Brazil's Big Election

October 4, 2018 Topic: Security Region: Americas Tags: BrazilElectionPoliticsEmerging MarketEconomy

Brazil's Big Election

Brazil is at a crossroads and its 2018 election is definitional.

Brazil goes to the polls on October 7 to select a new president, congress, governors and local governments. It is the vote for the top national position, however, that dominates as there is no overwhelmingly frontrunner, which makes it likely that the country will face a highly polarized second round. According to opinion polls, the outcome could well pit far-right nationalist-populist Jair Bolsonaro of the small Social Liberal Party (PSL) against leftist Fernando Haddad of the Workers Party (PT). Although opinion polls indicate that Haddad would win the second round, Bolsonaro should not be ruled out as he could be the receipt of an angry voting public. And, his victory would take Brazil into uncertain terrain as it is not clear what his economic policies are and where he wants to take South America’s largest country.

Brazil’s 2018 elections have arrived to a backdrop of an economy seeking to recover from the country’s worst downturn since the 1930s. Although Brazil is slowly turning the corner with real GDP growth of 1.6 percent expected for the year, inflation is still high (it was 4.2 percent in August); unemployment remains above 12.0 percent; and the budget deficit to GDP is at 7.0 percent.

What is particularly painful for many Brazilians is that in the first decade of the twenty-first century the country made considerable progress in terms of poverty reduction and the expansion of the middle class. Much of this was under the presidency of PT leader Luiz Inacio Lula da Silva (2003–11). However, the country’s economy incurred considerable problems with the end of the commodity boom in 2014, which occurred during the presidency of Lula’s PT successor Dilma Rousseff (2011–16). Since the advent of the recession, it is estimated that GDP per person was cut by 10 percent and millions were pushed back into poverty. Additionally, many Brazilians fear for their personal safety, a condition reflected by a record number of murders last year (close to sixty-four thousand).

Brazilians have also been pummeled by a succession of political scandals and a disruptive judicial investigation (Lava Jato or Operation Car Wash) that has arrested and incarcerated major political figures and their big business counterparts. President Dilma Rousseff herself was impeached for breaking budgetary laws. Other corruption investigations hit other major political figures, both related to the ruling government parties and those in the opposition. Even the outgoing president, Michel Temer, narrowly escaped being from hauled out on corruption charges.

The combination of a bruising recession and ongoing revelations of government corruption has left voters in an ugly mood and dissatisfied with the political establishment. This has helped the candidacy of the outspoken and often politically incorrect Bolsonaro, who has positioned himself as an outsider, man of action, bold and ready to right the country’s wrongs. He stands at the head of the pack, with opinion polls giving him around 25–27 percent.

The candidate most likely to contest a second round with Bolsonaro is Haddad, who became the PT candidate after it was finally ruled that Lula was not allowed to run. The former mayor of Sao Paulo had a late start, but he has managed to campaign hard on social issues, reaching to the PT faithful, while demonstrating that he will be pragmatic economically, with an eye to the middle class. Haddad has been polling at a little over 20 percent of the vote.

While Bolsonaro and Haddad lead, the other candidates that might gain enough votes to take them into a second round are Ciro Gomes (10–12 percent) and Geraldo Alckmin (at 8 percent). Gomes is a center-left former governor of Ceara (northeastern state) and the candidate of the Democratic Labor Party (PDT). Alckmin is a former governor, the candidate of Brazilian Social Democracy Party (PSDB), and the most pro-business of the frontrunners. Both men lack charisma and are perceived by many Brazilians as part of the disgraced political establishment.

The expectation is that Bolsonaro will probably win the first round of the elections, but lose in a second round which would be held on October 28. Opinion polls indicate that Haddad would defeat Bolsonaro by 42 percent versus 38 percent in a second-round contest. Polls are also showing that Bolsonaro would also lose a runoff second-round election if he had to face either Gomes or Alckim.

But Bolsonaro should not be so easily dismissed. He is one of the more colorful presidential candidates to grace Brazil’s often frothy politics, making the cover of The Economist described as “Latin America’s latest menace.” Indeed, Bolsonaro has a less polished side and many Brazilians are scandalized by him. A former military man, he has been accused of embellishing his time in the army and has at various times suggested that perhaps the armed forces should return to power. He condoned torture during the military regime (1965–85) and has openly disparaged gays, women and blacks.

Alternately, for a sizable slice of Brazilians, Bolsonaro is a breath of fresh air, promising to crack down hard on crime as well as promising to get the economy going again. Although he indicated that he was not strong on economics, he brought a well-known free-market economist (and graduate of the University of Chicago) Paulo Guedes as his chief economic adviser.

In early September Bolsonaro’s campaign was almost derailed by an assassination attempt. The assailant told police that he stabbed the far-right candidate because he had “orders from God.” Although he had to undergo surgery, Bolsonaro quickly bounced back, adroitly making use of his hospital room as his campaign headquarters and gaining considerable media coverage with that action.

From his Sao Paulo hospital room, Bolsonaro has actively reached out to his supporters via an endless stream of tweets. He has 1.5 million Twitter followers and his messages are very much in the Trumpian vein as reflected by the following, “We want to rescue our long-lost values and get Brazil out of this swamp of violence and corruption they have put us in! Our country cannot take another four years of this.”