Brazil’s next president faces tough austerity juggling act

Aerial view of a demonstration in support of Brazilian right-wing presidential candidate Jair Bolsonaro at Paulista Avenue, in Sao Paulo, Brazil on September 30, 2018. (AFP)
Updated 01 October 2018

Brazil’s next president faces tough austerity juggling act

  • There are also 13 million people unemployed in a country with a population of 208 million that ranks ninth in the world in terms of social inequality
  • Public debt hit 77 percent of gross domestic product in July, up from 56 percent in 2014

RIO DE JANEIRO: Whoever wins Brazil’s presidential election on October 7 will have their work cut out juggling market pressure to implement austerity measures while trying to drag 23 million people out of poverty.
According to a World Bank report presented to the 13 candidates, Latin America’s biggest economy is facing “three main challenges: a major fiscal imbalance... a lack of sustainable growth in productivity... (and) the state’s ever increasing difficulty in providing basic public services.”
In Brazil, “part of the population still lives in the 19th century and the other part is already in the 21st century,” says Marcelo Neri, an economist at the socioeconomic think tank Getulio Vargas Foundation.
Neri says millions of Brazilians have a poor education, live without access to water and sanitation, and are confronted by “levels of violence worthy of a war.”
As for the economy, it’s struggling. Public debt hit 77 percent of gross domestic product in July, up from 56 percent in 2014. The World Bank says it won’t stabilize unless Brazil manages an unlikely 4.0 percent annual growth through to 2030.
Without deep structural reforms, the debt could reach 140 percent of GDP, the World Bank says.
While hugely unpopular outgoing President Michel Temer has frozen public spending, he has left hanging the delicate question of pension reform, considered by the markets as a cornerstone to fiscal consolidation.

Most presidential candidates are proposing pension reform and a program to reduce the public deficit, but without going into specifics on the figures for fear of losing votes.
Right wing frontrunner Jair Bolsonaro has proposed a transition toward a system of funded pensions and a 20 percent reduction in the public debt through “privatization and sales.”
His closest rival, the leftist Fernando Haddad, is offering the opposite: “an end to privatization” while he intends to “increase employment” and “battle tax dodging” in order to balance the public books.
Former Sao Paulo state governor Geraldo Alckmin has made an ambitious promise to wipe out the public debt “in two years” through privatization and a simplified tax system.
The problem is that while candidates focus on trying to win votes, they might ignore the most pressing issues affecting those most in need.
Neri says the country needs social “inclusion policies” but fears that “the elections aren’t heading in that direction.”
Six million (33 percent) more people live in poverty than in 2014, the Getulio Vargas foundation says.
There are also 13 million people unemployed in a country with a population of 208 million that ranks ninth in the world in terms of social inequality.
Marcos Lisboa, president of teaching and research institute, Insper, is concerned that all the candidates are traveling a worryingly well-trodden road.
“The worry is that debates on the most urgent problems are ditched in favor of proposals that either reproduce the disaster the country went through these last few years, or that promise the moon,” says Lisboa.
Brazil needs to choose the “middle path,” says Neri, between those who advocate austerity after two years of recession followed by two more of weak growth, and those who believe that such a policy would finish off the sick patient.


UK to reopen thousands of shops in easing of coronavirus lockdown, says Boris Johnson

Updated 25 May 2020

UK to reopen thousands of shops in easing of coronavirus lockdown, says Boris Johnson

  • From June 1, outdoor markets and car showrooms could be reopened
  • Johnson is keen to restart an economy which has been all but shut down since Britain entered a lockdown

LONDON: Britain will reopen thousands of high street shops, department stores and shopping centers next month, Prime Minister Boris Johnson said on Monday, setting out a timetable for businesses as part of moves to ease the coronavirus lockdown.
He told a news conference that from June 1, outdoor markets and car showrooms could be reopened as soon as they are able to meet the COVID-19 secure guidelines, and all other non-essential retail from June 15 if the government’s tests are met.
Johnson is keen to restart an economy which has been all but shut down since Britain entered a lockdown to try to stem the spread of the novel coronavirus, but also fears a second peak of infection if measures are eased too quickly.

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“Today, I want to give the retail sector notice of our intentions to reopen shops, so they too can get ready,” Johnson said. “There are careful but deliberate steps on the road to rebuilding our country.”
The government said shops selling clothes, shoes, toys, furniture, books, and electronics, plus tailors, auction houses, photography studios, and indoor markets, would be expected to be able to reopen from June 15, giving them three weeks to prepare.
It said that businesses would only be able to open from those dates once they had completed a risk assessment, in consultation with trade union representatives or workers, and are confident they are managing the risks.
“The high street sits at the heart of every community in the country,” Business minister Alok Sharma said in a statement.
“Enabling these businesses to open will be a critical step on the road to rebuilding our economy, and will support millions of jobs across the UK.”