Fri | Jan 18, 2019

Electoral drama in Brasilia

Published:Friday | September 26, 2014 | 12:00 AM
Marina Silva, presidential candidate of the Brazilian Socialist Party, gives the thumbs up to her supporters during a campaign meeting with union leaders in Sao Paulo, Brazil, on Wednesday. Brazil will hold general election on October 5.
Ap photos President Dilma Roussef of Brazil.

Elections used to be full of high drama across the emerging world. The destiny of nations hung on an electoral outcome.

The release of polling data would create huge market swings, from deadly plunges to soaring rallies. Investors scrutinised the composition of possible economic teams, and future finance ministers would make campaign swings through New York and London.

However, the incorporation of China into the World Trade Organization (WTO) in 2001 and the move to a lax monetary position by the developed world, after the collapse of Lehman Brothers, produced such a surge of capital inflows into the emerging markets that people lost interest in local political issues.

Money flowed into these countries, regardless if the president was from the left or right. Countries were able to tap into the international capital markets, independent of whether the economic team was competent or not.

Investors were so desperate for yield that they were willing to look the other way. However, the situation is starting to change.

As some parts of the developed world slowly begin to move towards a tighter monetary position and the Chinese economy continues to slump, pushing commodity prices lower, the political landscape in the emerging world will become more important.

Nowhere is this more evident than Brazil, where a humdrum re-election has turned into high drama.

At stake is the stranglehold that the Worker's Party (PT) has on the presidency. Eduardo Campos, the former governor of Pernambuco and a member of the Brazilian Socialist Party (PSB), was trailing in third place when he died in an airplane accident last month.

His running mate, Marina Silva, was then selected to replace him. Silva was not a long-standing member of the PSB. She is an environmentalist and ran in the 2010 presidential election as the candidate for the Green Party. She is a prominent figure on the domestic and international fronts, and was able to secure almost 20 per cent of the national vote. This is probably why Campos invited her to be his running mate, despite the fact that she was not a lifelong socialist.

No one expected her to turbocharge the campaign, but partly out of sympathy and partly because of her own charisma, Silva moved the PSB ticket into the spotlight. Most polls put her at striking distance of winning the election in the first round, and she will most likely trounce President Dilma Rousseff in the second round.

Many local political pundits expected Silva's allure to fade as the election approached, but the opposite is happening. In many ways, it is starting to look like a replay of the 2008 US presidential elections, when an unknown senator from Illinois promised to break the malaise that was hanging thick in the air.

Barack Obama's election campaign was about change. Brazilians are also clamouring for a new direction. After 12 years of PT control, endless corruption and four years of dogmatic ideology, Silva appears fresh and new.

There are many factors working in Silva's favour. Like Lula, she was born on the wrong side of the tracks. Many people think that she also hails from the poverty-ridden northeastern part of the country. However, she was born in Acre, deep in the western edge of the Amazon.

Acre was a contested region with Bolivia, which fell into Brazilian hands after a short war at the end of the 19th century. Acre came into prominence in the late 1800s, when the demand for rubber soared with the acceleration of the Industrial Revolution. The mass production of cars and the proliferation of electrical wiring increased the demand for rubber tyres and insulation.

Acre had some of the best rubber trees in the world, and the province became a very valuable piece of real estate. Many of the inhabitants of Acre were poor workers from the impoverished northeast who went to tap the trees.

Silva was born on such a plantation, and she was an illiterate housemaid in her youth. This gives her credentials that appeal to a broad swath of the Brazilian electorate. Hence, this is how a third-place candidate was able to take on a powerful incumbent.

Today, the moneyed class is reading the writing on the wall and is lining up behind the most-likely next president of Brazil. She is also being coached on what to say to the domestic and international business press.

Silva is in favour of an independent central bank and an orthodox monetary policy. She wants to push ahead with the tax reforms that eluded her predecessors. There are even rumours that some of Brazil's brightest financial stars may be part of her economic team.

This election is starting to take on many of the characteristics of before, and we maybe in for some high drama in one of the most forgotten parts of the continent.

Dr Walter T. Molano is a managing partner and the head of research at BCP Securities