BWorld 281, Trump and Bolsonaro vs Xi and Duterte

* This is my article in BusinessWorld on January 4, 2019.

“I stand before the whole nation on a day when people begin to free themselves from socialism, from the inversion of values, from state gigantism and from the politically correct.”

— Jair Bolsonaro, Brazil

President Inauguration Speech, Jan. 2, 2019

When Donald Trump became US President, the US has among the highest corporate income tax (CIT) in the industrialized world at 35% plus other federal and state business taxes. So among his first major projects was to cut it to 21% and move the US away from a high tax, near-socialistic economy.

Trump also exited the Paris Agreement which is a huge global ecological central planning and wealth redistribution scheme that will transfer an initial $100 billion a year starting 2020, money coming from taxpayers of the industrialized world to developing countries. He also freed up various restrictions to oil and gas exploration and extraction and this contributed to a big jump in US oil production from 8.8 million barrels per day (mbpd) at end-2016 to 11.7 mbpd in end-2018, and this contributed to current low world oil prices.

The new Brazil President inherited an economy ran by the socialist-leaning Workers’ Party for 13 years. That is why he made an explicit anti-socialist, anti-bureaucratic government electoral campaign and he won. In his inaugural speech, he noted that “The government machine is really heavy… There are hundreds of bureaucratic governing bodies across Brazil, of regulators as well….We have to untangle the mess.”

Like Trump, he justified and will implement his campaign promise to free up gun possession, rightly arguing that “Good citizens deserve the means to defend themselves.” He also hinted that Brazil will exit from the Paris Agreement. So Bolsonaro is now Trump’s closest ally in South America.

Bolsonaro also appointed an economics team led by former investment banker Paulo Guedes known for their adherence to free and open markets. Guedes plans to privatize as many state companies as possible that will raise up to 1 trillion reais ($257 billion), significantly reduce the budget deficit and public debt without creating new taxes or raising existing ones.

Across the West Philippine Sea (WPS), the top leader of the China Communist Party, President Xi Jinping has explicitly reiterated that he will have no tolerance for Taiwan independence — and by extension, Hong Kong, Macau, Tibet, Uighur region, independence.

Currently the main “Yes man” of the China communist dictatorship in Asia is Philippine President Rodrigo Duterte. He never used the ruling by the Permanent Court of Arbitration (PCA) which declared that China’s claim of control and ownership of Philippine territories within the “nine-dash line” has no legal basis. Japan’s Abe, UK’s May, Australia’s Morrison and US’ Trump use and enforce the PCA ruling by sending their battle ships and aircraft carriers in the area under their freedom of navigation operations (FONOPs) of international waters.

Like his beloved communist dictatorship across the sea, Duterte extended the Mindanao-wide Martial Law for another year, raised many taxes under the TRAIN law to get more money from the citizens, also pay many new loans from China in the future.

This new and explicit friendship in public policy, Trump and Bolsonaro vs Xi and Duterte, will have a big impact on geopolitics and global business in the next few years. The former alliance though is much richer than the latter (see table).

One of the 29 agreements of the Xi-Duterte alliance is the “Safe Philippines Project,” a video surveillance system using 12,000 closed-circuit TV cameras initially in Metro Manila and Davao City with a $337-million (P17.9 billion at P53/$) loan from China.

Sen. Ralph Recto has expressed concern about this during the budget hearing last December. The contractor, China International Telecommunication Construction Corp. (CITCC), is an affiliate of state-owned China Telecommunications. The equipment supplier is Huawei, a firm blacklisted in several countries wary of hacking and spying.

Senator Recto rightly feared that China’s police state will indirectly have access to surveillance data by the PNP and LGUs, and Philippine taxpayers will pay for it. Senator Legarda defended the project that aims to “reduce crime by 15% and improve response time by 25%.” Notice that this is a technology project signed by the DILG but with no prior knowledge or consultation with the DICT.

This project, along with many other Xi-Duterte signed agreements, is dangerous for the Philippines: (1) It gives China indirect access to big surveillance data, and (2) it will prod Duterte to extract more taxes from Philippine taxpayers to pay China.

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See also: 

BWorld 278, Top 10 economic news of 2018, January 15, 2019 

BWorld 279, Top 10 energy news of 2018, January 16, 2019 

BWorld 280, Provinces and New Year wishes for them, January 17, 2019