Moderates on both sides see a chance to draw a line, and start fixing deep-seated problems
BRAZIL’S CHIEF JUSTICE, Luís Roberto Barroso, did not receive an official notice when his American visa and those of his children were apparently revoked on July 18th. Like most of his colleagues on Brazil’s Federal Supreme Court, he learned the news from an online post by Marco Rubio, America’s secretary of state, who cited the court’s “persecution” of Brazil’s hard-right former president, Jair Bolsonaro.
Sitting in his vast office, Mr Barroso looks emotionally exhausted as he recalls how his son had to leave his career in America and return home. The room is sparsely furnished with just a few tables and black leather chairs. It has not been fully refurbished since it was trashed by a horde of Mr Bò supporters on January 8th 2023, in an insurrection that shocked the country, mirroring what had happened two years before in Washington, DC. On August 26th Brazil’s president, Luiz Inácio Lula da Silva, said his justice minister’s visa had also been revoked.
The visa bans are part of an astonishing attempt by Donald Trump to shield his friend and ideological ally, Mr Bolsonaro, from prosecution. On September 2nd the former president goes on trial on charges that he attempted a coup in order to remain in power after losing his re-election bid in 2022. He denies the charges, but there is a widespread expectation that he will be found guilty.
It is an extraordinary moment for Brazil. In a country with a long history of military dictatorships, it is the first time that anyone has been tried for plotting a coup. But it is also an unprecedented moment globally. America is using tariffs, sanctions and visa bans in its attempt to force a democracy to subvert its justice system.
On July 9th ministers were in a cabinet meeting when Mr Trump published a letter online announcing tariffs of 50% on Brazilian imports, citing a “Witch Hunt that should end IMMEDIATELY!” “At first, we thought it was fake,” says one minister. “We are living in a moment of irrationality,” he exclaims, throwing up his hands. Mr Trump followed up by imposing sanctions, under the Global Magnitsky Act, on Alexandre de Moraes, the supreme-court judge who has led the prosecution of Mr Bolsonaro. Such measures, usually reserved for genocidal generals, mean being frozen out of America’s banking system.
As we lay out in our investigation· this week, Mr Bolsonaro supercharged Brazil’s polarisation and strained the sinews of its democracy. Yet unlike other countries where illiberal populism has emerged, such as the United States, Hungary or Turkey, Brazil’s institutions, notably its supreme court, did not remain supine.
And now, though there is a possibility that Mr Bolsonaro’s supporters could rally around a new figure on the hard right, there are signs that Brazil is tiring of him and his family, and that Brazilians are weary after a decade of political upheaval. If he is found guilty, the country, divided though it is, could put the worst of the polarisation behind it. There is a growing consensus across the political spectrum of the need to restore the balance of power between the branches of government and to tackle Brazil’s economic weaknesses. If Brazil can find a path towards this destination, it will not only save itself another decade of strife, but perhaps show a way out of populism for others to follow.
Whether this is possible depends on how the country’s politicians, who are gearing up for a general election next year, respond to whatever judgment is handed down to the former president, and on whether they have the courage to argue for serious constitutional reform.
Trials and tribulations
If convicted, Mr Bolsonaro and seven others (who also deny the charges) face decades in prison on charges of masterminding the coup plot. Another 25 face lesser charges. More than 1,200 Brazilians have already been tried or entered plea bargains for taking part in the insurrection.
As the pre-trial investigations have progressed, Mr Bolsonaro has tried to enlist the help of allies. Last year he spent two nights at the Hungarian embassy, fuelling speculation that he might try to flee. On August 20th police found a draft letter to President Javier Milei of Argentina on his phone, in which he requested political asylum (it is not clear whether it was sent).
He has also turned to his sons. In March the most politically gifted of the four, Eduardo, took leave from his job as a congressman in Brazil and moved to Texas to lobby his friends in the MAGA movement to sanction Mr Moraes. On August 11th Scott Bessent, America’s treasury secretary, abruptly cancelled a virtual meeting with Fernando Haddad, Brazil’s finance minister
Instead he met Eduardo, who warned that Brazilian banks were not complying with sanctions on Mr Moraes.
Eduardo’s pleas have resonated with Mr Trump, who sees Mr Bolsonaro as his tropical mirror image. Both were victims of assassination attempts. After losing their respective re-election bids, both are accused of inciting their followers to riot, which they deny. If Mr Bolsonaro is convicted, he will be held to account in a way that Mr Trump was not after his supporters stormed the Capitol on January 6th 2021.
