Brazil First Round Still Up for Grabs on Eve of Vote

By Raymond Colitt

Brazilians vote tomorrow in a presidential election that polls indicate is so unpredictable it could result in a first-round victory for incumbent Dilma Rousseff or a runoff between her and either of her two main challengers.
The incumbent is five percentage points away from clinching a second term tomorrow, while former Environment Minister Marina Silva and Senator Aecio Neves are statistically tied in second place, according to an Oct. 1-2 Datafolha poll. Neves rose six percentage points since the end of August while Silva dropped 10 points after
running even with the president, according to the poll, which has a margin of error of plus or minus two percentage points.
The difficulty of predicting the election reflects how voters are shifting between a desire for a change in policies and a lack of confidence in candidates, said Mauro Paulino, executive director for Datafolha. While economic growth under Rousseff is the weakest for any president in more than two decades, the president’s campaign has hurt her opponents by saying they would adopt policies that jeopardize record-low unemployment and eliminate programs that lifted 35 million people out of poverty.
“People aren’t totally convinced of their candidates,” Paulino said in a phone interview from Sao Paulo. “It’s an unpredictable election.”

Tomorrow’s Election

Rousseff has 40 percent support for tomorrow’s election, versus 24 percent for Silva and 21 percent for Neves, according to the Datafolha poll published Oct. 2. The leading candidate needs more than 50 percent of valid votes, which exclude blank or null votes, or more than all other candidates combined, to win outright and avoid an Oct. 26 runoff against the runner-up.
A Sensus poll published by IstoE magazine yesterday showed Neves closing the gap on Silva in the first round from 4.3 percentage points last week to 1.9 percentage points, which falls within the margin of error of plus or minus 2.2 percentage points. Rousseff in both polls has more than a 10-point advantage.
Eurasia Group political risk consulting company gives Rousseff a 70 percent chance of winning re-election in a second round, be it against Silva or Neves, according to a research note e-mailed Oct. 3. Rousseff leads Silva by 48 percent to 41 percent and Neves by the same numbers in a runoff, according to the Datafolha poll.
“If there is a runoff, Aecio has a slightly better chance to be facing Rousseff than Marina,” Mario Marconini, managing director of Teneo Intelligence in Brazil, said by phone. “Aecio is on an upward trend, and Marina seems to have difficulty stemming the hemorrhage.”

Winning Outright

Rousseff even stands a chance of winning re-election outright tomorrow, Datafolha’s Paulino said. If the share of invalid votes rises to 13 percent or 14 percent from 5 percent in the latest Datafolha poll, “the chance of wrapping this up in the first round is big,” he said.
For much of the year financial markets rallied on falling support for Rousseff in opinion surveys as investors bet an opposition candidate would do more to improve Brazil’s business environment, slash above-target inflation, and reduce deficit spending. Since Sept. 2, when the president started rebounding in the polls, the Ibovespa index has lost 11.9 percent and the real dropped 8.7 percent against the dollar.
Rousseff and Neves saw their support rise in the past month as they targeted Silva, saying she lacks executive experience and waffled on positions from gay marriage to taxes.

Political Meddling

Silva’s proposal to grant the central bank formal independence to prevent political meddling in setting interest rates took center stage in the campaign with Rousseff saying that would give it power over the jobs and salaries of Brazilians. A Rousseff TV ad showed food disappearing from a family’s dinner table due to central bank independence.
Such messages hit home with many voters of Brazil’s new middle class, who for the first time can afford to drive a car, go to college or dine out, and are afraid to fall back down the social ladder, said Thiago de Aragao, at Brasilia-based political consultancy Arko Advice.
“This is a dispute between keeping what was conquered and being able to make a secure change,” Aragao said.
Neves, who is the preferred candidate among wealthier Brazilians, has sought to tread that line by seeking to convince lower-income voters that his plans to downsize a state costing 36 percent of GDP in taxes will not undermine welfare benefits.
He has pledged to increase the minimum wage, boost the income-tax exemption by at least the inflation rate and expand and write into law long-term funding of the government cash transfer program, Bolsa Familia.
Whoever takes the country’s reins in January will have to contain spending and find a new engine of economic growth beyond consumer spending that has fanned prices, Marcos Troyjo, who teaches and co-heads a forum on emerging markets at Columbia University in New York, said by phone from Rio de Janeiro.
“What’s at stake is whether Brazil will make the necessary policy changes to bring the economy back on track,” Troyjo said.