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Brazil’s new president inherits huge economic challenges

EXPERT COMMENT

Brazil must tackle a hangover of Bolsonaro’s profligate public spending while attempting in a limited fiscal space to address growing poverty and malnutrition.

The second round of Brazil’s presidential elections is shaping up to be far closer than expected with leftist Luiz Inácio Lula da Silva running at only 1-8 percentage points ahead of the current right-wing incumbent, Jair Bolsonaro – a clear sign of the division currently within a country struggling to cope with a multitude of crises.

The description of Jair Bolsonaro as right-wing applies more to his social views and disregard of environmentalism than any commitment to economic orthodoxy. As with many other populists on either end of the ideological spectrum, Bolsonaro was willing during COVID-19 – and twice during the presidential campaign – to loosen the state’s purse strings in order to build popular support.

He gutted the conditional component of the Lula-era Bolsa Familia conditional cash transfer programme of the early 2000s to make them straight-up cash transfers which benefitted more than 20 million families. And in the face of rising fuel costs and inflation, the Bolsonaro government also implemented a fuel subsidy programme including direct cash transfers to lorry drivers.

But Bolsonaro’s energy subsidy programmes have been at best a short-term palliative. The effort excluded support for basic household goods, and only temporarily halted the upward climb of inflation, lowering it in the final quarter of 2022 to under ten per cent.

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Original article link: https://www.chathamhouse.org/2022/10/brazils-new-president-inherits-huge-economic-challenges

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