by André Oliveira for OFFNews
@andreufmg

BELO HORIZONTE, BRAZIL - Today, nearly 140 million citizens will elect Brazil’s next President for the following four years. On this year’s presidential run, three are the main candidates to take the 7th world’s biggest economy power: Ms Dilma Rousseff (Workers’ Party, PT), the current center-left head of State; Ms Marina Silva (Brazilian Socialist Party, PSB), a former center senator and then-environment minister during the Lula da Silva’s government; Mr. Aécio Neves, from the Brazilian Social Democracy Party (PSDB), a center-right candidate who had looked like Ms. Rousseff’s biggest opponent.

Dilma Rousseff was largely favourite until everything comes to an unexpected turnaround when a tragic private jet crash killed one of the presidential contenders, Eduardo Campos, the first choice of the Brazilian Socialist Party (PSB) – who holded a bashful third place in past pools. Campos’ vice-presidential running mate, Marina Silva, accepted the nomination as her successor and replaced the former governor and rising political star. By now, Ms Silva is running neck-and-neck in a heated race with Dilma Rousseff – and, despite of lacking executive experience, the internationally acclaimed environmentalist appears as a viable alternative for a political renewal after two decades of control by the PT and, before it, Mr. Neves’s PSDB, parties which have ruled country's politics so far. In other hand, critics argue no further promised substantial changes will be reached, as she was one of the founders of the Worker’s Party (PT) now headed by Ms Rousseff. A legitimate concern over a Silva government, analysts say, is how she would rule given her Socialist party is likely to only have 30-40 seats in the 513-seat lower house. The party might be able to count on another 50-60 seats from the PSDB but it would need more than 200 to control the house.

Silva grew up in a poor rubber tappers' community in the Amazon. In the 2010 presidential race, she came third. Now, if elected, Silva would be Brazil’s first mixed-race president, a significant reach in a country where political power is still headed by whites. Her campaign urges for support by every social class in every Brazilian corner. It relies on Brazil’s poor, from whose conditions Ms Silva came; on the markets, which is attracted by her orthodox economic principles; and on ordinary Brazilians, whose antiestablishment sentiment disquieted Brazil last year, including dissatisfy over a sluggish economy, poor public services and fatigue with political corruption. A green activist and devout evangelical, Ms Silva – or simply “Marina” – also appeals to religious and environmentalists. Her pragmatic agenda for controversial issues, like abortion, homosexuality and drug decriminalisation reveals how the Pentecostalist faith can guide Silva’s campaign and the wide ideological spectrum her supporters come from.

According to Financial Times (FT), from an interview of Eduardo Giannetti, a prominent Silva economic adviser, her campaign pitch is to combine the ‘best elements’ of both PT and PSDB parties. She is up to preserve the social benefits of Worker’s Party, particularly the Bolsa Família [a federal social welfare program], while returning to the responsible economic management of the PSDB. “When it was in power in the 1990s the Brazilian Social Democracy Party (PSDB) introduced inflation-targeting, fiscal prudence and a floating currency that is credited with overcoming Brazil’s history of runaway prices. She is also pledging full independence for the Central Bank. Ms Silva’s advisers say she would immediately make the adjustments being demanded by the markets – restoring the budget primary surplus to healthy levels, estimated by economists at about 3 per cent of gross domestic product compared with under 2 per cent now. This would create a ‘positive shock’ in which inflation would fall and interest rates – standing at 11 per cent – could be lowered. [...] Some question, however, whether she will maintain a hard line on the environment, blocking much-needed infrastructure projects and inhibiting Brazil’s most competitive sector, agribusiness.”

Recent polls show a very tight and likely second-round run-off between Marina Silva and Dilma Rousseff, a Bulgarian descendent who is seeking for a new term. Preceded by the former President Luiz Inácio Lula da Silva, Ms Rousseff was initially welcomed in 2011 by markets as a competent technocrat. But despite late social advances, Ms Rousseff’s government faces economic setbacks which can be the key of today’s election contest. Unemployment reached the lowest levels in history (5%, in August/2014) and the federal assistance programs helped to reduce inequality and bring millions up to the status of middle class. International reserves stand approximately at $375 billion and foreign direct investment reached strong USD 65,3 billion in 2013.

In other hand, GDP growth is now projected to expand 0,7% this year, according to government sources, and, despite a stagnant economy, the annual inflation is on the top of the central bank’s target range (6,5%) – although not out of control. The sustained increase in the general price level of goods and services has forced the Brazilian Central Bank to tighten monetary policy since 2013, raising the interest rate to 11%. But why Brazilians are facing a unusual “stagflation” – when the country’s economy experiences technical recession and sustained increase in general prices? And why this gloomy scenario is coming along with low unemployment rates?

After a cycle of high economic growth during the ‘Lula Era’ (2003-2011) – 4% per year in avarage –, it has now slowed the most since the 1990s, averaging under 2%. The pillars of recent year’s increase in real national income – household consumption, government spending and China’s economic miracle – have led Brazil to an exhausted and dependant development model. The investment and consumer sentiments declined. Ms Rousseff’s government is unpopular among investors, who accuse it of undermining confidence by successive interventions from fuel and energy prices to the financial sector. In addition, China, Brazil's top trading partner, is no longer growing 10% per year anymore. In other hand, government spending is traditionally high but does not foster efficiency – which contributes to a intense inflation pressure and to a trifling impact on economic growth experienced in Brazil, where public employees are paid on average twice as much as people doing similar jobs in the private sector. The country spends an impressive 15% of GDP on social programmes – including pensions for civil servants, education and health care systems and welfare benefits – although just 1.5% of Brazil’s GDP goes on infrastructure investment from all sources, both public and private. The long-run global average is 3.8% and there is no doubt infrastructure investment contributes to a higher economic growth.

To keep the economy boosted, Brazil's central bank and Finance Ministry announced measures to stimulate credit – and they are still reliant on public debt, in spite of facing a lower primary budget surplus due to a weak economic activity. It partially explains the sustained increase in general prices. Unemployment, tough, experiences the lowest rates ever with real salary raises. Yes, the number of jobs generated falled nearly 20% last August, considering the same period of 2013, but Brazilian youngs retard their access to labour market due to high household incomes.

For global investors, the vote is crucial, according to Financial Times. “With the economy in technical recession in the first half and its fiscal accounts deteriorating, the world’s seventh largest economy – once an emerging market star – could be headed for junk bond status – leading to a decrease of foreign direct investments – unless the next president makes tough spending choices.”

Now, the election contest is too close to call and nearly 140 million citizens will elect Brazil’s next President for the following four years. Of course, with an unpredictable result.

The author, ANDRÉ PINTO DE SOUZA OLIVEIRA, 28, Brazil, graduate of the Federal University of Minas Gerais (UFMG) is lawyer, instructor and specialist in Environmental and Constitutional Law through the University of Lisbon (Portugal)
*with the contribution of Ben West