Relief and doubt were the main sentiments in Brazil – home to a globally-significant renewable energy sector – on Monday after former army captain Jair Bolsonaro was elected to lead the country from January 1 2019 through to the end of 2022.
Relief to the extent that the voting on Sunday put an end to the most polarised and violent presidential campaign since the country returned to democracy in 1985.
Doubts because Bolsonaro has avoided debates and campaigned mostly through social media, reaching his voters directly mainly through hundreds if not thousands of WhatsApp groups, where he used his preferred themes of personal security, the fight against corruption and accusations of moral weakness against his opponents to carry 55% of valid votes in polling yesterday.
A signed, blank cheque – as some media outlets have described his victory – with an obscure far-right programme, in which the fight against communism stands out.
A transition period has already been declared by outgoing centre-right president Michel Temer so, over the next weeks and months, Brazilians and investors will get a clearer picture of what the Bolsonaro administration will look like.
In the renewables industry, the hope is for continuation of current tendering policies under which wind and solar have flourished in the past decade because of falling prices and energy transition policies, but which were based on strong public financing support from the National Development Bank (BNDES).
If nothing else, the hope is that the impetus of these successful policies – which created hundreds of thousands of jobs and built Brazil’s 14GW wind industry into the eighth-largest in the world – will convince incoming policy makers to leave most of regulatory framework untouched.
This could be especially true as the economic team headed by free-market advocate, and controversial banker and investor Paulo Guedes, will focus on untying the knots of what he sees as the loathed government interventionism and “social democratic” economy implemented by the left-of-centre Workers’ Party (PT) since 2002, and earlier by the Brazilian Social Democracy Party (PSDB) in the 1994-2001 period.
Bolsonaro’s energy advisor Luciano de Castro – who holds a PhD from the US’s Iowa university and an engineering degree from Brazil’s prominent military engineering school ITA – spoke little in the few months of the election campaign. But the main message was clear: the new administration would support current reform proposals that would liberalise Brazil’s power sector even further.
Bolsonaro himself has commented on some energy and environmental policies, with the ad hoc approach of someone who has not thought much in detail about anything, except for a far-right, bigoted view of society marked by attacks on minorities and feminists that have seen him accused of libel and incitement to rape.
Bolsonaro himself has built a personal image based more on rhetoric rather than on concrete achievements.
Bolsonaro has enjoyed a meteoric rise in the past couple of years, helped by a deepening political and economic crisis that threw 14 million Brazilians into unemployment, rising violence which killed over 64,000 in 2016 and a deep mistrust of traditional political parties.
But Bolsonaro himself has built a personal image based more on rhetoric rather than on concrete achievements.
A retired army captain who spent the last three decades as a controversial congressman from Rio de Janeiro, he led an obscure career marked by a vociferous and aggressive stance on public security, gun ownership, attacks against minorities, and praising torturers in Brazil’s military dictatorship.
In an attempt to polish off these rough edges, which saw his hard-core supporters dub him “mito” (the legend), he lured support from the business and financial community by promising policies to promote liberalisation, even though this goes against his voting record in Congress in which support for strong, nationalist government stands out.
As his lead was confirmed by polls during the election campaign, and with limited mobility as he recovered from wound from a near-fatal knife attack to the abdomen during the campaign for the first round, Bolsonaro’s house in a plush Rio de Janeiro neighbourhood became a bunker where he held meetings with possible elements of his future cabinet.
With little structure from his PSL party (Social Liberal Party) – which before the election had only one lawmaker in the 594-strong congress – he scoured the private sector and the military to build his cabinet.
The most important visitor for the energy sector was by a group led by André Pepitone, the current president of power regulator Aneel, and Adriano Pires, head of ultra-right and free market energy think-tank Centro Brasileiro de Infraestrutura (CBIE).
On the agenda: liberalisation of power trading, the elimination of all subsidies and of all price controls, Reuters reported.
It was during this period – when he consolidated his lead in the first round on 7 October to the voting this Sunday – that Bolsonaro started to adopt a clearer posture on energy policies, abandoning some of the most radical stances and fleshing out the general outlines in his vague official manifesto.
Below are some of the main points to emerge from Brazil’s media reporting, which have not yet been confirmed or added to by any clear declarations from the candidate or his advisers:
- Bolsonaro says he will keep Brazil in the Paris Agreement, backing away from a previous position, but continues to promise an easing of environmental licensing and to end all “activism”.
- He will no longer privatise power group Eletrobras or state oil firm Petrobras, but will promote the market entry of new players, although subsidiaries will probably be sold.
- He is against local content, which he says is a “source of corruption” – but this probably refers more to the oil sector than the wind and solar industries.
- He is in favour of the continuation of the search for hydro-generation through large dams in the Amazon forest region, where Brazil’s main remaining potential is located
- Bolsonaro and his advisers have said a lot more about natural gas than any other source in power generation – possibly as a base-load generation to combine with wind and solar – promising to do away with Petrobras’ monopoly on the fuel’s distribution.
- Finally, there is the unclear role of BNDES in the Bolsonaro administration. Although, at first, he wanted total deregulation of the banking sector, including sale of most federal-controlled banks, he has backed away from that position. In the case of BNDES he has been quoted as saying he will carry out a deep audit to reveal all the alleged “wrong-doing” and is said to be negotiating BNDES’s presidency with owners of small, private investment banks.
While a free-market in general bodes more profits for investors, the complex requirements of a new industry such as the renewables sector still need to delineated in the coming weeks and months, before investors can have a clear picture of the risks and opportunities of one of world’s largest renewable energy markets. Government policy remains one of the main drivers for renewables in Latin America.
As one player told Recharge: “I am guiding myself by Brazil’s long-term 10-year energy plan.” The PDE-2026 plan as it is known, which is revised annually, indicates wind doubling to 28.5GW and solar PV increasing almost tenfold to 9.6GW by 2026. Bolsonaro’s team will revise the new plan for 2019-2027.
Finally, most probably Bolsonaro will keep things unchanged for renewables in the short term, since he has many other policy focuses and, more importantly, he has to face the challenge of governing a country that is now deeply divided – mostly by his own aggressive rhetoric.
In Dispatches, Recharge journalists offer a personal insight into the issues shaping the development of renewable energy around the world
