Bolsonaro Gains Second Wind as Allies Win in Brazil Congress

President Jair Bolsonaro received a boost for the second half of his mandate as candidates he supported will preside over both houses of Brazil’s congress, potentially helping to push forward his reform agenda while blocking impeachment attempts.

Arthur Lira, leader of a pragmatic group of centrist lawmakers who usually trade their support for jobs and power in the administration, was elected speaker of the lower house with 302 of the potential 513 votes. Rodrigo Pacheco, from the right-wing Democrats party, became the new senate head. Both had Bolsonaro’s support.

Bolsonaro Gains Second Wind as Allies Win in Brazil Congress

“This is the beginning of a new Bolsonaro administration,” said Leonardo Barreto, a political scientist and head of the Brasilia-based Vector consultancy group. “The outcome of the election is a massive victory for the president but from now on the pressure grows on him to deliver,” he said, referring to much-awaited structural reforms.

The heads of the lower house and the senate effectively control the legislative agenda by deciding which bills go to a vote and when. The house speaker is the second in the president’s line of succession, and is also responsible for initiating impeachment proceedings against him. Bolsonaro desperately needed allies to navigate the second half of his term amid a worsening Covid-19 crisis and a sputtering economic recovery.

Brazilian markets posted gains, with the real strengthening 0.7% to 5.41 per dollar at 9:42 a.m. in Sao Paulo, as investors bet that the new balance of power in congress will favor the approval of market-friendly reforms.

Lira got the upper hand in the race after he promised government jobs, influential roles in the lower house, and extra budget for legislators. He defeated Luiz Felipe Baleia Tenuto Rossi, backed by outgoing Speaker Rodrigo Maia, who had sought to keep the house more independent from Bolsonaro. Pacheco was backed by a wide coalition that ranged from far-right groups to the leftist Workers’ Party of former President Luiz Inacio Lula da Silva.

Lira and Pacheco have also made clear they are against calls to impeach the president for allegations he mishandled the response to the coronavirus crisis, delaying the vaccination campaign. Brazil is one of the hardest-hit countries, with more than 9 million cases and 225,000 deaths.

Covid Stimulus

They have both said they would consider approving new measures to help the poor during the pandemic, increasing public spending just as the country posted its widest budget deficit ever last year. The senate may consider a new round of financial help for vulnerable Brazilians who lost their income during the pandemic as soon as congress resumes work later this week, Pacheco said after his victory.

“I’ll start a conversation with the government so we can reconcile the spending cap rule with social assistance,” he told reporters, adding that he would focus on reforms of the country’s tax system and its public sector.

Bolsonaro Gains Second Wind as Allies Win in Brazil Congress

Deciding whether to provide another round of Covid stimulus will be one of lawmakers’ first tasks as they resume work. Another possibility is to boost the current cash transfer program known as Bolsa Familia. Any decision will entail difficult discussions with the Economy Ministry, which is trying to contain any additional expenditures within the country’s spending cap rule, seen by investors as a key commitment to fiscal discipline.

Barreto says that while additional social spending is nearly inevitable in the short term, the stars seem aligned for Bolsonaro to push for reforms as Lira and Pacheco will likely provide solid support at a moment when the opposition remains fragmented. “The ball is in Bolsonaro’s court to get things done,” he said. “There will be no more excuses or scapegoats regarding his agenda in congress.”

The only risk, he added, is Bolsonaro himself.

“Not only is he an unpredictable character but also it remains unclear whether he is really committed to reforms, especially unpopular ones.”

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