The Week Ahead in Brazil #123

What is happening in Brazil?

1. Politics – A former minister of the Federal Supreme Court (STF), Joaquim Barbosa, declared support for the campaign of former President Luiz Inácio Lula da Silva (PT) and harshly criticised President Jair Bolsonaro (PL). He sent the video was sent to Geraldo Alckmin (PSB), Lula’s vice-president. The unusual thing is that Barbosa was the rapporteur of the PT’s Mensalão when he called for the conviction of several PT members, including Lula himself. (g1)

Justice Alexandre de Moraes authorised a request by the Federal Police to break the bank secrecy of the aide-de-camp of President Jair Bolsonaro (PL), Army’s Lieutenant Colonel Mauro Cesar Barbosa Cid. The claim is to investigate cash transactions made by Cid. The President’s Office denied any irregularity and declared that the resources left Bolsonaro’s current account. (Folha)

TV Globo held, on Thursday (29), the last presidential debate before the first round of elections.

The FSB/BTG survey shows Lula (PT) leading the voting intentions in the first round with 45% (+1pp), followed by Bolsonaro (PL) with 35% (stable). The disapproval rate is 55% (stable), and the approval rate is 39% (+1pp). The poll was conducted by telephone with 2,000 voters from 23 to 25 September.

The Ipec/Globo poll points out that Lula (PT) has 48% (+1pp) of voting intentions in the first round, and Bolsonaro (PL) has 31% (stable). The government is disapproved by 60% (+1pp) and approved by 36% (stable). The poll was conducted face-to-face with 3,008 voters between 24 and 26 September. In a more recent, Lula has 47% (-1pp) and Bolsonaro, 34% (+3pp).

The Quaest/Genial poll shows Lula (PT) with 46% (+2pp) and Bolsonaro (PL) with 33% (-1pp). The disapproval rate was 42% (+2pp), and the approval rate was 31% (stable). The survey heard 2,000 voters in person from 24 to 27 September.

According to the PoderData poll, Lula (PT) has 48% (+2pp) and Bolsonaro 38% (-1pp). The disapproval rate is 55% (+2pp), and the approval rate is 39% (-2pp). The poll interviewed 4,500 voters by telephone between September 25 and 27.

The Ideia/Exame poll shows Lula (PT) with 47% (+3pp) of voting intentions in the first round and Bolsonaro (PL) with 37% (+1pp). The government is disapproved by 43% and approved by 37%. The poll was conducted by telephone with 1,500 voters between September 23rd and 28th.

Datafolha points Lula with 48% (stable) and Bolsonaro with 34% (stable). The survey was held face-to-face with 12,800 voters between September 23rd and 28.


2. Economy – According to the Brazilian Institute of Geography and Statistics (IBGE), inflation, measured by the IPCA-15, retreated by 0.37% in September, better than analysts’ predictions. It is the best rate for the month since 1998. Gasoline was the main factor behind the result (Valor)

The Brazilian Central Bank (BC) raised the estimate for GDP growth from 1.7% to 2.7% in 2022. For 2023, the forecast is for 1.0% growth. The Central Bank reduced the estimate for inflation in 2022 from 8.8% to 5.8%. (g1)

Direct investments in the country totalled US$ 7.72 billion in July, the highest volume for the month since 2014, according to Brazil’s Central Bank (BC). In 12 months, companies contributed US$ 65.6 billion to Brazil or 3.73% of the Gross Domestic Product (GDP). (Valor)

Federal revenue collections reached R$ 172.3 billion in August, a net increase of 8.2% compared to the same month in 2021. In the accumulated from January to August 2022, the collection reached R$ 1.46 trillion, representing an increase of 10.2% compared to last year. (Brazil)

According to official numbers (Caged), Brazil created 278,639 formal jobs in August this year. The year-to-date total is 1.85 million formal jobs created. (g1)

According to the IBGE, the unemployment rate fell again in the quarter that ended in August, reaching 8.9%. The employed population reached 99 million people, a new high in the series started in 2012, with 7.3 million more people employed in 12 months. The actual income mass grew 4.7% in the previous quarter and 7.7% in annual comparison. (Estadão)

