Brazil’s Bolsonaro Starts a Populist Death Spiral
His firing of state-owned oil giant Petrobras’s CEO signals that real reform of Latin America’s biggest economy is off the table.
Can this marriage be saved?
Photographer: Evaristo Sa/AFP via Getty Images
Brazen, business friendly and proudly impolitic, Brazil’s Economy Minister Paulo Guedes had made his name in the trenches of financial markets but always hoped for more. He saw his chance in Jair Bolsonaro, the former military man turned rightwing provocateur, who weaponized his id to win the presidency. Together — Bolsonaro on the stump, Guedes with the suits — they would rescue Brazil from the cabal of statists, communists, social democrats and other presumed political invertebrates, and so unleash Latin America’s biggest underachiever with foundational free market reforms.
Tell me another one.
By firing Roberto Castello Branco, the president of Brazil’s state-owned oil giant Petrobras president last week, Bolsonaro not only crushed investor confidence and the oil major’s shares, he also sent Guedes and his liberal entourage for a pratfall. Petrobras’s plunge on Monday by some R$100 billion ($19 billion), 22% of its value, dragged down the Sao Paulo stock exchange by nearly 5%. The real tumbled against the U.S. dollar. Petrobras and Bovespa clawed back some value on Tuesday, but unless the dirigiste-in-chief pulls back, more losses look certain. Yet the more telling casualty may be the idea of any kind of a partnership between president and minister on behalf of real economic reform.