- Good relations between President Jair Bolsonaro and congressional leaders are desirable but not imperative for economic reforms.
- A strong emphasis on the economic agenda both in government and Congress may result in the approval of tax reforms in an electoral year.
- The transfer of state-owned assets to the private sector may represent a significant boost to the economy but signature projects in Congress will continue to be divisive.
Congress came back from recess this week talking the talk on the economic agenda. Relations between President Jair Bolsonaro and House Speaker Rodrigo Maia and Senate Chairman Davi Alcolumbre were initially perceived as having improved but the absence of the president in the first session of Congress of the year on 4 February brought back memories of last year’s difficulties. The short window of opportunity for 2020, which is an electoral year, should in principle require a greater alignment between government and Congress, though to walk the walk, the leadership of the latter could still advance agenda items without the full commitment of the executive/government.
These are the key signposts to watch during the legislative year:
Agenda: the president’s 145-page document delivered to Congress this week on the priorities of the government for 2020 is economically-dense, focusing on the tax reform, the independence of the Central Bank, the Eletrobras privatization, the new Legal Framework for Sanitation, and the three-pronged “Plan More Brazil” that comprises three constitutional amendments on emergency measures, the federative pact and public funds. The document was surprisingly silent on the administrative reform and coy on social issues.
Reforms: the president differs from Economy Minister Paulo Guedes who would prefer to tackle the administrative before the tax reform. Maia sides with the president on this since time is short and a tax reform would have a greater potential effect on the economy by signaling simplification of a byzantine regime. Maia also believes that there is significant support for a taxation overhaul, including at the traditionally difficult sub-federal level, where governors and mayors have seemingly understood the need to readjust. The House would need to clear it by April to allow enough time for the Senate to approve it before the beginning of the municipal election cycle.
Privatization: the government has a roster of 115 projects involving the transfer of assets to the private sector, of which 64 will be acted on this year, including the sale of six state-owned companies, the 5G auction, and concessions in airports, roads, railroads and energy – among others. This represents a 36% increase in relation to 2019 when 47 projects were executed. Last week the government transferred the Investment Partnership Program (PPI) from the Presidency to the Economy Ministry, which tends to contribute to greater expediency. Apart from Eletrobras and the National Mint, 2020 privatization projects do not require legislative approval. Senate Chairman Davi Alcolumbre and the Northern and Northeastern state bench are strongly against moving ahead with Eletrobras.
Social agenda: there was not much on poverty reduction in Bolsonaro’s priority document to Congress and no reference or support to any current related congressional activity. The Presidency’s Chief-of-Staff Onyx Lorenzoni said that the government aims to revamp the Bolsa Familia (cash transfer to families) and mentioned a daycare-voucher to be launched by the Education Ministry to families under an existing extreme-poverty program. On education, there is considerable uncertainty over the future of Minister Abraham Weintraub, who has come under increasing criticism for incompetence and lack of decorum.
Calendar: studies have shown that the House worked an average of 3,385 hours in the last three electoral years (2014, 2016, 2018), which is roughly half of the hours worked in a non-electoral year. The government has until 17 July, the last day before the mid-year recess, to try and approve its projects in Congress. Municipal elections will take place in October and about 100 parliamentarians will run for mayoral positions, contributing to a virtual halt in legislative activity by mid-year. There will be some time after the elections, but most issues need to be close to approval before the recess to have any chance of clearing Congress before year-end.