Brazil Election - 5 October 2014

[Paleobrazilian]

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.

[Paleobrazilian]

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.

[Paleobrazilian]

Well, all in all, good. Like Al said, Dilma's certainly not perfect, PT maybe even less so, but hopefully some very poor Brazilians can keep getting a little less poor, as opposed to hugely rich Brazilians getting even more hugely rich. That's always a pleasure.

No program took more people in Brazil from poverty than FHC's Plano Real, for instance.

BTW, the bloodbath on Ibovespa today is so big that the trading of most companies had to be delayed and put into auction. Petrobras will start trading at -14%.

[Paleobrazilian]

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

http://eleicoes.uol.com.br/2014/raio-x/presidente/#resultado-por-municipios/sp

Here you can see the numbers for each state and the maps of each state and the voting on all cities of Brazil.

[Paleobrazilian]

Here goes my recap. I know it's impossible to predict the future, that's far from my human capacities. I'm just trying to read the tea leaves a little bit

1 - Conclusions regarding the national scenario:

a) Dilma won with just over 54.5 million votes, the smallest absolute number of votes for the winner since 2002. Then again, in 2002 Lula won by 22% of the votes, this time Dilma won by 3.3% of them. This was the 1st time ever the PT had to sweat for their win.

I find it very important to look at the trend we have seen from 2002 on:



b) Dilma will have a dangerous Chamber of Representatives in front of her. Her coalition amassed 304 out of the 519 seats in play, a 36 seat loss. She failed to get the 60% supermajority she'd need to pass constitutional amendments (308 seats). That means she'll have to get more parties on board (tough on a chamber with 28 parties with largely different interests) or work with the opposition in order to pass big reforms there. She's in danger because the PMDB wants tight control of the Chamber and there's also a big risk of a rebellion among some of the parties within the coalition (specially the PMDB).

c) While Dilma will still have a large majority on the Senate, the PSDB got some of its most prominent names there, such as José Serra, Antonio Anastasia, Alvaro Dias and Tasso Jereissati. Plus, Aecio Neves will be there. It's believed the PSDB will try to make a lot of noise from the Senate.

2- Conclusions regarding the states:

a) For the PSDB, tightening the grip so tight in São Paulo was definitely a huge win. Keeping Paraná with ease was also important. Goiás was expected and Perillo is also a larger name than he was 12 years ago when he was reelected for the 1st time there. Keeping Pará was a positive surprise, just like claiming Mato Grosso do Sul for the 1st time ever.

b) On the flip side, losing Minas Gerais could be a drag for the future of the PSDB. That will be the most important governorship the PT has ever had, so they must be jubilant with the prospect of running such a big, important and strategic state.

c) The PT or a PT-ally won in 8 out of 9 states of the Northeast. They now control 2 out of 3 most populous states of the region, Bahia and Ceará. The only northeastern state not won by the PT coalition was Pernambuco, due to the local strength of Eduardo Campos/PSB.

d) The PMDB had some painful losses through the country, but can still be happy with their initially unexpected win in Rio Grande do Sul. On the flip side for them, Sartori is part of the rebel side of the PMDB that's closer to the PSDB than to the PT, and the PT will be on the opposition in RS. Keeping Rio de Janeiro was expected by most political analysts, and shows just how strong the party is there.

e) Among smaller parties, I'd highlight the PSD. On their 1st national election, they elected 2 governors, a strong performance from what could easily become the second largest clientelistic party of Brazil, behind the PMDB, of course.

f) The PSB won Pernambuco, as expected, saved Paraíba, and got a bonus on the Federal District. Pernambuco and the Federal District will be important for the party to regroup after the death of Eduardo Campos and it's aftermath.

g) The PMDB, the PT and PSDB together will govern 17 of 27 federal units. Despite everything, those 3 are still the leading forces of Brazil.

3- What is next?

