In late October following a significant victory for Jair Bolsonaro in Brazilâ€™s presidential elections, the stock market for Latin Americaâ€™s largest country shot up. Financial markets reacted favorably to the news because Bolsonaro, a free-market proponent, promises to deliver broad economic reforms, fight corruption and work to reshape Brazil through a pro-business agenda. While some have dubbed him as a far-right â€œTrump of the Tropicsâ€� against a backdrop of many Brazilians feeling that government has failed them, the business outlook is extremely positive.
When President-elect Bolsonaro appointed Santander executive Roberto Campos as new head of Brazilâ€™s central bank in mid-November, Brazilâ€™s stock market cheered again with Sao Pauloâ€™s Bovespa stocks surging as much as 2.65 percent on the day news was announced.Â According to Reuters, â€œanalysts said Bolsonaro, a former army captain and lawmaker who has admitted to having scant knowledge of economics, was assembling an experienced economic team to implement his plans to slash government spending, simplify Brazilâ€™s complex tax system and sell off state-run companies.â€�
Admittedly, there are some challenges as well. Most notably, pension-system reform tops the list of priorities to get on the right track quickly. A costly pension system is increasing the countryâ€™s debt and contributed to Brazil losing its investment-grade credit rating in 2015. According to the new administration, Brazilâ€™s domestic product could grow by 3.5 percent during 2019 if Congress approves pension reform soon. The other issue thatâ€™s cropped up to tarnish the glow of Bolsonaro coming into power are suspect payments made to his son that are being examined by COAF, the financial crimes unit.
While the jury is still out on Bolsonaroâ€™s impact on Brazilian society at large after being portrayed as the Brazilian Trump by the opposition party, heâ€™s come across as less authoritarian during his first days in office. Since the election, his tone is calmer and heâ€™s repeatedly said that he plans to govern for all Brazilians, not just those who voted for him. In his first speech as president, he invited his wife to speak first which has never happened before.
Still, according toÂ The New York Times, â€œsome Brazilians remain deeply divided on the new president, a former army captain who has hailed the countryâ€™s military dictators and made disparaging remarks about women and minority groups.â€�
Others have expressed concern about his environment impact with the â€œan assault on environmental and Amazon protectionsâ€� through an executive order within hours of taking office earlier this week. However, some major press outlets have been more upbeat: â€œWith his mix of market-friendly economic policies and social conservativism at home, Mr. Bolsonaro plans to align Brazil more closely with developed nations and particularly the U.S.,â€� according to theÂ Wall Street JournalÂ this week.
Based on his publicly stated plans, hereâ€™s why President Bolsonaro will be good for business and how his administration will help build an even stronger entrepreneurial ecosystem in Brazil:
Bolsonaroâ€™s Ministerial Reform
President Temer leaves office with 29 government ministries. President Bolsonaro plans to reduce the number of ministries to 22, which will reduce spending and make the government smaller and run more efficiently. We expect to see more modern technology implemented to eliminate bureaucratic red tape and government inefficiencies.
Importantly, this will open up more partnerships and contracting of tech startupsâ€™ solutions. Government contacts for new technology will be used across nearly all the ministries including mobility, transportation, health, finance, management and legal administration â€“ which will have a positive financial impact especially for the rich and boomingÂ SaaS market playersÂ in Brazil.
Government Company Privatization
Of Brazilâ€™s 418 government-controlled companies, there are 138 of them on the federal level that could be privatized. In comparison to Brazilâ€™s 418, Chile has 25 government-controlled companies, the U.S. has 12, Australia and Japan each have eight, and Switzerland has four. Together, Brazil-owned companies employ more than 800,000 people today, including about 500,000 federal employees. Some of the largest ones include petroleum companyÂ Petrobras, electric utilities companyÂ Eletrobras,Â Banco do Brasil, Latin Americaâ€™s largest bank in terms of its assets, andÂ Caixa Economica Federal, the largest 100 percent government-owned financial institution in Latin America.
The process of privatizing companies is known to be cumbersome and inefficient, and the transformation from political appointments to professional management will surge the need for better management tools, especially for enterprise SaaS solutions.
STEAM Education to Boost Brazilâ€™s Tech Talent
Based on Bolsonaroâ€™s original plan to move the oversight of university and post-graduate education from the Education Ministry to the Science and Technology Ministry, itâ€™s clear the new presidential administration is favoring moreÂ STEAMÂ courses that are focused on Science, Technology, Engineering, the Arts and Mathematics.
Previous administrations threw further support behind humanities-focused education programs. Similar STEAM-focused higher education systems from countries such as Singapore and South Korea have helped to generate a bigger pipeline of qualified engineers and technical talent badly needed by Brazilian startups and larger companies doing business in the country. The additional tech talent boost in the country will help Brazil better compete on the global stage.
The Chicago Boysâ€™ â€œSuperâ€� Ministry
The merger of the Ministry of Economy with the Treasury, Planning and Industry and Foreign Trade and Services ministries will create a super ministry to be run byÂ Dr. Paulo GuedesÂ and his team ofÂ Chicago Boys. Trained at the Department of Economics in the University of Chicago under Milton Friedman and Arnold Harberger, the Chicago Boys are a group of prominent Chilean economists who are credited with transforming Chile into Latin Americaâ€™s best performing economies and one of the worldâ€™s most business-friendly jurisdictions. Joaquim Levi, the recently appointed chief of BNDES (Brazilian Development Bank), is also a Chicago Boy and a strong believer in venture capital and startups.
Previously, Guedes was a general partner inÂ Bozano Investimentos, a pioneering private equity firm, before accepting the invitation to take the helm of the worldâ€™s eighth-largest economy in Brazil. To have a team of economists who deeply understand the importance of rapid-growth companies is good news for Brazilâ€™s entrepreneurial ecosystem. This group of 30,000 startup companies are responsible for 50 percent of the job openings in Brazil and theyâ€™re growing far faster than the countryâ€™s GDP.
Bolsonaroâ€™s Pro-Business Cabinet Appointments
President Bolsonaro has appointed a majority of technical experts to be part of his new cabinet. Eight of them have strong technology backgrounds, and this deeper knowledge of the tech sector will better inform decisions and open the way to more funding for innovation.
One of those appointments,Â Sergio Moro, is the federal judge for the anti-corruption initiative knows as â€œOperation Car Wash.â€� With Moroâ€™s nomination to Chief of the Justice Department and his anticipated fight against corruption could generate economic growth and help reduce unemployment in the country. Bolsonaroâ€™s cabinet is also expected to simplify the crazy and overwhelming tax system. More than 40 different taxes could be whittled down to a dozen, making it easier for entrepreneurs to launch new companies.
In general terms, Brazil and Latin America have long suffered fromÂ deep inefficiencies. With Bolsonaroâ€™s administration, thereâ€™s new promise that there will be an increase in long-term infrastructure investments, reforms to reduce corruption and bureaucratic red tape, and enthusiasm and support for startup investments in entrepreneurs who will lead the countryâ€™s fastest-growing companies and make significant technology advancements to â€œlift all boats.â€�
Source: Techcrunch Disrupt