Brazil's far-right president-elect eyes close U.S. ties

By Ricardo Brito and Rodrigo Viga Gaier

RIO DE JANEIRO (Reuters) - Jair Bolsonaro, a far-right former Army captain who won Brazil’s presidential election by a comfortable margin, received a supportive call from U.S. President Donald Trump on Monday and began planning trips to Washington and a conservative ally in Chile.

Bolsonaro, who early in his legislative career declared he was “in favour” of dictatorships and demanded that Congress be disbanded, has vowed to adhere to democratic principles while holding up a copy of the country’s Constitution.

Trump said he had an “excellent call” congratulating Bolsonaro and tweeted about their plans to “work closely together on trade, military and everything else!”

Investors were quick to cheer Bolsonaro’s victory, sending Brazil’s benchmark Bovespa stock index <.BVSP> to an all-time high in early trading before turning negative as traders booked profits following a sharp rally this month.

Markets had surged on Bolsonaro’s ascent, as he pledged to quickly close Brazil’s gaping budget deficit and privatise state firms. But investors said further gains will hinge on clearer signs he will deliver on a market-friendly agenda.

His election alarmed critics around the globe, however, given his defence of Brazil’s 1964-1985 military dictatorship, vows to sweep away leftist political opponents and a track record of denigrating comments about gays, women and minorities.

Bolsonaro’s victory brings Brazil’s military back into the political limelight after it spent three decades in the barracks following the country’s return to civilian rule. Several retired generals will serve as ministers and close advisers.

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“You are all my witnesses that this government will defend the constitution, of liberty and of God,” Bolsonaro said in a Facebook live video in his first comments after his victory.

The president-elect’s future chief of staff told Reuters his first international trip would be to Chile — one of the South American neighbours that swung to the right in recent elections — and soon after that he hoped to visit the United States.

An outspoken Trump admirer, Bolsonaro also vowed to realign Brazil with more advanced economies, such as the United States, overhauling diplomatic priorities after nearly a decade and a half of leftist rule.

CLOSER U.S. TIES

The 63-year-old former paratrooper joins a list of populist, right-wing figures to win elections in recent years that include Trump, Philippine President Rodrigo Duterte and Hungarian Prime Minister Viktor Orban.

Trump’s friendly call augurs closer political ties between the two largest economies in the Americas - both now led by conservative populists promising to overturn the political establishment.

In a telephone call on Monday with U.S. Secretary of State Mike Pompeo, Bolsonaro discussed collaboration on priority foreign policy issues, including Venezuela, tackling transnational crime and ways to strengthen economic ties.

Bolsonaro has vowed to turn up pressure on Venezuela’s authoritarian leftist government to hold free elections that could stem the flow of refugees into neighbouring Brazil and Colombia, also governed by a conservative president.

Mauricio Santoro, a political scientist with Rio de Janeiro State University, said he was concerned that Brazil would not soon dispel the tense and occasionally violent atmosphere that enveloped the polarizing campaign.

“It’s possible that even with his win, we could see a further wave of violence among Bolsonaro’s supporters against those who backed his opponent,” Santoro said.

Bolsonaro supporters carried out physical attacks and organised campaigns of online harassment in the run-up to Sunday’s vote, targeting journalists in particular, according to a tally kept by Abraji, an investigative journalism group.

Bolsonaro himself was stabbed in the abdomen at a rally last month and will need to undergo surgery in mid-December to remove a colostomy bag before he can travel to Santiago and Washington.

EASY WIN

Bolsonaro won 55 percent of votes in a run-off election against left-wing hopeful Fernando Haddad of the Workers Party (PT), who got 45 percent, according to electoral authority TSE.

The fiery lawmaker’s rise has been propelled by rejection of the leftist PT that ran Brazil for 13 of the last 15 years and was ousted two years ago in the midst of a deep recession and political graft scandal.

Thousands of Bolsonaro supporters cheered and set off fireworks outside his home in Rio de Janeiro’s beachfront Barra de Tijuca neighbourhood as his victory was announced.

“I don’t idolize Bolsonaro and I don’t know if he will govern well, but we are hopeful. People want the PT out, they can’t take any more corruption,” said Tatiana Cunha, a 39-year-old systems analyst during the noisy celebrations.

Investors have been hopeful that Bolsonaro would carry out fiscal reforms proposed by his orthodox economic guru, Paulo Guedes.

Brazil’s benchmark Bovespa stock index <.BVSP> rose as much as 3 percent to an all-time high in opening trade, led higher by shares of state-owned firms and blue-chips, before retreating and closing 2.2 percent down.

Brazil’s currency, the real , has gained around 10 percent against the dollar this month and interest rate futures have tightened dramatically as Bolsonaro’s prospects improved.

Investors have been particularly heartened by Bolsonaro’s choice of Guedes, a Chicago University-trained economist and investment banker, as future economy minister.

Guedes, who wants to privatise an array of state firms, said on Sunday the new government will try to erase Brazil’s budget deficit within a year, simplify and reduce taxes, and create 10 million jobs by cutting payroll taxes. New rules will boost investment in infrastructure, he told reporters.

Still, Fitch Ratings on Monday highlighted the “deep fiscal challenges” confronting Bolsonaro’s team, as weak growth and a huge budget deficit leave little room to manoeuvre.

“The exact details of how his administration plans to achieve (its) objectives are limited,” wrote Fitch analysts led by Shelly Shetty. “The lack of fiscal space, a high unemployment rate and a sluggish economic recovery will also likely limit economic policy options.”

Onyx Lorenzoni, a fellow congressman whom Bolsonaro has tapped as chief of staff, told journalists that Guedes would be responsible for structuring the government’s relationship with an independent, autonomous central bank with targets.

Asked about Brazil’s currency, Lorenzoni said Bolsonaro would offer businesses more predictability, but ruled out an exchange rate target. Lorenzoni reiterated his view that efforts to reform Brazil’s pension system should wait until next year.

In a separate interview with Reuters, he said the president-elect would meet with Guedes and other members of his team on Tuesday. He will oversee the transition from Rio this week and fly to the capital Brasilia next week, Lorenzoni added.

In parallel, representatives for Bolsonaro will begin meeting with President Michel Temer’s team to start work ahead of the Jan. 1 inauguration.

Retired General Augusto Heleno, slated to become defence minister, told reporters that Bolsonaro has a positive view of a planned $4.75 billion joint venture between Boeing Co and Brazilian planemaker Embraer SA . He said the Temer government may approve the deal before leaving.

(Reporting by Ricardo Brito in Rio de Janeiro and Anthony Boadle in Brasilia; Additional reporting by Gabriel Stargardter and Rodrigo Viga Gaier in Rio de Janeiro, Brad Brooks in Sao Paulo and Jake Spring in Brasilia; Editing by Neil Fullick, Alistair Bell and Bill Berkrot)

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