January 29, 2021

Latam

BRAZIL: House Speaker vote crucial but Bolsonaro’s future is in his own hands

BY Mario Marconini

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( 5 mins)
  • Two candidacies for house speaker reveal realignments among centrist forces but candidates agree on legislative priorities.
  • Not even a pro-government candidate could stop an impeachment if political conditions so warrant it.
  • Support for the Jair Bolsonaro administration will not be automatic from either the independent or pro-government candidates.
  • Both candidates agree that a way needs to be found to pay for a limited extension of the emergency assistance.

It is true that the 1 February congressional elections for house speaker will be a bellwether for future developments in relation to the Jair Bolsonaro administration, including an impeachment process against the president. However, the two main candidacies in the House are not so different after all – they just come from different places in the centrist spectrum and reflect different alignment strategies with an eye on the 2022 presidential elections. In relation to the actual agenda in Congress, they agree more than disagree on big-ticket legislative items. Both will sway with the political winds. Support will not be unconditional for the Bolsonaro government from either candidate. Below is an overview of what is involved:

Impeachment. A victory by independent candidate Baleia Rossi from the centrist MDB in the House may indeed make the cogwheels turn faster in launching an impeachment process and mobilizing forces in Congress than might be the case if Bolsonaro’s candidate, Arthur Lira from the Big-Center Progressives (PP), were to prevail. However, there is no guarantee that either candidate could singlehandedly spearhead or block an impeachment push in the absence of strong conditions that justified it. If the president continues to lose popularity and governability following his utter mishandling of the pandemic and the vaccination effort, Lira might not be willing or able to stop demands for his removal. The same is true for Rossi in the opposite direction.

Pork. In the case of Lira, who has been promising unrestrained pork and patronage to secure votes, the proof of the pudding will be in how the government delivers on the promises. Bolsonaro is not reputed to be a good deliverer – much less so in times of pandemic and fiscal scarcity. He fared badly during the pension reform when, in addition to confusing the body politic with an ambiguous discourse, he failed to pay for the support that benefitted his government with the passage of the constitutional amendment. Were Bolsonaro not to honor commitments, Lira would have no option but to attenuate his loyalty towards the government.

Independence. Rossi would be freer from the outset. He would not have to worry about how the government behaves to decide to exact a price for support. He can be demanding and play hardball in setting legislative priorities and extracting necessary concessions. His candidacy is in fact stronger vis-à-vis those that do not trust the Bolsonaro administration to deliver on promises. A majority of party leaders have publicly committed to him, but betrayals are expected as the vote is secret and Lira has more to offer.

Reform agenda. A tax reform would be important for both candidates – more so than for the government whose main preoccupation is to find money to remain fiscally viable. Government can only accept a tax reform that does not fully bar revenue increases. Rossi, who is the author of the more complete draft proposal for a tax reform (PEC 45), may indeed be more diligent in pushing for it than Lira. However, government will be expected to lend its support – and may not be in a position to do so. Expect the tax reform to oscillate as a priority item in 2021.

Fiscal responsibility. The government knows that it will not be able to honor debt payments and additional pandemic-related expenditures unless it restructures or cuts spending. Both candidates do not differ much on this. The so-called Emergency Constitutional Amendment (“PEC Emergencial”) is the priority target here as it could de-link spending on health and education – respectively 25% and 15% of the overall annual budget – and thus free money for other uses. Achieving this would certainly be a tall order but it would be much more amenable than ending the legally mandated budget ceiling. Both candidates know the risks involved in pushing for laxer fiscal rules.

Emergency assistance. Both candidates believe that the assistance that ended on 31 December 2020 will need to be reinstated to prevent a deterioration of social conditions in the country. Ideally, the PEC Emergencialcould alone cover the assistance without raising taxes. The safer operating assumption, however, is that a new tax will be needed. Economy Minister Paulo Guedes has been a staunch advocate of a new financial transaction tax that would pay for a permanent and broader replacement of the existing cash transfer Bolsa Familia. Both candidates know that a new permanent tax and a new permanent cash-transfer program are unfeasible but could favor a temporary “tax fix” that would cover assistance for an additional year – and no more. An earmarked and time-limited financial tax that could bridge the gap until the economy recovered should be acceptable to both candidates.

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