Our panelists discuss the current political, economic, and public health situation in Brazil.
STAFF: (Gives welcome remarks.)
MEIMAN HOCK: Thank you so much. I'm Kellie Meiman Hock, managing partner at McLarty Associates. It's my pleasure to be your presider here today to discuss Bolsonaro's Brazil--An Inside Look and you've got the bios of all of our participants.
I think we really couldn't have put together a more interesting set of players to have this discussion with us here today. I'll just quickly go through names and titles. We've got Marcia Castro. She is the Andelot Professor of Demography and Chair of the Department of Global Health and Population at the Harvard T.H. Chan School of Public Health. We’ve got Monica de Bolle, Senior Fellow at the Peterson Institute. And then we've got Brian Winter as well, the Vice President for Policy at American Society, Council of the Americas and Editor in Chief of America's Quarterly. So I'll go ahead and dive right in.
Brian, I thought I'd start with you. Just a real overview, how is Bolsonaro doing? Obviously we've got Brazil in second place in the world, not a silver medal that you really want to get, in COVID cases - we'll discuss that a little bit later with Marcia. You've got unemployment projected -only talking about the official sector, not even the informal sector - going up towards 15% or so projected for the end of the year, and growth flattening to the tune of reductions in 2020, projected from anywhere from 5% to 6.4., if you believe the Central Bank - a tough picture. How is he managing this? How has he changed his governance style, and how is that serving him, or not, with his base?
WINTER: Well thank you very much, Kellie, thank you CFR for the invitation. It's a real privilege to be here on this panel with my friends Monica and Marcia, I'm here today speaking in a personal capacity, the views that I'll give here don't represent any institution. If I had to summarize the current situation resilient politics in a couple of words, and it pains me a little bit to say this, but those words would basically be it's a depressing equilibrium right now. And let me explain the word equilibrium first because it's the one that tends to catch people the most by surprise. Brazilian politics has reached a certain amount of stability right now, the president, Jair Bolsonaro, has an approval rating when you measure it on a binary basis of about 40%, which makes him as popular or more popular than Donald Trump, depending on which polls you're looking at. And you know, people who don't follow Brazil on a day to day basis, especially outside the country, tend to sort of ask how could he still be that popular given the problems that you just laid out - the terrible death toll from COVID, an economy that was underperforming well before the pandemic started, high levels of violent scandals involving some people close to him, and so on. And what I always try to tell people is that you have to understand the Brazil that the world kind of grew up watching, which is basically the Brazil that we see in Rio de Janeiro, of bossa nova and beaches and favelas and so on, does not fully relate the complexity of Brazil. And it also, when we see it through that lens, and we think of Carnival and soccer, all these things, it doesn't capture the fact that Brazil is, and almost always has been, a fundamentally conservative country.
When you leave the coast, when you go to places like the interior, states like Goias and Mato Grosso do Sul, and so on, what you find is a different culture and in many ways it represents or it's similar to what we see here in the United States. Some polling - you know, Bolsonaro has, for example, a plan to open a new wave of military schools - 61% of the Brazilian population said in a poll in February that they support that. 60% says that they favor mandatory religious instruction in schools. Majorities also oppose gay marriage and abortion.
And so what you have there, what that begins to sort of paint for you, is a picture of a conservative country that has reacted well, at least a portion of society, to Bolsonaro's emphasis since he took office on the culture wars - on denouncing everything from gender ideology, to the socialists and communists who he said ran Brazil into the ground over the last 20 years and as a result, partly because of that, he has retained this popularity. And we can go into sort of further detail on that later. But basically the same thing that has caused so much noise in a Bolsonaro administration, that has chased off investment, that has caused Brazil to be seen with much greater weariness in foreign capitals, amongst democrats in Washington, in European capitals, as well, has basically played well with enough people at home that he's retained that popularity, and therefore - back to this idea of an equilibrium - there continues to be speculation in the Brazilian press that he may face impeachment proceedings before the end of the year. There continues to be speculation that perhaps some of the scandals involving his allies, particularly his sons who are politically active, might eventually force a crisis for him. But at least for the moment, I don't, I don't see it. I think we're going to continue to see more of the same.
Which then, in conclusion, brings us back to the first part of that phrase I used, depressing equilibrium. Why depressing? As someone who's been following Brazil for the better part of 20 years. This current situation, even again leaving the pandemic aside, was not what people hoped for. As recently as 5, 7, 10 years ago, this was not the Brazil that was up and coming, all this talk not so long ago about the country or the future that had now made it.
