Guedes accepts Bolsonaro’s order due to risk of strike, and team wants to avoid antiliberal turn – 02/20/2021 – Market

Previously placed by President Jair Bolsonaro (without a party) as the owner of the final say in government economic decisions, Minister Paulo Guedes (Economy) saw his interests contradicted in two consecutive episodes in the same week.

Fuel measures, determined by the president, were accepted by the Ministry of Economy on the grounds that there was an imminent risk of a truckers strike. The justification is that the impact of the strike alone would not be more damaging than the pandemic of the new coronavirus.

Now, the portfolio works to avoid a turn in the government’s economic policy, which could undermine the country’s credibility.

Members of the economic area affirm that the next 90 days will be decisive to evaluate the path chosen by the Planalto Palace. The focus, at the moment, will be to ensure the approval of fiscal adjustment measures as a counterpart to the release of a new round of emergency aid.

The exemption from fuel taxes and the appointment of General Joaquim Silva and Luna to the command of Petrobras, in place of Roberto Castello Branco, were ordered by Bolsonaro despite contrary positions by the Minister of Economy.

After the president’s announcements, Guedes established a period of silence. Behind the scenes, even trying to minimize Bolsonaro’s actions, the minister’s assistants recognize that, to some extent, they will have a negative impact.

The folder works with two possible scenarios. In the first, the damage would be restricted to the devaluation of Petrobras shares due to the distrust generated by the withdrawal of a liberal and the appointment of a general to the command of the state company. For this, the turbulence cannot affect Guedes’ economic agenda, with measures to adjust public accounts and structural reforms.

The second scenario, considered catastrophic, would be a change in the direction of the government’s economic management, which would put Guedes’s liberal agenda at risk. The assessment is that a breach of confidence in the long-term policy would be much more harmful than the one-off change at Petrobras, causing investment flight and rising interest rates, inflation and unemployment.

The vote in the Senate of the PEC (Proposed Amendment to the Constitution) of the Federative Pact is scheduled for Thursday (25), which brings adjustment triggers in public accounts. The voting agreement was closed as a way to offset the new release of emergency aid.

Also among the priorities of the economic team are administrative reform, which alters rules for entry, remuneration and progression in the public service, and the privatization of Eletrobras, which suffers from resistance from parliamentarians.

In the words of an interlocutor of the minister, the decision of investors in general is not linked to the price of Petrobras shares on Monday (22), which should fall, but in long-term factors and the country’s solvency.

Members of the Ministry of Economy also argue that Bolsonaro’s recent actions are within the prerogatives of the President of the Republic and do not harm Guedes’s administration.

The exemption from federal taxes on diesel and cooking gas should generate an impact of more than R $ 3 billion in the collection. Technicians affirm that, following the guidance of the minister, this cost will be compensated, in compliance with the Fiscal Responsibility Law.

Among the options placed on the table for evaluation and which can be used to offset the measure, are cuts in tax incentives for the petrochemical sector, vessels, aircraft and luxury cars for people with physical disabilities.

Regarding Petrobras’ change of command, the assessment is that the appointment is a prerogative of the president and the minister of Mines and Energy. In the formation of government, however, the suggestion of the name of Castello Branco was given by Guedes.

Members of the portfolio assess that there was no loss of power by the Minister of Economy because, in addition to not being directly linked to Petrobras, Guedes has names in charge of several bodies, such as the Central Bank, BNDES (National Bank for Economic and Social Development), Caixa Federal Economy and Banco do Brasil – the latter was almost fired by Bolsonaro, but remained in office after Guedes’ offensive.

In a publication on social networks, Minister Fábio Faria (Communications) stated that the Jair Bolsonaro government will follow the liberal line.

“The government will never intervene in prices and believe in the free market. What existed was a total lack of affinity between the President of the Republic and Castello and the exchange was an isolated fact ”, he said.

In a live broadcast on the internet this Saturday (20), Bolsonaro criticized the current Petrobras chief. Although he affirmed that there was no interference in the state company, he signaled that adjustments will be made in the way of charging fuel.

“When there is an increase in fuel, people aim and shoot for the President of the Republic. This will start to change, it started to change already. We have to remove who is in front of Petrobras. It’s a curiousity. Did you know that since March last year, the president of Petrobras has been at home, as well as his entire board? You can’t be ahead of a state-owned company like that. The new president, if approved by the board, I hope it will be approved, will give Petrobras a new dynamic, without interfering, zero interference, but it will have transparency and predictability ”, he said.

The president also signaled that he can make new exchanges in government areas.

“If the press is concerned about yesterday’s exchange, next week we will have more,” he said.


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