The March 2019 BrazilWorks Brazil Risk Index was moderate at 6 and well within the average in the last 9 months. However, form employment creation and unemployment continued to plague Brazil and heighten country risk. Unemployment is a major policy challenge but one that is neglected by President Bolsonaro and his Minister of the Economy Paulo Guedes. During the 2018 campaign season unemployment was declining very modestly, but the first few months of 2019 show a slight uptick, coupled with stagnant growth, should alarm policymakers in advance of the 2020 municipal elections.
The president’s party, the Social Liberal Party (PSL), has the most to lose if unemployment remains a serious policy challenge during the second half of 2020. Bolsonaro and his PSL were the big winners in the 2018 elections but could suffer a serious defeat in 2020 if high unemployment lingers. Today’s 12. 4 percent unemployment rate is further complicated by increasing underemployment and the growing legion of workers who have fallen out of the labor market altogether and now pose a latent but dynamic source of political opposition to the president, his party and closet allies.
The latest DataFolha presidential approval survey shows that President Bolsarono’s excellent rating stands at 32 percent of respondents and a combined rate of excellent/regular of 65%. While Bolsonaro’s marks out of the gate to not compare with recent first term presidencies they are certainly high enough to lead the country and influence the national congress. Yet, unemployment may threaten to drag down the president’s approval ratings as the year wears on, especially among those populations that are most vulnerable to unemployment, namely: youth (14 to 24 years old), women, those with only an elementary school education or less, those earning less than two minimum salaries, and of course, the unemployed. In all of these segments, Bolsonaro’s excellent ratings fall below the national average of 32%.
· Youth: 31%
· Women: 28%
· Elementary school education or less: 29%
· Less than two minimum salaries: 26%
· Unemployed: 22%
It is critical to take into consideration that current unemployment is concentrated in Brazil’s largest cities, and especially among these vulnerable segments of the population.
DataFolha’s numbers indicate that unemployment may play a direct role in dragging down presidential approval, especially in light of the government’s failure to recognize this policy challenge and offer sensible solutions. Indeed, Minister Guedes’ version of supply side economics and trust in fiscal consolidation may pan out in the long term but there is a threat that his belt tightening policies and social security reform could produce higher levels of unemployment in the short run. Indeed, Brazilian investment bank BTG Pactual forecasts that unemployment will not drop below 10 percent until 2021. President Bolsonaro and his PSL continue to dance to the drum beat of blaming the Workers Party and Brazilian social democracy for corruption and crime but they do so at their own electoral risk. Persistent high unemployment now poses a significant political risk, one capable of stopping Bolsarono’s emergent conservative-nationalist movement in it tracks.