japanja
Brazil votes against corruption with conservative Bolsonaro win

Brazil votes against corruption with conservative Bolsonaro win

08-10-2018 | Emerging markets alert

Conservative candidate Jair Bolsonaro (PSL) received 46% of the valid votes, while Workers’ Party contender Fernando Haddad (PT) won 29% of valid votes. Bolsonaro led in 17 states against nine for Haddad. The candidates will participate in the runoff, scheduled for 28 October.

  • Daniela da Costa - Bulthuis
    Daniela
    da Costa - Bulthuis
    Portfolio Manager & Country Specialist

Speed read

  • Right-wing candidate Bolsonaro attracts strong first-round support
  • The congress elected has a conservative majority
  • Brazil poised for 28 October two-way Bolsonaro vs. Haddad runoff

Bolsonaro’s party became the second biggest in the Congress with 51 seats out of 512. The Conservative, Agribusiness and Christian benches advanced the most in the lower house elections, now accounting for more than 2/3 of the Chamber of Deputies and resulting in one of the most conservative congresses Brazil has ever had. The senate maintained its current balanced profile with more center seats but a pro-reform composition.

The biggest losers were the establishment parties, the MDB of President Michel Temer, the Social Democrats of former president Fernando Henrique Cardoso (PSDB) and the Workers’ Party (PT), all losing ground in both the lower and upper houses. Many congressmen who were subject to investigation by the corruption-fighting Car Wash task force (Lava Jato) were not re-elected and lost special forum protection.

Stay informed on emerging markets with monthly mail updates
Stay informed on emerging markets with monthly mail updates
Subscribe

Anti-corruption stance pays off

Bolsonaro has been a constant target of media criticism, given his positions in favor of gun possession liberalization, hard line statements regarding criminality, corruption and conservative social views. However, the result of the general elections show that Brazilians voted first and foremost against corruption and political privileges. In that sense, Bolsonaro’s campaign has personified the fight against crime and corruption, gaining better odds to win.

The PT candidate, on the other hand, suffered voter rejection given the past corruption scandals involving the Workers’ Party that culminated in the impeachment of former president Dilma Rousseff and the imprisonment of former president Lula. In addition, the other center-right candidates who were running had an economic agenda more aligned with Bolsonaro. They attracted more than 10% of the valid votes and we do not envisage their electorate migrating to the Workers’ Party.

Reform potential gains traction

Despite doubts raised by the domestic and international media over Bolsonaro’s ability to pass reforms, we think that he will push for tax and pension reforms. Generally described as a populist leader, Bolsonaro has (as congressman) recently voted in favor of the spending cap and labor reform both implemented during the current Temer administration. Reforms have core importance in his economic program. Among Bolsonaro’s proposals are lower corporate taxes in exchange for a dividend tax, government spending cuts, and tax, administrative and pension reforms.

In the event of his election, Bolsonaro should have support in both houses and therefore reasonable ability to govern. The parties in the center-right would support his government while the social democrats (MDB and PSDB) should remain neutral. Left wing parties would form the opposition. Nevertheless, in a reform scenario, the democrats will vote in favor. In addition, we have seen 2/3 of the Congress already migrating support to his candidacy.

Market-friendly, on balance

The market should react positively since Bolsonaro won more votes than the polls initially estimated and the Congress as elected is more likely to favour reforms. In addition, even in the event of a runoff win for the Workers’ Party, the elected congress wouldn’t pass measures such as abolishing the spending cap or reviewing the labor reform.

However, given the highly polarized views expressed in the second round, we do see some risk of social unrest until the elections are concluded.

Positioning

Within our fundamental Emerging Markets Equities core strategy, we hold a similar weight to the benchmark in Brazil, while the unconstrained Emerging Stars strategy has a weight of approximately 8%.

重要事項

当資料は情報提供を目的として、Robeco Institutional Asset Management B.V.が作成した英文資料、もしくはその英文資料をロベコ・ジャパン株式会社が翻訳したものです。資料中の個別の金融商品の売買の勧誘や推奨等を目的とするものではありません。記載された情報は十分信頼できるものであると考えておりますが、その正確性、完全性を保証するものではありません。意見や見通しはあくまで作成日における弊社の判断に基づくものであり、今後予告なしに変更されることがあります。運用状況、市場動向、意見等は、過去の一時点あるいは過去の一定期間についてのものであり、過去の実績は将来の運用成果を保証または示唆するものではありません。また、記載された投資方針・戦略等は全ての投資家の皆様に適合するとは限りません。当資料は法律、税務、会計面での助言の提供を意図するものではありません。

ご契約に際しては、必要に応じ専門家にご相談の上、最終的なご判断はお客様ご自身でなさるようお願い致します。

運用を行う資産の評価額は、組入有価証券等の価格、金融市場の相場や金利等の変動、及び組入有価証券の発行体の財務状況による信用力等の影響を受けて変動します。また、外貨建資産に投資する場合は為替変動の影響も受けます。運用によって生じた損益は、全て投資家の皆様に帰属します。したがって投資元本や一定の運用成果が保証されているものではなく、投資元本を上回る損失を被ることがあります。弊社が行う金融商品取引業に係る手数料または報酬は、締結される契約の種類や契約資産額により異なるため、当資料において記載せず別途ご提示させて頂く場合があります。具体的な手数料または報酬の金額・計算方法につきましては弊社担当者へお問合せください。

当資料及び記載されている情報、商品に関する権利は弊社に帰属します。したがって、弊社の書面による同意なくしてその全部もしくは一部を複製またはその他の方法で配布することはご遠慮ください。

商号等: ロベコ・ジャパン株式会社  金融商品取引業者 関東財務局長(金商)第2780号

加入協会: 一般社団法人 日本投資顧問業協会