That is partly because of big spending on poor people, who received 600 reais ($107) a
month at the start of the pandemic and 300 reais from September until the end of 2020.
This was an about-turn for the liberal economy minister, Paulo Guedes, who had
promised to assist Brazil’s recovery from a previous recession (2014-16) by slashing
spending and red tape. Reforms were delayed to focus on covid-19. In 2021 markets
will be less forgiving. Any new spending that does not come with cuts or reforms will
push Brazil closer to fiscal insolvency. In 2020 public debt jumped from 76% of GDP to
around 95%. A move by Congress to get rid of a federal spending cap imposed in 2016,
though unlikely, would cause a crisis of confidence. Mr Guedes could quit.
Yet removing the safety net that was put in place during the pandemic will lead to an
increase in poverty and a decrease in Mr Bolsonaro’s popularity. With the municipal
elections of 2020 out of the way, opposition parties will be turning their attention to the
presidential contest in 2022. To avoid being cast as a miser, Mr Bolsonaro will therefore
need to balance economic reforms with efforts to shore up his support.
A revamp of the byzantine tax code would reduce the cost of doing business, attract
foreign investment and boost employment. Its success depends on chumminess with
the centrão, a bloc of centre-right parties in Congress that started voting with
bolsonarista legislators in 2020 (in exchange for the sort of patronage he had previously
denounced). Mr Bolsonaro may also seek victories on his ideological agenda: expanding
gun access, for example, and weakening environmental enforcement. That would satisfy
his conservative base and the “beef, Bible and bullet” lobbies in congress.
The Amazon will suffer further in 2021. Fires will rip through the rainforest and the
Pantanal wetlands for the third year in a row. That is the new normal, the result of
climate change and rising deforestation. The high price of gold spurred a boom in illegal
mining. Mr Bolsonaro’s government will push Congress to legalise it on indigenous
reserves, but as politicians debate the controversial bill, miners and loggers will invade
more land. The few remaining isolated tribes will be further squeezed.
Pressure from international investors may force big beef and soya producers to crack
down on deforestation in their supply chains. But Mr Bolsonaro will not adopt a greener
tune. Joe Biden, less of a friend than Donald Trump, will criticise Brazil’s environmental
vandalism, though he will probably stop short of sanctions.
Brazil’s Congress will again take the lead on passing ambitious policies. In 2020 these
included long-awaited improvements to the regulatory framework for public sanitation,
which now allows private-sector investment, and a reform of the main financing
mechanism for public education, which will help poorer schools.
Unless Mr Bolsonaro’s approval rating collapses, the centrão will shield him from
dozens of impeachment motions. The presence of two new supreme-court justices,
picked by Mr Bolsonaro, will increase his chances of slowing probes investigating him
and his sons. Flávio, a senator from Rio de Janeiro, is suspected of money-laundering
and connections with organised-crime groups called milícias. Carlos and Eduardo, who
are also politicians, are under scrutiny for allegedly running an online misinformation
network. Mr Bolsonaro faces an investigation in the supreme court for obstruction of