Brazil's President Jair Bolsonaro Friday insisted he would not take any adventurous steps as he expressed his full support for Economy Minister Paulo Guedes amidst a rocking financial market.
The parity rate between the Brazilian real and the US dollar kept falling Friday as the Government injected more money into the local market through the Auxílio Brasil program which replaces the Bolsa Família created by the opposition Workers' Party (PT).
Bolsonaro's statement came after a presidential visit to the Ministry of Economy as the Government was set to change the public spending ceiling rule to allocate additional funds to Auxílio Brasil and also one day after a mass resignation from most of Guedes' top aides citing personal reasons.
“I have absolute confidence in him, he understands the afflictions that the government is going through,” said Bolsonaro about the minister he appointed right after coming to power. In the President's view, Guedes “did a brilliant job, [but] when 2020 began, the pandemic was an unknown factor for the whole world.”
We do not want to jeopardize anything about the economy, said Bolsonaro about Auxílio Brasil payments scheduled for 2022. He also insisted rising inflation was not exclusive to Brazil but it was rather a global issue due to the coronavirus pandemic, although analysts agree domestic political tensions make things worse.
The President once again pledged to pay R $ 400 (US $ 71) a month to autonomous truck drivers to make up for the losses stemming from increases in the price of fuel.
Guedes then addressed the resignation of his aides who were in charge of managing government spending. Departures are a “natural” occurrence in Guedes' view when there is a discrepancy. The officials wanted to keep subsidies at R $ 300 but the political wing of the Government insisted on increasing spending to look after the interests of those most in need.
“There has to be a balanced line there,” Guedes explained. He also admitted that from a political standpoint he had been asked to consider handouts of between R $ 600 and 700. Hence, R $ 400 was a compromise solution.
On Thursday, steps we're taking towards a Constitutional amendment to make changes to the spending cap rule.
The dollar US dollar was once again trading sharply higher Friday, amid fears of a worsening fiscal scenario after government manoeuvres to circumvent the spending ceiling and the Bovespa stock exchange index fell over 3%, unlike in most world markets.
As Bolsonaro seeks reelection in 2022, Auxilio Brasil is a plan for nearly 17 million families in need.
Friday marked the second time in less than 24 hours Bolsonaro needed to come out in Guedes' support. The ultra neoliberal economist who once worked for Chile's military regime has been branded a super minister since his appointment, but his aura began to fade away a few weeks ago when he was mentioned in the so-called Pandora Papers, an independent investigation which revealed assets and investments in tax havens owned by politicians and celebrities worldwide.
Bolsonaro told CNN Brasil Thursday evening that Paulo Guedes continues in the government and the government continues with the reform agenda, we defend the reforms that continue in the national Congress, that is the objective.
The market is nervous, if you, the people of the market, make the Brazilian economy explode, you will also be harmed, Bolsonaro added after the resignation of four senior Guedes aides, including Treasury and Budget Secretary Bruno Funchal, an advocate of fiscal discipline.
Brazil's Central Bank also needed to offer millions of dollars in future contracts, a tool that it has used quite frequently in recent weeks, to keep the greenback from skyrocketing.