Once again, I don't want to predict the future, I'm just having some fun looking at the tea leaves. Here's what is looming on the immediate future:

a) The economy will be the #1 problem of Dilma. Very slow growth + growing inflation are a dangerous formula, as you know. Will Dilma double down on her developmentalism philosophy or will she make a turn for more liberal, orthodox policies? The market has seemingly lost the patience it had with her and wants her to take a different instance. Lula also wants her to make a move to the center on the economic fundamentals. Much of what happens for the next 4 years will be influenced by the decision of Dilma and whether she made the right or the wrong decision.

b) It's known that Lula wanted to be the candidate this year, but obviously couldn't challenge Dilma. Will he have a prominent place on Dilma's second term? That's anyone's guess. Lula could help her politically, but she would probably feel overshadowed by him. The answer has a lot to do on whether Lula still has electoral ambitions. More on this later.

c) Dilma promised big reforms, specially a sweeping political reform. Can she do that with a problematic Congress and a brewing scandal? There's definitely the risk of a broken promise here, and, in fact, there's a large looming feeling that Dilma will quickly become a lame-duck.

d) Don't rule out the risk of an energy crisis next year. The level of the hydro-electrical reservoirs is getting lower and lower on a scary pace. Water shortage is already a reality on many areas, by the way.

e) Will Dilma try to reconcile with the Center-South areas that voted Aecio heavily, or will she govern for the 51% that voted for her? The anti-PT feeling grew very strongly within the middle class and she'll have to do something to avoid losing it by even bigger margins from 2018 onward.

f) Then there's the Petrobras scandal. The 1st whistleblower has already said all he knows to the feds, and it's believed he said a lot of highly damaging things, and that he proved all he said. It was part of his plea bargain. The second whistleblower is now telling all he knows to the feds as well, and his testimonial has even more damaging potential it's believed. He'll also have to prove what he says under the plea bargain he signed, and it's believed he also has plenty of proof of what he says. It's said that at least 50 politicians with high public offices will be implicated on this scandal. The prospect of both Lula and Dilma being implicated with solid proof against them is real (specially because there's a long, deep federal police/federal attorneys investigation behind it), and the consequences of such a scenario could be explosive (you know what I mean).

g) As for the opposition, the PSDB is now stronger than ever since 2002. That's an undeniable fact. Aecio has reunified his party after his gigantic comeback, and that is an UNDENIABLE WIN for a party that had such a low self steam. There's now a big block of voters that self identify as PSDBists and this could be huge for the future, to bring more people to the party, to strengthen it from the base upward, to get more people on public office (hell, the PSDB had more direct votes for the party on Congressmen races than the PT). The PSDB is now expected to be a sharper, stronger oppositionist party then it was for the last 12 years. Expect strong rhetoric in favor of populist measures as a way to appeal to lower classes, and if the link between Lula/Dilma and Petrobrasgate is proven, expect them to go very strongly after Dilma.

h) After such a polarized runoff, the prospects for a 3rd way in national politics are not particularly high. That will be the hard mission of Marina Silva, who should have her new party fully operational next year.

i) Moves within smaller parties could become relevant. It's believed the DEM will dissolve soon (how the mighty have fallen...), and most of it's members will probably go to the PSDB (specially the brightest ones like ACM Neto and the São Paulo wing of the party). Some of them will move to parties like the PP and the PR, a few to the PMDB (like the conservative Senator-elect Ronaldo Caiado - DEM/GO). Another big movement that's in the cards is the PSB and the PPS merging, to form a strong center-left alternative to the PT and the PSDB (under this scenario, the older, left wing portion of the PSB will definitely leave the party, probably to join the PT). Finally, it's believed that the PSD will try to merge with the smallest parties such as the PTN, the PMN and the PRTB to become stronger. The wish of a smaller number of parties is pretty much common to the PT and the PSDB. The problem is, more 6 parties are about to start operating. One that calls my attention is the NOVO, which will the 1st truly economically liberal party in Brazil, with strong support from leading economists.

[Paleobrazilian]

4 - What about 2016?

2016 will be hugely important for the future of national politics. Since Dilma will be term limited, it'll be very important for both big blocks (PT/PSDB) to gain political capital and momentum with big wins in 2016. Since Dilma will be on the 6th year of her term, and since the possibility of a downturn on the economy and on the political scenario is real, there's a large chance those midterms will be a big referendum on the national government, something that's rare (most municipal elections are usually decided by local questions only, even on the largest cities).

For me, 2 cities will be specially important.

