NEW SCENARIO

Risk Briefing's risk scenarios are potential developments that might substantially change the business operating environment over the coming two years. We analyse the drivers, provide the context and conclude with recommended action. The following scenario has been added to the latest country update.

GOVERNMENT EFFECTIVENESS RISK

The Bolsonaro government weakens democratic institutions

Moderate probability; High impact; Risk intensity=12

The president, Jair Bolsonaro, has previously expressed his support for Brazil's military dictatorship, which ruled the country from 1964 to 1985. His cabinet includes retired and active military officials including the vice-president, Hamilton Mourão, who is a retired general. This raises concerns that he could dismantle Brazil's young democratic institutions. In his victory speech, Mr Bolsonaro said that he would defend the constitution, but a drift towards authoritarianism cannot be ruled out. In April-June 2020 Mr Bolsonaro attended rallies with supporters calling for military intervention and a shutdown of Congress and the Supreme Court. This was mostly bluster, and the president has now quietened down as he seeks an agreement with the political establishment, especially with the centrist parties in Congress to ensure his political survival from an impeachment risk. Nevertheless, voters overwhelmingly support democracy. A vote conducted by Datafolha, a polling institute, in mid-2020 highlighted that 75% of the people view democracy as the best form of government and only 13% preferred military rule. A majority would not acquiesce in the event of an unexpected shift to military rule, and this reduces the probability of such a scenario. In addition, even an unsuccessful attempt to establish authoritarian rule would probably result in widespread social unrest. That said, businesses should monitor political developments and any further anti-establishment discourse from Mr Bolsonaro, which is likely to intensify in the run-up to the 2022 elections.