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Brazil’s New Finance Minister: Who is Paulo Guedes?

Here is a simple explainer on why he matters.

By | [email protected] | November 2, 2018 11:39pm

paulo_guedes(Photo via

OK, What’s Going On and Why Should I Care?

Last Sunday, Brazil held the run-off election between Jair Bolsonaro (Social Liberal Party) and Fernando Haddad (Worker’s Party/ Partido dos Trabalhadores/ PT). Bolsonaro won handily, receiving 55 percent of the vote compared to Haddad’s 45 percent. Voters handed Bolsonaro a clear mandate, and puts an ignominious end to nearly fifteen years of PT government. PT hero and former President Luiz Inácio Lula da Silva (Lula) is incarcerated and had his candidacy barred by a Brazilian judge. Lula’s successor, Dilma Roussef, was impeached and removed from office (with a yes vote from Bolsonaro) in 2016.

Hold On… Who is future President Jair Bolsonaro?

Jair Bolsonaro is a former army captain who has served in the Brazilian Congress for almost thirty years. He campaigned as an outsider, soundly defeating Haddad, the former mayor of Sao Paulo who relied on an enormous party apparatus to promote his milquetoast campaign slogan: “Haddad is Lula! Lula is Haddad.” On the other hand, Bolsonaro’s campaign effectively utilized online social networks to spread his controversial statements on gay rights, women’s rights, the rights of the accused, and pretty much everyone’s rights.

What should we expect from a Bolsonaro administration?

Honestly- we don’t know. Bolsonaro has delivered a string of contradictory statements on the environment, the economy, and most major issues. However, he has been consistent in his admiration of Brazil’s brutal military dictatorship (1964-1985), his disdain for the clientelism and corruption endemic in Brazilian politics, and his commitment to putting an end to Brazil’s rising homicide rates- by any means necessary. To drown out the noise of the controversies, contradictions, and controversial contradictions surrounding Bolsonaro’s campaign, let’s take a look at a key member of Bolsonaro’s future cabinet: Paulo Guedes.

A sign of stability- maybe

Paulo Guedes was Bolsonaro’s top economic advisor on the campaign and is his likely future economic minister. Guedes is widely seen as the counterpoint to Bolsonaro’s populist economic rhetoric. While the two men have publicly diverged on many key issues, their relationship appears to remain strong, and Guedes’s level of influence on administration policy- and his ability to blunt Bolsonaro’s populist instincts, will have a substantial impact on the economy of Brazil, the eight largest in the world.

Chicago Boys

Much has been made over Guedes’s stellar academic credentials, but his CV comes with an ominous caveat. Guedes received his Ph.D. in Economics from the University of Chicago in 1978, where he was taught by future Nobel prize winners such as Milton Friedman. However, Guedes’s alma mater has a fraught relationship with Latin America. Remember, it was Guedes’s professor, Friedman, who led the so called “Chicago Boys,” the Chicago trained team of economists who guided Chilean dictator Augusto Pinochet’s notorious “shock therapy.” This was a dramatic wave of privatizations that defined Chile’s economy after the democratically elected socialist President Salvador Allende was overthrown in a bloody 1972 coup.

“Sell it All”

Guedes took a move directly out of the “Chicago boys” playbook in a May interview with Reuters. “Sell it all. Privatizing cautiously, bashfully, just won’t do.” Guedes was referring to the almost 150 firms owned by the Brazilian state, including Brazil’s largest corporation, the oil company Petrobras (Petróleo Brasileiro SA), Brazil’s largest utility Eletrobras (Centrais Eletricas Brasileiras SA), and its chief lender Banco do Brasil. According to Guedes, the privatization of all state firms would raise 800 billion reais (US $215 billion) and would lower the federal debt by a fifth.

Good Neighbor

Much remains uncertain about Bolsonaro’s future relations with neighboring countries. Already, Guedes has indicated a distaste for Mercosur, the trade bloc which counts Brazilian neighbors Argentina, Paraguay, and Uruguay among its principal members (We’ve got more on this here). Guedes declared that Brazil, Latin America’s largest economy, would seek to form bilateral trade deals in order to bypass what he characterized as onerous Mercosur restrictions. Guedes implied his preference for more open trade policies, and suggested that Mercosur restrained Brazil as its “ideological prisoner.” Guedes flatly stated that neither Argentina nor Mercosur are priorities. “For us, the priority is to exchange with the whole world.”

Guedes’s ambivalence is particularly concerning in light of the recent steps toward a long overdue free trade agreement between Mercosur and the European Union. These negotiations have been ongoing since before the turn of the century, but renewed interest on both sides of the Atlantic nearly lead to a breakthrough this summer. Without full Brazilian commitment, Mercosur will be dramatically weakened and lose much of its credibility at the negotiating table.

Markets React

Bolsonaro’s victory, combined with Guedes’s credentials and pro-market rhetoric has already boosted investor confidence. Flying in the face of decreasing global confidence in developing markets, Brazilian assets have been among the world’s best performers in recent months. Both the Brazilian stock index Ibovespa, and the Real have continued to climb in response to election returns. Investors appear to trust Guedes’s ability to check Bolsonaro’s more outlandish impulses.

Mixed Message

At the end of the day much is unknown about Bolsonaro’s plans for Brazil. In October, Bolsanaro directly contradicted Guedes’s calls for privatization, suggesting it would result in Chinese ownership of Eletrobras and other key firms. Guedes himself has characterized their relationship as in the “dating” stage- a push and pull between Guedes’s preference for pro-business reforms, and Bolsonaro’s people-pleasing economic populism. The evolving relationship status of the president-elect and his economic minister is one of the key issues to watch as this government takes form but for now it can be summarized in two words: it’s complicated.

Big picture

After years of recession and financial turmoil, a revitalized Brazilian economy is promising for its southern cone neighbors. After all, each principal Mercosur state (Argentina, Paraguay, and Uruguay) maintains Brazil as its largest trading partner. However, Guedes’s clear preference for free markets and privatization could pose a threat to Brazil’s already fragile economy. In the coming months, more information will become available about Bolsonaro’s policy plans, and Guedes’s role in shaping them. For the time being, like nearly everything about Bolsonaro, the only prediction we can confidently make is: we just don’t know.