Brazil began the crisis, and I know Monica is going to talk more about the economy, but before the pandemic started, Brazil's economy was at the same level on a per capita basis as it was in 2010. And the pandemic will obviously set it back maybe to '08, '09, and because of this situation of equilibrium, but you know, a certain chaos in politics, very few people I know expect the recovery from the pandemic, to look anything like a V. Because of this political noise, because of this inability to establish a consensus in Brazil amongst policies that might actually resume that path that the country seemed to be on for a couple of years. So, as somebody who believes in Brazil and has been following it for a very long time, who's seen it through the good times, it's been, just on a personal level, it's been upsetting to watch. But here we are, and again, for the time being, I don't see major changes to that scenario.
MEIMAN HOCK: I always speak to Brazil as, it's a muddle through country. Depressing equilibrium, it paints a starker picture but, but that was very, very helpful and from here, Marcia I really have to go to you next because having served in Brazil with the embassy in the mid 90s you know it was right when Brazil was starting to react to the HIV/AIDS pandemic and at that point really was a beacon of good solid public health policy that I think many of us globally looked at. So when you see the extent to which Brazil's reaction to COVID-19 has faltered – I think for a lot of us that have spent a great deal of time working on Brazil - SUS might not be perfect, but SUS is something that has done a very good job on - I'm speaking, can you go? Sorry - SUS is something that's done a very good job of addressing the health needs of many of the underserved in Brazil. So what have we learned about the deficiencies in the Brazilian health system through COVID? Are there any course corrections, not just speaking about COVID-19, but looking forward to addressing NCD's and other issues that have plagued Brazilians increasingly over time, what would you say to us? What can we learn?
CASTRO: Okay, so thanks so much, Kellie, and thanks CFR for putting together this discussion. The more we have discussions around science the better, considering the moment we live.
So I think that if somebody was in a coma for the past four years and just woke up, they would not believe that we would be telling the truth about what's happening in Brazil, because for a country with a universal health system that has reduced inequalities in access to health, inequalities in mortality for the past three decades, and for a country that has one of the largest primary care programs in the world, with almost 300,000 community health agents, and a country with a history, you mentioned HIV, we have a more recent one, we have the response to Zika and the key difference was Brazil was the first. When Zika hit Brazil couldn't learn from anybody else. With COVID they had a few months to learn, they had China, they had Italy, and they could have planned something better. So, the person just wakes up from a coma, they could not believe that this is happening in Brazil. So I think one of the lessons learned is that we didn't learn the lesson, because Brazil could have provided one of the best responses to this pandemic, and teach the world how a country with a universal health system and a large community based primary care program could, in fact, provide an adapted, locally adapted response, and control the pandemic.
And that is one of the key issues here, is locally adapted, because you cannot imagine that the social distancing or lockdown, whatever has happened in Europe, is going to work in Brazil. It has to be adapted. And I think one of the key issues of this government, that Brian didn't mention, is this government does not use the word inequality. And for a country like Brazil, if you don't have policies that actually think about inequality, I'm sorry, it's not going to work. And I think that explains why in this response, Suez was neglected, the community health agents were neglected. Right? And honestly, we are in the, really, in the eye of the hurricane of the pandemic, and we have a ministry of health that remains minister-less for 68 days. That gives you an idea of how important those issues are being taken in the country.
So I think one of the other lessons we learned is that Brazil is much bigger than the disorganized, uncoordinated, and really neglected response that we have in the country. And what we see is a collection of really courageous local responses from secretaries of health, mayors, governors, and community organizations, they're actually doing what should be done at a global level, at country level. I think another indication is we had $39 billion that was set as an emergency fund to help with the pandemic and we are almost done with July and only 29% of this money has been used. So we don't have a minister, we don't use the emergency funds, and in the meantime we just are counting the lives lost. So I think honestly, we still have time to react. I like to be optimist with caution. But I think we still could change of course. And one of the ways to do this is to use the network of health services we have in the country. We have to leverage SUS. I mean, SUS has provided a lot. If some cities were able to increase the number of ICU beds, hospital beds, that's thanks to SUS, because if we didn't have SUS, we would not be able to do this.
But I think we have an enormous potential if we can engage the community health agents. Those people know the communities they serve. They know exactly the people that have co-morbidities and therefore are exposed to a higher risk of mortality. They know the families that don't have access to water and therefore cannot wash their hands with soap for 20 seconds. They know the people that depend on informal labor so they can be the eyes of the health system on the ground, they can identify those people that are high risk. They can do contact tracing, which we, we basically don't do in Brazil. We have one state in the northeast, Sergipe, who was really the pioneer who recruited people. And it's soon those numbers are going to come out and they're going to prove it works and it does make a difference and Sao Paulo is trying to do this now, in the city, recruiting people to do contact tracing. But those community health agents could do this on the ground, and they can also keep their job and make sure that kids are being vaccinated, women are following their prenatal care, and people with high blood pressure and cardiovascular problems are receiving the treatment that they used to receive every month and suddenly has stopped.
