Jair Bolsonaro shortened the gap in the polls that separates him from the former president Luiz Inacio Lula da Silva, favorite for the Brazilian presidential elections on October 2. The improvement of the president of Brazil in the presidential race is the response of the electorate to the improvements in the economy, where the government has applied measures that increase cash handouts to the most dispossessed.
According to the DataFolha survey conducted in person with 2,500 people in 181 cities throughout Brazil between March 22 and 23 (with a margin of error of 2 percentage points), Lula would win in the first round with 43% of the preferences, but drops 5 points compared to the December measurement. In reverse, Bolsonaro grows 4 pointsgoing from the previous 22% to the current 26%, which improves its chances, even more so in the face of a possible ballotage.
silver plan
Lula76 years old and leader of the Workers’ Party (PT), has been leader in the polls of opinion since Brazil’s highest court last year dismissed the corruption convictions that prevented him from running in the 2018 elections.
But the popularity of Bolsonaro, 67, a former army captain, has slowly risen in recent weeks as voters worry less about the government’s -flawed- response to Covid-19, and turn their attention to the economy.
Bolsonaro’s cash aid program to vulnerable Brazilians was a relief for consumers affected by cost-of-living increases. But the decision by state-owned Petróleo Brasileiro SA to increase fuel costs by up to 25% in early March could still spell a setback for Bolsonaro’s approval ratings in April.
Analysts predict that the current president would retain in the second round the votes won in October by Bolsonaro’s former judge and former Minister of Justice, Sergio Moro (who has 8% of the voting intentions in the first round according to DataFolha), while what Lula could reap those generated by former Governor Ciro Gomes (close to 6%) who was his minister, after leaving Fernando Henrique Cardoso’s PSDB (today an eventual ally of the PT leader to defeat the current president), to join the leftist Popular Socialist Party (PPS) with which he was third in 2018.
Revaluation
Bolsonaro’s rebound It is due, in large part, to the success of the superminister of Economy, Paulo Guedes. Graduated from the University of Chicago and former official of Augusto Pinochet in Chile (something he proudly acknowledges), he was chosen by the Brazilian market when the current president put together his team for the 2018 campaign.
Perhaps the greatest success in the management of the former military man, taking into account the current indicators of the Brazilian economy: the real and the shares of local companies lead global profits this year, while international investors continue to accumulate assets, attracted by high interest rates and the massive spike in commodity prices.
The Brazilian currency strengthened to 4.7663 per dollar, the highest level since March 2020, extending its advance to more than 16%, andl largest among the world’s top 31 currencies. And as the real rose, the benchmark local stock index’s return in dollar terms surged more than 30%, the most among all national stock indices audited by Bloomberg.
Brazil has been attracting investors markets despite heightened global volatility, as local assets benefit from the massive rally in commodity prices, and fixed income instruments offer juicy returns after an intense cycle of monetary tightening. Global investors were buyers of Brazilian shares in 53 of the 55 trading sessions of the year, totaling more than 83 billion reais ($17.3 billion) in that period.
Green shoots
After exceeding 5 reais per dollar during the pandemic, the appreciation of the real it could bring it closer to 4 reais per dollar, an important psychological mark for the Brazilian middle and upper class electorate: salaries in the neighboring country today are below Argentina, but in an upward cycle. Ecuador leads the ranking of the region with a total of US$425 per month in January of this year; followed by Chile, with a value of US$411; and Panama comes in third place, with a minimum of US$326 per month.
Foreign investors, who fueled the real’s rally in the first two months of the year, are resuming their bets after sitting on the sidelines for a few weeks. due to the war between Russia and Ukraine. Foreigners cut their dollar positions by $3.9 billion between March 14 and 23, while local stocks attracted $1.6 billion in the week ending March 18.
“Ibovespa’s attractive valuations, extreme carry and positive terms-of-trade impact are firmly established,” said Álvaro Vivanco, head of emerging markets strategy at NatWest Markets, which recommended the bet on the real against the Mexican peso since the war in Ukraine began.
Credit Suisse said the real has additional room for improvement because it remains undervalued, and the recent gain only partially reversed the large depreciation of recent years. Analysts at the Swiss bank noted in a report that Brazil’s real interest rate differential with that of the United States is close to its all-time high, supporting further currency strength. a virtuous cycle that could make forget the Bolsonaro disaster during the pandemica reverse cycle to that of Donald Trump in the US elections.
