Daily Times

Brazil is drawing up a new wave of fiscal stimulus in its battle against the economic ravages of the new coronavirus, but the most notable aspect may be what is missing: the fingerprints of Economy Minister Paulo Guedes.

The “Pro-Brazil” plan for investment in ??infrastructure, mining, energy and regional development was announced at a Wednesday news conference by Presidential Chief of Staff Walter Braga Netto, an army general, alongside Infrastructure Minister Tarcisio Freitas, a former army engineer.

Guedes was nowhere to be seen, stirring questions in Brasilia about President Jair Bolsonaro’s commitment to fiscal discipline and boosting private investment over public spending.

Although the “Pro-Brazil” program is still in early planning stages, with no spending targets announced, two people familiar with the matter said that investments by the infrastructure ministry alone could rise to 30 billion reais ($5.5 billion), up from 18 billion reais in its current three-year budget.

At around 0.4% of gross domestic product, that is not particularly big in economic terms. But it could pack a much heavier political punch: the latest indication that the military influence in Bolsonaro’s cabinet is on the rise, and the influence of ‘super minister’ Guedes is on the wane.

“Symbolically, yesterday was a terrible moment for Guedes,” said Creomar de Souza, founder of Brasilia-based consultancy Dharma Political Risk And Strategy. “It looked like Bolsonaro and the military are now deciding economic policy and that Guedes is no longer the most important voice on these issues.”

Privatization czar Salim Mattar, who reports to Guedes, said the plan announced by Braga Netto “is a little different from the Economy Ministry’s plans.”

When asked on Wednesday evening why Guedes was not at the unveiling of the “Pro-Brazil” plan, after departing a cabinet meeting early, Bolsonaro said that Guedes “participated a little and will participate quite a bit next week.”

Guedes, who rolled together the authorities of three ministries into one, was heralded as one of the far-right president’s two ‘super ministers’ whom the former army captain turned to on taking office in January last year.

The other high-profile civilian member of the cabinet, Justice Minister Sergio Moro, has spearheaded Bolsonaro’s ‘law and order’ agenda, but threatened to quit on Thursday if the president swapped the head of the federal police, a source said.

DIVISIONS EXPOSED

Public investment and state enterprises, which Bolsonaro and the generals in his cabinet have traditionally supported, is anathema to Guedes. The current crisis, and debates over how best to respond to it, has exposed these divisions. What Guedes represents for economic policy has been clear from the outset: sweeping reforms to shrink the state, overhaul the pension system, privatize state firms, deregulate the economy and reform the tax system to spur private-sector growth, attract foreign investment and spark a long-awaited recovery.