Brazil Election - 5 October 2014

[jaichind]

Minas Gerais and Pernambuco cost Aecio this election.

How the hell did Aecio experienced such problems with his home state, given his astronomical approvals?

It's the northern part of the state, which is basically a northeastern area in the southeast. I guess Aecio had huge wins in the southern part of Minas Gerais.

But I thought he had an 92% approval rating when he left office, would that not have translated into a lot of support for him even in the northern part of the state which I gather from what you wrote has a pro-PT tilt.

[jaichind]

Where can I get a regional breakdown of the election results. 

http://divulga.tse.jus.br/oficial/index.html

Seems to give overall totals and not regional breakdowns or I do not know how to work that website.

[jaichind]

========================================================
                         Dilma       Aécio       Counted              Swing from
                         Rousseff    Neves       votes                       2010
========================================================
Overall:               51.6%       48.4%       99.8%                +4.5%
--------------------------------------------------------
Acre                    36.4%       63.6%       86.9%                TBD
Alagoas               62.1%       37.9%       100.0%               -8.5%
Amapá                61.5%       38.4%       100.0%              +1.1%
Amazonas           65.0%       35.0%       99.7%               +15.6%
Bahia                  70.1%       29.9%       98.3%                 +0.8%
Ceará                  76.8%       23.3%       100.0%               +0.6%
Distrito Federal    38.1%       61.9%       100.0%             +14.7%
Espírito Santo      46.2%       53.9%       100.0%              +3.1%
Goiás                   42.9%       57.1%       100.0%              +6.4%
Maranhão            78.8%       21.3%       99.9%                +0.4%
Mato Grosso        45.3%       54.7%       99.9%                 +3.6%
Mato Grosso        43.7%       56.3%       100.0%               +1.2%
do Sul  
Minas Gerais        52.4%       47.6%       100.0%              +6.1%
Pará                    57.4%       42.6%       99.8%                 -4.2%
Paraíba                64.3%       35.7%       100.0%              -2.8%
Paraná                39.0%       61.0%       100.0%              +5.6%
Pernambuco        70.2%       29.8%       99.9%                +5.5%
Piauí                   78.3%       21.7%       99.9%                 -8.3%
Rio de Janeiro      54.9%       45.1%       100.0%              +5.6%
Rio Grande          70.0%       30.0%       100.0%             -10.5%
 do Norte
Rio Grande          46.5%       53.5%       100.0%              +2.6%
  do Sul
Rondônia             45.2%       54.9%       100.0%              +2.3%
Roraima              41.1%       58.9%       100.0%               -7.7%
Santa Catarina    35.4%       64.6%       100.0%               +8.0%
São Paulo            35.7%       64.3%       100.0%             +10.3%
Sergipe                67.0%       33.0%       100.0%             -13.4%
Tocantins            59.5%       40.5%       99.9%                -0.6%
========================================================

[jaichind]

I definitively do see what Paleobrazilian is pointing out in terms of regional divergence.  On thing I noticed which is really the same thing is that the swing toward Aecio is negatively correlated with the 2010 Serra vote.  This runs counter to the statistical convergence to the mean one would normally expect.

[jaichind]

Brazilian Stock ETF Tumbles in Tokyo Trading on Rousseff Victory falling 5.3% at the open. So it begins.

[jaichind]

Nomura expects BRL is break 2.52 which would means it will weaken to its lowest level versus USA since 2005.   Nomura also expects Dilma to continue the BRL FX swap program.  I hope this is not true as it will just continue to double down on a bad BRL trade that is about to get at lot worse.  PT might run rings around Goldman Sachs when it comes to winning an election, but when it comes to complex FX derivatives who do you think will come out ahead, Goldman or PT ?  Dilma has to work toward floating BRL as soon as possible and even if she wants to make it an orderly devaluation she should use the Brazil  foreign currency reserves to do so in an orderly manner.   

[jaichind]

Political analyst Andre Cesar indicate that Rousseff

Doesn’t have much time to act.
Needs to reach out to opposition, including Aecio Neves
Needs to “re-build bridges that were burnt”

and that

There’s a tiredness of Workers Party model
New finance minister can’t be linked to Workers Party
Brazil is divided along class and regional lines which is at risk of being permeate

 

[jaichind]

Brazil will probably face some softening in labor market, Christopher Garman, head of emerging markets research at political risk consulting firm Eurasia Group, said by phone.  Things he said does not seem to indicate that the the second term of Rousseff would be positive in any way.

