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Amazon Fires and Agribusiness

This month the Bolsonaro government faced its most serious crisis since the demonstrations against the Education Ministry’s budget cuts. Brazil’s National Space Research Institute (INPE) warned of above average increases in deforestation and fires since July, leading President Jair Bolsonaro to publicly dismiss INPE Director General Ricardo Galvão. Clouds of smoke from the Amazon fires drifted over São Paulo, Brazil’s largest city, to spark international attention on Brazil’s management of the Amazon. The issue took center-stage at the G7 Summit in France where the French government of President Emmanuel Macron openly defended sanctions against Brazilian agribusiness. President Bolsonaro reacted negatively to international concerns and criticizing Macron and others for their attacks on Brazilian sovereignty while ignoring the real risks and potential damages to the country’s agricultural exports, especially in relation to the recently signed Mercosul-European Union trade agreement. The reduction of tariffs on Brazilian exports to the EU is a noteworthy victory for the Bolsonaro government. However, the president’s confrontation with Macron and others places the agreement in jeopardy because it requires ratification from the French parliament, the largest obstacle to enacting the agreement.

Divisions Within the Government

Widespread opposition to the Education Ministry’s budget cuts created the first crisis of the Bolsonaro government, but the Amazon fires and spike in deforestation revealed significant divisions within the broader conservative movement that serves as the loyal support base for the administration. The Ministry of Agriculture quickly responded to the crisis and recognized that such an international scandal posed certain risks to the country’s image and agricultural exports. This ministry’s quick response sharply contrasted with those advanced by the presidency and the Ministry of the Environment. President Bolsonaro decided to associate his position with the military by voicing a nationalist defense based on Brazilian sovereignty over the Amazon and reminiscent of the former military dictatorship’s position during the 1970s. This nationalist approach raises questions about whether the Bolsonaro administration will continue with the wide-ranging set of environmental protection policies adopted since the 1980s, at least those under his direct authority. Congress is also expected to address the issue, but partisan divisions may hamper efforts to approve effective legislation. At the beginning of the year the Chamber of Deputies approved modifications to the forestry code but the legislation was not taken up by the Senate.

Limits to the Lava-Jato

President Bolsonaro’s threat to directly intervene in the management of the Federal Police (PF) has created a rift with Justice Minister and former Federal Judge of the Lava Jato corruption cases Sergio Moro. The rift between Bolsonaro and Moro is now more significant than the ongoing VazaJato leaks of personal communications between Moro and Lava Jato prosecutors that indicate judicial bias. The rift may be the result of Bolsonaro’s concern over the PF’s investigation of his oldest son, Senator Flavio Bolsonaro (PSL-RJ), and the so called Queiroz affair that implicates Flavio in an employee kickback scheme while his was a Rio de Janeiro state legislator.

It is a critical moment for Minister Moro and the Lava Jato prosecutorial effort. Just last week, several Supreme Court Justices annulled the conviction of former Bank of Brazil CEO and former Petrobras CEO Aldemir Benedine. The decision raises doubts about other corruption convictions handed out by Moro. Benedine’s case still awaits a full hearing and ruling by the entire Supreme Court bench where the future of the Lava Jato may be in the balance. Also, the National Congress approved a new law that punishes “abuse of official authority” by public officials and employees in all three branches of government: executive, legislative and judicial. This legislation awaits the president’s signature, or veto of all or parts of the new law. Any veto, partial or complete, can be overturned by a joint session of the National Congress.

Social Security and Privatizations

The Social Security reform is moving through the Senate. The Constitution and Justice Committee (CCJ) may vote on the measure in the coming days and adopt the version drafted by the sponsor, Senator Tasso Jereissati (PSDB-CE). Once approved by the CCJ, the reform moves to floor debate, amendments and two rounds of voting. Most expect passage, but the reform effort will need to consider two constitutional amendments that could significantly shape the outcome. The first amendment includes state and municipal employees and would allow for normal legislation to change the conditions of their social security systems. The second, still to be drafted by the presidency, would establish private accounts (capitalization) for beneficiaries.

The reform agenda is welcomed by a congressional majority, but the government remains concerned about the slow economic recovery. This concern led the Ministry of the Economy to announce a list of state-owned enterprises (SOEs) to be privatized during the coming years, including the Postal Service (Correios), the national electricity company (Eletrobras), and the national telephone company (Telebras). The government claims that privatizations will trigger private investment and send a positive message to investors as the global economy inches toward recession.

The Shadow of 2022

The country’s economic performance is less than impressive. While the third quarter grew more than expected, mostly the result of private investment, unemployment remains high. The slight reduction in the third quarter employment figures indicates that job creation remains fragile and concentrated among precarious and informal jobs. Federal budget projections for 2020 show that public investment will continue to decline. The drop in public finance for economic development and infrastructure, along with uncertainty over the possible implementation of international sanctions against Brazilian agricultural exports, threatens to curb future growth. President Bolsonaro recently recognized that the bleak economic outlook may shape the 2022 general and presidential elections. The recent CNT/MDA and Datafolha public opinion surveys show that presidential disapproval has risen to 40%, ten percent more than those approving of the president’s performance in his first eight months. An increasing number of loyal voters and base supporters are beginning to voice disapproval of Bolsonaro’s government. The president denies that his falling support will influence his decisions, but he did launch a series of attacks against Sao Paulo Governor João Doria (PSDB-SP) who is considering a presidential bid in 2022. His skirmish with Doria suggests that Bolsonaro is apprehensive about his reelection prospects. It is still uncertain whether the country’s economic prospects will shape the president’s political future in the coming year.

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