Milei wants a libertarian revolution and Brazil shelves Guedes’ liberal agenda

During the four years of the government of former president Jair Bolsonaro (PL), the Economy Minister of the period, Paulo Guedes, spearheaded a liberal agenda for Brazil. Although the results achieved in the search for reducing the state machine, carrying out serial privatizations, widespread deregulation and commercial opening fell short of his aspirations, his initiatives introduced these themes in the country in an explicit and definitive way. In practice, however, Guedes’ agenda is hibernating.

One year after the minister’s departure from power, his legacy continues to produce positive effects on economic indicators, while neighboring Argentina, under the leadership of libertarian president Javier Milei, is experiencing an even broader and more radical shock of liberalism, marked by hundreds of measures under discussion. Brazil, in turn, sees a pause in the liberal reform agenda, whether due to the change of government, with the return of leftist Luiz Inácio Lula da Silva (PT), or due to the difficulty of the majority of parliamentarians, with a centrist profile. -right, come forward with proposals to resume it. Milei’s victory was celebrated by the Brazilian right and supported by Bolsonaro and his group.

Centrão, the majority group in the Chamber, has so far only managed to block revisions and revocations proposed by Lula against liberal advances. Politicians and analysts interviewed by People’s Gazette assess that the resumption of economic freedom in Brazil will depend on the rearrangement of forces after the 2026 elections, and the success or failure of Milei’s avalanche of decrees could influence this scenario. For them, the parties united to re-elect Bolsonaro – PL, PP and Republicans – have prioritized only the conservative agenda of customs, without investing in the agenda of economic liberalism, whose flag is raised by Novo – with only three federal deputies and one senator in Parliament .

Proof of this was the approval in November 2023 by the Chamber of Deputies of the project that revives the “Green and Yellow Card”, a proposal by Guedes to make labor rules more flexible for hiring young people aged 18 to 29 and people over 50 years old. Reported by Adriana Ventura (Novo-SP), the text received 286 “yes” votes and 91 “no” votes, and went on to the Senate for analysis.

According to deputy Marcel Van Hattem (Novo-RJ), “the liberal agenda will not advance alone in Congress as long as the Chamber is presided over by Arthur Lira (PP-AL)”, which would be conditioned by the “give and take” with the government . Lira, however, is enthusiastic about a reform proposed by Guedes during the Bolsonaro administration and rejected by Lula’s: administrative or State reform.

For political scientist Luiz Felipe D’Ávila, candidate for president for Novo in 2022, the liberal agenda will not be able to advance in Congress at the hands of the opposition. “With the exception of my party, which actually defends this agenda, we do not find supporters of economic opening, deregulation and the reduction of subsidies in the rest of the opposition. Unfortunately, most people like a little help from the state,” he said.

D’Ávila recognizes that liberalism “walked two steps” during the Bolsonaro government, due to Paulo Guedes. According to him, Congress approved matters such as the sanitation framework, which improved governance in the sector and prevented the hiring of state-owned companies without bidding, the economic freedom law, which reduced bureaucracy and facilitated entrepreneurship, and a new framework for startups, which encouraged the emergence of innovative companies in the country, among other initiatives.

But the Bolsonaro government had at the end what D’Ávila classifies as an “anti-liberal relapse”, approving “absurd” projects, such as the PECs Kamikaze, guaranteed additional government spending on social benefits in the middle of an election year, and the Precatório, which staggered government payments to suppliers by court order over the next three years and the secret budget, which gave power to the Legislature to spend in exchange for political support.

Despite significant advances on central issues, former minister Guedes was unable to overcome political resistance to economic opening, something dear to liberals. “There were supporters of national industry, protectionism and market reserve in the government base”, he lamented.

João Henrique Hummel, director of Action Government Relations, disagrees and assesses that the liberals in Congress are, in fact, losing the chance to continue producing structural changes in the country under the liberal spectrum.

He highlights that there is a majority of deputies who have already been preventing setbacks in the advances of recent governments and that the leading role of Congress has been expressed through projects under its exclusive initiative. “Why don’t parliamentarians suggest, for example, the end of natural monopoly, to open markets and generate competition, efficiency and lower prices?”, he provoked.

Milei attacks reforms that Brazil has implemented since 1990

Business advisor and speaker Ismar Becker recalls that the biggest difference between Milei and Guedes is the fact that the Argentine economist has the presidential pen in his hand to endorse his intentions and promote them. “Milei is change itself. He is using the tough tools he has within a bold plan of attack with an experienced team. The tsunami of measures that unleashed was already ready and the bet was on,” he said. Regarding Guedes, Becker observes that, in addition to Bolsonaro’s restraint, he also did not know how to negotiate with politicians to advance the middle ground.

Javier Milei’s economic plan was known for extreme measures, such as ending the Central Bank and dollarizing the economy. In practice, the Argentine president, a 52-year-old libertarian economist, is proposing a revolution to attack the state deficit in a devastating way, without any gradualism. The goal is to approve its “decree” in full by the end of January, on an urgent basis. The Law of Bases and Starting Points for the Freedom of Argentines (Bus Law) attacks several state bottlenecks at once, many of which Brazil has been pursuing since 1990.

