Brazil’s newly-elected far-right president Jair Bolsonaro has famously admitted that he does not understand economics, but he doesn’t think that understanding is a necessary qualification for being president. He was “running a political campaign and not studying for university entrance exams”. He stated that all economic policy would come from his adviser Paulo Guedes, a free-market economist and co-founder of Brazil’s free-market think-tank, the “Millenium Institute” in Brazil. Guedes is now Minister for the Economy in the Bolsonaro administration.
Guedes’ ultra-free-market economic views have been often seen to contradict Bolsonaro’s statist, protectionist and nationalist politics. In his career as a federal deputy, Bolsonaro voted against privatisations, against breaking state monopolies, and for more privileges for the political class. Guedes’ economic plan, on the other hand, heavily relies on privatisations, pension cuts, and decreased spending on the public sector.
Bolsonaro and Guedes have in common their plans to slash workers’ rights and prioritise profit over environmental and public welfare. Guedes has promised to reduce the R$300 billion fiscal deficit to nil in the next year. To do that, he will rely on the privatisation of the state electrical utility company Eletrobras, the privatization of large chunks of Petrobras (the semi-public oil corporation), and on the pension cuts. Those cuts will also end the “Abono Salarial”, a benefit of one extra minimum month’s salary given each year to regularised workers earning less than two minimum salaries a month.
Guedes also relies on cuts made to the state machinery, such as the scrapping of several ministries and the decentralisation of administrative roles to the state governments, and on further opening Brazil to international trade by lowering import taxes and obstacles to international capital. If he can’t make up R$300 billion through “scrapping here and there”, Guedes says he will “leave it for the politicians to solve it”, but insists the three main sources of money should be the pension cuts, privatisations, and cutting jobs in the public sector.
The Brazilian federal government currently has 148 state companies, which range from oil and utilities, to banking and hospital services. Paulo Guedes is in favour of privatising all of them, while Bolsonaro has stated publicly that only the state companies that are not generating profit are going be privatised, and energy generation companies and the core of Petrobras will remain under state ownership.
Another key policy in Guedes’ economic plan is the introduction of “green and yellow” work permits. Currently, to work legally in Brazil you need a work permit — a document that looks a bit like a passport and needs to be signed every month by the employer, guaranteeing that the worker gets sick pay, holiday, benefits, payments into pensions etc. The green and yellow permit would be “voluntarily” chosen by workers, and would mean that they renounce all rights (aside from those set out in the constitution) in favour of individual negotiations with the employer. The plans do not state how that would affect workers’ ability to join a trade union and take industrial action, but it is likely that those rights would also be renounced by having a green and yellow permit.