1 October 2014
While the outcome of Brazil’s presidential election remains uncertain, what we can be sure of is that the new president will have to make strong economic decisions and changes to the Brazillian system.
Victor Bulmer-Thomas

Professor Victor Bulmer-Thomas CMG OBE

Associate Fellow, US and the Americas Programme, Chatham House


Brazil's President Dilma Rousseff and Brazilian Socialist Party presidential candidate Marina Silva in the run-up to Brazil's 2014 election. Images by Dado Galdieri/Getty Images and Ben Tavener/Getty Images.
Brazil's President Dilma Rousseff and Brazilian Socialist Party presidential candidate Marina Silva in the run-up to Brazil's 2014 election. Images by Dado Galdieri/Getty Images and Ben Tavener/Getty Images.


The first round of Brazil’s election is due to take place on 5 October, in the midst of great uncertainty. Indeed, about the only thing of which we can be sure is that the next president will be a woman. This is not because Dilma Rousseff, the incumbent and candidate of the Workers’ Party (PT), will be re-elected (although it  is possible). It is because her main challenger is now Marina Silva, the candidate of the Brazilian Socialist Party (PSB). Neither can expect to win on the first round, according to all opinion polls, and so the contest between them – if they are the top two candidates - will be decided in the second round on 26 October.

The rise of Marina Silva is due, first of all, to the unexpected death of Eduardo Campos in August, who was elected as the PSB presidential candidate earlier in the year. Yet Campos at the time was only in third place in the opinion polls. He was still not well known outside his home state in the northeast, where he is a former governor. Instead, he was languishing not only behind Dilma but also Aecio Neves, the candidate of the Brazilian Social Democratic Party (PSDB). The second reason for Silva’s rise has been her own strong personality and high political profile.

Marina Silva, unlike Eduardo Campos, is not an unknown quantity to Brazilians. Born in the Amazon region and of African heritage, she grew up in poverty among the rubber-tapping community and was illiterate until the age of sixteen. She joined the PT and became President Lula’s environment minister in 2003. A devout Christian and member of an evangelical church, she then ran for president in 2010 as the candidate of the Green Party winning almost 20 per cent of the vote. She is the politician who best captures the anti-establishment mood among many Brazilians at present, although there are some who worry about her lack of experience in building coalitions (essential in Brazilian politics), her self-confessed weakness on economic policy and her social conservatism.

This is all very different from 15 months ago, when Dilma looked set for re-election – possibly on the first round – despite a lacklustre presidential performance and a poor macro-economic stewardship. The outlook then changed almost over night following widespread riots in mid- 2013. These were triggered by the frustrations of millions of newly-empowered middle-class Brazilians, for whom a higher monthly income was not sufficient to compensate for poor public services (especially transport, education and health).

This was not supposed to happen under a government led by the PT.  During his eight years as president (2003-11), Lula had combined respectable economic growth with huge social progress. Minimum wage rates rose faster than inflation, social programmes such as Bolsa Familia raised the income of poor families and Brazil moved towards full employment. The poor were the main beneficiary, but the elites were happy to work with Lula as tax rates on their income and wealth were not raised significantly.  

Since Lula left office, the Brazilian economy has massively under-performed. GDP growth has been worse than expected and will be close to zero this year. Inflation has been higher than anticipated and the Central Bank was forced to hike interest rates to keep it inside the target range. Fixed capital formation has never reached even 20 per cent of GDP, while investment in public infrastructure has been dismal. There have been endless bureaucratic delays, a series of corruption scandals and accusations of micro-meddling by the private sector. And, although government debt remains at sustainable levels, public finance has suffered from a series of weaknesses including unfunded pensions and unjustified subsidies - especially for energy use.  

Not all of this is Dilma’s fault. She cannot be blamed for the slowdown in China or the end of the commodity super-cycle from which Brazil benefited greatly. However, many of the problems can be attributed to her administration. The business community, although broadly supportive in her first two years, has turned against her: in the last few weeks there has been an inverse relationship between her performance in opinion polls and the main Brazilian stock market indices. More worrying for her electoral prospects has been her inability to portray her main opponent as a closet neo-liberal who would roll back the social progress Brazil has achieved in recent years.

This does not mean she will lose and that Marina will be the next president. The opinion polls for the second round suggest it will be close. However, it is clear that whoever wins will have to make big changes to the Brazilian model. As always, this will require building coalitions across states and in Congress. This is never easy, but it is not as difficult  as in the United States (US). Brazilian politicians are notoriously pliable when it comes to their votes, or even party allegiances.

Dilma already understands this and has made an effort this year to be more pragmatic and professional when taking big economic decisions. This may be enough to sway some undecided voters. Marina is also aware of the need to convince the doubters about her economic credentials and has put together a highly professional team of advisers. She has, for example, committed to independence for the Central Bank, more fiscal discipline and wants to sign free trade deals with the US and the European Union. Whoever wins, Brazil should at least perform better in the next four years than it has done in the last presidential term. And both candidates are certain to fight hard to preserve the social gains of the last 20 years.

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