a) São Paulo. After Aecio won the city of São Paulo with 64% of the vote yesterday, it became clearer than ever that Fernando Haddad (PT) is the most endangered incumbent in the whole country. He's an unpopular Mayor in hostile territory for his party. With the growth of the anti-PT wave in São Paulo (that's already huge right now), he'll have to do a lot of his good for the city to compensate for the obvious referendum on the national PT that the PSDB will impose. The PSDB will be salivating to reclaim the city of São Paulo, specially because that would be a huge victory for Alckmin. The PSDB has a HUGE bench of young, potentially appealing names who'll battle it out for the nomination. Among the favorites, I'd list Congressman Bruno Covas (the front-runner right now, already well known with a universally known and approved last name, young, bright background, dynamic speaker and politician, close name to Governor Alckmin), State Congressman Fernando Capez (well known, the best-voted state congressman in the state, solid background as prosecutor, famous Criminal Law professor), Andrea Matarazzo (experienced, close ally of José Serra and FHC), José Aníbal (a veteran of the party, well known, goes along well with both Alckmin and Serra) and Saulo de Castro Abreu (still a unknown, Alckmin's Chief of Staff - obviously a name Alckmin likes a lot). Also, there will be plenty of other names vying for the Mayor office. It's believed Paulo Skaf (PMDB) will be on the fray, and he'd start out strongly. Russomano (PRB) is a lock for this race, he could be even more competitive than in 2012, and his presence will definitely hurt Haddad, as his presence hurts Haddad with his most loyal electorate. All in, this will be a very hardly fought race.

b) Belo Horizonte. It'll be crucial for Aecio Neves to win this race for this party, to show his strength in Minas Gerais is real and to gain coattails for 2018. Marcio Lacerda (PSB) will be term limited so it's a wide open race. Luckily for him, it's speculated that Antonio Anastasia will enter the fray, and if he does, he'd be the immediate favorite. Then again, if Pimentel is doing well in the government of Minas, he could end up electing the Mayor of Belo Horizonte (Patrus Ananias?), delivering a strong punch on Aecio. Just don't bet on Aecio himself running for Mayor. The Senate is a better springboard for his probable 2018 presidential run.

Of course, some other cities will be hotly contested. Rio de Janeiro has a term limited Mayor (Eduardo Paes - PMDB/RJ) that will be leaving just after the Olympics, so expect him to be on the height of his popularity. I think he'll choose someone within his cabinet to succeed him. Opponents could be Marcelo Freixo (PSOL), who'll be popular with the middle class but perhaps not enough for a definitive win. Romário (PSB), meanwhile, would be a highly competitive candidate. In Porto Alegre, term limits will also make the race wide open. Finally, Curitiba and Salvador call my attention due to Mayors from parties/blocks that seem to be completely opposed to local trends. I think Gustavo Fruet (PDT/Curitiba-PR) and ACM Neto (DEM/Salvador-BA) will be endangered.

5- And WHAT ABOUT 2018, OH MY GOD?

As many here said, it's impossible to say what the political environment will be in 4 years. But it would be naive to deny the tea leaves can be read and trends can be anticipated.

a) For the PT, the 1st question is Lula or not Lula? Lula will be 73, so this is probably the last chance he'll have if he wants 2 full terms. If he goes for it, he'd start as the undeniable favorite. I think it'll depend a lot on his health and on the national mood (if there's a significant fatigue towards the PT, he'll stay away from the race).

b) If not Lula, who? I'd say there are 2 strong candidates right now in Jaques Wagner (2 term Governor of Bahia, expected to have a strong cabinet position now) and Fernando Pimentel (who'll now have a chance to make a good government in Minas Gerais). Among the outsiders, Aloizio Mercadante (PT-SP) is an important name, but he's a weak campaigner overall who wouldn't do well even on his state. Mercadante is probably Dilma's favorite (Pimentel close behind), Wagner is extremely well liked by Lula, they're very close friends. Fernando Haddad is an outsider, I think he'll have trouble rebuilding his popularity, but certainly a name that has to be reckoned.

c) For the PSDB, it's Aecio x Alckmin. Aecio is now the prohibitive favorite and the base is already screaming for him to run in 2018. It's known he wants to run again. If he knows how to lead the opposition for the next 4 years, he could well be a formidable candidate. Alckmin also wants to run, on the base of the strength of Aecio's run in São Paulo. It could be a tough battle between them. The fact that FHC is on Aecio's side could be important. If they reach an agreement where Aecio heads the ticket and Alckmin is his running mate, this could REALLY rally the base and give tons of excitement. The fact that Aecio is a well known quantity nationally is also a plus, Aecio claims there's nothing more that the PT will be able to use against him, and if the national mood becomes just a little bit more anti-PT, that will be the ultimate opening for the PSDB.

d) As for third way candidates, there are ton of possibilities. Marina Silva is probable, but I feel she'll be weaker than in 2014. The PMDB could be tempted to (finally) launch a candidate, perhaps the Mayor of Rio de Janeiro, Eduardo Paes. The PDT has Senator Cristovam Buarque (PDT-DF) just waiting. The PSB could look for Governor-elect Rollemberg (PSB-DF).

e) If you're looking for a "truly right wing" candidate, there's a possibility our own tea partier, Congressman Bolsonaro (PP-RJ) will run for President, possibly after a party switch to the PSC. He could well get over 3% of the national vote. From the left, the PSOL will definitely have a candidate, but no one knows who. The Greens could run Eduardo Jorge again, the usual joke candidates will be there again.

f) Of course, if the Petrobras scandal becomes just THAT huge and takes down the Government, you can just imagine how big the turmoil will be. In this case, no prediction whatsoever can be made.

