Hey the Economist came out swinging last week with its commentary on the upcoming Brazilian election. Ok, I agree Jair Bolsonaro says things that make Trump blush, but I think comparing him to Augusto Pinochet is a bit much. Either way, the Brazilian electorate wants change, too bad it isn’t on offer. They saw a glimmer of hope with actual consequences of Lava Jato but they’ve got no one to vote for.
But if you think Jair is going to win and democracy lose in Brazil come the second round; relax. As much as I don’t want to see the PT back in power, they know how to win elections and are likely to win this one.
That’s not a screaming endorsement but the market seems fine with it.
People seem comfortable with, and when I say people I mean investors, because the poor Brazilians are already uncomfortable and probably will get more uncomfortable before this story is over. Investors need to get comfortable that no politician is going to lead any meaningful change in Brazil in the medium term. Haddad isn’t his own man and he’ll never get out from under Lula’s thumb. Lula did some fantastic work but it was made possible by FHC’s original hard work and a supportive global environment. It is totally possible that Haddad could get some reform done on the margins but the scale of what Brazil needs to do outsizes the appetite by multiples.
The Economist did correctly identify that graft, the economic slow-down and violence are Brazil’s major ills and it would be wonderful if the next government focused on these three things. But since the government itself is largely to blame it is hard to imagine anything of significance will change.
The Brazilians want and deserve change. It is unlikely this election will produce that. It is also unlikely to produce the market pressure we are seeing elsewhere in EM.
Feel free to file under JUST ANOTHER ELECTION NOTHING TO SEE HERE