The most important recent news for the presidential elections in 2018 has nothing to do with the universe of candidates, but with the economic scenery in which the campaign will take place. “Normalization” of the North American monetary policy reduces international liquidity and puts pressure on emerging economies, including Brazil.
For voters, the most visible consequence of this reality in the world is the strengthening of the dollar and its reflex on fuel prices and on other imported products. Apart from the risk of inflationary pressure, the appreciation of American securities may oblige the Central Bank of Brazil to increase the benchmark interest rate (Selic), to make the country more attractive to investors. A concrete effect of this new scenery was maintenance of the Selic at 6.25% in the last meeting of the Monetary Policy Committee (Copom), contrary to market expectations of another cut pf 0.25 percentage points.
Greater inflation and interest rates would eliminate a share of the legacy of the Michel Temer government and would complicate a reformist narrative in the electoral process. As has already been pointed out in prior analyses, it would be important for those defending a more orthodox management of the economy to see growth that would support it, suggesting to the population that “recovery cannot be interrupted by electing a non-reformist candidate.”
In the war of narratives, developmentalism and liberalism will be the main players in the debate. The first school brings the negative baggage of the fiasco of the “new economic matrix” during the Dilma Rousseff (PT) government, and its association with interventionism and corruption. However, developmentalism still sounds more familiar to Brazilians, who have already tried the approach in several variations and still grant state activity a good share of expectations for improvement of their lives.
The liberal narrative, in turn, must be disconnected from the Michel Temer government, to be granted good chances. The absence of results makes defence even harder, more so due to its renowned natural difficulty of generating social costs right from the start, when the State is reduced, and efficiency and productivity gains are promoted for the economy.
However, the fiscal crisis scenario should restrict candidate capacity to make promises. Without the government having the capacity to create a temporary scenery of well-being, like president Rousseff did in 2014, it is essential to discuss the terrible condition of public finances. For this reason, even left-wing candidates, like Ciro Gomes (PDT) and Marina Silva (Rede), are preparing proposals for public pension reform.
In this aspect, remembering Greece may be useful to Brazil. After fighting against fiscal reforms imposed on the country by the European Union, left-wing party Syriza had to adopt such measures when it took power. Without reforms, the way out for developmental politicians is increasing the tax burden, which former president Rousseff, clenching a fresh victory in the ballots, could not do. Therefore, despite elections traditionally seeming like places where everything is possible, the economic reality of the country should influence the debate, bringing it closer to reality.
Will Alckmin make it?
Geraldo Alckmin’s (PSDB) chances for running for the presidency of Brazil are under pressure. His bad performance in the polls, the risk of an accusation by the Public Prosecutor’s Office of slush fund usage in prior elections and the existence of a potentially stronger candidate than him within the PSDB itself may be an overly irresistible combination.
The former governor of the state of São Paulo has also been erring with regard to generation of ties with potential allies. The feeling that only he is a moderate option in the centre has resulted in the PSDB presenting itself rather arrogantly to allies, expecting them to join, not presenting and negotiating alliances.
The fact is that the PSDB has little to offer today. For example, the support in São Paulo is compromised by the fact that governor Márcio França is from another party – the PSB – which should compete against the PSDB on the national agenda.
In Paraná, former governor Beto Richa has lost power over his successor and may even be sued before formalizing his candidacy to the Federal Senate. In Minas Gerais, the PSDB is facing the embarrassment of having former governor Eduardo Azeredo fighting a prison sentence while senator Aécio Neves faces uncertain chances of re-election.
The party does not have strong names in the North-east and is being stunted by Álvaro Dias (Podemos) in the South. The hegemony in the Mid-west, where the party rules three of the four states, suffers due to the low density of voters in the region, as is the case in the North.
Mr. Alckmin has been working on positive aspects for his campaign. Currently, the former governor is focussing mainly on the market, announcing economic team names connected to the Real plan (which created Brazil’s most recent currency). His expectations are to create synergy with opinion makers in financial sector media.
At home, the confirmation of eligibility of former São Paulo city mayor João Doria has become a problem. For the time being, research institutes are not disclosing Doria’s vote potential if he runs for president. In case his performance is much greater than Mr. Alckmin’s, that could spell trouble.
Therefore, in an attempt to cut losses, advisors connected to the former governor have been leaking information that a Doria nomination for vice president would result in two-digit indices for the PSDB campaign. There is an attempt to establish fixed ties between Mr. Alckmin and the former mayor of São Paulo.
The strategy is frail, though, mainly due to Mr. Doria’s ambitions. Although Mr. Alckmin is the president and rules the PSDB internally, it is not possible to ignore the delicate situation he finds himself in, as a simple opinion poll placing Mr. Doria ahead of him could eliminate his chances of running.