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Possible successors to embattled Brazilian Economy Minister Paulo Guedes are already being proposed to President Jair Bolsonaro, economic advisors and members of Congress told MNI, pointing to Regional Development Minister Rogerio Marinho and central bank President Roberto Campos Neto as lead candidates.

Whilst Campos Neto is seen as the most market-friendly potential replacement should Guedes, whose resistence to expanding a social programme has irritated the president, be ousted, Marinho has more political backing, they said.

A member of the centre-right PSDB party who was responsible for labour reform under the government of former President Michel Temer, Marinho was appointed special special secretary for social security and labour by Bolsonaro and spearheaded a pension reform approved last year. Formerly a close ally of his then-boss Guedes, he switched to a stance more in favour of boosting public investment at the beginning of this year and was promoted to minister, focusing on construction of basic sanitation infrastructure and housing.

Marinho, who also served as a member of the federal congress for the northeastern region of Rio Grande do Norte, Brazil's poorest, until failing to win reelection in 2018, and who plans a bid to head the regional government in 2022, has broad support among legislators. But he is less popular among economy ministry technocrats.

Like investors who spoke to MNI, the technocrats prefer Campos Neto, an economist who spent 18 years at Banco Santander and has defended the central bank's autonomy since being appointed to run it in 2019.

CRITICISM OF GUEDES

For the moment, Guedes, whose plans to privatise many of Brazil's 200 state-owned companies and for administrative and tax reforms are popular with financial markets, remains in office. But doubts over how long he will stay there surged on Wednesday when he came in for public criticism from Bolsonaro over his reluctance to implement the president's plans to boost transfers to poorer Brazilians.

Bolsonaro's Renda Brasil programme would replace the existing Bolsa Familia allowance made to 14 million low-income families, roughly doubling monthly payments as well as extending it to an additional six million recipients. But, while Bolsanaro wants to pay families about USD53 a month, Guedes says the most that could be afforded is USD44. The economy minister also proposed withdrawing a salary allowance made to 12 million people who earn no more than double the minimum wage, prompting a rebuke from Bolsanaro, who said he would refuse to send it to Congress and that he "cannot take from the poor to give to the poorest."

"It is an unsolvable problem. Guedes cannot deliver what the government wants,"economist Jose Luis Oreiro, a professor at the University of Brasília, told MNI.

MNI London Bureau | +44 203-865-3829 | jason.webb@marketnews.com
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MNI London Bureau | +44 203-865-3829 | jason.webb@marketnews.com
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