So I think there's still room to give a better response to prevent some of those unnecessary deaths, but I have to tell you, I'm not sure if this is going to come from the government. But the way that different groups are mobilizing in Brazil, this is probably going to come from councils of municipal and state health secretariats, combined with community mobilization. And honestly, at this point, if they are the ones to provide a response, so be it, because we have no more room to have no response.
MEIMAN HOCK: I think it's really interesting - if you look at the three countries in our hemisphere that are really facing the biggest challenges around COVID, United States without a doubt, first and foremost, Brazil, but then also in Mexico you've seen this really interesting dynamic where the federal government is leaving a space for, in some cases, governors. I think what you just said about the community reaction and mobilization is fascinating. Do we have a sense, I mean, it sounds like at a local level we've got a sense of the impact of COVID and also perhaps the impact of the opportunity cost, if you will, of COVID, those diabetes treatments, hypertension treatment, that may have fallen by the wayside, but do we have a holistic sense? Do we have national level data that you would trust with respect to that impact?
CASTRO: Yeah, so two things on this. I think one common thing between Mexico and Brazil is that both countries have been underfunding their health system for years in the world. So SUS has been under financed forever, honestly, since it was created and in Mexico the same thing was happening. So when the pandemic hit the hospitals had no equipment, they didn't have well trained physicians. So if the pandemic really caught Mexico in a horrible moment they were not ready for it at all.
In terms of data, that's a great question because what we see in Brazil - and honestly it's happening in the U.S. now because now the CDC is not going to manage the data anymore, who knows the numbers that are going to start coming in the U.S. - but Brazil has also a very beautiful history of creating an information health system and it's probably one of the countries that have the largest amount of data freely available on hospitalizations, deaths, births, outpatient care, it's really remarkable, all at the municipal level. And we have something called the transparency law, which means you can request more detailed data, nothing identifiable, but you can request more data from the government.
What happened in the middle of the pandemic is that the data was being hidden, which is kind of part of this agenda. If you don't measure, you don't act. It's part of the story, but what we have now is we have a fairly good group record on people that are hospitalized with acute respiratory syndrome and that allows us to do a lot of analysis of people that were hospitalized with COVID and that data set has information on laboratory results so we can do a lot of analysis of that. But when it comes to the overall numbers on how many people were infected, and how many deaths we had, there is one database, which is the one we see updated every day, but this is by day of reporting and we always have a delay between when the event happened and when it gets reported, so that's why the curves look so irregular and everybody uses the moving average. If we had those numbers by either the day of the first symptom or the day when the person was tested the curve would be much more smooth. Those numbers we don't have, and even if we had, we don't do a lot of testing so there's a lot of other reporting.
MEIMAN HOCK: Yup. I hear a lot of similarities. Well, Monica, off to you for the economic picture. As Brian pointed out, it wasn't a pretty picture before COVID, it's gotten even more dire after COVID. What exactly can be done? Here in the United States, as you know, we're throwing money at the problem. Our Congress today is fighting over how and what to do next, in that regard. Brazil doesn't really have that luxury. But we'd love to hear a bit from you on the economic picture, and perhaps specifically, what sectors in Brazil have been the most damaged by the pandemic.
DE BOLLE: So thank you. Thank you to the Council on Foreign Relations. It's a pleasure to be here. It's nice to see you, Kellie and Brian. It was also great to hear you Marcia in your excellent, excellent remarks on the situation on the ground. So, the economic picture, as you Said Kellie, I mean, Brazil went into this with an already pretty fragile economy, a recovery that wasn't really getting off the ground for a few years and then you know, it got hit by this shock. It was not a shock that was unexpected, evidently because it was already going on around the world. So as Marcia said correctly, the country did have time to prepare and did have time if it wanted to prepare on the economic front and have some ready made measures to be fully engaged once the inevitability of the pandemic actually hit the shore. However, if we go back to sort of late February, which is when we registered the first couple of cases of COVID infections in Sao Paolo in the city, and we go sort of two weeks forward from that, so about mid March, the minister of the economy, Paulo Guedes, was still talking - and I have this reference from him speaking on TV - where he was still talking about growth rates of two and a half percent in Brazil for 2020, the reform agenda, so he was completely disconnected from what was already happening on the ground.
Now, interestingly, when we get into the second half of March, which was just about when he made these remarks, that's when the economy started to be hit in a very big way. And in fact, when we later received the GDP numbers for the first quarter, and there was a recession registered in the first quarter, the entirety of that recession is due to those last two weeks in March in the first quarter, so that is very telling, and I think very illustrative of the fact that even though the country had time to prepare it simply decided to ignore, on the economic front and on the health front, it simply decided to ignore completely how severe the shock was going to be and that kind of denial has never really gone away.
