Brazil U.S. Roadshow Tough Sale as Bolsonaro Honeymoon Ends

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Brazil’s top economic policy makers will have a hard time selling their story to U.S. investors this week amid growing concern that President Jair Bolsonaro’s honeymoon is ending before it really began.

Economy Minister Paulo Guedes, Central Bank President Roberto Campos Neto and Vice President Hamilton Mourao will insist they can deliver a drastic cut in pension outlays and a massive sale of state assets during a series of meetings in New York, Boston and Washington. But judging by repeated sell-offs in the country’s equity and currency markets in recent weeks, investors are growing wary.

Indeed, Bolsonaro’s first 100 days in office have been anything but smooth. Despite having the most market-friendly economic team in decades, the government has failed to forge a working majority needed to approve reforms in Congress. Instead, the former Army captain has exacerbated the country’s ideological divide by preferring skirmishes of cultural warfare over the hard slog of political negotiations.

“Bolsonaro threw out the first 100 days in office -- he’s cornered,” said Deysi Cioccari, a researcher at Casper Libero University in Sao Paulo. “The president needs to show an ability to dialogue and coordinate that he hasn’t shown during these first 100 days.”

As part of a charm offensive, the vice president is attending a Brazil conference at Harvard University as well as a roundtable organized by the U.S. Chamber of Commerce in Washington. Guedes and Campos Neto will speak at an event organized by XP Investimentos in New York before heading to meetings of the International Monetary Fund and the World Bank.

“There are people who want us to speed things up,” Mourao said Sunday at the conference. “But the executive has no magic wand. In the case of social security reform, we need to convince the Congress in one way and the people in another way. And that takes time.”

Michael Shifter, president of the Washington think tank Inter-American Dialogue, said the roadshow could be helpful, but politics are the real problem.

“All these people who are coming may be technically very competent, but it looks like success or failure will depend on the Bolsonaro government’s political skills, and that is an open question,” Shifter said.

Investors are notably less optimistic than they were in January, according to two senior officials at the Treasury, who asked not to be named because they weren’t authorized to comment publicly. And foreign investors are “somewhat suspicious and careful,” said Alberto Ramos, chief Latin America economist for Goldman Sachs Group Inc.

Yet the government will ask them for a vote of confidence, Mourao, a four-star general, said in an interview before heading to the U.S. last week. “Trust us. We’re soldiers. We don’t lie.”

Uncertain Support

Over the past few weeks, Bolsonaro needlessly traded barbs with lower house speaker Rodrigo Maia, Brazil’s most powerful lawmaker and a supporter of pension reform. Lack of political support for reforms was evident when Guedes appeared before a house committee on Wednesday to defend his pension bill. Opposition lawmakers occupied the front seats and repeatedly shouted over the minister, while government supporters largely stayed silent.

“Congress gave signals, and the government understood that political negotiations need to be improved,” Treasury Secretary Mansueto Almeida told journalists at the Brazil conference. “It’s very important that social security reform is approved this year in both houses of Congress so you can start to see results next year and move on.”

Sparks Fly as Brazil Economy Czar, Lawmakers Clash on Reform

Brazil can ill afford more discord. Over the past three years, one sitting president was impeached, a former one imprisoned, and the most recent charged with corruption. The economy has failed to fully recover from the worst recession on record, while years of budget deficits have pushed public debt as a portion of the economy to the highest level in over a decade and a half.

“We’re in a real economic crisis for nearly five years, we’re taking huge steps toward a collapse,” Maia told a group of investors in Sao Paulo on Friday.

Pork Barrel

Bolsonaro’s reluctance to engage with parties he long criticized as corrupt means there’s no coordinated strategy nor formal alliance to push his agenda forward in Congress. In a sign of the challenges ahead, disgruntled legislators recently dealt him one of the biggest defeats any Brazilian leader has seen -- 453 to 6 votes in favor of imposing more budget restrictions on the government.

The day after, former President Fernando Henrique Cardoso wrote on Twitter: “A Brazilian paradox: political parties are weak but Congress is strong. The president that doesn’t understand won’t govern and may fall.”

The good news is Bolsonaro may have realized he needs to be a better negotiator, probably by engaging in some of the country’s traditional pork barrel politics. In an about-face from its “no-favors-for-support” stance, the government may start offering jobs to political parties and slush funds to first-time legislators, according to Mourao.

Bolsonaro also sought to rebuild bridges to party leaders in a series of meetings that began last week and will continue in coming days. Romero Juca, head of the Democratic Movement Party, the largest faction in the Senate, was one of them. He saw a president more willing to listen than before and under pressure to act fast.

“You can’t do politics without dialogue; the president agreed with that,” Juca said. “The government needs to be humble and swift to correct its errors.”

--With assistance from David Biller and Cristiane Lucchesi.

To contact the reporters on this story: Simone Iglesias in Brasília at spiglesias@bloomberg.net;Bruce Douglas in Brasilia Newsroom at bdouglas24@bloomberg.net

To contact the editors responsible for this story: Daniel Cancel at dcancel@bloomberg.net, Raymond Colitt, Steve Dickson

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