While opponents focus exclusively on his controversial statements and eccentric attitudes, of which there is no shortage, the election of Brazilian President Jair Bolsonaro last year still holds out real hope of major, positive reforms in South America’s troubled giant. Several new commentaries, coinciding with talk of a trade deal, outline the upsides as well as the major reforms still needed by the Brazilian economy.
In a commentary for Forbes, Lorenzo Montanari, Director of International Programs and Affairs for Americans for Tax Reform, lays out the enormous potential of a Brazilian administration which appears truly committed to breaking with the country’s corrupt socialist past – but also points out that Bolsonaro needs help to achieve his proposed overhaul in the face of resistance from a sclerotic bureaucracy.
The recent signing of a trade deal between the EU and Mercosur, a South American trade pact including Brazil, shows that Brazil and its neighbors are ready to strike ambitious agreements. Now Bolsonaro is proposing a similar deal between Mercosur and the US. Brazil is currently president of the trade bloc, bolstering its ability to move things along.
At home Bolsonaro is pursuing liberalization and a free market overhaul including pension reform, simplification and reform of the tax code, and deregulatory reforms.
The big one is pension reform, as pension spending equals 13% of GDP. Reforms here are necessary to “bring back confidence from domestic and foreign investors,” according to Mauricio De Freitas Bento, a founder of NOVO, a young libertarian political party.
However numerous obstacles to economic growth remain, as exemplified by the Brazil telecoms industry, kneecapped by “high taxes, economic uncertainty, and regulations arbitrarily targeting the market,” including courts holding up a proposed merger between AT&T and Time Warner. However there’s good news as a federal judge suspended the regulator’s block, and proposed legislation would loosen up cross-ownership rules.