So if we go back to the measures that were put in place, and they were put in place in a very haphazard way, there was never any sort of concerted strategy. There was never any group kind of working together and trying to figure out where the main bottlenecks were going to show up and where the main policy should be targeted to. Basically what happened was, oh, we need to start doing stuff and then nobody really knew what to do, so Brazil lost some precious time in late March and April -throughout the month of April - in trying to figure out exactly what policies were necessary.
When we got the GDP released in May and we saw - and we already had very clear indications that the two sectors that were suffering the most were, not unexpectedly and not unsurprisingly, the services sector and the commerce sector, because obviously, those are the two sectors that that employ more people, where there is more contact, and where evidently, the shutdowns that happened even though they were, again, very haphazard, they were not initiated by the federal government in any way - the federal government had this fight going on with the governors and with local authorities, with respect to lock downs and other sanitary measures - but in some places, those lockdowns actually did go into effect even if for a short period of time and therefore these were the two sectors that were hit the hardest and we saw that very clearly in the GDP numbers. And we still have some evidence that this has continued, even as premature reopening has happened in Brazil. Some of those very negative effects have dissipated, which is not to say that they might not come back, if these premature reopenings that are happening in the country result in another uptick or a significant sort of rise in infection rates in the course of the epidemic.
In terms of the policies themselves, a lot could have been done to sort of sustain the economy without actually having to spend that much money. So I remember that back in March, when I was already thinking through the issues, I was saying, look, the government needs to be prepared to spend something in the realm of two to four percentage points of GDP, which is not huge, and it's way, way smaller than the U.S. has already spent, but it needs to do this in a targeted way. So it needs to focus its spending first and foremost on sustaining the health system, so it needs to devote a lot of resources to SUS. On top of that, it needs to deal with inequality and with the large amounts of informal workers, very large amount of informal workers, and self employed workers, which are also in…they have very precarious labor market conditions. So it has to find some way of sustaining these people, because some of these people are precisely the people who work in services sectors and the commerce sector which are going to be evidently affected.
And then, you know, there were a few other thoughts as to measures that the central bank had to do which actually the central bank did do in terms of liquidity provision to financial markets and things of that sort and provision of credit to companies because obviously we were going to have a situation which we now have that banks are receiving liquidity support from the central bank, but they're very reluctant to lend because, obviously, the situation is one of extreme uncertainty and they simply do not want to have borrower risk on their books.
So what this means is that a lot of companies are cash strapped at the moment. They're not getting the credit that they need. But Brazil has instruments to deal with this. And it used them back in 2008 and 2009, when the financial crisis hit, and these are the public banks. So Brazil has three public banks, one of which is very large, BNDS, the public Development Bank, and these banks are used to providing this sort of support to the economy when that support is needed. So there could have been a lot of use of these public banks in this situation, but that was not done, because the view from the government was, oh, these are the same banks that were used during the PT era, some of which may have been involved in corruption or may have facilitated some corruption dealings. And therefore, for ideological reasons, we do not want to emulate the PT, which is a complete fallacy, because obviously, you can design policies in a completely different way and still have the public banks doing the job that they needed to do. So, with all of that we ended up with a half hearted response.
The government has actually to date spent way more than the four percentage points of GDP that I had argued for because they did not do this sort of targeted action in any sort of conservative strategic way. And now the outlook continues to be very grim. It's what Brian was saying before, it's this depressing equilibrium that the economy is in. Of course doing economic projections in the middle of an epidemic is sort of trying to pull numbers out of thin air because the uncertainty is so great. But the more pessimistic numbers that we've seen, and I've been on the more pessimistic side of this, are not too alarmist, actually, given the state of play and given the state of affairs. So the bottom line is that the economy is in a terrible condition.
When you look at labor market numbers, they're awful. The unemployment rate doesn't actually capture everything that's happening in the in the labor markets, because unemployment doesn't capture the number of people that have dropped out of the labor force. So the number of people that have dropped out of the labor force is actually way larger than it ever was in 2015 and 2016, the two years when we have this massive recession in Brazil. Currently, the number of people who have dropped out of the labor force is way larger than that of 2015 and 2016. So when you add up those numbers with the unemployment numbers, you come up with about 35 million people that are that are either unemployed because they get counted as unemployed since they report that they're looking for a job so they enter the unemployment statistics, but on the other hand you have this large number of people that are not counted as unemployed, but they are unemployed. The reason that they don't get counted as unemployed is that they say that they've given up looking for a job, they've dropped out of the labor force. So that is the labor market situation.
