Brazil’s vote could change region’s political map

20131229andresNew polls showing that opposition candidate Marina Silva is likely to win Brazil’s upcoming presidential elections are leading growing numbers of analysts to predict that Latin America’s biggest country may soon shift toward more business-friendly policies, and rock the whole region’s political scene.

Silva, an environmentalist who was born in poverty, comes from a mixed-race family and is often referred to as “Brazil’s Obama,” is tied with left-of-centre President Dilma Rousseff in the the polls for the first-round vote on October 5, and would defeat Rousseff by 10 percentage points in a likely second-round vote scheduled for October 26, according to the latest Datafolha poll.

If current voter preference trends continue and Silva wins, it would mark the end of a 12-year hold on power by the leftist Workers’ Party. During that period, Brazil has played a key role in supporting Venezuela and other leftist populist governments in the region.

While Silva is a leader of the Socialist Party, she — as well as fellow centre-right opposition candidate Aecio Neves — would support much more investment-friendly economic policies than Rousseff in an effort to get Brazil out of its current economic stagnation, according to the two opposition candidates’ respective campaign platforms.

In addition, both opposition candidates would shift Brazil’s foreign policy away from its current focus on seeking better economic ties with Argentina, Venezuela and other South American neighbours, and would seek preferential trade agreements with Europe, the United States and Asia, analysts say.

“There will be a big change, no matter which opposition candidate wins,” says Rubens Barbosa, a former Brazilian ambassador to the United States and current business and political adviser in Sao Paulo.

Barbosa added that either of the opposition candidates would “revise” Brazil’s current foreign policy of prioritizing ties with South America’s Mercosur economic bloc, and South-South relations in general. Under Mercosur rules, member countries cannot sign individual free trade agreements with any external countries, or economic blocs.

If Silva or Neves win, “Brazil will also make it a priority to seek better trade ties with developed countries, to become part of global production chains and get out of its current isolation,” Barbosa said.

Brazil does not have free trade agreements with the United States or Europe. It has long been negotiating a free trade agreement with the 28-country European Union, but negotiations have been stalled because of objections from Argentina and, more recently, Venezuela.

“On international trade policy, there is a clear divergence between Dilma [Rousseff] and the other candidates,” says a report by Brazil’s RCConsulting firm. “While the current president proposes to maintain and improve regional ties, especially Mercosur, opposition candidates seek to make the Mercosur deal more flexible, and to seek closer ties with the United States, Europe and Asia.”

On domestic economic issues, Silva’s campaign platform proposes to contain public spending, and to give greater autonomy to the Central Bank as a way to generate investor confidence. Silva proposes a new law that would set fixed terms for Central Bank presidents, and make them more immune to government influence.

“She would be more pro-business,” says Paulo Sotero, head of the Brazil Institute at the Washington DC-based Wilson International Center for scholars. “Every time that Silva rises in the polls, the [Brazilian] stock market goes up.”

But Brazil analysts also agree that Silva’s personal thinking on economic issues is a big question mark, and that the business community may be hoping that any opposition candidate would be better for Brazil’s economy than the current government. The economy is in a technical recession, having been downgraded 14 times in recent months to an expected 0.5 per cent growth this year.

Sceptics about Silva’s chances to help revamp Brazil’s economy cite the fact that she never held a high-profile elective job — her highest public position was that of minister of the environment — and that if elected she would have to make concessions to the left wing of her own Socialist Party, which calls for maintaining and increasing current government subsidies to the poor.

While Silva’s campaign platform calls for more free-market economic policies than the current ones, it also calls for increasing the current Bolsa Familia subsidy for poverty-stricken families from 14 to 24 million families, and to raise healthcare spending from 7 per cent of the country’s gross domestic product to 10 per cent over the next four years.

These and other social measures would require increasing public spending in those areas, and would put upward pressure on inflation, sceptics say. In addition, she would have a minority in Congress, since she comes from a relatively small party, they say.

“Brazil has a great resistance to change, both to good change and to bad change, and I doubt that things would change much in a Silva government,” says Paulo Rabello de Castro, an economist and political analyst.

“Neither she nor her party have a personal conviction to support free market policies; it’s something that has been imported by them,” he said. “If she wins, she would put market-friendly people in the Finance Ministry and other cabinet position to protect the government from leftist influences, but there would be a growing conflict with her leftist followers.”

My opinion: Silva is riding high in the polls these days, but I wouldn’t rule out a Rousseff victory yet, because under Brazil’s electoral rules, the president will enjoy much more television time than her opponents in coming weeks.

In addition, Rousseff may get popular former President Luiz Inácio Lula da Silva to double his campaign efforts to support her re-election, and she will most likely get the votes of millions of poor families who depend on her Bolsa Familia subsidies.

But if polls are right and Silva wins, we may see an economic and political change that will be felt throughout Latin America.

After more than a decade of populist policies funded by record world commodity prices in Brazil, Venezuela, Argentina, and other countries in the region, we may see a shift to more free-market economic policies aimed at attracting investments, and at increasing industrial exports to the world’s biggest markets. Whether she is a true believer in market-friendly policies or not, economic reality would push Silva to honour her campaign promises.

© The Miami Herald, 2014. Distributed by Tribune Media Services.