Mr Trump has little patience for Lula, as Brazil’s current left-wing president is known. In Brasília officials huff that Mr Trump has closed all doors to them. The American president sees Mr Bolsonaro as having helped spread his flavour of populist nationalism abroad, and he sees Brazil as a large economy that he can bully without serious consequences, unlike China or Mexico. The tariffs have backfired. Lula is portraying himself as the defender of Brazil’s sovereignty (though officials remain keen to seal a trade deal). This has lifted his flagging approval ratings and put him in the lead ahead of next year’s election.
Escalation is a risk. Bolsonaristas in Congress want to pass an amnesty for those who participated in the January 8th insurrection. Dozens of senators are also trying to impeach Mr Moraes.
Barred from competing in next year’s general election, Mr Bolsonaro may anoint one of his sons or his wife, Michelle, to run. If he backs one of Brazil’s more moderate right-wing governors, they will probably have to promise to pardon him if they win. Right-wing parties could sweep Congress and pursue the impeachment of Mr Moraes. It is easy to imagine Brazil falling further into dark polarisation, and Mr Trump ratcheting up the fight.
However a different outcome seems more likely. After Mr Bolsonaro’s trial, temperatures may cool. Fully 69% of voters say Eduardo is defending his family’s interests rather than Brazil’s. A majority supported Mr Moraes’s recent decision to put Mr Bolsonaro under house arrest and are against an amnesty for the rioters (see chart 1). The former president’s actions have focused the minds of those who know that Brazil needs to step back from the extremes. Though in public they seek his blessing, in interviews two right-wing governors who want to run for president distanced themselves from Mr Bolsonaro.
Courting trouble
Three crucial areas need reform: Congress, the economy and, especially, the supreme court. Unlike its counterparts elsewhere, the court combines three functions: it is the chamber of last instance for appeals; it rules on all matters related to the constitution; and it rules in criminal cases against politicians. Because of scandals in the past decade, it has become more visible in politics. After a massive corruption scheme was uncovered in 2014, the court sent dozens of politicians, including Lula, to jail (and then overturned his conviction on technicalities). Now it is dealing with Mr Bolsonaro. Many Brazilians, on all sides, have come to believe that the court meddles too much in politics.
It has such unusual powers because of the constitution of 1988. One of the world’s longest, it was written in the shadow of a two-decade military dictatorship and seeks to avoid men with guns ever ripping people’s rights away again. It does so by giving Brazilians a large number of rights and the government a slew of obligations.
In most countries, cases reach the top court only after filtering up from lower bodies. But in Brazil the constitution allows the president, state governors, bar association, trade unions and political parties to file lawsuits directly with the court. This has created a heavy caseload. It issued more than 114,000 rulings last year.
To handle this, judges are allowed to make decisions unilaterally. This has turned individual judges into stars. The court even has its own TikTok account, and livestreams decisions on YouTube. “Some people say we are even more famous than the national football team,” quips Gilmar Mendes, one of the justices. “I don’t see that as a good thing.”
As a result the court, not the legislature, “decides all important issues in the country: ethical, economic, political,” says Mr Barroso. There are pros and cons to having such a powerful court, he notes. But, in a country that had a tradition of coups d’état since the beginning of the republic in 1889, “We have now had 40 years of democracy and institutional stability.”
Mr Bolsonaro’s reign of intimidation led the court to give itself even more powers. His followers harassed the justices online and sent them death threats. In response, the court allowed itself to open investigations into online threats against itself, an unusual move that turned it into victim, prosecutor and judge all at once. Mr Moraes was put in charge of the probe, which became known as the “fake-news inquiry”. He has carried out his mission with unnerving zeal. Last year he shut down X, Elon Musk’s social-media platform, for more than a month in Brazil and threatened to fine anyone who tried to use it.
The probe remains sealed—it is now overseen mostly by federal police and the public prosecutor—and has crept into its sixth year with no end in sight. It is unclear how many accounts Mr Moraes has ordered to be taken down and why. He has been accused of overreaching, for instance by ordering accounts, not just specific posts, to be blocked.
Criticisms of the court are ten a penny from Mr Bolsonaro’s supporters. More striking, though, is that moderates are also now complaining. Many say it is possible for the court to have saved democracy, but for it also to be too powerful. “The court acted initially to defend democracy,” says one right-wing presidential hopeful. “But I think there’s been exaggeration in some cases.” One centre-left political analyst says, “Moraes has a heavy hand. The error is in the dose, not the prescription.”
Some scholars worry that a strong court is sapping faith in politics. When most political matters end up decided by the court, why vote? Others grumble about the judges being unelected rulers, and using their ability to try politicians as a cudgel to determine policy. Even the supreme court’s own judges think it does too much. “Here in the court, we all talk about the excessive judicialisation of politics,” says Mr Mendes. One proposal to rein in the court’s power would make it harder for politicians to petition. Another would limit its jurisdiction over criminal cases involving politicians, letting lower courts rule.
