Brazil: Neves overtakes Silva, heads to runoff election against President Rousseff
October 14, 2014
Brazil is headed to a second-round runoff after none of the candidates received more than 50% of the vote in the 5 October presidential election. Current President and Workers’ Party candidate Dilma Rousseff won 41.6% of the vote, ahead of second-place Aécio Neves, the Brazilian Social Democracy Party candidate who received 33.5% of the vote after a late surge in the polls. Marina Silva, once favored to win, finished a distant third with only 21.3%. Rousseff and Neves will go head-to-head on 26 October for the presidency.
Brazil’s presidential race has been anything but predictable. At the start of the campaign, the election looked like an easy win for President Rousseff, however, the election has changed drastically over the past two months since the death of first-choice Brazilian Socialist Party candidate Eduardo Campos. Subsequently, Silva had surged in the polls, temporarily overtaking frontrunner Rousseff, whose party has held the government for the past 12 years. Meanwhile, Neves—a member of a powerful political family—remained in the background. Leading up to the 5 October election, Rousseff unleashed a parade of attack ads aimed at Silva which, combined with Silva’s own slipups, resulted in her plummeting in the polls. Neves was able to ride a late surge, surpassing Silva, to finish second and advance to the runoff election with Rousseff.
Throughout the campaign, the future of Brazil’s economy has been at the forefront of the presidential debate. The largest economy in Latin America has performed below expectations in recent years. Second quarter GDP figures have established that Brazil is in a technical recession and inflation is now above the Central Bank’s tolerance margin. Neves, an economist himself, has concentrated his criticism of Rousseff on her handling of the nation’s economy. He has promised to bring much-needed change to Brazil’s economic policies, including cutting both government spending and bureaucracy. Meanwhile, Rousseff has signaled that she won’t drastically alter policy if reelected. She argues that the economy is waning due to external pressures and cites Brazil’s low unemployment rate as a reason to continue with current policies. However, she has hinted at potential new government appointments and similar small changes.
Recently, Brazil’s markets and the real have fluctuated along with the poll results, improving when a change in government seems more likely. The possibility of a new government seems increasing likely. As Tony Volpon, Latin America Strategist at Nomura states:
Voters still want an agent of change, and if Marina Silva faltered on the “reliability” prerequisite, Aecio Neves is the quintessential “reliable” politician, with well thought-out policy proposals, strong political support and a long record of getting things done. In effect, a large part of the electorate, which we believe will be a majority, want change, and know that President Rousseff does not promise or seems to be able to deliver change. The default option is Aecio Neves.
However, the outcome of the election is still unclear. The Socialist Party have announced their support for Neves in the runoff election, increasing the likelihood that Neves will gain the majority of Silva’s voters. However, Neves, who was largely ignored by Rousseff leading up to the election, will now bear the full weight of her criticisms and attack ads which could sway voter opinion. In particular, pro-business Neves will have to reassure the poor that he will not cut any of Brazil’s popular social welfare programs despite his intention to reduce government spending. With the results of the election unknown, LatinFocus Consensus Forecast panelists expect the economy to expand 1.0% in 2014, which is down 0.2 percentage points from last month’s estimate. For 2015, the panel sees GDP growth at 1.5%.