Then on top of that, you've got all of the visibility of inequality and the vulnerability of the Brazilian population, which some of us who have been working with inequality for a very long time knew, but suddenly that was unveiled to the population at large. So suddenly everybody perceived that there are 50% to 60% of the population in Brazil who live in very precarious conditions. They are either very poor, or they don't have any sort of solid labor market links, or they’re informal, or they're self employed, in any event, they're extremely precarious. Now, this is where an interesting thing happened, because in the middle of all of this mess and disappointment, civil society, in conjunction with Congress, started to push for a temporary basic income program - this was back in March - and within a month, which was really extraordinary under these conditions, Congress approved legislation and passed legislation to introduce this temporary basic income which has now been in place for a few months. So initially, the program was to run for three months, but it always had the possibility of being extended - it's being extended as we speak. That kind of income support has actually been extremely valuable, not only in terms of supporting many, many of these people who have either lost their jobs or stopped looking for a job, but it has also lent a lot of support to revenues and tax revenue support in municipalities and at the state level.
So just to recall one thing, before the pandemic, you had many municipalities and a lot of states in Brazil that were in dire financial straits, and what happened with this temporary basic income, because of course this is going to low income people who consume everything that they earn, this reverts back to higher tax collections. So in municipalities where perhaps you might have seen essential services being stopped like trash collection and security, and other things because they would have run out of money and they would not have been able to pay these essential workers - that actually didn't come to pass because of this emergency basic income. And interestingly, just touching on something that Brian was mentioning at the outset, you know the level of support and popularity that Bolsonaro holds - much of it has to do with the introduction of this basic income program, temporary basic income program, which was not really Bolsonaro's doing. He and Paulo Guedes refrained from being involved until actually Congress approved it and then they jumped right on the boat and they said, Oh, this is great, let's even raise the benefit by a little bit and that's what's happened.
What is happening at the moment is that at some point that benefit is going to expire. But the visibility that this program has right now and the fact that it has revealed the revelation that there are all of these very vulnerable people in Brazil and that the levels of inequality are extremely high - the levels of extreme poverty have been on the rise for the last five years, so differently from what was happening in the rest of the region, extreme poverty was already increasing in Brazil before the pandemic, now it has increased even further - all of this has actually garnered a lot of support within Brazilian society for a basic income program that is permanent. So the Brazilian Congress has just very recently created a, as they call it, a frente ampla, an ample front, consisting of 23 political parties - this was launched this week - and all of these parties are in charge of, and there's an advisory council that I'm a member of - there are 10 of us on this advisory council - and our job is to come up with a permanent basic income program for Brazil, so this tells you a little bit how surreal Brazil is. I mean, we know this because it is a surreal country, but it's a country where you can fall way short of the crisis response in the way that the government has, and at the same time, come up with this extremely creative and sort of innovative approach in dealing with inequality and you know, strengthening the social safety net, even in a government that doesn't believe in these things at all. So this is the fascinating point I think, at which we are right now.
MEIMAN HOCK: Yeah, no, Brazil never ceases to surprise that is for sure. I think we are at the time to open up the floor to our members for questions. If I could just ask our members to identify themselves and their affiliation and then I think the CFR team will be teeing them up for us.
STAFF: (Gives queuing instructions.) We will take the first question from Stanley Gacek.
Q: It's an honor to be involved in this conference and I'm currently the senior advisor for global strategies at the United Food and Commercial Workers and I served as deputy and interim director of the ILO mission in Brazil from 2011 to 2016. Kellie, it's good to see you again, albeit remote. Assuming, and I know this is a big assumption, but assuming that there is a certain electoral regime change in the United States in November, does anyone wish to comment on what you think should be the engagement posture of a new U.S. administration in relation to the Bolsonaro administration? And bearing in mind, given this state of depressed equilibrium, but bearing in mind what I would see some various serious threats, would have been serious threats, to constitutional order and rule of law, and not to mention serious violations of human rights, labor rights, trade union rights in the country, a hollowing out completely of collective bargaining - I won't go into all those details but they definitely exist - women's rights, indigenous rights, and the environment. Anyone care to comment? And thank you.
MEIMAN HOCK: Stan, thanks for the question. And, Brian, I think you've been looking at this question a great deal from our conversation before we started, I think I would first pass the word to you, and if others have comments...
