A period of predictable political and economic change in a country that is, but in all likelihood will cease to be the country of Jair Bolsonaro. Brazil is preparing to expand state involvement in the region’s largest economy, end privatizations planned by the current president, lift cap rules that limit government spending growth to inflation, revive public investment in infrastructure, and encourage private participation.
Investors are already scrutinizing Lula da Silva’s economic plan, hoping that the PT leader and former president, who is well ahead of Bolsonaro in the polls, will turn left in Brazil. from Peru, Chile and Colombia. But there are fewer fears: we do not expect cardinal changes, and Lula will turn out to be an “old acquaintance”.
Although Bolsonaro has recently reduced his disadvantage regarding intentions to vote against Lula after Congress approved the welfare package, he is still far behind his bitter rival, whom he will face on October 2. Bolsonaro of the PL (right), who is seeking re-election, received 31% of the vote in the polls against 45% for Lulu of the Workers’ Party (PT). Far behind are Ciro Gomes of the PDT (centre-left) with 6%, as well as Simone Tebet (MDB, Conservative) and André Janones (Avante) with 2%, according to a Quaest poll that predicts that in the case of a runoff presidential election, Lula will win ( 53%) Bolsonaro (34%).
Lula’s economic plan advocates greater state involvement in the economy and opposes the government’s current plans to privatize companies such as electricity company Eletrobras, Correios, and oil companies Petrobras and PPSA. While Bolsonaro has accelerated the sale of Petrobras’ secondary assets, PT says the state-owned company will “become once again an integrated company that invests in exploration and production and also participates in the ecological transition.” And also, unlike Bolsonaro, he will strengthen state banks (Banco do Brasil, CEF, BNDES, BNB, Finep) to stimulate economic and social development.
Lula is not Petro
However, when it comes to energy, Lula does not go as far as Petro in Colombia and advocates a realistic approach. For the former president, the “anti-oil front” proposed by Petro is unrealistic for Brazil and the world. “In the case of Brazil and the world, this is not realistic. Oil is still needed for a while,” said Lula, for whom Brazil cannot stop exploration and production of crude oil until there is no other way. However, he advocates developing a long-term plan to reduce oil consumption as alternatives are created. Lula’s PT wants to remove the cap on spending, which limits their growth to inflation, in order to increase public investment in infrastructure. The goal is to ensure the modernization and expansion of transport infrastructure, as well as social and urban logistics, through a strong program of public investment, which is considered necessary for growth. It should also encourage the participation of the private sector. “Private investment will also be fundamental to Brazil’s recovery and will be encouraged,” the statement said.
Latin American Euro
Experts believe that infrastructure concessions will continue after the elections. Lula, who plans to increase mining in an environmentally friendly way, is in dialogue with employers, and there is every reason to believe that he will continue this cooperation if he wins. Borders aside, Lula’s most striking idea is to create a single Latin American currency “to avoid dependence on the dollar”; a model similar to the euro, aimed at strengthening regional integration and monetary independence of the region.
Although Bolsonaro claims to be recovering, the situation is not rosy. The OECD expects a “significant” slowdown in the economy in 2022, with growth of 0.6% due to high inflation and higher rates, but an improvement to 1.2% in 2023. The OECD is more pessimistic than Brasilia and the Central Bank, which has forecasts of 1.5% and 1.7% in 2022 after +4.6% in 2021, the highest in 11 years, and a historic drop in 2020 due to for COVID (-3.9%). According to the OECD, inflation (12% per year) due to the war in Ukraine and rising interest rates (12.75%) are undermining purchasing power, to which should be added “uncertainty” due to the elections. In June, inflation was 11.89% year on year.
Spain, with a total amount of 48 billion euros, is the second foreign investor in Brazil and the fourth largest in the world for Spanish investments. The economy is very important for Spain, present in all sectors, especially in telecommunications, finance, infrastructure, industry, energy, trade and tourism in Brazil, where there are more than 500 companies, including many of those included in the Ibex-35 index.
Ena and Action
Brazil is a particularly important market in terms of turnover and revenue for Santander, Iberdrola, Naturgy, Telefónica and Mapfre, but it is also important for Repsol, Acciona, Ferrovial, Dia, ACS, Aena, Sacyr, Redeia and Globalia. Most of them were already active there under the left in power: the PT ruled from 2003 to mid-2016. Lula served as president for the first eight years, while Rousseff led the presidency from 2011 to August 2016. A few days ago, Brazilian Infrastructure Minister Marcelo Sampaio Cunha Filho said in Madrid that the privatization of Electrobras is irreversible because it is a “win-win” option. “despite Lula’s desire to reverse the process. The minister who defended the privatization held meetings with Aena about the seventh tender for 15 airports (including Congonhas), which will take place in August; with Acciona (on the road sector) and with other companies. Aena has already operates airports in Brazil’s northeast, and the minister assured that Spanish companies are “very well prepared” to bid in the country.The airport’s concession will last 35 years.
Sampaio indicated that in the past six months, Brasilia has received investment requests worth 33,000 million euros; he looked at business opportunities related to, for example, lithium and mentioned the importance of Spain in the energy sector, with particular reference to Iberdrola and Repsol. A market that also develops other renewable energy companies such as Elecnor, Enertis and Ingeteam.