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Brazil: The strongman vs. the majority | Analyst Picks | RiskMap 2020

Brazil

Brazil risk forcast

The strongman vs. the majority

The government’s pro-business stance will remain unabated in 2020, and so will its commitment to rebalancing public finances; the administration of far-right President Jair Bolsonaro however is likely to struggle to implement large swathes of its reform agenda in the face of a shrinking coalition in Congress. Even the economic growth forecasted for 2020 is unlikely to substantially improve his low approval ratings, which have nose-dived since he took office – a reflection of his polarizing nature and penchant for controversial statements. Bolsonaro himself will also shift his focus to other priorities, such as the creation of a new political party (his ninth) to compete in the October local elections. However, the business environment is likely to improve due to executive-led initiatives that do not require legislative approval, such as privatisations, trade liberalisation and measures to reduce red tape. Crime rates are likely to remain on a downward trend, particularly homicides, but the widespread presence of organised criminal groups will continue to make for a challenging security situation for businesses, including risks associated with cargo theft. While the threat of social unrest will remain latent, groups with the capacity to stage large demonstrations remain squarely divided between opposing sides of the political spectrum.

On the external front, the Bolsonaro administration will maintain a confrontational style in global fora, moving away from multilateralism and focusing on strengthening ties with a smaller set of international allies, including US President Donald Trump. A (likely) rise in deforestation in the Brazilian Amazon would put the government’s controversial environmental policy in the global spotlight – again – and risk damaging Brazil’s pursuit of new trade agreements, including the EU-Mercosur deal. Lastly, watch out for the evolution of bilateral ties with Buenos Aires. Bolsonaro’s relationship with Argentine president Alberto Fernández started off on the wrong foot, with nasty verbal confrontation between them. A high degree of economic interdependence between the two largest Mercosur members makes a complete divorce unlikely – for now – but it could force the downgrading of the customs union (to a Free Trade Agreement) if gridlock over trade policy persists.
 

 

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RiskMap 2020

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