Brazil’s hosting of the World Cup soccer tournament in June through July 2014 was a trial of sorts for President Dilma Rousseff, who will stand for re-election in October. Any serious problem during the games could have turned the upcoming election into a referendum on whether she is the best person to head the government in the summer of 2016 when Brazil hosts the Olympics.

On balance, it is probably fair to say that Rousseff passed the test, to the extent that Brazil did not suffer any lasting damage to its image during its turn in the international spotlight. But the debate over whether the benefits of hosting the World Cup and the Olympics are sufficient to justify the massive outlays required will continue to percolate. In terms of the upcoming election, more general concerns about the state of the economy figure to be the more important factor in influencing the behavior of voters, and, on that score, the outlook is not favorable for the president.

Poll data released in mid-July showed Rousseff’s lead over challenger Aécio Neves, the candidate for the center-right PSDB, narrowing to just four percentage points (within the margin of error) in a hypothetical run-off election. With Rousseff’s overall support slipping to 36 percent, and that for Neves holding steady at 20 percent, that hypothetical contest is becoming a virtual certainty.

Neves, a former governor of the state of Minas Gerais who was officially chosen as the PSDB’s candidate in early June, can be expected to focus on the current weakness of the economy, which he will undoubtedly blame on the PT government’s failure to completely abandon the interventionist tendencies embedded in its leftist roots. A deteriorating fiscal position — in May, the government posted its largest primary budget deficit since the depths of the global financial crisis in late 2008 — is likely to figure prominently in his critique.

Neves will call for a return to the business-friendly and fiscally conservative policies.

While Rousseff pledges to maintain the policy framework she inherited from her very popular predecessor, Luíz Inácio “Lula” da Silva, Neves will call for a return to the business-friendly and fiscally conservative policies of Fernando Henrique Cardoso, a fellow founding member of the PSDB who preceded Lula in the presidency. Among other things, Neves has stated that he would reduce the number of ministries, simplify the tax system and reduce the tax burden, and bring inflation under control.

However, he has indicated that he would maintain some of the more effective (and popular) anti-poverty programs introduced under the PT, such as Bolsa Familia, which provides cash transfers to the poor, while tying increases in the minimum wage to inflation.

The third contender in the presidential contest is Eduardo Campos, the leader of the Socialist Party, whose campaign received a huge boost when the charismatic environmental activist, Marina Silva, agreed to be his running-mate after her own presidential bid ran aground because she failed to register her party in time. Silva finished third in the 2010 presidential election, and her addition to the PSB ticket should help to solidify the party’s hold on third place.

On that basis, the Socialists may be in a position to play the role of king-maker in the second round of presidential voting. The PSB did not put forward a presidential candidate in 2010, instead throwing its support behind Rousseff. However, that does not mean the president will be at an advantage in securing the PSB’s support when it comes to enlisting allies ahead of a run-off vote.

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The PRS Group
About The Author The PRS Group
The PRS Group is a leading global provider of political and country risk analysis and forecasts, covering 140 countries. Based on proprietary, quantitative risk models, the firm's clientele includes financial institutions, multilateral agencies, and trans-national firms.




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