See you all in 2016, guys. It was a fun ride this year.

[Paleobrazilian]

Then again, there's the Frank Underwood alternative.

[Paleobrazilian]

Two days after the election Dilma has already suffered a big loss on the Chamber as a landmark decree she signed a few months ago was nullified in a landslide voting. The Senate is expected to do the same.

Dilma will have major trouble with the Congress this time out.

[Paleobrazilian]

Hmm, I understand that some people within PMDB would want to run a presidential candidate, given the reward would be great, but that can be dangerous, given that PMDB has already established themselves as a party of (sucking on the) system and the presidential run could put their position in jeopardy.

With that in mind, what sort of person votes PMDB?

As I've previously said in this thread, voting in Brazil is based very, very heavily on personality/candidate rather than partisanship (especially downballot). Otherwise, the PMDB is a very powerful patronage machine. Needless to say, some people receive the benefits of that patronage.

And Eduardo Paes is the kind of charismatic, populist politician who could do well on the entire country.

Another 3rd way option I forgot earlier is Cid Gomes (PROS-CE). After 2 successful terms as the Governor of Ceará, Dilma will give him a strong cabinet position, that he could use as a springboard. His brother Ciro is always a possibility, but he's been out of public office for just too long now.

The most probable 3rd way right now is still Michel Temer, though

[Paleobrazilian]

Two days after the election Dilma has already suffered a big loss on the Chamber as a landmark decree she signed a few months ago was nullified in a landslide voting. The Senate is expected to do the same.

Dilma will have major trouble with the Congress this time out.

What was the content of the decree?

It was a decree regulating forums and councils and ways of helping the participation of individuals and social movements on policy-making affairs. The decree was quickly labeled as "bolivarian" by the opposition and was not well liked by Dilma's base as well.

Then again, I do think the decree involved matters that could only be regulated by a law passed by the Congress, but in the end the discussion was more about the substance than about the formal aspect, and that's why this ended up being a defeat for Dilma.

Also, today she already started to backtrack from her commitment for a plebiscite on political reforms, as her base is also against this. Most on the base + the opposition want a referendum instead.

Also, it's believed many old, traditional politicians such as Gilberto Kassab, Katia Abreu and perhaps even José Sarney will be on her cabinet. Dilma is scared she'll have major governability problems and is trying to pander to the base that will try to suck as much money and cabinet posts from her as possible. With the Petrobras scandal on her mirror, perhaps that's the only way for her to delay the bubble burst. Political analysts are adamant a bloodbath is coming, and they definitely know Dilma will be sucked into it. They are just waiting until the feds end the plea bargains they're dealing with right now to leak all the info they have, that's my bet.

[Paleobrazilian]

More on the base rebellion: the PMDB has told the PT they want to have the next President of the Chamber AND the next President of the Senate. The PT wanted to have the President of the Chamber. Even worse for Dilma, the PMDB wants Eduardo Cunha (PMDB-RJ) to be the President of the Chamber, and he's already actively running for the post. Dilma has an awful relationship with him and she knows she'd have an even harder time getting things done on the Chamber with him running things. The danger for her: the opposition also wants to run a name, and if there's a division within the majority, then the Presidency of the Chamber could fall on the hands of a PSDBist of a PSBist (or a PSDB puppet from a theoretically PT ally). Imagine the nightmare for Dilma. In fact, don't count out on the possibility of Eduardo Cunha approaching the PSDB to get their support in exchange of giving them power on important committees and making Dilma's life on the Chamber a misery.

Finally, more problem for Dilma on the Congress: there are 2 inquiry commissions already underway on Congress to analyse the alleged wrongdoing on Petrobras. Now those 2 will be closed in favor of a 3rd, bigger, bicameral commission. Their expectation is getting a hand on the material the feds already have.

[Paleobrazilian]

Actually, it was more a formal problem than a substance one: Dilma should have asked the Congress to pass a law taking care of the issue instead of trying to regulate by decree something the Constitution says that has to be done by law.