Brazil elections: Rousseff and Neves vie for Brazil’s top position
The upcoming election for the Brazilian presidency is tight, pitting center-right Aecio Neves against incumbent Workers’ Party President Dilma Rousseff. The results could have major consequences for Brazil’s internal market, as well as its position in international politics.
On October 26, 150 million voters will cast their second round ballots to determine the next president of Brazil. The current president, Workers’ Party leader Dilma Rousseff, is in a tight contest against center-right Brazilian Social Democracy Party (PTSB) candidate Aecio Neves. Five of the past six public opinion polls have put the candidates within three points of each other, with the last two polls (one from Datafohla, the other from Ibote) placing Neves at 45%, Rousseff at 43%, and 6% undecided (the remainder intend to vote for “none”).
The Neves campaign received a significant boost when Marina Silva, the 3rd place candidate in the first round of voting, pledged both her personal support and that of her party, the Brazilian Socialist Party, which, despite the name, is a relatively centrist political player in Brazilian electoral politics.
Both international and domestic markets have expressed a strong preference for a Neves presidency. The Ibovespa, Brazil’s market index, rose nearly 5% when the first round election results indicated that Neves would move on to the second round of voting. Most polls and analysts had predicted the race would ultimately be between Rousseff and Silva.
Markets in recent days have rallied, likely as a result of polls showing Neves with a decisive chance of winning next Sunday. He is generally perceived as a market-friendly candidate, as well as one who desires warmer ties with the United States and the Pacific Alliance (Peru, Chile, Colombia and Mexico). His governorship of the state of Minas Gerais was marked by significant reform efforts in government, including a “management shock” that was focused on reducing corruption in the civil service.
In addition, one of his closest advisors (and likely future finance minister), Arminio Fraga, is a well-respected Brazilian-U.S. dual citizen, receiving wide accolades for his handling of Brazilian monetary policy in his previous bank president position from 1999 to 2002. Both are generally viewed as reform-oriented, market-friendly, and eager to promote Brazilian growth through international trade.
The past four years under President Rousseff have seen a slide in the economic performance of Brazil, in part due to a broader lag in the wider Latin American economy, and in part due to specific macroeconomic policies pursued by the Rousseff administration that have discouraged investment and investors. Inflation is a particularly worrying concern. The inflation rate in September rose 0.24% from August’s rate to hit a three-year high of 6.75%. Aside from Russia, whose sanctions have created a significant economic hole, Brazil has become the weakest performing of the BRICS countries.
Corruption has gained a significant position in Brazil’s public debates. The most recent is the Petrobras scandal, where several high-level Brazilian public officials have been implicated in a bribery scheme to provide permits and tax advantages to the major oil producer, which is Brazil’s largest company. Members from all major parties have been implicated, including the former leader of Silva’s PSB Eduardo Campos, whose death in a plane crash in August led to the elevation of Silva as the party candidate.
However, attention has focused on the Workers Party and Rousseff’s administration officials, and Neves’ candidacy has focused extensively on the notions of rooting out corruption and promoting “change” at the higher echelons of Brazilian power.
A Neves presidency has the potential to reach much wider implications beyond Brazil’s internal market and monetary situations. Should Neves be elected, it is likely that he will seek to reorient Brazilian economic policy more towards the United States, in all likelihood at the expense of the less-than-market-friendly economies of Latin America, notably Venezuela, Bolivia, and Cuba.
In a first round debate, Neves emphasized that he wanted to shift from Brazil’s controversial relationships with Latin American countries towards strengthening relations with the United States, the European Union, and China.
Brazil may begin to explore more bilateral free trade agreements – Neves has already signaled he would like to engage more fully with the stalled Brazil-EU trade agreement – as well as shift away from its current BRICS orientation. Both Neves and Silva have strongly argued that this attention to BRICS countries has deprived Brazil’s growing middle class of significant market access to major OECD economies.
In a first round debate, Silva supported a shift from focusing on BRICS countries towards the Pacific Alliance countries that have generally pursued neo-liberal policy reform-Mexico, Chile, Colombia, and Peru. This would likely be Neves’ strategy, as well.
A shift to the right would mark a significant crack in the populist wall much of South America has erected over the past decade, and could herald future shifts away from the populism in other Latin American countries, notably Argentina and Uruguay. However, it is not necessarily the case that Rousseff’s re-election would preclude all of these developments: Brazil’s inflation rate is unsustainably high, and currency swaps pursued by the Rousseff government have been roundly criticized for not being effective.
Additionally, the lack of growth in Brazil’s economy could lead to an increase in unemployment, which up to this point has been one of the success stories of the Brazilian economy. If unemployment increases under a Rousseff second term, it is likely that the Rousseff administration will undertake reform efforts to protect employment. Absent a change in power at the top, this is the only significant development that could alter Brazil’s ongoing economies policies.