28 The Americas The EconomistSeptember 5th 2020
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ewamericantownsareasremoteas
Hyder,a settlementof 65 peopleinthe
panhandlethatjutssouthfromtherest
ofAlaskabetweenCanadaandthePacif-
ic.Itsonlyroadconnectionpasses
throughStewart,BritishColumbia,2km
away.Forgenerations,Stewarditesand
Hyderitespaidlittleattentiontothe
border.TheycelebrateCanadaDayon
July1stinStewart,thenmovethepartyto
Hyder,“thefriendliestghosttownin
Alaska”,fortheUnitedStates’Indepen-
denceDaythreedayslater.Activities
includeanugly-vehiclecontestandthe
“chicken-shitboard”,inwhichbetsare
placedaboutwhichsquareina grida
chickenwilldefecateon.Hyderitesbuy
petrolandgroceriesinStewart.Their
telephonenumbersuseCanadianarea
codes(250or778).
Theback-and-forthbetweenthe
formergold-miningtownsstoppedin
Marchwhentheborderbetweenthetwo
countriesclosedbecauseofcovid-19.
Undera specialdispensation,Canada
allowsHyderitestogotoStewartoncea
weekforfourhours.Thatisnotenough.
WesLoe,Hyder’spostmasterandun-
officialmayor,wouldnormallydriveto
TerraceinBritishColumbia,300km
away,tostockupforwinter,butthe
lockdownrulesdon’tallowthat.Soon,
theroadswillbetoodangerous.“Things
aredeteriorating,andI meanemotional-
lyandmentally,”saysMrLoe.
Theborderislightlypoliced.Thereis
noAmericanpost.TheCanadianguard’sshiftendsat4.30pm.Cameras and a
telephone connection to an agent some-
where else in Canada keep watch after
that. If Hyderites break the rules, “an
alarm and sirens would be set off and the
rcmp[Royal Canadian Mounted Police]
will be notified, and that’s just not the
thing we would do,” says Mr Loe.
Most Canadians are eager to keep
Americans out. The United States’ co-
vid-19 infection rate is five times Cana-
da’s. Canadians post pictures of suspect-
ed American intruders on social media.
Some in cars with American plates affix
signs to their windows saying they’re
Canadians returning home. From March
21st to August 19th Canada turned away
14,000 Americans from its borders. It
allows Alaskans to travel home across
Canada from the lower 48 states, but they
can enter in only five places and must
take the most direct route.
But Hyderites and Stewardites value
togetherness. Mr Loe and Gina McKay,
Stewart’s mayor, want the towns to be
able to form a bubble that would let their
citizens mingle freely. Alaska’s governor,
Mike Dunleavy, and Taylor Bachrach, the
Canadian mpwho represents Stewart,
have lobbied the Canadian security
minister to let that happen. So far, they
have had no luck. “We’re two countries,
two communities but for as long as
anyone can remember, we’ve essentially
operated as one,” says Ms McKay. “We’re
used to isolation up here but we don’t
want to be isolated from each other.”Frontierfriendship
Canadaandthe United StatesVANCOUVER
Tworemotetownswant the border reopenedIt’s the isolation that has them spookedgramme’s minimum payment of 89 reais.
In the poor north-east, the pt’s heartland,
the share of people who call the govern-
ment’s performance “bad” or “terrible” fell
from 52% in June to 35% in August.
The government has extended to De-
cember the emergency benefit initially
meant to last three months (but will reduce
it by half ). Mr Bolsonaro wants to replace
Bolsa Família with his own Renda Brasil
(Brazil Income), a benefit that will unify all
social programmes. Its details are still
vague. To give the economy an extra boost
Mr Bolsonaro wants to borrow 5bn reais
more this year to build infrastructure.
Pro-poor spending makes sense. The
economy shrank by 9.7% in the second
quarter. It is the same size as it was 11 years
ago. Without the relief programme it
would have shrunk more. The jobless rate
climbed to 13.3% in the second quarter
from 12% in the same period last year.
But the prospect of big deficits worries
Mr Guedes. The government is set to smash
through a ceiling on spending, which is in-
scribed in the constitution. (A workaround
can probably be found.) The primary defi-
cit, ie, before interest payments, jumped to
$94bn in July from $6.5bn the year before.
It is expected to reach $147bn for the full
year, 11% of gdp.
Disagreement between president and
minister flared in late August, when Mr
Guedes said the government should pay for
Renda Brasil by cutting back other welfare
programmes. Mr Bolsonaro rebuffed him.
He would “not take away from the poor to
give to the poorest”, he said.
The two men seem to have reached a
truce. Mr Guedes may accept a breach of the
spending cap if Congress acts to control fu-
ture spending, says Chris Garman of Eur-
asia Group, a political-risk consultancy.
His other demand is reform of the tax sys-
tem, which is among the most complex in
the world. A mid-sized Brazilian firm typi-
cally spends 1,500 hours a year dealing with
tax, compared with 175 for an American
firm, according to the World Bank.
But reforming tax is as complex as tax-
ation itself. One of Mr Guedes’s ideas—re-
placing two taxes on company turnover
with a 12% vat—would anger farmers, who
have a powerful lobby, notes Marcos Cin-
tra, the chief of the federal revenue service
until September. Consumers would also
object. Reform, if it happens, will be “a very
noisy process”, says Mr Garman.
Mr Guedes has apparently decided he
can still do some good. After tax reform
could come measures to reduce public-sec-
tor employment and benefits. Perhaps. But
Mr Bolsonaro has now seen that enlarging
the state is more popular than shrinking it.
As the presidential election approaches in
2022, the salience of that lesson will grow.
Brazil’s experiment with economic liberal-
ism may prove short-lived. 7