WINTER: All right, thank you, Kellie, and thanks for the question. Look, everybody on this call, I'm sure is aware of the affinity, some have used the word bromance, between Donald Trump and Jair Bolsonaro. It's real and maybe goes deeper even than some people might appreciate. In late 2018, Bolsonaro son, Eduardo, who is a congressman himself, actually walked out of the Trump Hotel in Washington wearing a make America great again hat, so you don't you don't get much more sort of pro-Trump than that. And those kinds of signals, not that explicit necessarily, but those kinds of statements have continued to happen over the last few months and years. And so, you know, this has raised the question of whether there might be some sort of retaliation in some way, shape, or form from a future Biden administration, not just because of the atmospherics of the support, but because of very concrete issues, such as the one that you mentioned and, of course, perhaps the big pressure point for a future democratic administration with regard to Brazil would be the Amazon and the continued deforestation there, which somehow I don't think we've mentioned yet, a very important issue with regard to Brazil's kind of international reputation and therefore investment and so on.
So, in the last few days, for a variety of reasons, I actually, I started my career as a reporter and that was why I lived in Brazil from 2010 to 2015. And I kind of put my old reporters hat back on and tried to talk to as many people as I could, close to the current administration in the U.S., as well, as you know, people, let's say in sort of the orbit of the Democratic Party, who might be involved in a future Biden administration. It's very difficult to sit here in July, the year before, and try to game out what an administration might do because the world is very dynamic right now, because we don't know who the secretary of state would be, we don't know what the amazon fire season is going to look like exactly over the next few weeks, and so, you know, this is a difficult thing to do. That said, I did come away with what seemed like a pretty clear vision based on the people who I spoke to. And there's this expectation in the Brazilian press that if Biden wins, that a President Biden would feel compelled to treat Bolsonaro's Brazil like a pariah, to ostracize Bolsonaro, maybe even, there's talk in some progressive circles of sanctions against Brazil. What I heard suggested that that at least at the beginning will not be the case that you may see a President Biden who is, at least at the beginning of his administration, willing to at some level give Bolsonaro's Brazil a chance to do the right thing.
The answer, you know, why would they do that? It's basically because they believe that they will find a very complicated world, a West that is in trouble in January 2021, because of the pandemic, and that therefore there's another pressure point on this as well, which is China. The Democratic party establishment seems, at least part of it, to have understood in the last couple years, perhaps even the last couple months, that we're moving at least towards a more bipolar world than we have seen before, and as a result Bolsonaro's Brazil can be a partner in that growing confrontation. I personally, and just in conclusion here, I think still that a Biden administration would end up on a collision course over time with a Bolsonaro government. And the reason why is basically it comes back to the Amazon issue, I can tell you with total certainty that Brazilian government officials, both in public and in private, continue to treat the Amazon problem as if it were a problem of public relations and perception rather than reality. They fundamentally do not believe that there is a real problem in the Amazon, really for the most part, there may be exceptions to that, but that's the government's stance that they believe that this is being used as a cudgel by protectionists in Europe and globalists more generally to isolate and punish Brazil. And as long as they continue to believe that it means that the problem is unlikely to get solved, regardless of some of these efforts by the Brazilian military and others to tamp down the illegal, the people who are setting these illegal fires, which by the way, just parenthetically, Brazilian agribusiness, big agribusiness hates the fires, they hate it. They're the ones who are screaming at the government, please try to get your head around this problem, because it's bad for their markets and it's not generally speaking not the way they do things.
But if Brazil continues on that course, where the Amazon issue only continues to get worse, and what I mean specifically is that forest cover continues, the pace at which it is reduced continues to rise, then I feel like the likelihood of it becoming a domestic policy issue and basically becoming something that the progressive wing of a future Biden administration is not willing to sort of turn a blind eye towards any more, that's when things get uncomfortable. So in conclusion, the atmospherics of the relationship may actually be better at the beginning of a future Biden administration than many people currently expect, but it's still it may be fated to become more conflicted and more problematic over time.
CASTRO: Can I comment really quick? I know we're running out of time. There's one thing I would add, I think for the very first time we heard the vice president saying that we do have an environmental problem. Why? Because for the first time, the agribusiness is in danger. The letter that was written by more than 120 companies and CEOs, that created a lot of noise. And I think that the only way Brazil is going to take the Amazon issue seriously, is when the business is in danger of being hurt. That's the only way unfortunately, but I hope that if by Biden winning, I mean first I hope he wins, but when that happens, I think it can actually create an interesting thing with Brazil, which is Brazil has been following Trump's footsteps. You don't sign the climate agreement, we don't sign the climate agreement, you're going to get out of funding WHO, we want to do the same - I mean, Brazil depends on the WHO for Pete’s sake. So I wonder what's going to happen when those decisions made by Trump will be reversed by Biden. What's going to be the position of Brazil, because then they're going to be alone and I don't know what that's going to create so I leave that up in the air, but it's going to be interesting. Bolsonaro was supported by Trump on those decisions. He could say, oh, Trump did it and we're going to do it, and he won't have that anymore. And I'm not sure that he's the kind of guy that is going to take a decision being alone in the room. I'm not sure about that.
