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In Brazil, the currency retreated yesterday Monday, and the equity market was very bumpy. It finally recovered after a sharply declining start to the session. Bolsonaro’s supporters’ attack on the presidency is shaking business circles, even though they are known to be close to Brazil’s former president.
The shadow of agribusiness hangs behind this spectacular assault on the institutions of Brazilian democracy. Did the big fortunes of the agro-industry charter the buses and finance the operation carried out by fans of Jair Bolsonaro? The investigation is being carried out at a rapid pace, and arrests could very quickly take place, promises the government. The only certainty about this still flourishing sector of the Brazilian economy is that it was a pillar of the Bolsonaro presidency. Its Minister of Agriculture, nicknamed the king of soya, was one of the representatives of the agricultural lobby.
These powerful operators largely financed his election campaign
They share Bolsonaro’s ideological software. His coming to power freed their speech, which had been restrained until then. Racist beliefs are deeply rooted among the big landowners in the south, who find the north of the country too poor and underdeveloped. A region where Bolsonaro has facilitated the rise of intensive agriculture which is dear to them with the return of unfettered deforestation. The gap between these two Brazils seems even wider today, but these ultra-conservatives are also businessmen, they have no real interest in the Lula presidency sinking into chaos. It would be like shooting yourself in the foot, says consultant Olivier Antoine, a specialist in agricultural issues in Latin America. They will know how to get along with the re-elected president, as they have done in the past.
Lula had made Brazilian agricultural exports a diplomatic weapon
Now that he has returned to power, he is not going to stop a machine that he helped launch, the agricultural lobby can count on him, even if his environmental policy is not to their liking. Last year, agricultural exports surged, propelled by demand and rising prices. Plus 20% in value for soybeans. This improvement in agricultural exports is welcome, it is one of Brazil’s last assets. It will not last, the courses should sag this year in the event of recession. In the early 2000s, the commodity boom served Brazilian growth and therefore Lula’s redistribution program. This super cycle is over. Lula’s challenge is to reconcile a country more divided than ever with fairly limited room for manoeuvre.
The Covid has weakened Brazil’s public finances
Debt has increased, it represents 90% of GDP, and the policy pursued by Bolsonaro has served the industry. After this political crisis which increases the risk premium on Brazilian assets, President Lula will therefore be under increased market surveillance to repair the fractures between north and south, between the Brazil of the poor and that of the rich, between the blacks , the Indians on one side and the whites on the other. It will also have to act by convincing the foreign investors on whom it is counting to restore the economy. Business circles are impatiently awaiting the presentation of its first economic measures, because during the campaign Lula was very vague about his programme. The announcements were scheduled for this week. Yesterday, they were almost postponed. But the agenda is finally maintained. President Lula confirms that he is able to govern, a first reassuring signal for the markets.
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