Before dancing to the beat of samba, Brazilians will need to endure a political waltz

Lunedì, 09/05/2022

Brazilian elections are coming up and the contest, which promises to be tight, will be determinant for the near future of the Brazilian economy. Between a fiery candidate who does not shy away from controversies and former President Lula’s attempted comeback, the country is gearing up for a tight race.

Lunedì 05/09/2022 - 16:19
Renan Senan Portfolio Manager

Brazilian elections kick off soon and for the moment, there are two candidates clearly far ahead, recent polls have shown. As could be expected, these are current president Jair Bolsonaro, a right-winger and the left wing former president Luiz Inácio Lula da Silva.

The first round will take place on Oct. 2, if no one wins more than 50% of the vote, a runoff is scheduled for Oct. 30.

Lula has been leading the polls for a long time but the gap between the former president and current president Bolsonaro is narrowing. On Monday, an FSB poll showed Lula’s advantage down from 11%  to 9%, and polls from Ideia on Wednesday and Atlas on Thursday came out with a slightly smaller gap of 8% (Figure 1).

However, the third favorite candidate in the polls Ciro Gomes is closer to Lula in terms on the political spectrum and is likely to support him in the event of a second round.

Therefore, at this stage, a Lula victory appears to be the most likely scenario.

Voting intention for presidential election (First round)
Multiple pollsters, J.P. Morgan
Political program
Below are the main points of the two candidates’ agenda:
Political program

If Lula wins, his public spending program should be beneficial to domestic demand but could raise concern about the suitability of the Brazilian debt, with a potential negative impact on the Brazilian real.

On the other hand, if Jair Bolsonaro is reelected, the status quo is likely to prevail.

However, it is very hard to implement the entire political program due to multiple factors that can arise during the mandate, and each implementation remains subject to congressional agreement.

Risk and recent developments

Democracy at risk ?

  • Recent comments of the current president about the reliability of the election system raises a crucial question - Will Jair Bolsonaro accept the results if he loses or will we see a similar situation as when Donald Trump lost the US election ?
  • Brazil’s last coup, in 1964, led to a brutal 21-year military dictatorship. “The middle class supported it. Business people supported it. The press supported it. And the U.S. supported it,” said Luís Roberto Barroso, a Supreme Court justice and Brazil’s former elections chief. “Well, none of these players support a coup now.”

The first debate revealed some of the candidates’ weaknesses

  • The first debate took place last Sunday, August 28, with an under par performance from President Bolsonaro, as he insulted women during the debate and seemed not to know that hunger has increased in the country with the recent rise in inflation.
  • On the other hand, Lula tried to avoid questions about corruption in his party despite having previously admitted that some missteps occurred in previous Workers’ Party administrations.
Potential impacts
Potential impacts