The primary surplus of the central government this year should be around R$ 40 billion, said the National Treasury Secretary, Paulo Valle. The official projection of the Ministry of Economy is a surplus of R$ 13.5 billion. (Valor)

3. Public administration – The Superior Electoral Court (TSE) decided on Thursday (29) to ban the transport of weapons and ammunition by collectors, sport shooters and hunters (CACs) on the eve and day of elections and within 24 hours on the day after the election. (g1)

The Ministry of Infrastructure published a norm on Friday (30) that creates the Green Railroad Fleet Program (Programa Frota Ferroviária Verde). The primary purpose is to induce sustainability in manufacturing rolling stock and railway operations. (Poder360)

An analysis:

1. The trend in politics remains neutral. The elections are happening today in Brazil, Sunday (2), when more than 156 million people must vote. The scenario is the most polarized in Brazil’s recent history. Lula and Bolsonaro show stability in voting intention. Even with indications of Lula’s leading the presidential race, the difference ranges from 10 to 14 percentage points and does not allow to say what the result of the first round will be. Bolsonaro directed part of his effort this week to resume his criticism of the polls and Justice Alexandre de Moraes.

The Globo presidential debate does not seem to have changed the voting preference among voters of the two leading candidates. Both performed well in the event. Bolsonaro did not get out of control as most of the media expected. He maintained control of the narrative, focused on attacking the PT candidate in corruption cases, spoke of economic advances, and teased the candidates here and there. Lula was not as controlled as analysts predicted but arrived with a lot of energy in the first blocks of the debate. He diversified the agenda, drawing attention to culture and refuted some accusations, but was dragged into some provocations.

Ciro Gomes attacked both Lula and Bolsonaro. Although he did not have a chance, he presented government proposals slightly more precise than the other candidates and spoke fluently about the country’s social and economic numbers. However, he made a strategic error when he tried to break the polarisation and position himself outside his party’s left domain. The voters and the parties seem confused by the candidate’s position. In addition to being unable to form an alliance with other political parties for the vice-presidency, Ciro began to face erosion within PDT itself. He will emerge politically weaker from his fourth attempt at the Presidency of the Republic.

In the opposite direction, Simone Tebet and Felipe d’Avila will rise victorious from the election, even though they have no chance of being elected. They presented good, transparent proposals and made moderate attacks on Lula and Bolsonaro. They used their time to debate relevant public policies and created good connections among themselves. Soraya Tronicke, on the other hand, has had a more combative performance, especially in clashes with candidate Father Kelmon.

Even with the indications that Lula should win the first round, uncertainties about the outcome between Lula and Bolsonaro remain. That is not the case for the legislative branch. There is reasonable consensus that approximately 50% of the composition of the lower house will be centre-right parties, and the left should obtain around 30% of the seats. With this, it is possible to draw two basic scenarios. The first considers that Lula wins the elections. Lula will have to make major initial adjustments to form a relationship with Congress, but without advancing essentially left-wing proposals. In practice, he will not be able to run the legislative agenda without dialogue with the centre-right parties, which represent today more than 260 federal deputies and may grow even more. This set of factors generates unpredictability in political arrangements. In the second scenario, with Bolsonaro’s victory, the political conditions of governability would be more favourable, with stability and the advancement of structural reforms.

The main point is that regardless of who wins the elections for the Presidency of the Republic,  the private sector, broadly speaking, should not suffer significant setbacks in the first half of 2023.

2. The economy continues a positive trend. The falling unemployment figures and the increase in salary mass are news that shows that the Brazilian economy is growing fast. The combination of falling inflation and growth in the GDP projection completes the picture with highly beneficial information for the economy.

A good part of these advances is due to the improvement of the specific regulatory framework approved in recent years, such as the Sanitation Legal Framework, Railway Framework, Start-ups Law, and Cabotage Law. More broadly, the Business Environment Law, the Modernization of Notary Public Offices and even the formal autonomy of the Central Bank are essential contributions to unlocking private sector investments. In addition, another critical factor for these positive results was the progress in the concessions of airports, ports, highways, railways, and other areas. Privatization, in this sense, seems to have been crucial to increasing the participation of private investment and job creation.

3. Public administration continues in a neutral trend, without significant changes.


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