Photographer: Paulo Fridman/Bloomberg

Brazil’s Wall Street Is Starting to Dabble in Politics More

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  • Money managers seek new vehicle for political ambitions
  • Trust in politicians low in wake of scandal and recession

Frustrated with years of graft and economic malaise, big names from Brazil’s corporate and financial world are increasingly dabbling in politics as the watershed 2018 election draws nearer.

Take Gustavo Franco, one of the architects of the country’s historic economic stabilization program known as the Plano Real, who recently joined the Partido Novo -- a champion of free markets founded by a prominent banker. Or Arminio Fraga, Franco’s successor at the central bank, who is backing Renova -- or "Renewal" -- a kind of finishing school for would-be politicians.

Arminio Fraga

Photographer: Dado Galdieri/Bloomberg

With 26 parties in Congress -- from the Free Country Party to the Humanistic Solidarity Party -- Brazilian voters suffer no shortage of choice. But this wealth of options failed to halt, and arguably exacerbated, a monumental corruption scandal and devastating recession that roiled investors’ and voters’ confidence in Brazil’s future. Now some of the country’s more affluent and engaged citizens are pursing new ways of shaping the nation’s politics.

"The Brazilian population is disappointed with the political establishment," said Eduardo Mufarej, the founder of investment firm Tarpon Investimentos and the brains behind Renova. "They would love to see some new people they could vote for."

Renova, backed by Brazilian TV presenter -- and possible presidential candidate -- Luciano Huck, is bringing together a group of wealthy donors to finance a six-month training program and scholarships for around 150 would-be politicians. The course starts in January, with the hope that at least some will go on to run in next year’s congressional and state elections.

On the curriculum: leadership skills, how the country’s political system works, as well of areas of strategic interest for Brazil, such as security, education, poverty and sustainability.

Graduates who win election must commit to finishing their mandates, explaining their votes on social media and running their personal offices with minimal cost to taxpayers. Mufarej says his organization will have no further claims on its students.

Fraga confirmed his support for Renova in an email his office sent to Bloomberg, adding that "the name says it all: it’s time for renewal!"

For Michael Mohallem, a professor at the law school of the Getulio Vargas Foundation in Rio de Janeiro, organizations like Renova and the Movimento Brasil Livre, a brash conservative pressure group that styles itself as a Brazilian Tea Party, are a response to the difficulty established parties are having in attracting new talent in the wake of a massive corruption scandal. Brazilian law bans unaffiliated politicians from running for elected office.

"Parties are no longer an easy option for outsiders," he said. "A lot of the big ones are deeply involved in corruption schemes. Society rejects them all. So for someone who is not in politics there is a lot to lose."

The New Party

Economically liberal parties with an explicit small-state agenda remain a comparative rarity in a country that’s still highly protectionist. But Joao Amoedo, a board member on Banco Itau BBA SA and the Partido Novo’s presidential hopeful, believes there’s an increasing appetite for his party’s free-market message.

"Privatization is no longer a forbidden word," he said in an interview. In next year’s elections it plans to run candidates in 18 states, plus the federal district, and hopes to win 35 seats in the lower house, a result that would catapult the party into the middle tier of Brazilian politics.

Founded by a handful of friends from the financial services industry in 2011, the Partido Novo is rare in that it hasn’t been spun out of a church, a trade union or another political movement and it currently has no politicians in its ranks.

Amoedo rejected local media criticism that the party was run for the country’s financial elite, saying that its core objective is to hand power back to the citizen.

"Many people still think that because Brazil is a poor country it needs a big state," he said. "I argue the opposite: we are a poor country because the state is really big."

Right Turn?

Since the 14-year rule of the Workers’ Party, or PT, ended last year, the right has been on the rise, from the market-friendly reforms of President Michel Temer to the cultural dominance of conservative movements on Brazilian social media.

But Temer’s approval ratings are in single figures and his economic reforms remain deeply unpopular.

"Most Brazilians are not economically liberal, including the middle classes," said Adriano Codato, a professor of political science from the Parana Federal University. "This turn to the right was more a turn away from the failure of the economic management of the PT."

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