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How Will the Brazilian Elections Impact Argentina? We Asked Around

The Bubble talked to an economist and a political analyst to find out.

By | [email protected] | September 14, 2018 2:58pm

candidatesFrom left to right: Jair Bolsonaro, Geraldo Alckmin, Fernando Haddad, Marina Silva and Ciro Gomes. Photo via Veja
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The upcoming presidential elections in Brazil will have a direct impact in Argentina.

As the country’s largest trading partner, its economic stability and the political course it takes as a result of the elections could contribute to curve the economic crisis Argentina is currently immersed in, or further deepen its recession.

However, the situation in the neighboring country is not particularly rosy. For four years now, political scandals like the Lava Jato (“Operation Car Wash”) in 2014, the impeachment of former Partido dos Trabalhadores (PT) President Dilma Rousseff in 2016, and the recent incarceration of ex President Luiz Inácio Lula Da Silva – also her mentor – in 2018, as a result of a corruption sentence against him, have kept the country immersed in a constant state of political turmoil, with its consequent – negative – economic implications.

To make matters worse, recent events concerning the two politicians with the highest voting intention,  far-right candidate Jair Bolsonaro and former president Lula Da Silva have plunged the country into a deeper state of uncertainty: the former was stabbed during a rally in the state of Minas Gerais, while the latter, by far the most popular candidate in Brazilian politics, was barred from running for President due to the sentence against him.

After resisting for months, Lula dropped his bid earlier this week. The party immediately confirmed his former Education Minister and Mayor of Sao Paulo – the largest city in Brazil – between 2013 and 2017, Fernando Haddad, who however is far less popular and lagging in the polls.

In such a context, The Bubble talked to the Treasurer and Executive Committee Member of the Argentine Council for International Relations (CARI), Francisco de Santibañez, and Management & Fit consulting agency’s chief economist, Matías Carugati, to get their opinions on the road that Brazil might go down depending on the different likely outcomes, and ask them how they think Argentina’s commercial and political relations with Brazil will unfold based on them.

Both analysts agreed on the fact that Brazil is immersed in a state of political uncertainty which, consequently, affects the economic landscape in the same way. Carugati explained this “affects decision-making processes, especially when it comes to real investment in the private sector.”

“Companies are waiting to have a more precise picture about the direction towards which the new President will take Brazil before making any decisions that could be costly to revert. Long-term investments of capital require a degree of certainty that does not exist today,” he said.

Even though Brazil’s GDP showed mild growth during the last five quarters, this is far from being enough to recover from the recessions the country experienced in 2015 and 2016, when its economy shrank by 3.5 percent each year. In fact, a report recently published by the Getulio Vargas foundation informed that between late 2014 and the end of 2017, poverty in the neighboring country increased by a staggering 33 percent – from 8.4 to 11.2 percent of the country – meaning that a total of 23.3 million people – 6.27 more than in 2014 – lived with less than 232 Brazilian Reals a month. According to the foundation, the main reason for this increase was the increase in unemployment rates, which currently clock in at 12.9 percent.

In regards to the current state of the political landscape, especially concerning the upcoming elections, Santibañez indicated that “the major doubt is whether Lula can transfer an important portion of his votes to Haddad.” “If that is the case, the runoff would probably be between him and Bolsonaro. Otherwise, Bolsonaro would face a moderate candidate,” he said.

Although Haddad’s candidacy has room to grow – in fact it has, from a meager 4 percent to 9 percent – and could experience another boost as a result of Lula’s recent explicit support, another piece of data from the survey becomes yet another hurdle in his already uphill road to the presidency: Haddad would be the only main candidate who would not beat Bolsonaro in an eventual runoff. He would only tie. This could lead many detractors of Bolsonaro’s racist, sexist and homophobic rhetoric – to name a few – to use their votes strategically to prevent him from taking office.

The other candidates are:

  • PSDB’s Gerardo Alckmin, who served as the Governor of São Paulo from 2001 to 2006 and from 2011 to 2018. According to the Datafolha survey, he has a 11 percent voting intention.
  • Sustainability Party’s (REDE) Marina Silva: she  served as a Senator of the state of Acre between 1995 and 2011 and was the Minister of the Environment in 2003. According to the survey, she has an 11 percent voting intention as well.
  • PDT’s Ciro Gomes: he has occupied several political offices, the most relevant being: Mayor of Fortaleza, Governor of Ceará, Minister of Finance during the Itamar Franco administration and the Minister of National Integration during Lula’s tenure. According to the survey, he has a 13 percent voting intention.

All of them would beat Haddad in an eventual runoff. On his end, Bolsonaro has a 24 percent voting intention, but as mentioned before, many point at precedents set by experiences of other far-right candidates across the world – Marine Le Pen, for example, who in the last French elections she had a rather high “floor” of votes, but an extremely low ceiling – given their inability to attract voters from other ideological spectrum.

From left to right: Jair Bolsonaro, Geraldo Alckmin, Fernando Haddad, Marina Silva and Ciro Gomes. Photo via Veja

When asked about this argument, De Santibañez warned that “the same was said about [US President] Donald Trump and he ended up winning.”

“The Brazilian society is extremely fed up with its leadership, even more so than the American one. It will be harder for an establishment candidate to win, rather than an anti-establishment one to emerge victorious,” he added.

Moreover, he indicated, the stabbing increases Bolsonaro’s chances of winning: “The negative vision a large part of society had of him largely had to do with the fact that he was seen as an extremist. The stabbing will generate sympathy among many. It also restrains his opponents, who will have to be more careful when attacking him, and gives him more – free – coverage, thus ending the disadvantage he had in that area (lack of air time to do campaign on TV),” De Santibañez  said.

Regardless of the final outcome, Bolsonaro’s chances of making the runoff are practically assured. I asked the two analysts how they thought political and economic relations between Argentina and Brazil would bode under an eventual Bolsonaro administration.

De Santibañez said he does not believe “Argentina would play a central role in his foreign policy, but that does not mean the bilateral relationship would deteriorate.”

Talking about potential economic relations, Carugati said on his end that “it is hard to know” what they would be like: “Bolsonaro is a politician who is difficult to understand. His discourse has a stance, but his actions as deputy went, many times, on the other direction. I assume, nonetheless, that Argentina would try to keep the good relations given the character of strategic partner Brazil has,” he argued.

Carugati went on to explain that, however, “any candidate that is not rupture-prone would be convenient for Argentina.”

“I am talking about politicians who see value in keeping Argentina as a strategic partner, something that also applies to the Mercosur [trading bloc],” he said.

Nonetheless, Carugati emphasized on the need for Argentina to improve its commercial integration in general terms, regardless of who the Brazilian President is.  “It is clear that some candidates can make this job easier, since Brazil is the most important market of the region for Argentina. But our economy needs to increase its exports to grow sustainably. This means creating systemic competitiveness, and not base it exclusively in a depreciated exchange rate, as well as develop new external markets. Brazil and the Mercosur are important, but we don’t have to limit ourselves to them,” he said.

A key step, the economist said, would be reaching the long-negotiated free trade agreement between the Mercosur and the European Union.

Brazilians are heading over to the polls in less than a month. Argentina, immersed in its own state of uncertainty, looks on.