Putting the house in order
The second institution that needs reform is Congress, which has become easier to capture in the past decade. This happened not just under Mr Bolsonaro, but also Dilma Rousseff, a left-wing predecessor, and Michel Temer, a centre-right one. Congress, when faced with a weak president it did not like, gave itself more control over the federal budget, and used this power to splurge on its own pet projects. Successive presidents protected themselves by conceding such powers. Today, Congress directly controls around a quarter of discretionary spending in the federal budget, compared with 1% in the United States. This has made Brazil harder to govern.
Leaders on the right and left agree that congressional power must be trimmed. Congress has hijacked the federal budget, says the right-wing presidential hopeful. “They took all the power…but none of the responsibility.” Mr Haddad, the finance minister, fumes that parliament’s parochial interests make it harder for him to balance the books. Reining in Congress will require a more vigorous president with strong lieutenants in the legislature and even constitutional reform, a big challenge given that Congress itself would need to vote for it.
The third issue that badly needs reform is Brazil’s creaking economic model, which promotes cronyism and hampers growth, leaving many voters disenchanted with politics. These woes cannot be blamed on Mr Trump’s tariffs. Exports are equivalent to less than a fifth of GDP, compared with 90% in open economies such as Vietnam. Just 13% of exports go to the United States. And businesses with contacts in Washington have secured exemptions on 700 products, from planes to orange juice. Markets have therefore shrugged at the tariffs. Goldman Sachs, a bank, has not changed its growth forecast for Brazil this year
nstead, Brazil’s economic wounds are self-inflicted. Tax exemptions total 7% of GDP, up from 2% in 2003 (see chart 2). Dozens of sectors receive tax breaks or credit subsidies on the basis that they are national champions, or from “temporary” help that has never ended. Brazil’s courts cost 1.3% of GDP, making them the second-most expensive in the world, with much of that going on cushy pensions and perks. Some $15bn a year, or 78% of the military budget, is spent on pensions and salaries. The United States spends just one-quarter of the defence budget on personnel.
Even the beneficiaries of these perks admit this is unwise. “I have no doubt that for the Brazilian private sector it would be better to give up short-term benefits in exchange for a thriving country in the long run”, says Beto Abreu, the boss of Suzano, the world’s largest cellulose producer.
Yet perhaps the biggest reason spending is high is that the constitution requires it. The charter mandates an extraordinary 90% of all federal spending. Notably it ties most public pensions to wage growth, and requires health and education spending to rise in line with revenue growth. If Brazil were to end most tax exemptions and undo these two policies, its debt-to-GDP ratio, which is already above 90%, would be almost 20 percentage points lower by 2034 than it would be without any reform, reckons the IMF. To deal with all this, what is really needed is to amend the constitution.
High spending and a tangle of subsidised credit schemes also reduce the effectiveness of monetary policy. That means the central bank must increase rates even higher to control inflation. Brazil’s real interest rate of 10% is among the highest in the world. Such rates cripple investment and drag down growth, while well-connected businessmen can get their hands on artificially cheap rates.
Among those who must pay the full rate is the government itself. It is thus stuck in a cycle: it issues debt to finance high spending, and must then pay eye-watering interest payments. The government spent 30% of revenue in 2023 on interest payments. This makes it harder to afford spending that could boost productivity, such as education and infrastructure.
Tackling these problems would help unlock growth in Brazil, which has lagged behind almost all other major developing economies in the past two decades, including those of China, India, Indonesia and Turkey. Growth, in turn, would make it easier to escape the calculus of zero-sum politics, since rising prosperity dulls the appeal of the politics of grievance.
The prerequisite for such changes is pragmatic politics. To amend the constitution in order to rein in the power of the supreme court, the profligacy of Congress and the vast mandatory spending requires a three-fifths majority in both legislative houses. That is daunting, but possible. In 2023 Lula’s government passed a tax reform through a constitutional change. Brazil’s constitution has been amended over 140 times since 1988. The trouble is that those amendments often just tweak policy. Bolder reforms that excise some of the endless policy prescriptions from the constitution would reduce the court’s power and make cutting spending easier
Brazil’s political landscape has been in disarray for much of the past decade. Intense polarisation has made it harder to pass reforms. Mr Bolsonaro’s removal from public life could give the country a chance to tackle these problems. It will take boldness, vision and compromise. But politicians on both sides appear ready to try. ■
ECONOMIST
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