Morning After in October or November

The elections in Brazil are generating a lot of heat.  There has been a lot of drama including the death of Eduardo Campos, the strong uptick with Marina, Aecio’s fall and Dilma being touched (again) by corruption scandals.  It makes you wonder how Brazil survives.  Yet it does and the sun will come up after round 1 of the elections and even after the runoff.  Dilma continues in the lead, but according to the polling, statistically tied with Marina.  So let’s think a bit:  What will change with Dilma’s second term?  Or, what will Marina’s government look like and how will it be different from the PT?

In the economic sphere, Dilma wants to continue overseeing the Central Bank while Marina has promised its autonomy/independence.  So with the current administration, more of the same where the BC (central bank) is not formally dependent upon the President and acts in, I think the consensus is, a fairly non-political fashion.  With Marina, independence would be enhanced but it still remains to be seen how “independent” it could actually be under a new formal legally sanctioned environment.  At this moment, we don’t really know what that looks like.

In terms of policy, there really is not that much difference between Dilma and Marina.  Both favor and want the continuity of state participation in the economy.  I would be surprised if Marina could successfully reform the tax system as she, like Dilma, needs every centavo of revenue to pay for state activities ranging from pensions to health to education to infrastructure.  Marina has only spoken vaguely of reviving Brazilian manufacturing and has failed to clearly show how this might be done.  With Dilma, she promises to remove Finance Minister Mantega but his replacement is just as likely to bring a similar state friendly outlook and face the same internal and external barriers, i.e. continued weakness of the dollar and euro, plus the need to keep taxes high, thus effectively constraining production.

Marina might have more of a sustainable development approach, but this will not mean stopping Belo Monte.  She might slow further dam construction in the Amazon basin but this will have to be balanced by other alternative power sources that thus far Brazil has only scratched.  The Petrobras and statist lobbies favoring traditional sources of energy will not go away meekly.

Dilma, for whatever reason, has not been directly or closely associated, to this point, in the corruption scandals.  Her hard core followers accept that she is personally honest. She still carries some of the image of Ms. Clean although the PT in power has not helped.  Marina, in turn, is trying to be the standard bearer for the clean up.  However, she has been touched (perhaps lightly) by the accusations against Eduardo Campos in the Petrobras saga.  The big question she has to face is if there is an institutional structure and a culture coming into place that will inhibit dishonest dealings.  One might have doubts about this in the land of the “jeitinho”.  Passive acceptance of certain ills are so deeply embedded that it will take more than one exemplary leader to set a new standard.  And while apparently upright, who can vouch for those surrounding Marina?

Brazil continues to be a bit messy with slow and jerky improvement.  Those who have clawed their way to middle class status want fair access and a level playing field.  Those who have long shared in state “bonesses” (the traditional middle class) are loath to make concessions.  Can Marina or Dilma lead the way out of this morass?  Maybe, but only slowly.

What about Aecio? He would like to be Fernando Henrique number 2, but at this point, he does not have political support.  Only the traditional elites, the media and his home state strongly support him.  That is not enough.

Brazil will wake up in October or November with a new administration and still a long haul of problems.  Just like on the morning after the 7 x 1 world cup defeat to Germany, people will still have to get up.

 

 

 

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