak. “The elections were run free, clean and democratic and brought Bolsonaro to power,” said the ambassador.

Bolsonaro openly assumed that he is not an expert in economics, but he recruited the University of Chicago-trained economist, Paulo Guedes to run Brazil’s economy and bring Brazil back to the road of development, with free market reforms. This measure strategically brought the support of skeptical investors and the business community. Guedes assumed the ministries of finance, planning and industry with a clear priority in fiscal consolidation and to balance the budgetary deficit which, according to him, is connected with the malfunction of the Brazilian economy. The new minister is promising to control public debt, reform the pension system, privatize thousands of state companies, and implementing tax reform.

Changing the pension system is crucial for the economy. The system is extremely generous with a part of the population and unfair with many since workers in the different sectors receive benefits disproportionally. The government has to create a broad coalition in Congress being able to convince public  opinion of its importance. According to the new president, the pension reform is the center of gravity of the government. Meanwhile, the government is facing many challenges of to pass its reforms in Congress. Besides, the privatization plan is going ahead. The Ambassador gave the example of the successful airport concessions just realized, and an essential round of oil exploration to come soon. On the other hand, Bolsonaro’s team has raised the issue of reducing Brazil’s 34% corporate income tax. Dividends taxation could be paired with such a reduction in corporate income tax to make the Brazilian corporate tax system more competitive. Tax reform, simplification of the system, reduction and elimination of taxes aims at creating a virtual circle of growth. According to the Ambassador, for many, Bolsonaro’s government will be measured by its capacity to receive the economy of the country.

After a live and engaging Q&A session with the ambassador, a Brazilian economist, Rafael de Souza presented an analysis of the foreign direct investment in Brazil using a statistical approach through an exciting and entertaining presentation. The economist showed the foreign investment in Brazil in an adverse global investment scenario, which countries invest most in Brazil, and which industries gets the most of the investments.

​A mingling session took place, where attendees could keep discussing and building knowledge to ensure the ability to rapidly adjust to downside risks of the new government rapidly, but at the same time taking advantage of the sudden emergence of new opportunities in the years to come.

By Larissa Slottet, BNCC