(Bloomberg) -- A top contender to become Brazil’s next president has a peculiar way of easing bankers’ concerns about his past comments on the economy: admitting his ignorance.
Jair Bolsonaro’s candor may mean he’s more likely to heed the guidance of Paulo Guedes, the candidate’s top economic adviser and a proponent of privatizing government-owned companies and overhauling social security. Bolsonaro, who’s soaring in the polls, once said a former president should be shot for trying to sell off state-owned properties.
While those contrasting views might make for an odd couple, Bolsonaro has indicated he’d pick Guedes as his finance minister, and has reversed himself on several key economic issues that resonate with many of Brazil’s financial elite -- including privatization and the need for an independent central bank.
“The last 30 years were a disaster -- we corrupted democracy and stagnated the economy,’’ Guedes said in his first interview with international press since his name emerged in connection with Bolsonaro. “We should’ve done what the Chicago Boys instructed,” he said, referring to a group of economists, many from his alma mater the University of Chicago, who advocated deregulating Latin America’s tightly controlled economies in the 1970s.
Bolsonaro and Guedes also agree on one of the issues the economist says will be decisive in the October election: crime and public safety.
Part of the Bolsonaro’s appeal is that he’s explicitly saying the role of government should be to “preserve life and property, fight crime,” said Guedes, who earned his doctorate in economics in 1978.
Bolsonaro, a former army captain, says he’d loosen up gun restrictions and give police more latitude. Authorities should be issued more lethal weapons, Bolsonaro said, and medals given to those who kill criminals, not trials. The candidate trails only former President Luiz Inacio Lula da Silva, who’s been convicted of corruption and is likely to be barred from running.
Bolsonaro has generated a groundswell of support in spite of -- or because of -- his inflammatory statements and devil-may-care attitude. In an interview with Bloomberg, the congressman from Rio said he only has a “superficial understanding” of economics, expressing hope Brazil’s benchmark interest rate would fall to 2 percent even though it hasn’t dropped lower than 6.5 percent in the past two decades. He said he opposes “making concessions” to China, Brazil’s biggest trading partner.
Bankers interviewed about Bolsonaro uniformly declined to comment, though they privately admit his unpredictability is a source of concern. Bolsonaro, 63, has been a member of at least eight political parties and never led any of them. For this election, he’s a candidate for the little-known Social Liberal Party, which he joined in March.
“People saw Bolsonaro as a wild card, and I decoded what was going on,’’ Guedes said.
Guedes, 68, one of the founders of Rio-based private equity firm Bozano Investimentos, has been a campaigner for free and efficient-market economics in Latin America, and founded Instituto Millenium, a Brazilian think tank that promotes that ideology.
Guedes in 1983 helped found Banco Pactual SA, which later became Banco BTG Pactual SA. At Bozano, he invested in companies including Abril Educacao, today Somos Educacao SA, an educational firm with a market value of 3.9 billion reais ($1.2 billion).
“I build companies now,” he said.
Guedes also has respect in academia, having held professorships at top private universities such as PUC-Rio and Fundacao Getulio Vargas. He helped found a private business school called Ibmec and then became its chief executive officer.
While he’s proud of his own Chicago Boys pedigree, it wasn’t always that way. At college, his hero was John Maynard Keynes, a proponent of state intervention in the economy. Guedes only ended up at the University of Chicago by chance, when his Brazilian university got caught up in ideological disputes with other schools in the U.S. where he intended to study. While in Chicago, professors including Milton Friedman provided what he called the best possible macroeconomic training in the world.
“Nobody had better training than me,” said Guedes, whose Keynesian worldview was upended by Friedman, Thomas Sargent, Robert Mundell and other top economists who taught him.
Still, some friends don’t understand why he’s supporting Bolsonaro and not a candidate more in the financial mainstream, such as Sao Paulo Governor Geraldo Alckmin.
“Alckmin’s a nice guy in a sinking boat,” Guedes said. “The winner will be an outsider,” carried into office by the same wave that lifted Donald Trump in the U.S. and Emmanuel Macron in France, he said.
“Ruined socialism,” as Guedes puts it, has spurred more than 3 billion people in Europe and Asia to flee their misery and join the global labor pool, creating deflationary pressures and keeping a lid on wages in the West, spurring dissent.
“Something big is going on globally,’’ Guedes said. He sees in Bolsonaro a man with the desire to chart an utterly new course for Brazil. “He wants to play big, not just in the garden.’’
Guedes dodged the question when pushed to predict whether, as Bolsonaro’s finance minister, he would have free rein to run the economy. The two are negotiating and still in the “dating” stage, he said.
But he sees signs he would have influence. After a recent meeting in which Guedes impressed upon the candidate the importance of central-bank independence, Bolsonaro echoed the position publicly, Guedes said. As recently as a year ago, Bolsonaro voiced strong opposition, saying it would render the president a “hostage” to the financial system.
Guedes said he’s also influenced Bolsonaro with regard to studies for social security reform; the lawmaker voiced opposition to a reform proposal in January.
Guedes, who says he’s always viewed politics through the lens of economics and has never joined a political party, says he’d sacrifice the many perks his current position offers if country calls.
“I have a great life -- I walk on the beach in Ipanema and Leblon every morning,’’ Guedes said. “But I’m willing to be finance minister if it’s to build a better Brazil.’’
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