Monthly Commentary – Nov/18

Dear Friends,


January 1st 2019 is coming, but the best part of the party is in waiting for it!

The transition team is in full-power mode, and the best definition we can give, especially for the economic side is: exiting Unicamp and entering the stage, the University of Chicago! The mindset is completely different, truthfully, from everything we have ever seen in Brazil. The dominance of conservative ideas, the reestablishment of order, the fight against the State hypertrophy and the incessant search to privilege merit and competence to the detriment of quid pro quo, has been the mark in these early days of transition and nominations of the cabinet.

This is our new normal. Moreover, the Super-cabinet begins to structure their teams with absolute autonomy and in tune with the whole. The importance of this form of action is fundamental for Brazil, as we will no longer have dependence, at least in the medium and long term, of one or another cabinet member. Obviously, the realignment of actions, policies and programs, depends a lot on the “mentors” of each department, but once the structure is reestablished, with a new direction and a cohesive team, the trajectory becomes easier to follow and our vulnerabilities to such direction and conduct of policies are toned down.

A significant risk mitigation tool can be translated into establishing, therefore, the ordering of ideas and campaign proposals with competent professionals that can follow the government program. Investors, risk rating agencies and markets as a whole look at and evaluate this. The moment requires recovering the confidence indexes, which are the basis for everything else. The return of confidence will, along with the first actions, be the driving force for economic recovery.

The formation of the new government has some peculiarities, and these are not subtle. Besides the reduction of the State size, which is not expected to be timid, the soon-to-be administration is composed of several members with military background. Military personnel of the highest technical abilities and adjusted to their future functions, but who, as a rule, carry in their curricula the characteristic of seriousness and incorruptibility. Nothing is fairer and more consistent with the promises of the campaign, and that will once again break paradigms that the military is authoritarian and less democratic. In this line, the much awaited “disruptiveness” on several dimensions within the country’s life (we repeat, always within legal bounds), no one better than the military to compose this new team. If the economic field will face a strong right turn, in other segments society also believes in radical changes. Hope is back and, certain that we can not “erase” or disregard the actions taken and gains we have made in recent years, we expect a lot of seriousness and commitment from the new team not only during the short transition period to listen to respectable citizens but also over the next few years as contributors. We need effectiveness. Hence the quote that opens this Commentary by the economist Milton Friedman of the University of Chicago translates well the moment we live: “One of the great mistakes is to judge policies and programs by their intentions rather than their results”.


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