MEIMAN HOCK: Thank you Marcia. Do we have another question?
STAFF: We will take our next question from Christina Davis.
Q: Hello, this is Christina Davis. I'm professor of government at Harvard University. Thank you so much for the interesting discussion of the challenges Brazil faces. Amidst this crisis, it has been very interesting to see continuity in the desire to join the OECD and establish closer ties with open economic policies. What do you think are the economic interests that support that policy? Or is it just symbolism between Trump and Bolsonaro?
MEIMAN HOCK: Monica?
DE BOLLE: Yeah, so that's a great question. In general, I would say that this is much more symbolic than actual policy and I would back that up by saying that in order to actually apply or be on track for OECD membership, there are many, many things that Brazil needs to do on a lot of different areas, as you all know. And it's simply not doing any of these things and it's not just because of the pandemic. I mean, obviously, the pandemic takes the focus away from that and into other areas, but I don't think there was ever really the intention of following through. I think the sense was as long as Brazil is seen as being a future member of the OECD, that's a good thing, because it will reflect on perhaps more foreign direct investment coming into the country and the sort of perception of the Bolsonaro government was, we can play this game for a while - this sort of pretend game that we're really interested, when in fact we're really not - and keep this going. Of course, you know, all of these issues, including OECD membership, and not just that the EU Mercosur deal as well are all impacted, very, very largely impacted by the Amazon problems and everything that Brian was referring to.
So at the end of the day unless there is a significant change in policies towards the Amazon, and I think what Marcia was saying about the agribusiness sector and how the agribusiness sector is now taking a really tough stance because they are losing money - they now are definitely losing money. They are affected by the pandemic, they have lost markets. The Amazon issue has been a massive issue for them since the Amazon fires and the deforestation picked up from already high levels, because this has been ongoing since at least 2015 in terms of deforestation levels rising every single year. But now the situation has really come to a point where either the administration changes some policies and really does address deforestation, or things are going to go the other way and things are going to get very bad for Brazilian agribusiness very soon. All of that is mixed together with OECD membership, the EU Mercosur deal and everything else that we were speaking about here in terms of U.S.-Brazil relations in the future if there's a change in administration. So I would like to just leave you with those thoughts.
MEIMAN HOCK: It's really a time when Brazilian agribusiness should be enjoying the advantage of the U.S.-China trade war, which gets worse every single day. Do we have any more questions?
STAFF: We will take our next question from Joel Motley.
Q: Thank you. Most of my work has been involved in infrastructure finance, but I have a question about politics, which is that imagine a lot of Bolsonaro's support springs from the reaction against the corruption that was revealed in the lava jato scandal and the really deep involvement of the Labor Party. Can you give us a sense of how accurate that assessment is? Where you see the Labor Party now as a counterweight to Bolsonaro or are they still discredited by that problem?
MEIMAN HOCK: Brian, I'll pitch that to you.
WINTER: Yeah. So I mean, quickly, if you had identify three reasons why Jair Bolsonar won in 2018 it would be discussed with corruption, people upset over rising street crime, which peaked in Brazil in 2017 at 63,000 homicides, and then discussed with the economic crisis that was, up until at least this year, the longest deepest recession that Brazil had faced in its modern history. And so some of the resilience of the approval rating, like I said in my opening remarks is based on the culture war, and when I say culture war and in Brazilian context, it's basically to a large extent, it's beating up on the workers party and the culture associated with the 13 years that the workers party was in power. I mean, that's kind of the reason why you find Brazilians, or at least a significant percentage of Brazilians, so animated by that fight is partly because of deeply held cultural beliefs, but also because of residual anger for this awful crisis that Brazil has been going through in one way or another since really since 2013 - that explains why we are here today.
There's a perception, and this is where things get complicated a little bit, that Bolsonaro has made improvement in all of those areas, and it might take longer than the time that we have today to sort of really unpack that. I mean, for example, again, talking about what was happening before the pandemic - Brazil's economy grew just 1.1% in 2019. That was its worst - that was Bolsonaro’s first year in office - that was its worst growth in three years and less than half of what economists had expected at the beginning of the year. So that was disappointing, especially to investors. But, you know, to some Brazilians, it felt like a continued recovery from the depths of the crisis in 2015, and 2016. As far as the Workers Party itself, I mean, it continues to retain the support of anywhere between 20 or 30% of Brazilians kind of depending on how they do the polling and who they ask about. But their negatives remain very high because of the correct belief that they are largely if not principally responsible for the economic crisis and the corruption scandals of recent years. And I can tell you that the fear of a more sort of centrist crowd in Brazil is that we're going to end up in 2022, excuse me, the next election in 2022 with another polarized election between the workers party and Bolsonaro.
