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Big business in Brazil is having its patience tested by Jair Bolsonaro. The rightwing president’s outbursts against supreme court justices, the voting system and next year’s election have jolted Latin America’s most populous democracy.
Many in the corporate and financial world who once backed him are now losing faith in the leader of the continent’s largest economy.
The unease was underlined in an open letter by prominent business groups calling for “harmony” between Brazil’s three constitutional powers, following Bolsonaro’s clashes with top judges over his unproven claims of voter fraud.
Such public interventions by the private sector are unusual in Brazil, say experts, given the state’s powerful role as a regulator and provider of subsidies, tax breaks and contracts. Yet lately there have been a handful of similar “manifestos” urging calm.
The open letter did not explicitly mention the president but it suggested the mood had soured since the former army captain swept to victory in late 2018, pledging to liberate the country from corruption and bureaucracy.
Back then, the populist known for his coarse style and admiration of the past military dictatorship convinced most of the country’s business elite he was a better option than the leftwing Workers’ Party, which presided over a major recession in 2015-16.
Bolsonaro entrusted an investment banker, Paulo Guedes, with the economic portfolio. He offered a platform of orthodox structural reforms with promises to slash red tape, simplify taxes, reduce state interference and privatise state operations.
Yet poor relations between the government and Congress have meant little on that agenda has yet come to fruition, and the window of opportunity is narrowing. Worse still, GDP growth forecasts for next year have been downgraded to below 2 per cent after about 5 per cent in 2021 according to a central bank survey. Unemployment remains high, annual inflation has approached double digits and interest rates have been increased sharply.
It has left many of Brazil’s empresários, or businesspeople, pondering which is the worst option for the national elections: Bolsonaro or the leftist policies of two-term former president and expected candidate Luiz Inácio da Silva.
For Lauro Gonzalez, professor at the think-tank Getúlio Vargas Foundation, the open letter shows a message being sent to the government about the risks of disruption to commerce. “That Bolsonaro is bad for business — this is very clear,” he adds. “It’s almost a consensus.”
Maílson da Nóbrega, a former finance minister, adds: “You may see some young traders on Faria Lima still supporting Bolsonaro, but they are a minority.”
Expected to stand in the October 2022 ballot, Lula is leading in opinion polls. Some executives fear he will stall on economic reforms. Memories are still fresh of the sprawling corruption scandal known as Lava Jato that took place under his Workers’ Party.
The worry for some is also a prolonged period of political tensions that result in instability, borne out by recent volatility in the exchange rate and stock market. That could end up hitting corporate bottom lines.
Of course, there is still support for Bolsonaro in business from the likes of certain prominent entrepreneurs in retail, small enterprise owners and the increasingly wealthy and influential farming sector.
And for all the damage wreaked by the Covid-19 pandemic, many listed Brazilian companies have posted solid financial results so far in 2021, while initial public offerings have boomed. Robust global demand has buoyed exporters of key commodities such as iron ore and agricultural products.
But given Bolsonaro’s weakened position and growing whispers of impeachment, there are concerns he might pursue populist measures that harm the public finances, or even embark on anti-democratic adventures.
“How can we investors look forward and make investments in production when there exist very big uncertainties?” says Paulo Cesar de Souza e Silva, the ex-chief executive of aircraft maker Embraer.
Like others, he hopes for a so-called “third-way” centrist candidate. For now, a strong unifying figure is yet to emerge and the left-right polarisation would be tough to overcome. Young state governor Eduardo Leite is already the talk of business elites for his pro-market, liberal stance. But the question is whether he — or anyone else — can win enough broader support.