Brazil’s presidential race - By a whisker, more of the same

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Brazil’s presidential race

By a whisker, more of the same

An incumbent scrapes home despite the desire, and need, for change

Nov 1st 2014 | SAO PAULO | From the print edition

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BRAZILIANS seemed to be clamouring for change. Since nationwide protests erupted in June last year over shoddy public services, the rising cost of living and venal politicians unable to do anything about either, two in three have been telling pollsters they wanted their next government to do things differently. Yet on October 26th, 51.6% of them opted for continuity. The president, Dilma Rousseff, was re-elected to a second four-year term and her left-wing Workers’ Party (PT) handed its fourth consecutive victory. The centre-right challenger, Aecio Neves, trailed by 3.5m votes. It was the slimmest margin in Brazil’s modern psephological history, but a clear defeat nonetheless.

Perhaps this was inevitable. Only two Latin American presidents have lost re-election bids in the past three decades. Odds are stacked in favour of incumbents, with all the machinery of power and patronage at their disposal. Ms Rousseff could also point to record-low unemployment, rising wages and falling inequality on the PT’s watch. But Mr Neves argued, with good reason, that progress has stalled since Ms Rousseff took office in 2011. Fully 51m Brazilians believed him. Ms Rousseff’s 54.5m votes, out of an eligible population of 143m, are certainly no ringing endorsement. “The message from the ballot box is this…change and reform,” she conceded in a television interview on October 27th.

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• Brazil
• Dilma Rousseff
• Aecio Neves

She will lead a country rent asunder. She strolled to victory across swathes of the poor north and north-east, helped by less fortunate Brazilians’ gratitude for the PT’s social programmes, but also by her baseless insistence that Mr Neves would end them. In Maranhao, the poorest state, she notched up 79%; in six others her rival failed to carry a single municipality.

Much of Brazil’s richer centre and south plumped convincingly for the market-friendly Mr Neves. As a measure of how capital voted, if each Brazilian state had an electoral weight determined by GDP rather than population, Mr Neves would have beaten Ms Rousseff by 53% to 47%.

In Sao Paulo, home to one-fifth of Brazil’s population and a third of its economy, he led by 7m votes; around the state capital there were some fireworks and a march celebrating the PT’s victory but the local response was deafening silence. Mr Neves lost only in Rio de Janeiro (by less than predicted) and Minas Gerais, Brazil’s second most populous state where he served two successful terms as governor in 2003-10—a strange defeat that probably cost him the presidency. Social media are abuzz with quixotic calls for southern independence.

In her acceptance speech Ms Rousseff denied that Brazil was divided, before promising “dialogue” and “consensus”. Efforts at healing wounds after the tetchiest campaign in living memory got off to a poor start, however, when she failed so much as to mention Mr Neves, who had been gracious enough to congratulate her.

The scars run deep. Ms Rousseff’s ally and predecessor Luiz Inacio Lula da Silva went so far as to liken the PSDB to the Nazis because of their supposed intolerance of the disadvantaged. The PSDB, for its part, accused the PT of being mired in sleaze, citing a rumbling probe into a kickback scheme at Petrobras, the state-controlled oil giant, that allegedly benefited Ms Rousseff’s party and some coalition allies. Three days before the run-off Veja, Brazil’s biggest weekly which is fiercely anti-PT, published unsubstantiated claims that she and Lula had known all about the alleged graft, something both strenuously deny.

Given all the acrimony, the prospect of bipartisanship looks remote. Indeed, PSDB bigwigs have already hinted that they lost in part because their opposition has been too docile. They want a congressional inquiry into the Petrobras affair. The bad blood will be an obstacle to Ms Rousseff’s stated aim of overhauling the political system to make the country more governable.

An attempt at political reform prompted by last year’s protests was stymied by congressmen who like the current set-up. Such obstruction is only likely to deepen. From January Congress will contain 28 political parties, up from an already unwieldy 22. Ms Rousseff’s weak mandate—the flimsiest of any government since democracy was restored in 1985—will make it hard to bang heads together. In her victory address she vowed to consult Brazilians on political reform in a plebiscite, before there is congressional deliberation. Eduardo Cunha, congressional leader of the Party of the Brazilian Democratic Movement (PMDB), the PT’s biggest coalition ally has said it will reject such a hasty vote—though it would accept a referendum held after proper legislative preparation. In many areas, he warns, support for the government “will not be automatic”. To ensure that Ms Rousseff got the message, on October 28th the PMDB helped quash a controversial executive decree, issued in May, which would require the federal government to consult grassroots social movements when formulating policy.

This mood of rancour may hamper Ms Rousseff’s immediate task of reviving near-zero growth and curbing inflation, running at 6.7% a year. (In a move that was both unexpected and overdue, on October 29th the central bank raised its benchmark interest rate, from 11% to 11.25%.) A bigger obstacle is the refusal to admit that there is a problem. Jobs are plentiful and wages are rising, Ms Rousseff boasted in the television interview. Judging by her acceptance speech, the economy is a distant third on her priority list, behind political reform and curbing corruption. The result of the race “shows that the people approve of our economic policy,” her outgoing finance minister, Guido Mantega, crowed on October 27th. She delayed naming his replacement, keeping markets on edge. Those hoping for concrete pro-business proposals got only some platitudes about snappier growth and the need to harness “entrepreneurial energy”.

At the hustings Ms Rousseff blamed high unemployment, prohibitive interest rates and stagnant wages during the PSDB’s tenure in 1995-2002 on the party’s orthodox policy prescriptions (less government meddling in the private sector or central bank policy, more fiscal rectitude). In fact, far from wreaking havoc, those methods helped stabilise an economy plagued by hyperinflation and poor competitiveness, paving the way for Lula’s social policies. Even if Ms Rousseff can understand this, she had made it harder to embrace Mr Neves’s ideas, because of her campaign’s left-wing tone.

Lula may prompt his protegee to be a bit more business-friendly and pragmatic, as he was while in office in 2003-10, a period many Brazilian bosses recall with nostalgia. Markets, too, may force some adjustment. Following Ms Rousseff’s re-election Brazil’s currency, the real, reached a nine-year low against the dollar. The main stockmarket index plunged by 6%. Both have rebounded, but—in the view of Tony Volpon of Nomura, a bank—that probably reflects the fact that her victory was priced in, more than any faith in a policy rethink.

The odds are that Ms Rousseff will tinker at the edges, just enough to stave off a painful credit-rating downgrade. The deficit is running at a five-year high of 4% of GDP. After the election Standard & Poor’s and Fitch, two ratings agencies, intimated that more budgetary restraint and structural reform would be needed in order to preserve Brazil’s prized investment grade, secured by Lula in 2008. Without such policies, the chances are that the country will keep drifting, putting jobs and incomes, and even the PT’s social programmes, at risk. After a wild election campaign, Ms Rousseff is in for a bumpy ride.