Brazil elections: Why the left has already won

Brazil elections: Why the left has already won

Whoever wins the Brazilian presidential elections will have to accommodate a powerful legislature dominated by left of center parties, opposed to macroeconomic adjustment and proposals to attract foreign investment. Although the incumbent Worker’s Party lost seats in the legislature, the left is still in power.

On the surface, Brazil’s incumbent PT (Worker’s Party) is against the ropes. They lost 18 seats in the lower legislative chamber and their presidential candidate, Dilma Rousseff, is head to head in the polls with the business-friendlier presidential candidate Aecio Neves (PSDB, or social democratic party).

Many are hopeful that Neves will win the upcoming runoff elections on October 26. Mr. Neves has pledged to address Brazil’s macroeconomic imbalances with IMF-approved orthodox policies as well as emphasize better business conditions for both local and international companies.

Despite the recent optimism surrounding the Neves campaign, there remain three tall political hurdles to overcome to create a more stable investment environment.

First, Neves will have to face a constitutionally powerful Brazilian legislature dominated by left of center interests as well as leftist governors in strategic departments that would oppose business reform at the state level.

Second, if he wins, he will also have to govern with a coalition involving leftist interests, which would restrain any effort to implement a business-oriented development trajectory.

Finally, Neves has received the full endorsement of the Brazilian Socialist Party (PSB), which comes with strings attached. The PSB approval ties Neves’ hands and forces his party to continue focusing on social programs rather than prioritizing the investment climate.

It should also be noted that although the Social Democrats are business-friendlier than the Worker’s party, they still prioritize improving Brazil’s social reality over concentrating on the ease of doing business in Brazil.

Legislative makeup

The bicameral Brazilian legislature is composed of the Chamber of Deputies, whose members are elected by proportional representation, and the Federal Senate, whose members are elected by a “first past the post” plurality system. Following the recent October 5 elections, both chambers are dominated by a wide combination of left of center parties, many of which will cement an ideological opposition to any macroeconomic adjustment proposal by the national executive branch.

The constitutionally powerful Brazilian Federal Senate’s role in creating fiscal policy and oversight capacity could also block economic liberalization measures. Article 52 of the Brazilian Constitution of 1988, for example, charges the Federal Senate with approving foreign financial transactions, including those that involve states and municipalities as well as establishing limits for the total public debt.

Chamber of Deputies

*Only includes parties that are definitely associated as right of center or left of center. Some parties, such as the Party of National Mobilization, were unaccounted. There are 513 total seats in the lower chamber.

Federal Senate

*Only includes parties that are definitely associated as right of center or left of center. Some parties, such as the Party of National Mobilization, were unaccounted. There are 81 total seats in the lower chamber.

The figures above demonstrate that left of center parties still dominate both chambers. This includes the Brazilian Democratic Movement Party (PMDB), a large centrist party that has shifted decisively to the left during the Luiz Inácio Lula da Silva years. The PMDB endorses Rousseff and constitutes the largest and therefore indispensable part of the incumbent coalition. Although the PT lost seats in both chambers, its incumbent coalition with PMDB and several other Lulista parties – parties that threw their support behind former PT president Lula – have secured an absolute majority in parliament.

A Neves presidency would break the mentioned incumbent coalition and would require Neves to court many of the former block of Lulista parties, most of which do not share the PSDB’s business-oriented platform. A Neves cabinet built on multi-party consensus would surely include at least a partial hesitance for any type of economic liberalization.

Building a cooperative relationship between Brasilia and individual departments

The constitution of 1988 created popularly elected governors with a certain degree of fiscal and political autonomy. Neves himself was a governor of Minas Gerais and his political credibility derives from his success as an executive. As president, Neves would have to create a collaborative environment between the office of the president and the departmental governments. This might be difficult in left-leaning and social program-dependent northern states such as Maranhão, which was won by the Communist party.

The PSDB also had trouble in the southeast, their traditional base of support. Minas Gerais, for example, was won by the PT in the first round. It seems that the PMDB will control Rio de Janeiro, with a 20% lead over the second-place candidate in the first round. These two governors hold influence because of the economic capacity of their departments – Minas Gerais and Rio de Janeiro departments account for 20% of Brazil’s GDP.

It cannot be ignored that highly strategic states  with high productive capacity are controlled by the incumbent PT/PMDB-led coalition. With this said, Neves will have to adapt and build consensus with governors on investment and trade-related reform rather than strongarm opposing departmental governments.

A crowded legislature

There are 32 registered parties in Brazil, and 28 of these have representation in the lower chamber — four more than in the 2010 elections. If Neves wins the presidency, he will have to sway some of these smaller parties to join the PSDB government, which will almost surely involve concessions and important cabinet positions.

Whatever happens, it is not expected for macroeconomic adjustment to occur immediately because Neves will be hindered by a crowded Senate and lower house dominated by small left of center parties, a relationship with the Socialist Party that will drive the PSDB agenda to the left, and possibly uncooperative governors in the north of the country. The first round of elections demonstrates that the road is not easy for either of the two large parties. This time around, it is the smaller parties that have the power in forming the government.

Categories: Latin America, Politics

About Author

Daniel Lemaitre

Daniel is a GRI Senior Analyst. He has worked in policy research centered on the political economy of the Andean region in the public, NGO, and private sectors. Daniel holds an MSc in Comparative Political Economy from the London School of Economics, concentrating on Latin American markets.