Analysis – Brazil’s new economy chief will need space from Rousseff

Brian Winter – Reuters, 11/25/2014

When Brazilian President Dilma Rousseff first considered replacing Finance Minister Guido Mantega two years ago, a top aide confided that any good candidate for the job would have to meet two requirements.

First, a good personal relationship with Rousseff, a notoriously gruff and demanding manager known for making subordinates break down in tears. And second, accept that “Dilma likes to be the minister” – that as a trained economist with a fervent belief in a strong state, she would insist on making many policy decisions, even minor ones, herself.

Rousseff is expected to finally replace Mantega this week with respected banker Joaquim Levy. But it’s unclear whether the job description has really changed since then and whether Levy will have the power and independence to execute the pro-business shift that investors are hoping for.

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Brazil Investors Like Dilma’s Cabinet

Kenneth Rapoza – Forbes, 11/24/2014

Investors from New York to São Paulo are increasingly pleased with Brazilian president Dilma Rousseff’s new economics team.  The names have not been made official yet. After a tight presidential race, which tested her and her party’s approval rating following 12 years in power, Dilma needs all the help she can get.

According to the local press, Dilma’s new economic team will be introduced by month’s end. Investors are anxious to see who will replace Guido Mantega as Finance Minister. Insiders say that Joaquim Levy will be Mantega’s replacement, along with Nelson Barbosa as Minister of Planning, and Alexandre Tombini still leading the Central Bank.

Levy is the most welcome name. He’s currently the president of Bradesco Asset Management, but is global enough to understand the external market forces at work in Brazil. He has held posts at the International Monetary Fund, was a visiting economist at the European Central Bank, and was the Treasury Secretary under Dilma’s political party companheiro, Luiz Inacio Lula da Silva, who served two terms as president before handing the torch to Dilma four years ago.

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Next Four Years Will Be Pressure Cooker For Brazil Pres Dilma

Kenneth Rapoza – Forbes, 11/05/2014

October 26, 2014 will go down as one of those days where Dilma Rousseff should have been more careful about what she wished for. Dilma, re-elected president of Brazil with around 52% of the popular vote, has the Workers’ Party credibility on the line. More important than politics, the business community is now counting on her for revival. If she fails to resuscitate – and no one thinks she’s the Red Cross – Brazil will be mired in slow growth for most of her second term.

Within the greater Latin American economy, Brazil is the elephant in the room, says Guilherme Loureiro, a UBS economist based in São Paulo. The region’s fortunes will largely be determined by whether its biggest economy can turn its fortunes around. Loureiro thinks it is unlikely that a new Dilma administration will introduce the type of structural reforms needed to boost savings and investment in the economy. Out of the big four emerging markets, Brazil is the worst for private investment. It equals just 17% of GDP. For Loureiro’s team at UBS, the base case scenario for Brazilian growth next year is a paltry 0.6%. In 2016, it’s 1.8%.

Dilma is currently dealing with the worst political climate since the bribery scandals known locally as “mensalão” took place in 2005.  Top executives from state owned oil and gas company, Petrobras, are being investigated for fraud. Some whistle blowers are saying Dilma knew about the fraud. This is a political grenade for the Workers’ Party which– as rumor has it — is thinking about putting up Party frontman Luiz Inacio Lula da Silva as its presidential candidate in 2018. He already had 8 years as President prior to Dilma’s election in 2010.  A mis-step by Dilma would likely put an end to those plans, even if they were carried out. If Dilma sinks Brazil, Lula won’t be able to sell himself as the clean-up crew.

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Brazil’s Rousseff to rein in excesses – for a while

Anthony Boadle and Alonso Soto – Reuters, 11/05/2014

A quick belt-tightening, and then back to business as usual. That appears to be the strategy in coming months for Brazil’s newly re-elected President Dilma Rousseff, who is trying to win back the business community’s confidence without sacrificing her leftist agenda of reducing poverty and ensuring a strong state presence in the economy.

Since narrowly winning an Oct. 26 runoff, Rousseff has fueled hopes of a market-friendly shift by allowing the central bank to raise interest rates, which surprised investors and should help control inflation running above 6.5 percent a year.

Local press has also percolated with talk that Rousseff will make a large cut to budget spending, and that she is looking for a more market-friendly replacement for long-serving Finance Minister Guido Mantega.

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Brazil’s election: as polarised as can be

Jonathan Wheatley – Financial Times, 11/04/2014

What you see above is a graphic representation of something anyone who followed the campaign that led to the re-election of Dilma Rousseff as Brazil’s president on October 26 already knows: the election was the most polarised in the country’s history.

Brasil was split down the middle, not only numerically (Dilma got 52 per cent, Aécio Neves 48) and geographically (Dilma won in the less developed north, Aécio in the more prosperous south). The twitterspere, too, was divided into two camps. Not only that; they hardly talked to each other at all. “The tension during the election split the two sides in a way and with a strength that has never been seen in Brazil before,” says Marco Aurélio Ruediger, head of public policy analysis at the Fundação Getúlio Vargas, an educational institution, in Rio de Janeiro.

