The tragic death of PSB presidential candidate Eduardo Campos in August and the subsequent nomination of Marina Silva as his replacement have dramatically changed the landscape of Brazil’s presidential race. A runoff is now the most likely scenario, and all recent polls predict a victory for Silva over President Dilma Rousseff in the second round.
Why has Silva risen so fast in the polls?
There are several reasons that explain Silva’s meteoric rise:
- Silva’s popularity: Marina Silva obtained 20 million votes in the 2010 elections, and despite having a great disadvantage in terms of her TV airtime for political advertisements (see graph below), she has been able to capture most of the votes from undecided voters following her nomination as the PSB’s candidate.
- PSB’s “third-way” alternative: Silva has been able to garner support from both sides of the political spectrum thanks to her commitments to deepening social spending and orthodox macroeconomic management, as well as her promise of a more business-friendly administration. As a matter of fact, Silva’s main economic advisor, Eduardo Giannetti da Fonseca, is a recognized champion of Brazil’s macroeconomic tripod, established during the Fernando Henrique Cardoso era, and someone often associated with the PSDB.
- Brazilian society’s willingness for change: Around 79% of Brazilians say they want change, not continuity, which favors Silva’s “third way” political message. Indeed, some voices within the PSDB, the only other party that could pose a threat to Rousseff in the elections, have already confirmed, although not officially, that their party would shift support to Silva in a second round in order to oust Rousseff from power.
What would a victory of Marina Silva mean for multinationals?
Most of Silva’s electoral promises are encouraging from an economic growth and business enabling standpoint. Measures such as restoring Brazil’s fiscal responsibility, inflation targeting and a truly floating exchange rate, would reduce inflation and allow for a gradual depreciation of an overvalued real, helping Brazil’s manufacturing and export sectors, and favoring domestic consumption.
More predictable and consistent policies, especially in the management of administered prices such as gasoline and electricity, and the tax code, would certainly stimulate domestic and foreign direct investment. This would especially be the case were the government to establish a clear roadmap for the passage of key reforms, similar to what Mexico has done under Peña Nieto.
Finally, Silva would maintain PT’s flagship social spending policies while doubling down on education and healthcare spending, which would bode well for the consolidation of the middle class and future productivity gains.
Would Silva be able to execute on her promises?
While Silva’s policy aims are certainly appealing, most of the promises outlined above could very well end up becoming nothing more than a wish list is Silva is not able to form a coalition big enough to pass reforms in congress. As her coalition currently stands, Silva would only control around 80-120 votes in the 513-seat lower house. Silva has declared that she is prepared to partner with the “brightest” from all political parties and pass individual reforms through one-off agreements. However, given the tremendous number of political parties in Brazil, and its system of ingrained habits of patronage, her good intentions could become futile.
Additionally, some commentators see contradictions in her electoral promises, especially when it comes to doubling down on education and healthcare spending while at the same time reducing overall government spending. Silva maintains that she will be able to achieve these competing ends by making the government more efficient, but again, such efforts could also hit the given that around 49% of overall public spending is in hands of states and municipalities that she would not necessarily control.
Therefore, should Marina Silva win in October, she would have to lay out a very clear plan that explains how exactly she aims to fulfill all of her electoral promises. Otherwise, her government’s popularity could be short-lived.
If you wish to learn more about how this trend could affect businesses in Brazil, consider reading our full Q3 quarterly report, coming soon to the client portal. Not a client? Contact us for more information