"The odds of moving on economic reforms in her second term are pretty low’’

"The odds of her being a weak president in her second term are reasonably high’’

"She faces international economic headwinds, a scandal at Petrobras; she’s going to respond to this by making some constructive overtures to the private sector, have an economic team that will deliver some improvements on fiscal management’’

"She’s not going to make a significant fiscal adjustment.’’

"She’s going to move in a more constructive direction but it’s going to piecemeal and in a moderate fashion. I don’t see a positive credibility shock’’

"The call for political reform for her is a political move in a context where you have a brewing corruption scandal in Petrobras, which could be a liability for her and her team’’

"It’s going to be tough. Political reform is difficult to get a consensus on’’

[jaichind]

What took place in Alagoas and Sergipe? Aecio got completely smashed there and lost double digit or near double digit swings from 2010.  Same for Rio Grande do Norte and Piauí.  All of them arefrom the same region of the Northeast.  Why is the Northeast so much more anti-PSDB than 2010 ?

[jaichind]

This election seems to also be the victory for Datafolha.  Their last poll of 52-48 was pretty much on target.

[jaichind]

This fast reporting is a travesty! Imagine, how much fun it would have been if we could see that live!

Live football broadcasts should be banned. Then the rest of the world would know, how we feel!

Thanks god for Ukraine!

My thoughts exactly.  They took all the fun out of it.  If they are going to say that results cannot be released until everyone has voted, then they should not start counting the vote until everyone has voted.

[jaichind]

This fast reporting is a travesty! Imagine, how much fun it would have been if we could see that live!

Live football broadcasts should be banned. Then the rest of the world would know, how we feel!

Thanks god for Ukraine!

My thoughts exactly.  They took all the fun out of it.  If they are going to say that results cannot be released until everyone has voted, then they should not start counting the vote until everyone has voted.

ECI does it right Let us all go for Ukraine then ) It seems to be very much fun there.

There is also the technical point that counting the vote but not releasing it actually makes it easier to commit fraud. 

[jaichind]

According to analysts, the dollar rate could rise up to 10% tomorrow and Ibovespa will probably be stopped by a circuit breaker (after a 10% loss). Let's wait and see how big the nightmare will be.

Tomorrow I'll try to make my election recap, winners/losers, and a quick projection for 2016 and 2018.

Good God! What's Dilma promising that's freaking out investors so much?

It is mostly about BRL and rising inflation.  With stagflation coming to Brazil, the expectation is that Dilma will kick the can down the road and resort to various fiscal and monetary ticks to avoid devaluation and raising interest rates.  Problem with that is that this actually double downs on a policy that led to this situation in the first place and when these tricks exhaust themselves the economic cost will be much greater.  Also given the onging scandals at Petrobas one would expect Dilma to go the populist route to divert attention from these scandals which would make economic adjustment even less likely and the cost greater when they do come.

BRL is now at 2.544 which would make it weakest vis-a-vis USD since 2005 and expected to fall further out to 2.72 by end of the year.  IBOVESPA futures are down 7.2%.

From here what the next focus on would be who will be minister of finance.  A minster of finance that is not from PT and is independent of the political compulsions of Dilma would be seen as positive toward unwinding the current economic situation.

[jaichind]

With a total of about 54.500.000 votes, Dilma will have about 2.2% less total votes than she had in 2010. Aecio, meanwhile, had just over 51 million votes, a 16.7% increase on total votes compared to Serra 2010. I think the trend we're observing is very positive for the PSDB, they pretty much won ALL the new vote. I'm optimistic about 2018.

Well, with all the blowups in the Dilma administration with respect to economic, fiscal, monetary policies as well as the Petrobas scandal I would expect some non-PT candidate to be in a good spot for 2018.  Of course that does not have to be PSDB but that seems to be a good bet now that it will be PSDB if not Aecio who would be seen in 2018 as the path not taken if the 2014-2018 situation turns out to be poor which is now the expectation.

[jaichind]

Are there any links which has the final election results by state ?

[jaichind]

Actually, until the results were released, PSDBists were VERY confident they had won. Their tracking polls correctly showed the huge wave in São Paulo and in the South. They just expected to do a little better in the Northeast and in Minas.

