On the 2nd of October, the elections for the presidency of Brazil, and as everyone knows, the second round is on its way. On the 30th, Brazilians will return to the polls to finally decide who will be the next president of the country. Market analysts see the candidate Jair Bolsonaro with more strength in this Tough competition in the second round.
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Market analyzes Bolsonaro's strength gain for second round
The results of the first round of elections cheered up the Brazilian financial market, according to observations made by Stock Exchange analysts. Last Monday, the 3rd, the Ibovespa rose to 5.2% to 115,769 points, while the dollar fell 4.3% to close at R$5.16.
From the perspective of financial market analysts, the candidate and current president Bolsonaro is the winner. Not only for the results in
dispute to office, but also by the result of his supporters in state governments.“A positive point for Bolsonaro is that the current government managed to elect several senators and led in several states in the positions of governor. That still leaves the right with a lot of power in Congress. If Lula wins, he will face fierce opposition. If Bolsonaro wins, he tends to be able to govern with less difficulty” reports Pedro Medina, founding partner of Quantzed.
According to João Beck, an economist at BRA, the fact that most of the benches in the National Congress belong to the party of the current president will guarantee the spending cap rule, as well as prevent a flight from investors.
“As for the bench for senators and elected representatives, the market is excited with a certain guarantee that no PEC to end the Spending Ceiling passes Congress”, he suggests.
Lula against Bolsonaro
It is believed, according to economists, that the second round will balance the economic debates, and however, force a nod more to the center of Lula (PT) and Jair Bolsonaro (PL).
“The market sees the result as positive, both for keeping Bolsonaro in the running and for the tighter race that, in theory, forces Lula to wave to the center and get more support. Lula's path to victory continues to be easier, but there is room for change in another month of the campaign”, explains Beck.
Lula secured the highest percentage of votes in the first round, with 48.3% (57,258,115 votes), while Bolsonaro won 43.2% of Brazilians (51,071,277 votes). The final result contradicts dozens of opinion polls, which showed the former president with a possible victory in the first round.
As seen in the first round, extremely even and explicitly polarized between the candidates, the second round is expected to be even more fierce. Both will pursue alliances with governors, senators and deputies. In addition, they will probably review their government plans in order to receive more votes.
Lula's new strategies to win votes
In Lula's case, the market imagines the appointment of Henrique Meirelles, creator of the spending cap, to the Ministry of Economy. The candidate should also open his government program to other parties more in the center, such as the MDB, PSDB and Citizenship, where there is an expectation of support for the former president in the second round.
“We have to keep an eye on Lula's next steps. Not being elected in the first round, the former president needs to win votes. And for that, he should reveal more points of his government plan, until then almost secret, and appoint a possible Minister of Economy more accepted by the market. Henrique Meirelles could be an option with a lot of chances”, emphasizes Menin.
However, in the final stretch of his campaign, Lula must reinforce the accomplishments of his two past governments, and also focus on his promises for the country's infrastructure. Financial market researchers believe that this could be a factor that will favor the PT candidate in the dispute.
“The market expects Lula, if elected, to carry out the same strategies as in his two terms, therefore a government in that the state is the provider of economic power and that it distributes the population through aid such as the old Bolsa Family. The ex-president is also known to like great works, incentives for the white line, education, and these sectors can benefit”, says Marcus Labarthe, founding partner of GT Capital.
Change of focus from the current president
On the other hand, Jair Bolsonaro will turn to the public that does not believe in his promises and ideas: the less favored class. His president and government adjusted the Auxílio Brasil to R$600.00.
Jair's speech should revolve around the creation of aid, extolling the government's economic successes, in order to minimize Lula's management.
“It was evident in the numbers and even in President Bolsonaro's speech that the less privileged layer of the population had in their vote predominantly the choice of former President Lula. Bolsonaro must now demonstrate actions not only through economic numbers, but through popular initiatives that are part of the daily lives of these Brazilians. Lula is still remembered for his aid. This remains in the memory of many of whom Bolsonaro needs to reverse the advantage”, says Labarthe.