Milei was elected with 56% of the votes, the highest presidential vote in 40 years of redemocratization in Argentina. His party, Freedom Advances, however, has a minority presence in Congress. Milei will need to negotiate so that the DNU and the so-called Ônibus project, with more than 600 articles, pass. He has already said that he will hold a plebiscite if parliamentarians reject it, amid the debate on constitutionality.

Sworn in on December 10, Milei already suffered a first defeat in this effort on Wednesday, when the Labor Court decided to suspend the chapter of the labor reform provided for in its decree of necessity and urgency (DNU), equivalent to the provisional measure (MP). . The decision followed an appeal from the General Confederation of Labor (CGT), the largest trade union center in the country. In the DNU, with more than 340 articles, the labor reform includes, for example, extending the worker’s trial period from three to eight months, changing the compensation system and dismissal for those who protest at the doors of companies.

Despite resistance, Guedes’ agenda left a legacy for the country

Although he faced obstacles in structural reforms, such as administrative and tax reforms, considered crucial by him to boost the country’s growth, Paulo Guedes implemented or supported several liberalizing measures. When leaving office in December 2022, public accounts were under control, recording a fiscal surplus for the first time since 2013, in a more positive scenario than the current one.

Even in the face of resistance from most politicians, including Bolsonaro, Guedes made progress on his agenda that remains. Highlights include the successful Pension Reform, which will result in savings of R$900 billion in 10 years, and the autonomy of the Central Bank, preserving monetary policy against political interference. Despite not reaching the target of R$1 trillion in privatizations, there was progress in the privatization of Eletrobras and in concessions in several areas, such as airports and highways, reducing the state presence in the economy.

In the area of ​​regulatory frameworks, the liberal agenda had a significant impact, modernizing sectors such as sanitation, gas, railways and navigation. The Economic Freedom Act improved the business environment by simplifying licenses for low-risk activities and facilitating entrepreneurship. The quest to join the Organization for Economic Co-operation and Development (OECD) reflected the commitment to international quality standards to attract foreign investment.

The reduction in the role of the State involved more focused disbursements from BNDES, expansion of the capital market and specific cuts in import tariffs. The professionalized management of state-owned companies brought profits, reduced debt and paid dividends. The New Bankruptcy Law, in turn, provided flexibility to companies undergoing judicial recovery.

Despite the absence of Administrative Reform, the previous government promoted strong internal adjustments, reducing the number of employees and spending on civil servants. The digitalization of services, de-bureaucratization and incentives for innovative companies were part of the achievements, in addition to the modernization of the foreign exchange market and advances in the digitalization of the financial system, including Pix. Public investment declined, but was offset by growth in private investment.

Bolsonaro’s “cursed inheritance” continues to help the economy

Since the transition of government, Lula and the Minister of Finance, Fernando Haddad, have accused their predecessors, Bolsonaro and Guedes, of leaving a “damned legacy”, repeating a speech against the Fernando Henrique Cardoso era, in the first PT term. Opposition experts and politicians noticed some loss of steam in the positive effects of the advances made by the Michel Temer and Jair Bolsonaro governments, especially with the market’s distrust of the current management of the economy, delaying investments. Interestingly, the tax reform, born and promoted in Congress, helps PT members.

Lula was unable to achieve the so-called “revocation” of the liberalizing measures implemented or supported by Guedes. His counter-reform came through ordinances, decrees and bills, but encountered resistance in Congress and society. Some measures, such as the relaxation of the State Law and the return of the union tax, were implemented due to the collaboration of the Federal Supreme Court (STF). The end of the spending ceiling even passed through Congress, but through the adoption of a new fiscal framework. The attacks on the autonomy of the Central Bank, the privatization of Eletrobras and the new sanitation framework, in turn, were far from the Congress plenary sessions.

With the status of “Posto Ipiranga” given to him by Bolsonaro during the 2018 campaign, Guedes doubled down on speculation about leaving after each personal defeat, but ended up remaining in office until the end, even with limited room for maneuver. In practice, he fought to prevent the pressures of the electoral calendar and the effects of the pandemic and the war between Russia and Ukraine from burying his agenda. Covid-19 disorganized public finances and shook the country’s and the world’s economy, generating shortages of products, higher freight costs and inflationary pressure.

The leader of the opposition in the Senate, Rogério Marinho (PL-RN), counters the PT’s criticisms, recalling the party’s repeated habit, when in power, of creating untrue narratives about the country’s recent past. “For the first time in recent economic history, since 1988, we had a government in which the ratio of debt to Gross Domestic Product was lower at the end than what was presented at the beginning. There was a decrease of almost 12 percentage points, even with the impacts of the bad weather over the past four years: the Brumadinho catastrophe, the biggest water crisis in 90 years, the Covid pandemic and Russia’s war with Ukraine,” he said.

Marinho also highlights that the investment ratio of Brazilian savings between private and public, at the beginning of the Bolsonaro government, was 14.5% to 15%, and ended at almost 19%, an increase of four percentage points. In relation to a hypothetical GDP of R$ 10 trillion, there was an increase of R$ 400 billion, thanks to investments made, mainly by the private sector, due to predictability, legal security, changes in infrastructure and macroeconomics, such as structural reforms that began during the Temer period, such as labor reforms.