In Brazil Elections, President Dilma Has A Better Country On Her Side

by Unknown 03:31 0 comments Infotainment Ministry of Innovation / Business of Technology

What a difference a month makes.
In September, it appeared certain that incumbent president of Brazil, Dilma Rousseff, would struggle in a second round run-off vote with Marina Silva, a petite firebrand and one of the former stars of Dilma’s Workers’ Party.  While this election is likely to go to a second round run-off, and possibly pitting Marina vs Dilma in an ex-Workers’ Party vs Workers’ Party bid for the presidency, Dilma has some power in her corner now.

That power isn’t Workers’ Party strongman Luiz Inacio Lula da Silva, who was and still is one of Brazil’s favorite politicians. He has been relatively quiet this election season.  What Dilma has in her corner is a better country. Simply put, after 12 years of Workers’ Party rule, Brazil is better.
Poll results ahead of Sunday’s first round of voting suggests that Brazilians see that.  According to an Ibope poll, Dilma has 46% of the vote, while Marina is down to 27% and third place rival Aecio Neves has 22%.  A second round of voting is required if no one receives 51% of the popular vote in the first round.

Brazil incumbent Dilma Rousseff has good stats on her side, and better discourse on the economic front that could propel her to victory either Sunday or in a second election on Oct. 26.

Forget the insider baseball rhetoric of political rivalries: Who would God vote for? Is this one or that one gay? All of that is irrelevant nonsense.  All Dilma has to do to win is remind Brazilians that Brazil is better.  They don’t care if the Bovespa is up 10% or down. They care about having a job, potable water, and access to quality healthcare to name a few issues of importance.
According to a recent household survey by IBGE, the Brazilian Institute for Geography and Statistics, educational attainment levels continue to rise; middle incomes are rising, but the poor are doing better than ever; digital inclusion is improving; access to healthcare is improving. The number of working children aged 5 to 13 years old dropped 10.6%. Among children in this age group still working, 96.4% were attending school full-time in 2013.
This is the direct result of Workers’ Party policies which require poor families to keep their children in school in order to receive federal assistance. Brazil achieved its lowest recorded rate of illiteracy, and the number of children aged 4 and 5 years old attending pre-school increased from 78% in 2012 to 81% in 2013, according to the study. The average years each Brazilian spends in school continues to grow, and is now increasing at a rate of almost two years of study per decade.
When you think about it, this is exactly what the protests were about in Brazil over the last year. Brazilians clamoring for better public services, more investment in school and less investment in soccer stadiums. On one had, public services in Brazil have a lot of room for improvement. On the other hand, they are improving.
There were a few mistakes in the survey, which the media and rival parties pounced on to promote the story that IBGE was working to make Brazil look flawless in order to give Dilma a boost. Still, the facts remain: Brazil is better now than it was 12 years ago. Despite a weaker economy, Brazilians are not going hungry. Investors are not filing out of the country in droves. This is not the 1990s. Brazil is not Argentina.
– Over the last week, the strong dollar has hurt Brazilian equities more than anything else. A Better Economy, Too?
Marina’s late summer (winter in Brazil) surge surprised everyone. Despite the fact that she has changed political parties three times, and is a member of the Socialist party, the market seemed fine with a Marina win. Barclays Capital economist Marcelo Salomon was even playing with the idea that Marina was going to be Brazil’s second female president.
But what guys like Salomon were really looking forward to was changes to economic policy. No matter who wins, changes are coming. Dilma is not going to play a one-note samba in a second term should she get there.
Dilma told reporters last month that, if re-elected, there would be a shake up in her cabinet. The market took that as a sign beleaguered Finance Minister Guido Mantega would not return to his post.  A figurehead in the Workers’ Party, Mantega will likely stay within Dilma’s inner-circle, but removing him from the Finance Ministry and replacing him with a market favorite would likely seal her victory in the second round.  So far there are no hints as to who might replace Mantega. No matter who challenges Dilma in the second round, Marina or Neves, both will need to produce a genie from a big investment bank in their corner in order to have a chance now.
Since September 1, the Bovespa has lost more than 20% in U.S. dollar terms, but that is not because of Dilma, says Vladimir Signorelli, global economist for Bretton Woods Research, a top down investment research firm based in Long Valley, New Jersey.

The Bovespa’s weakness since September is tied to high interest rates; the failure by the Brazilian central bank to establish a floor on currency weakness during the last several weeks of global risk aversion and finally, the strong dollar.  Further strengthening of the dollar is creating a deflationary headwind for commodity sensitive emerging markets like Brazil.
The dollar’s recent strength is a negative for Brazil’s financial market, regardless of who wins.  Since July 1, the gold price has fallen nearly 10%, while oil has fallen 15% and the Commodities Index has fallen more than 10%. Traditionally, such deflationary pressures have been a headwind for Brazilian equities.
Dilma’s political comeback has been built on pivoting away from anti-growth, austerian moves.
Marina, meanwhile, has signaled the wrong kind of policies in recent weeks and has lost elite support in the polls. She has criticized the idea of trying to keep the local currency strong (the BRL is trading near 2.46 to 1, it’s weakest level since the 2008-09 financial crisis). She also said the Central Bank should be more rigorous on inflation, currently and stubbornly over 6%.  To market watchers, Marina is essentially campaigning as a rate-hiker, whereas Dilma, at the least, suggests interest rates should stay the same and the Brazilian real should be stronger, not weaker.
It is on this issue that Dilma has been winning over voters with money in the market.  She has already won over at least half of the country just for being the Workers’ Party candidate, a party that has helped Brazil improve over its 12 years in power.  It is not perfect, but it is better, and Dilma also has that fact in her corner Sunday.
As a result, Dilma is now within striking distance of even winning Sunday’s first round outright. That is a rarity in Brazil, but a second round challenger will have a harder time now than people perceived a month ago.
“We believe Dilma will win either on Sunday or in her head-to-head faceoff against Marina,” Signorelli said.