(Bloomberg) -- Two key promises from Jair Bolsonaro have underpinned his popularity as Brazilian president. Both are now under threat.
Bolsonaro swept to power in 2018 as a self-described outsider who would dismantle the political establishment. He would stamp out the endemic corruption that had festered for decades, and enact much-needed liberal reforms of the economy.
But the president’s anti-graft credentials were tainted on Friday when Sergio Moro, the former star judge who sent dozens of political and business leaders to jail during the so-called Carwash probe, abruptly resigned as justice minister.
Moro accused Bolsonaro of seeking to meddle in police investigations, some of them potentially involving members of his family. While Bolsonaro denied any wrongdoing in his move to fire the national police chief, the imbroglio is likely to cast a shadow over the rest of his term. Moro is a national hero in the eyes of many Brazilians for his relentless pursuit of corrupt officials, and having him in the government lent weight to Bolsonaro’s tough-on-crime credentials.
Moro is not the only minister to clash with Bolsonaro, whose blunt manner of speaking and far-right views have caused friction in his government and with the opposition, even as it resonated with voters. Earlier this month he fired his health minister after refusing to bow to demands to ease coronavirus social distancing policies in favor of reopening the economy.
The risk is the disunity spreads at a time the government is grappling with the economic fallout of the pandemic. Already markets are nervous -- Brazilian stocks fell as much as 9.6% on Friday and the currency reached an all-time low. Tensions with Economy Minister Paulo Guedes are increasingly apparent, according to three people familiar with their interactions, with Bolsonaro backing the launch of a 10-year recovery program that the University of Chicago-trained economist considers a mistake for relying too much on public spending.
“As we come to understand Bolsonaro’s governing style, we realize there are no longer ‘super ministers’,” said Deysi Cioccari, a political scientist with the Pontifical Catholic University of Sao Paulo. “The president determines all the guidelines and only those who agree will stay.”
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The economy ministry declined to comment when contacted by Bloomberg. Bolsonaro’s office didn’t reply to a request for comment.
Bolsonaro’s arrival to power 16 months ago shocked the political establishment in Latin America’s largest economy. His no-concessions style in political negotiations, coupled with a penchant for spreading conspiracy theories about everything from the reliability of Brazil’s electronic voting system to the origin of Amazon fires, played well with voters tired of years of corruption scandals.
He has carried over that manner to governing, which has seen him clash with Congress and the judiciary and set off diplomatic incidents with Brazil’s long-standing allies. Moro is the eighth minister to depart since Bolsonaro’s inauguration.
Now, the furor over the removal of federal police head Mauricio Valeixo, whom Bolsonaro said failed to properly investigate his stabbing when he was on the campaign trail in 2018, could trigger impeachment efforts against the president for overstepping his mandate. Meanwhile, Brazil’s economy may spiral into full chaos if Guedes, seen by investors as the architect of market-friendly policies, leaves the government as well.
The real has lost almost 30% of its value this year, the most among the world’s main currencies, while bond risk as measured by five year credit-default swaps widened to a four-year high on Friday. Another headache surfaced over the weekend after Boeing Co. scrapped a $4.2 billion commercial-jet deal with Embraer SA, long-regarded as one of Brazil’s industrial jewels and a component of the country’s benchmark stock index.
Bolsonaro made a show of unity on Friday when he turned up flanked by nearly all of his remaining cabinet members -- Guedes included -- to deliver a rambling 45-minute speech in which he refuted Moro’s accusations. Yet the mood in the economy ministry has deteriorated, according to an official close to the minister.
Guedes has told his aides that while he does not plan to leave for now, he won’t compromise his views on the need to balance the budget and privatize state-owned companies, say two people familiar with his thinking.
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Perhaps sensing political trouble, Bolsonaro has started to seek support among lawmakers of centrist parties, a group that represents about one third of votes in the lower house and that traditionally rallies behind whoever is in power in exchange for key government positions and government funds. A handful of such lawmakers had breakfast at the presidential palace on Friday, just as Moro crafted his resignation speech.
With a number of lawmakers from those centrist parties under investigation for corruption, aligning with them could prove risky for Bolsonaro, according to Thomas Traumann, a Rio de Janeiro-based communications consultant who has advised past ministers and presidents in Brazil.
An XP opinion poll published Saturday showed Bolsonaro’s disapproval rating remained at an all-time high of 42%, while Moro’s exit is seen as having a negative impact on the country by 67% of respondents. Some 49% said they expect the remainder of the Bolsonaro administration to be “bad” or “terrible.”
“It was the worst moment for Bolsonaro to lose Moro,” Traumann said. “He exchanged an anti-corruption symbol for traditional politics.”
Moro’s resignation caught Bolsonaro off guard and left his government divided into three main groups, according to three people familiar with the situation.
The president, his sons and members of his inner circle downplay the impact, saying he won’t be missed that much. A second group understands the gravity of the situation and is trying to rebuild the image of the government, while a third large group is unsure how best to respond, the people said.
While the president and his sons are already launching attacks against Moro on social media, labeling him a traitor, the second group intends to close ranks with Bolsonaro without getting mired into the debate surrounding the former minister, the people added, requesting anonymity because the discussion isn’t public.
The frictions come before crucial municipal elections in October and the 2022 presidential vote.
By repeatedly defying medical guidance on social distancing during the pandemic, Bolsonaro drove his previous health minister out of the government in one of the most controversial episodes of his administration. Luiz Henrique Mandetta stepped down earlier this month with rising approval ratings, which could make him a viable presidential contender in two years.
The latest data from the Health Ministry shows coronavirus cases stand at nearly 53,000, with 3,670 deaths.
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In the meantime, Moro’s next political steps are a source of much speculation, with the former judge only saying he will take time to rest and find a new job. He could be a strong candidate for president, said Marcio Coimbra, a political scientist and head of Interlegis, a think-tank in Brasilia.
“First Mandetta, now Moro,” said Coimbra. “Bolsonaro seems to be working hard to create an adversary in 2022.”
(Updates with details on opinion poll in 17th paragraph)
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