Brazil, its Importance in the Region, and the Current Change of Political Dynamics in Latin America

Photo by Rafaela Biazi on Unsplash

Brazil, the largest economy in Latin America and one of the most important emerging countries in the world, is on a course of transformation. During the 2018 electoral year, the political establishment was confronted by the electorate’s long list of grievances that were justified on the still ongoing effects of an economic crisis, diverse social tensions, generalized insecurity, and the massive indignation caused by the continuing operation Car Wash or Lava Jato investigation. Jair Bolsonaro, the new far-right populist President has promised to deliver a radical change. Furthermore, in the global stage, the new set of economic reforms and the rearrange on the nation’s foreign policy priorities will have lasting repercussions in the region and the world.

During most of the 21st century, Brazil was ruled by the left-wing workers’ party (Partido dos Trabalhadores or PT). For the world, the country was promoted, as a leader in sustainable development that created an inclusive, pro-poor economic growth. In fact, an international commodities’ boom, accompanied by a significant state’s role in the economy, and an expansion of social policies, allowed the decrease of the national poverty rate from a 24.9 % in 2003 to an 8.7% in 2015.

The sudden social transformation has been the main driver of change, pressuring the political class towards addressing the country’s issues. Once the Lava Jato scandal broke out, the investigation exposed the widespread corruption that plagued the nation’s institutions, exposing the PT party, and taking the charismatic former President Luiz Inácio ‘Lula’ da Silva to prison. Moreover, it proved how this bribery and money laundry corruption scheme was exported throughout the region, making a total of 13 countries, including 2 African nations, involved in one of the most important international corruption cases of modern times.

While Brazilians became disenchanted with their traditional parties, and the country’s international image moldered, a loss of faith in democratic values prompted the rise of the anti-establishment figure of Jair Bolsonaro, which antidemocratic values have been well documented and have brought concerns about the future of the country’s democratic institutions. On economics, Bolsonaro caught the world’s attention by proposing a liberal orthodox reform along with a change in Brazil’s relationship with its main allies. But, where exactly, under Bolsonaro leadership, is the country’s foreign policy most likely be heading to?

Brazil’s economy, with a Public Sector’s expense (% of GDP) that hiked to 37% in 2015, has heavenly depended on government intervention and has historically embraced protectionist oriented trade policies. Bolsonaro, under the influence of Paulo Guedes, a well known neoliberal economist, plans to reform Brazil, opening the economy, selling state-own enterprises, and reducing the significant public deficit. These measures follow the Chilean economic neo-liberal experiment, which reforms were carried out by the military dictatorship of Pinochet. Consequently, Bolsonaro has shown an inclination to develop a closer relationship with Chile and plans to visit the country in his first international tour as President. Nonetheless, Brazil economic opening and the establishing of stronger connections with Chile would propose a definitive change of the political status quo that has reigned 21th-century Southamerica.

During the last two decades, the region developed two different groups of countries with two different economic paradigms. In one hand the Pacific Alliance, formed by Peru, Chile, Colombia, and Mexico, is characterized by open economies that have centered their policies on free trade agreements; while, on the other hand, Mercosur, a block formed by Brazil, Argentina, Uruguay, Paraguay, and until its suspension, Venezuela, has focused on promoting intraregional trade between its members, restricting each member’s capability to engage in bilateral trade agreements with a third country.

Mercosur has focused in political consensus from governments mostly of similar left-wing political ideology as the determined component of the organization. However, with the return of right-wing governments in Brazil with Bolsonaro and Argentina with President Macri, the group may face its biggest challenge. Whether it reforms itself or loses its importance, will be determined by how Bolsonaro approaches the group, and the member’s ability to compromise in order to achieve consensus.

Although it may seem that Bolsonaro has several similarities with many of its neighbors, at least in economic terms, tensions between these leaders may arise if Bolsonaro’s proposals during the campaign become policy. Promises in foreign affairs such as moving Brazil’s embassy from Tel Aviv to Jerusalem, following President Trump’s decision, the systematic attacks to the Paris Climate Agreement, and Human Rights concerns. This seems to be significant differences that could drive left-wing governments to drift apart. Nonetheless, as Venezuela continues in the brink of collapse as the Maduro’s dictatorial regime rules, a united front remains viable to address the consequences of the tyrannical regime, that has already forced 3 million people out of their homes since 2015. Moreover, Bolsonaro’s plans to confront Venezuela’s dictatorship opens an opportunity also to keep cultivating Brazil’s relationship with the US.

Bolsonaro has shown political favoritism to the Trump administration, this relation is based on the ideological similarities between the two leaders, and it has become an opportunity for Washington to strengthen an important alliance, not only to keep pressuring the Maduro regime but also opening the window for the US to tilt the scale towards its favor in the current complex and dysfunctional relationship with China.

China has become Brazil’s most important trading partner, due to the country’s heavily rely on commodities exports. As Brazil seeks to overcome its economic difficulties, its growing economic dependence on China will complicate Bolsonaro’s intentions to come closer to the US. Under Bolsonaro’s view, China interest in Brazil is detrimental to the national interests. Nonetheless, While the American administration is eager to come closer to Brazil, it is still unsure what kind of deal, Washington is ready to put in the table to maintain an alliance between the two nations.

Brazil’s commitment to Mercosur makes it impossible to sign bilateral trade agreements with the US and even as its exit of the block seems to be a possibility, opening the economy will be a challenging process for the populist leader, as it starts its government without a majority in Congress neither strong political alliances to carry out reforms.

As the biggest country of Latin America, Brazil remains a key player on the global stage. The country will continue to face new challenges that will shape its role in the region and in the world, how political promises predicated by the new president are transformed into actual policies, will be one of the most important developments for the region, during this year.




Economist writing about Latin America

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Alexander Roman

Alexander Roman

Economist writing about Latin America

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