Ruediger and his team generated the image above from an analysis of 620,000 tweets sent on October 25, the eve of the election’s second round run-off. The red cloud represents tweets and retweets of messages mentioning policies proposed by Dilma and her supporters; the blue cloud does the same for the Aécio camp. What is remarkable, says Ruediger, is the almost total absence of retweets by supporters of either side of messages mentioning the other side’s policies.

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With Little Hope Of Impeachment, Brazil Protesters Turn To Obama For Support

Kenneth Rapoza – Forbes, 11/04/2014

Nine days have passed and already Brazilians are clamoring for the removal of Dilma Rousseff, the Workers’ Party candidate that won re-election in a squeaker against the Social Democrats. This weekend, police reported that roughly 3,000 people took to Avenida Paulista in São Paulo calling for deeper investigations into scandals involving Petrobras and the entire Workers’ Party apparatus.

Despite their passions, it is unlikely this will build into a mass movement. At least not yet.  For that to occur, the economy would have to get much worse, possibly slipping into a recession next year, and the Petrobras scandal would have to get even uglier than it already is.

Dilma, who faced nasty name calling by FIFA World Cup soccer fans this June and July, looked to be on the outs with the general public. Her popularity was in sharp decline. The market was forecasting Marina Silva, an ex-Workers’ Party insider then running on the Socialist Party ticket, to beat Dilma in the second round.  But last weekend she managed to beat Social Democratic candidate Aécio Neves instead with a decent 52% of the popular vote. Marina, then seen as the agent of change that even Barclays Capital and Deutsche Bankwere willing to accept, placed a distant third.

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The seven myths of the 2014 Election [PORTUGUESE]

Jose Roberto de Toledo, Daniel Bramatti, Daneil  Trielli, Diego Rabatone, Lucas de Abreu Maia and Rodrigo Burgarelli – Estadão, 11/03/2014

Estadão names and refutes seven myths of the 2014 Brazil presidential election, including ideas that the Northeast elected Dilma, statewide platforms influence voters, null votes are signs of protests, and Minas Gerais elects the president. The article also discusses the variability of the polls leading up to the first and second round finishes, the death of Eduardo Campos and its impact on the election, and the presence of voter abstentions.

Read more [in PORTUGUESE]… 

Obligatory voting, socialism and corruption: Brazilians tell us what they think about Rouseff’s re-election

The Guardian, 10/29/2014

A woman, being re-elected in a traditionally sexist Latin country as ours, first of all means that we can learn to be a little less prejudiced. Secondly, but no less important, it means that Brazil has decided to be more inclusive. The last 12 years have seen huge advancements for the country: we have left UN’s hunger map and have brought nearly 50 million people into the middle classes. This is the real impact of a leftist government – underprivileged people can now plan to go to university (public universities in Brazil are 100% free and the Labour government has built almost 200 of them). There are more schools and hospitals spread around the country than ever before.

Today, around 56 million people claim benefits and some 12 millions have given them up in the past years because they felt they no longer needed this government support. This means that many people in low paid jobs were able to go back to school, better themselves, make plans for the future – which of course makes all the difference! People who used to live from hand to mouth can now plan to buy a house through government programmes, can get a decent education and move up in life.

We cannot deny that there’s been corruption, there’s been embezzlement and white collar crimes. But to believe that the right-wing candidate was going to be the one to end it is childish and naive! He himself is involved in many corruption scandals and it’s hard to see why he’d do anything about it! Corruption is part of the political game and only a reform in the system would make it possible to end it – and this has never been in the right-wing agenda, but Dilma has already said she plans to have a referendum to know what people want on that matter.

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Brazil shocks with interest rate hike in wake of election

Alonso Soto – Reuters, 10/29/2014

Brazil’s central bank raised interest rates on Wednesday, surprising investors with a bold move that signals President Dilma Rousseff could make more market-friendly policy changes after her narrow re-election victory on Sunday.

In a divided vote, the central bank’s board decided to raise its benchmark Selic rate by 25 basis points to 11.25 percent. All 43 economists surveyed in a Reuters poll this week expected the bank to keep the Selic at 11 percent.

With the hotly contested presidential race over, the central bank moved swiftly to anchor inflation expectations at a time when markets are wondering if Rousseff is willing to overhaul her policies to regain the trust of investors.

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Can Brazil’s Socialist Iron Lady Defy The Markets?

John Cassidy – The New Yorker, 10/28/2014

I know, I know, there’s a lot going on: Andrew Cuomo and Chris Christie are busy making jackasses of themselves; the midterms are next week; Rex Ryan’s Jets are imploding. I wouldn’t blame you if you overlooked the news that Dilma Rousseff, Brazil’s socialist “Iron Lady,” was reëlected as the President of the world’s fifth most populous country. From what I saw, the broadcast networks barely covered it. Monday’s Times relegated the story to an inside page.

No surprise there, you might say. It’s nearly five thousand miles from New York to São Paulo, and Americans got their fill of Brazil during the World Cup. Who cares that Rousseff came from behind in the polls to defeat her opponent, Aécio Neves? Does it really matter to people outside Brazil?

It does, for at least two reasons. First, Rousseff’s victory has significant implications for the world’s financial markets. And, second, it extends Brazil’s decade-long effort to reduce poverty and inequality, which, despite great skepticism among the country’s business community (and free-market economists), has gone some ways towards spreading the wealth in what has long been one of the world’s most inegalitarian countries.

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