Brazil Is (Still) Not for Beginners: 2022 Outlook

Brazil's Outlook for 2022

On October 2, 2022, Brazil will have a watershed presidential election. The result will dictate whether the southern hemisphere’s largest economy continues to stagnate or returns to growth. No matter the outcome, the democratic pillars of Latin America’s biggest country will be further pressure tested before and well after the votes are in. The business community has good reason to be concerned, but also optimistic. After the tribulations of a national election, economic growth is expected to return.

 

Jair Bolsonaro – the incumbent

In his fourth year in office, President Jair Bolsonaro looks weak. His support according to a recent poll is at 31 percent. His disapproval rate, at 54 percent, is the result of a sluggish economy, inability to build coalitions and pass necessary reforms, and corruption investigations into Bolsonaro and his family. Brazilians are also irritated at Bolsonaro’s conduct during the pandemic.

COVID-19 claimed over 640,000 lives in Brazil. Displaying little compassion, Bolsonaro posited that Covid is a “little flu,” and that the country is best served by herd contagion. Two years in, he is still attacking Brazil’s equivalent of the FDA (Anvisa) and recently tried to halt vaccinations among children. His attempts at winning over Brazilians include pushing demonstrably ineffective treatments and organizing mass public gatherings. After a slow start, the national vaccination efforts did pickup, and Brazil has now fully inoculated over 70 percent of its population against COVID-19, which is in line with the EU percentage and about 6 points higher than the US. But given the fact the country has had a respected national vaccination plan for diseases such as polio, measles and tuberculosis for 50 years, the relative success of distributing COVID-19 vaccines is not attributed to Bolsonaro’s administration but to existing pillars in the public healthcare system. The best candidate in the eyes of most Brazilians is anyone but Bolsonaro.


Lula – the frontrunner and challenger

Leading the pack and checking the “not-Bolsonaro” box is Luiz Inácio Lula da Silva, Lula. Currently 40 percent of voters favour Lula. Four years ago, the two-term former president was in jail, convicted of money laundering and receiving illegal kickbacks for government contracts. Back then, most of the electorate strongly rejected Lula’s Workers Party (PT) and the systemic corruption that marred everything
it touched. Lula was in a similar position to Bolsonaro’s today: anyone he didn’t support was seen as the preferred option.

Lula today is not only “not-Bolsonaro,” but he enjoys a loyal base of supporters who never abandoned him. They remember that under Lula, Brazil’s internal market was booming, and the commodity economy benefitted from strong tailwinds. In 2009, during Lula’s presidency, The Economist published a cover showing a rocket-propelled Christ the Redeemer in Rio de Janeiro with the title “Brazil takes off”.

Voting for Lula now will still be hard for a large portion of the electorate who remain convinced the former president orchestrated the largest corruption scheme in Brazil’s history and caused long lasting damage to its economy, reputation and government institutions. His disapproval rate is at 43%.

Option 3 – neither Bolsonaro nor Lula

While a centrist third option is appealing to voters and the market, all other candidates are polling 9 percent or lower.

The top contender in this group is a former federal judge, Sérgio Moro, intimately and ironically involved with both Lula and Bolsonaro. From his bench, he led most of the Lava Jato corruption investigation and convicted 45 people, including Lula. He was considered a national hero for sending a message that crime would no longer pay. For a fleeting moment many Brazilians believed the country was about to be able to function without the parasitic weight of wide-spread corruption. But Moro overplayed his hand. First, he joined Bolsonaro as his justice minister, eyeing a future nomination to the supreme court and strengthening the impression that Lula’s trial was political persecution. Soon after, faced with leaked messages between Moro and Lava Jato’s prosecutors, the supreme court overturned important convictions on the grounds that the judge was biased and working outside his jurisdiction.

In the end, Lula was not acquitted, but he wasn’t convicted either, allowing him to claim innocence and vindication. In sum, Moro is damaged goods, unlikely to amass the kind of support needed to surpass 50 percent of the votes.

Ciro Gomes, at 4 percent in the polls, is again throwing his hat into the ring. Gomes is center-left, a longtime politician from the country’s northeastern state of Ceará, and was once seen as a possible successor to Lula. Albeit capable and moderate, Gomes has failed to gain traction nationally in the past three presidential races he entered.

Finally, there is an interesting dynamic brewing between two weaker candidates. João Doria, considered center-right and pro-business, is the current governor of São Paulo, Brazil’s most populous and richest state. He is polling around 3 percent and represents PSDB, a legacy party with national recognition, albeit in an unfavorable position. Simone Tebet, also center-right and polling below Doria, is a first-term
senator from Brazil’s agricultural region. She is well respected and is the candidate of MDB, another powerful legacy party apparently unable to capture votes for president.

There is talk that Doria and Tebet might join the same ticket to unify the center.

Lula is currently best positioned for October’s election, but with almost seven months until the elections, there is plenty of time for public opinion to shift and consolidate around another candidate.

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