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Brazil Election Tracker Summary (2018)

Core Content Overview

The document provides an in-depth analysis of the economic policies and political dynamics of the 2018 Brazilian presidential election, focusing on the platforms of Jair Bolsonaro (PSL) and Fernando Haddad (PT), as well as the broader implications for the country's political and economic landscape.

Main Candidates and Their Policies

Jair Bolsonaro (PSL)

• Economic Philosophy: Advocates for liberalism, claiming it reduces inflation, lowers interest rates, and stimulates growth and employment.
• Fiscal Policy:
  • Supports a spending cap.
  • Aims to achieve a primary surplus by 2020 and eliminate the primary deficit in the first year.
  • Proposes privatisations to reduce public debt by up to BRL800bn.
  • Defends a gradual transition to a capitalisation scheme in social security, alongside the current pay-as-you-go system.
• Taxation:
  • Seeks to simplify the tax code and reduce the total tax burden.
  • Supports lowering the top income tax bracket to 20% from 27.5%.
  • Advocates for eliminating taxes on inheritances and looser monitoring of companies.
• Public Banks and Credit:
  • Discards the privatisation of CEF and BB, but supports privatisation of public banks as a long-term goal.
  • BNDES will play a central role in privatisations.
  • Supports reducing interest rates and boosting private capital markets.
• Labour Policy:
  • Favors less stringent labor laws, including reducing non-wage costs, creating more flexible contracts, and reducing penalties for firing workers.
  • Supports new labor regimes based on direct individual negotiation.
  • Grants full liberty to labor unions.
• Development Model:
  • Promotes deregulation, cutting red tape, and privatisation.
  • Believes state-led interventionism is the root of Brazil's low-growth trap.
• Regulatory Agencies:
  • Advocates for reducing regulatory intervention.
  • Wants to decentralise tax collection and improve the tax system.
• Foreign Policy:
  • Focuses on bilateral trade deals, with a pro-US and pro-Israel stance.
  • Opposes Mercosur and left-wing relations.
  • Promises to guarantee a minimum income via negative taxation and direct transfers.

Fernando Haddad (PT)

• Economic Philosophy: Emphasizes an emergency, popular plan to address the crisis, prioritizing social and economic stability.
• Development Model:
  • Believes the state should lead development with a focus on national priorities.
  • Supports state coordination and funding for economic growth.
• Fiscal Policy:
  • Revokes the spending cap.
  • Aims to increase employment and consumption to solve fiscal issues.
• Social Security Reform:
  • Not a priority at the moment.
  • May discuss convergence between private and public regimes in the future.
• Labour Reform:
  • Revokes the liberal reforms, favoring restricting outsourcing, strengthening labor contracts, and increasing union bargaining power.
• Taxation:
  • Increases income tax exemption from BRL2000 to BRL5000.
  • Introduces new taxes on profits, dividends, and inheritances.
  • Proposes a VAT and a new regulatory tax on exports.
• Credit Policy:
  • Sees credit as a cornerstone of the emergency plan.
  • Supports reducing interest rates and increasing credit availability through public banks.
• State-Owned Companies:
  • Supports expanding the role of Petrobras in energy policy.
  • Bars new privatizations, especially of non-core businesses.
  • Seeks to use SOEs for job creation.
• Regulatory Agencies:
  • Strengthens and widens state regulatory powers.
• Foreign Policy:
  • Focuses on South-South relations.
  • Opposes China and Venezuela, and supports closer ties with the US and Israel.

Key Information and Comparisons

Election Results

• First Round:
  • Bolsonaro received 46% of valid votes (49.2 million votes), finishing just 4pp behind expected results.
  • Haddad received 29.3% of valid votes, 3pp higher than most polls predicted.
  • Bolsonaro won 17 out of 27 states, while Haddad won 10.
• Second Round:
  • Bolsonaro is the favourite to win the runoff.
  • Haddad is expected to gain more votes from other candidates, but still finish second.
  • Lula is not running, which affects the dynamics of the second round.

Congress Composition

• Bolsonaro's PSL rose from a tiny party to the second-largest force in Congress.
• MDB (Bolsonaro's main coalition) halved in size compared to 2014.
• PT remains the largest single group in the Lower House and the third-largest in the Senate.
• Newly elected senators have little experience, increasing uncertainty around reform.

Governability Outlook

• Bolsonaro is better positioned for governability, with support from radical right factions and big-tent parties.
• Haddad may face intraparty challenges and amplified opposition outside the Northeast.

Political and Economic Trends

• Privatisation: Both candidates support privatisation, but with different approaches. Bolsonaro is more ambitious, while Haddad is more cautious.
• Social Security: Bolsonaro supports a capitalisation scheme, while Haddad does not prioritize reform.
• Labour Policy: Bolsonaro promotes liberalization, while Haddad favors strengthening workers' rights.
• Central Bank: Bolsonaro supports formal independence and inflation targets, while Haddad wants to include employment in the central bank's mandate.
• Foreign Policy: Bolsonaro is pro-US and pro-Israel, while Haddad focuses on South-South relations.

Voters' Profile and Media Influence

• Internet Access:
  • 30.6% of Brazilians had no internet access in 2016.
  • 69.4% had access, with TV and radio being the main sources of information for those without internet.
  • Social media is increasingly influential for online voters.
• Media Preferences:
  • Voters prefer political and economic news.
  • TV and radio remain essential for offline voters.
  • Social media is important for researching candidate profiles.

Conclusion

The 2018 Brazilian election highlighted a divergence in economic and political philosophies between Bolsonaro and Haddad. Bolsonaro's liberal agenda includes privatisation, fiscal austerity, and market liberalization, while Haddad's socially oriented approach emphasizes state-led development, worker protection, and increased public spending. The election results and congressional shifts suggest a move towards a more right-leaning government, with Bolsonaro as the likely winner and stronger governability prospects. Voter behavior, particularly the role of media and internet access, also played a significant role in shaping the election's outcome.