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More Open Trade Regime, Bi-lateral Deals Expected in Brazil under Newly Elected President

Brazilian politician and retired military officer Jair Bolsonaro of the Social Liberal Party prevailed in Brazil’s 28 October run-off presidential election with an estimated 55.1 percent of the vote, compared to the 44.9 percent obtained by Workers Party candidate Fernando Haddad. Mr. Bolsonaro, who has been compared to Donald Trump and whose views have been described as conservative and far-right, will formally succeed Michel Temer as president of Brazil effective 1 January 2019.

It remains to be seen whether “law-and-order” candidate Bolsonaro will adopt a more pragmatic, centrist and conciliatory approach following a particularly divisive presidential campaign. The selection of University of Chicago-trained economist and founder of liberal think-tank Instituto Millennium Paulo Guedes as the next finance minister appears to be an encouraging sign, as was Mr. Bolsonaro’s first speech after being elected where he vowed to serve the interests of all Brazilians and move past the confrontational rhetoric that got him elected.

Mr. Bolsonaro’s campaign programme stresses the need to pursue a market-based liberal approach for the Brazilian economy that promotes higher employment and income and a balanced budget while pursuing low inflation targets. Economic policy will ostensibly be set by the Central Bank and the ministry of economy, which will assume the functions currently performed by the ministries of finance, planning, and industry and trade and the executive secretariat of the investment partnerships programme. In addition to significantly reducing the size of the federal government, a Bolsonaro administration would ostensibly seek to lower taxes, simplify the current federal tax structure and privatise various state assets.

Auspiciously, Mr. Bolsonaro’s campaign programme recognises that facilitating international trade is one of the most effective ways to promote long-term economic growth. Taking into consideration that Brazil does not have a particularly open trade regime, Mr. Bolsonaro is proposing “the reduction of many import duties and non-tariff barriers, in parallel with the establishment of new bi-lateral international agreements.” Mr. Guedes recently indicated in this regard that Mercosur will not be a priority for the Bolsonaro administration, noting that Brazil has been a “prisoner of ideological alliances” that have hurt the Brazilian economy. Mr. Guedes added that rather than breaking any of its existing trade relationships Brazil is looking to trade with the world without being hostage to the “cognitive prison“ of the Bolivarian ideology.

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