The emerging shape of the new administration

Can the incoming administration of President-elect Jair Bolsonaro lead Brazil out of the doldrums? Bolsonaro offered some clues this week. One clue—he acted quickly.
Within hours of his electoral victory, Bolsonaro announced the two most important names for his incoming administration, Finance Minister-designate Paulo Guedes and Chief Civil Affairs Advisor Onyx Lorenzoni. He also signaled his willingness to delegate. Lorenzoni and Guedes, in the wake of the election, were the ones to move the ball forward on policy, not Bolsonaro, and they did so with alacrity and appetite. Lorenzoni announced that Bolsonaro’s transition team was already engaged in talks with outgoing President Michel Temer on the possibility of passing a critical pension reform bill this year, even before Bolsonaro’s January 1st inauguration. Lorenzoni also announced Chile, the U.S. and Israel as Bolsonaro’s first foreign visits. He was explicit in stating Bolsonaro’s admiration for Chile’s market-friendly economic policies and its self-sustaining pension model. Other Bolsonaro aides noted that the new president’s focus on the U.S. and Israel is aimed at greater cooperation in areas such as defense and internal security. Professor Guedes also hit the ground running. He announced the administration’s determination to reduce the number of Cabinet portfolios from 29 to just 16. Some ministries will be simply eliminated; others will be merged. The latter strategy includes fusion of current Finance, Planning and Industry portfolios into a single Ministry of the Economy, with Guedes at its head. The new “super” minister also reiterated the administration’s commitment to a zero public sector primary deficit in 2019, down sharply from this year’s deficit ceiling of R$161 billion. Guedes said the new administration will accelerate privatizations, concession auctions and oil sales from the offshore pre-salt region as ways to raise money and close the budget gap. Longer-term, the government will cut spending, shut down subsidy programs and tax abatements, de-regulate industry and freeze civil service salaries. Guedes also reiterated the campaign’s pledge to create an independent Central Bank, saying the administration will present legislation setting explicit terms of office for board members, making sure the terms do not coincide with presidential terms. “This is the last time Brazilians will wonder what’s going to happen with the Central Bank when a new administration takes office,” Guedes told reporters. On the trade side, he downplayed Brazil’s role in the Mercosul South American trade bloc, saying the bloc was “holding Brazil back” from the overall trade liberalization policy the Bolsonaro team wants to implement “on a gradual basis.” It was a running start; next week—more names and, very likely, more policy clues.