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Potential political change as Brazilian presidential election nears

Potential political change as Brazilian presidential election nears

As the Brazilian presidential election nears on October 5, Marina Silva’s challenge of incumbent Dilma Rousseff, though fading, remains credible. However, if none of the candidates obtains more than 50% of the valid votes in the elections – which are regarded as the most competitive since the 1980s – a second round of voting will be held on October 26th.

Incumbent President Dilma Rousseff of the Workers Party (PT), who until mid-August was favored to win, was tied in an August opinion poll with Marina Silva of the Brazilian Socialist Party (PSB) – raising the possibility of a second vote and a new government under Silva. The results of an August opinion poll show that Silva would beat Rousseff by 4 percentage points – 47% against 43% – in a second round of voting. However, Rousseff’s fortunes appear to be changing for the better closer to the elections.

Minas Gerais Senator Aécio Neves of the Brazilian Social Democracy Party (PSDB), formerly Roussseff’s closest rival, is now running third in the race for President.

Campaigning on a platform of “political renewal”, Silva emerged from the shadows as the favorite on the back of her business-friendly and liberal policies, which have helped her win the support of the markets and the votes of Brazil’s rising middle class.

Silva is a former environment minister in the previous Luiz Inacio Lula da Silva administration, and an internationally acclaimed green activist. She was the running mate of the late Eduardo Campos of the PSB who was killed in a plane crash in August and was subsequently anointed his successor.

Her personal story is also resonating well with voters. She was born in a poor rubber tappers’ community in the Amazon and overcame illiteracy and sickness – which combined with her green activist credentials – all contribute to her growing popularity.

She is also leveraging the fact that she does not belong to the PT or the PSDB – which have dominated the country’s politics over the last two decades – and is therefore a viable alternative who can initiate change.

Although her rise to Presidential hopeful is more recent, Silva is not a newcomer to the Presidential race. In 2010, she ran for President under the banner of the Green Party and secured 19 million votes, forcing the race into a second round.

She subsequently established the Sustainability Network Party which was not officially recognized for failing to acquire the 500,000 signatures necessary for recognition. This failure led her to join the PSB as Campos’ vice-presidential running mate.

Arguably, Brazil’s economic slowdown under Rousseff is perhaps the leading cause for her declining popularity – fuelling support for change in South America’s largest economy. When Rousseff first assumed office in 2010, the Brazilian economy was growing at a staggering pace of 7.5% per annum, largely driven by the China-induced boom in commodity prices. However, the fall in demand for base metals and the consequent decline in prices, have led to a dramatic slowdown in economic growth which is forecasted at about 1% this year. Inflation, at 7%, is also running at the higher end of the central bank’s target.

To make matters worse for Rousseff, it was announced in early September – just over a month before the elections – that the economy fell into a recession earlier in the year – shrinking 0.2% in the first quarter and 0.6% in the second. Analysts suggest that this largely due to an economy too heavily focused on domestic consumption, combined with a decline in civil construction, manufacturing and investment. Rousseff attributes the economic decline to an unfavorable external environment.

Such “bad economic news” couldn’t come at a worse time for Rousseff. While the slowdown has not had a huge impact on the life of most Brazilians, it undermines their expectations about the future,

To Rousseff’s credit, her Workers Party which has been in power since 2003 has lifted millions of Brazilians out of poverty. Increases in the minimum wage, social programs aimed at encouraging school attendance in exchange for income support, and historically low unemployment levels in spite of sluggish economic growth, are hallmarks of her party’s success.

However, support for the government began to wane following massive protests last year over a number of issues, ranging from the rising costs of public transportation, corruption, police violence and expenses associated with the 2014 World Cup.

While the success of the Word Cup proved to be a temporary distraction from the electoral race, Brazilians are now back to dealing with “bread and butter issues” such as jobs and social welfare which could be impacted by its slumping economy.

The Rousseff campaign claims that if the opposition wins it may push through economic changes that would put recent social advances at risk. However, both Silva and Neves insist that they will preserve and even expand social services.

For now, Brazilians appear to want a President that can initiate change and they believe Silva can deliver. However, Rousseff is still in the race.


Dwarka Lakhan

Dwarka Lakhan

Dwarka Lakhan is a pioneer in emerging markets journalism in Canada. His first emerging markets article, “Africa Joins Ranks of the Emerging,” appeared in Investment Executive, Canada’s leading newspaper for financial advisors, in September 1994. Since then he has written hundreds of articles on the full spectrum of emerging markets and has conducted more than two thousand interviews with emerging and frontier markets investment professionals.

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