Brazil’s presidential election
Posted on September 12, 2014.
Sep 1st 2014, 23:50 by J.P. | SÃO PAULO
RECESSION is never good news for an administration. And in the run-up to a general election it can be a death knell. With five weeks to go before polling day, Brazil’s opposition must therefore have quietly rejoiced at official data released on August 29th, showing that GDP had dipped by 0.6% in the second quarter and by 0.2% in the first. Yet the dismal figures may not matter as much to electoral calculus as President Dilma Rousseff’s rivals would have hoped. Why is that?
Ms Rousseff blames the contraction on weak global recovery from the 2009 financial crisis, as well as a “surfeit of public holidays” (and thus fewer working days) during the month-long football World Cup in Brazil, which concluded on July 13th. These extra holidays were added by the authorities in a bid to ease pressure on public transport in World Cup host cities. But critics point out that this does not explain the fall in output during the first three months of the year—and the government had previously promised a Copa-related economic bonanza. Of the 45 countries which have reported second-quarter GDP so far, only war-torn Ukraine has fared worse. Instead, Ms Rousseff’s critics blame the slowdown on flagging business confidence and falling investment as a result of her interventionism, fiscal laxity and failure to address chronic problems: the shoddy infrastructure, tangles of red tape and arguably the world’s most convoluted tax system.
All this bodes ill for Brazil in the medium term, yet it is unlikely to cost Ms Rousseff many votes in the short run. Although businesses are cutting production they have so far proved reluctant to begin the costly process of laying off workers. As a result, unemployment stands at just 4.9%—a historic low—and although it is likely to rise, it will not do so until after the election. Median household incomes have managed to keep pace with stubbornly high inflation. And while consumer confidence remains low, it received a boost when food-price inflation stalled and prices of services declined after the World Cup. Rather counterintuitively, government approval ratings, which had been sliding since the start of the year, actually edged up in August.
Markets, for their part, saw the release of second-quarter GDP figures as raising the chances of a victory by the opposition and are hopeful that a new president would implement a more responsible economic policy. This explains why investors have been so bullish—the main stockmarket index reached a 20-month high on August 29th. Ms Rousseff is no longer a shoo-in: polls suggest that she would lose in a second-round run-off to the Brazilian Social Party’s Marina Silva, a popular former minister who has been thrust into the presidential race after the death of her party’s former leader, Eduardo Campos. Ms Silva is popular largely because she embodies political renewal, something that Brazilians crave. And it is the prospect of renewal, rather than a desire to punish Ms Rousseff for her economic mismanagement, that will have the greatest impact on how Brazilians vote.