They were so confident Aecio had won that FHC, Alckmin and Serra rushed to an airplane and flew to Belo Horizonte. 5 minutes before the results were released, many extremely reliable PSDB sources were cautiously celebrating.

I think either PSDB's estimation of Southern states were also inflated, or the made certain assumptions that I am not aware of, or their logic is faulty.  My view is this.  Say what PSDB predicted for the South was accurate, then their logic is faulty.  Lets look at this way.  In the first round it was  Dilma 41.59 and Aecio 33.55.  This means that Dilma most win 33.8% of the 1st round non-Dilma/Aecio vote to win.  If we look at Southern states results and compare them to 1st round results and compute what Dilma capture of the 1st round non-Dilma/Aecio vote, we get the chart below.


             Dilma 1st    Aecio 1st        Dilma 2nd    Aecio 2nd       %of 1st non-Dilma/Aecio
                                                                                                     going to Dilma

DF         23.02         36.01             38.01           61.90                      36.6
SP         25.82         44.22             35.69           64.31                      32.9
RS         43.21         41.42             46.47           53.53                      21.2
SC         30.76         52.89             35.41           64.59                      28.4
RJ          35.62         26.93             54.94           45.06                      51.6
PR          32.54        49.79              39.02           60.98                     36.7
MS         37.51         41.31             43.67           56.33                      29.1
ES          33.12        35.12              46.15           53.84                     41.0
GO         32.10         41.54              42.89           57.11                    40.1

Most of them has Dilma picking up a greater than 33.8% share of the 1st round non-Dilma/Aecio vote if not very close to it.  So if PSDB were confident of victory based on their assessment of the Southern PSDB vote, either they overestimated their support in the South, or they assumed that the Silva voter in the North/Northeast was MORE LIKELY switch over to Aecio relative to the Silva voter of the South, or their logic was faulty.

[jaichind]

Sorry If I keep on harping on this topic.  But reading the news right after the election as well as some of the views on this board, it seems that a lot of PSDB supporters feel that Aecio lost because of the North and Northeast.  

For their point of view, a check of the Dilma vote share against 2010 for second round yields the following chart keeping in mind that PSDB needed a swing of -6.05% against Dilma to win.

Overall                  -4.41%
North                    -0.90%
Northeast            +1.11%
Centerwest          -6.53%
South                   -4.95%
Southeast            -8.03%

So the argument goes that North and Northeast is only 1/3 of the total vote but Dilma managing keep the swing against her to pretty much zero while the other three regions had a swing of more than 7% against her.  So if North and Northeast swung against Dilma like the rest of the country Dilma would have been defeated.

My point is that PSDB should have know this after the first round of elections.  I tend to look at it from the point of view of what % of the non-Dilma/Aecio vote did Dilma get from the first round.
Here for Aecio to win Dilma must be held to 33.83% or less of the non-Dilma/Aecio vote from the first round.  Here the table by region tells a different story

Overall                  40.43%
North                    30.02%
Northeast             47.59%
Centerwest          37.06%
South                   33.26%
Southeast            41.77%

Here, we find the the North region Aecio actually was able to hold Dilma's gains from the first round to the necessary level.  It is really the Northeast and Southeast which cost Aecio the election.  Even though Aecio is strong in the Southeast overall in terms of absolute support, his campaign failed to capture enough of the Silva vote there.  You can say that is mostly because of MG where Aecio failed to get enough of the Silva vote even in his home state, but it is more then than.  Even in RJ where Aecio did well by historically standards, 51.59% of the non-Dilma/Aecio vote from the first round went to Dilma.   Also in the South where Aecio is strong, they barely got enough of the  non-Dilma/Aecio vote from the first round to win which is nowhere close to enough to offset other places.  That plus the Northeast is what lost Aecio the election.

[jaichind]

Reading stuff like  Moody's downgrades Petrobras to junk and  Brazil aims to generate 72 billion reais ($25 billion) in budget cuts and revenue this year, as it seeks to stave off a possible sovereign downgrade. Plus

http://www.bloomberg.com/news/articles/2015-02-27/rousseff-braces-for-turmoil-as-brazil-awaits-graft-list

Rousseff Braces for Turmoil as Brazil Awaits Congress Graft List

Makes me feel the same way back in Nov.  Rousseff and PT were better off losing this election.