Brasila report

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Friday, February 14th – 2020
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It is necessary to better prepare the speech

Paulo Guedes needs to understand that there are no private events scheduled in his agenda. Whenever he gives a speech, the press broadcasts it and Brazil listens to it. However, impulsive outbursts can harm the economic agenda of his own team

Economy Minister Paulo Guedes is sincere. He is the kind of person who says whatever comes to his mind. This is one of the reasons why he has such a strong connection with President Jair Bolsonaro – who is also known for his unrestricted discourse. Most of the time, Guedes’ sincerity helps him make the changes the Brazilian economy needs. Unlike traditional Brazilian authorities, the leader of the economy does not hide problems; on the contrary, he airs them publicly. With the Pension Reform, this was key in creating the necessary climate to getting harsh measures approved.

However, like Bolsonaro, Guedes often trips on his own sincerity, often increasing the resistance to his ideas. Last week, angry about the resistance to the administrative reform inside the administration itself, the minister compared public servants to “parasites”, criticizing policies that would guarantee salary increases despite the deficit in public expenses. Both public servants and even Congress reacted negatively. It resulted in another setback for the administration, which began to consider the possibility of not sending a constitutional amendment proposal to Congress. The option would be to try to make some changes in bills that are already in motion, proposed by members of Congress.

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This week, defending the historic high exchange rate for the American dollar, the minister once again stepped out of line. Arguing that this is the new reality Brazil will have to need to get used to, Guedes said, “There is no chance of an exchange rate at R$ 1.80. We’ll import less, replace imports, tourism. Everyone was going to Disneyland, even housekeepers were going to Disneyland, a total mess.” As he finished his thought, he suggested other destinations for tourism, “Go to Iguaçu Falls, go to the Northeast, which is full of gorgeous beaches. Go to Cachoeiro do Itapemirim to see where Roberto Carlos was born.”

In the case of the “parasites”, Guedes began to apologize on the same day and is still trying to fix his mistake. On Wednesday, he said he was misinterpreted and that the parasite he was referring to was the State and not public servants. On the same day, he started a new crisis with his speech on domestic workers. This time, the minister realized his mistake fast and tried to fix it during the speech. “They’ll say ‘the minister said housekeepers were going to Disneyland.’ No. The minister is saying that exchange rates were so low everyone was going to Disneyland.” Despite his efforts, the damage was done. The phrase immediately made the headlines.

Both controversial remarks were said during private events that were open to the press: a seminar at Fundação Getúlio Vargas and an event organized by a magazine. Guedes and his PR team need to understand that, when it comes to him, there are no private events. No matter how small the audience is, the Economy Minister will always be talking to the entire country.

Guedes’ remarks help to reinforce the idea that the administration does not care about the poor, something that the opposition will surely use during their campaign in this year’s elections. It is important to note that without the support of the poor, Bolsonaro will not be re-elected. The administration believes its economic policy will bring results, which will improve the quality of life of people and, therefore, they will get votes. Ironically, the question Guedes answered about the exchange rate during the seminar in Brasília happened on a day in which the Brazilian real was devalued due to frustrations with these expectations. The 0.1% drop in retail sales in December 2019 led the financial market to believe there is going to be another cut in interest rates, causing the price of the dollar to rise.

The minister probably forgot, but his statement provoked another historic bout of hysteria. During protests calling for the impeachment of President Dilma Rousseff, people would carry signs saying, “Out with Dilma, I want the dollar at R$ 1.99” or kids saying, “Out with Dilma, I want to go to Disney again”. Guedes aimed his remarks at domestic workers, but the exchange rate is also affecting the middle class, who might not like swapping Orlando for Cachoeiro do Itapemirim, Iguaçu Falls or the beautiful beaches in the Northeast.

Gustavo Krieger

JeffreyGroup Senior Consultant
in Brasilia
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