Rousseff victory rattles investors

published 30 October 2014

Dilma Rousseff was re-elected as Brazil's president at the weekend, beating Aecio Neves in a run-off, by 51.6% to 48.4%. Since Neves was seen as the pro-business candidate, both the Brazilian currency and the stockmarket have fallen.

In her re-election speech Rousseff acknowledged that her previous administration had fallen short of growth targets. She also vowed to bring the country together after an acrimonious campaign that had involved allegations of corruption at the state oil company Petrobras, whose shares fell by over 10% after the results.

What the commentators said

Rousseff's victory "has dented hopes" for "much-need economic policy reforms", said Neil Shearing of Capital Economics. "Growth in Rousseff's first term in office was already the weakest under any president since the early 1990s."

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While low growth and high inflation "can only be addressed through a new wave of policy reform", the likelihood is that "we'll see more of the same in terms of economic policy". That's bad news at a time when "Brazil's economy is already feeling the effects of the end of the global commodities boom".

Reform is unlikely, agreed Mary Anastasia O'Grady in The Wall Street Journal. The militant factions of Rousseff's Partido dos Trabalhadores (PT, or Workers' Party), "who have fattened up during PT rule, want more power, not less".

And there are reasons to worry about "the damage the PT might do to institutions and the rule of law over another 48 months". Rousseff has supported replacing local councils with people's councils; it appears that a "one-party state and indefinite rule" are the president's real goals.

The outlook may not be that bad, countered Bloomberg View. A promised cabinet reshuffle could allow her to "bring the country together politically". Replacing the finance minister will demonstrate that "she plans to respond to concerns about Brazil's fiscal situation and growing consumer debt".

And appointing an "unimpeachable technocrat" to oversee the energy sector could let her "help dispel the taint of scandal and restore Petrobras to health". But it is crucial that "change, however halting, must start now".

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.