And polling now, and that will change between now and then, I don't believe in taking polling about elections two years out too seriously - but since you asked and sort of give you an X ray of where we are - most of the current polling that I've seen suggests that in a run off between Bolsonaro and either Lula or another candidate from the PT. Bolsonaro would win that election pretty easily and that sort of tells you where we are. There are other forces, other names on the left, like Flavio Dino who is the governor of Maranhao state, who is trying to lead a effort right now to build a leftist front that is not opposed to the PT, but at least puts a new face on it. But it's still very early and it remains to be seen where that will lead.
MEIMAN HOCK: Monica, I think you've got something to add.
DE BOLLE: Yeah, I just wanted to add to what to what Brian was saying. I agree with everything that he said. I would just add this, the current basic income discussion that I was referring to earlier, is something that could potentially have political ramifications, which are hard to map out at this point. But it is meaningful, very, very meaningful, that there are so many political parties involved in this effort. And all of these political parties are the more sort of centrist political parties to a very large extent so you've got the center left working together with the center right. There is involvement of the more extreme spectrum of the left, though parties like the soul and the PT are involved in this, but they have been somewhat sidelined in these discussions. And I think it's going to be a major issue because if we see progress on the basic income discussion, even if it doesn't amount yet to an actual policy or legislation or whatnot, being put in place. The players who are currently now defending such a program for Brazil and which have a lot of support from civil society may become contenders in 2022. So there's a lot of ground shifting here that might happen as a result of this basic income program. And not to forget that Bolsa Familia, which has been a very, very important program for reducing poverty and Brazil, was actually the one thing that kept getting the PT reelected. So there's this interesting aspect to what's currently happening on the political front and what might happen from here until the next elections.
MEIMAN HOCK: I think we've got one more question.
STAFF: We will take our last question from Arvin Bahl.
MEIMAN HOCK: Think you need to unmute Arvin.
Q: Can you hear me now?
MEIMAN HOCK: Sure can.
Q: Okay. Hi, thanks for taking my question. Just follow up on what you just talked about, firstly, you know when Bolsonaro was elected a big reason, one of the reasons why a lot of folks supported him was because of Guedes's reformist agenda, it seems like that's a bit dead in the water now, is there a chance that that comes back? And then looking at 2022, are we seeing the PTB reinvigorated? Or do you think the reformist agenda, maybe continues in 2022? Either Bolsonaro wins again, or you get somebody like Joao Doria? And then last thing I wanted to ask you was on impeachment. One of you mentioned something about the possibility of impeachment at the beginning of the call.
Two months ago, I was on a call with one of the leaders of one of the parties of Central and his view was like, no, we don't want impeachment, we're kind of not as right wing economically as Bolsonaro, but we want to work with him to do XYZ, so I got the sense that possibility of impeachment was very low. I don't know if something has changed in the last 10 weeks. And with all that's happened with his son in the bad handling of COVID, if there's a greater sense, but I didn't feel that about 10 weeks ago. And I also do want to get your thoughts on 2020. I know it's early, but trying to figure out if the reformist market agenda is coming to a halt now or is there a little potential here.
DE BOLLE: So let me talk briefly about the reformist agenda...
MEIMAN HOCK: If I may Monica, sorry, we have got two minutes left, so maybe you could just answer the question on Guedes and the reform agenda, and I'll answer the impeachment questions. I think Brian did touch upon that at the beginning and it there's really not a lot of space for it right now, not a lot of support for it. Go ahead, Monica.
DE BOLLE: So I'll be very brief. The reform agenda, at least in this current government, has no chance of coming back. This is a government that is going to be managing the crisis until the very end. We are in the middle of 2020, we've got 2021, and then we're into 2022, that's an election year. 2021 is still going to be an extremely difficult year economically for Brazil, even if things start to get better soon, and they won't. So this is a government that will be managing the crisis, will be in crisis management mode, until the very end. And therefore, there's not going to be really any room for the kind of reforms that Guedes was talking about. Tax reform, maybe they'll be able to do one thing or another, very small, nothing big in the sense that they were thinking about before, so by and large, the reform agenda, at least for now is dead.
MEIMAN HOCK: Thank you, Monica. And with that, I think we've wrapped up our time. I really want to thank the Council on Foreign Relations for setting up this very interesting panel, Monica, Marcia, Brian, thank you for your insights. Thank you for the patience. I thought if I hid in my mother's basement from my kids, I wouldn't get interrupted, but apparently, you can't hide from family during COVID, so apologies for that and I really enjoyed the conversation today, and thanks to all the members for your good questions and participation.
CASTRO: Thank you. Thank you.
MEIMAN HOCK: Thank you. Bye.
STAFF: (Ends the meeting.)