Rousseff victory rattles investors

The election victory of Dilma Rousseff has dented hopes of serious economic reform for Brazil.

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."

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".

Recommended

I wish I knew what an emerging market was, but I’m too embarrassed to ask
Too embarrassed to ask

I wish I knew what an emerging market was, but I’m too embarrassed to ask

This week's “too embarrassed to ask” explains what emerging markets are, and why you might want to invest in them.
9 Sep 2020
Bullish investors return to emerging markets
Stockmarkets

Bullish investors return to emerging markets

The ink had barely dried on the US-China trade deal before the bulls began pouring into emerging markets.
27 Jan 2020
Why investors should beware of India’s surging stockmarket
Emerging markets

Why investors should beware of India’s surging stockmarket

The BSE Sensex benchmark index has soared by 90% since March, largely driven by foreign investors. But India's bull market is very vulnerable.
15 Jan 2021
How to invest in Africa as it takes its place in the post-pandemic sun
Emerging markets

How to invest in Africa as it takes its place in the post-pandemic sun

The African Continental Free Trade Agreement has come into force. Favourable demographics, improving governance and a growing technology sector also b…
14 Jan 2021

Most Popular

Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
Prepare for the end of the epic bubble in US stocks
US stockmarkets

Prepare for the end of the epic bubble in US stocks

US stocks are as expensive as they’ve ever been. How can you prepare your portfolio for a bubble bursting?
18 Jan 2021
The best investment trusts to buy for 2021
Investment trusts

The best investment trusts to buy for 2021

Sectors ranging from emerging markets to student accommodation look poised to do well this year, says David Stevenson, as he picks the best investment…
19 Jan 2021