Bolsonaro vs Lula: Who has Brazil's business vote?

Barely 24 hours after the first round of Brazil’s 2022 presidential election, the Sao Paulo stock market, the B3 (Brasil, Bolsa, Balcao), surged in its biggest one-day gain since April 6, 2020, a pre-Covid-19 high before the pandemic plunged the South American nation into an economic crisis.

The incumbent, Jair Bolsonaro, did much better than expected in the October 2 first round, coming just five points behind his leftish challenger, Luiz Inacio Lula da Silva. In the legislative elections, Bolsonaro's party won the most seats in both chambers of Congress. 

Some investors and market analysts began whispering that Bolsonaro could turn the situation around and win. “He would finally have the majority needed to carry out more concrete and much better reforms for the country’s economy,” said Antoine Skaf, director of the investment fund, Witpar.

In 2018, Skaf voted "in opposition to the left". Four years later, the young financier from Sao Paulo is once again voting for Bolsonaro despite the Brazilian president's often controversial statements on a number of issues.

“Despite the nonsense he comes out with from time to time, he has proven that he knows how to steer his ship. Paulo Guedes is the best economic minister we have ever had, and has had very good results,” said Skaf, referring to Brazil's finance minister, a bank co-founder who was also Bolsonaro's economic advisor on the 2022 campaign.  

Bolsonaro, the ultra-liberal

For Skaf, the list of Bolsonaro's successes is long. These include the difficult pension reform put in place and which, according to him, will transform the Brazilian economy for the next 20 years, privatising many public sector companies and branches, and the more flexible management of Petrobras, the national oil giant. Skaf has done well over the past four years and his fund has benefited greatly, he explains, from record foreign investments entering the Brazilian market.

Bolsonaro's frequent threats against the country's democratic institutions, he believes, does not necessarily frighten the financial markets, which are so fond of stability. It's "because he threatens them, but doesn’t go through with it. His actions are much more restrained than his words, which is reassuring in practice. His ultra-liberal policy is our guarantee,” maintained Skaf. 

For economist André Calixtre, the economic figures are the same, but they tell a very different story. “If you look at European pension funds, green funds, which are more structured than short-term investments, they've diminished a lot. To say that investments have reached record highs under Bolsonaro is wrong. Maybe they have in the short term, which allowed traders to make money quickly, but it's a very ephemeral success, which is not proof of the Brazilian market’s stability in the long term,” he explained

Calixtre, the co-founder of ‘Bolsa Familia’, a welfare scheme created by the first Lula government in 2004 for the poorest households, is very critical of the Bolsonaro balance sheet. When the Covid-19 pandemic hit the country and aggravated the global economic crisis, he criticised Bolsonaro for having copied Lula with his ‘Auxilio Brasil’, the Bolsonaro administration's social welfare programme which replaced Bolsa Familia. Nearly 20 million Brazilians were entitled to Auxilio Brasil, worth around 100 euros but which, unlike its left-wing predecessor, did not come with rights to social, educational or health support.

"He wanted to look like a new champion of the poor by giving out a single benefit per household. But in reality, he did it much too late and badly, without raising wages, without a real policy to combat inflation," said Calixtre. Today, "the perception of poverty and hunger is much greater", he added.

Claudio Amitrano has spent the past four years analysing the president’s economic management, and the results don’t make for rave reviews either. “Jair Bolsonaro could have taken faster economic measures to reduce the impact of the pandemic. He took them too late. He should have cut interest rates faster, lowered taxes on companies faster so that they produce faster, and slow down inflation … he underestimated the pandemic and it cost Brazil dearly,” said Amitrano. 

The Strong Business School in Sao Paulo decided to compare the economic balance sheets of the two candidates at the end of their respective first terms. Even if the economic contexts are very different – record inflation during the Lula era and a pandemic in the Bolsonaro era – the national consumer price index has recorded a 0.29% drop in inflation for the third consecutive month, and the unemployment rate has fallen by more than 1% since Lula's last term, falling below the 9% mark. A feeble victory therefore for the incumbent president.

But would Lula do better? The economic programmes of the two presidential candidates are still unclear, with information drip-fed to the press and then drowned in a flood of fake news. When asked who would be his finance minister, Lula didn’t reply during the last presidential debate broadcast live on Sunday, October 16. 

'The Communist Threat'

The “communist threat” described by the far right is only a delusion, according to many Brazilian experts. Lula has a track record as a president with a moderate economic policy which, according to Calixtre, would reassure the markets. Lula’s election would above all be a “regulatory” bulwark against the right’s majority in Congress, he believes. It would entail a balance of power that would move negotiations back to the centre, said the economist, adding, “the centre has always reassured the financial markets and investors”.

Amitrano simply laughs off Lula's "Communist threat". “He’s portrayed as an evil leftist who will ruin the country, but we mustn’t forget that President Lula had a rather orthodox fiscal policy. Under his governments, tax revenues exceeded expenditures, private investments boomed … his economic management was very conservative. And this past is also reassuring.” His bet is that the country's re-industrialisation programme, one of Lula's signature economic policies, appeals to the markets.

Lula, an international asset

Under Lula's presidency from 2003 to 2011, Brazil rose to the rank of sixth largest world power, with a boom in trade partnerships with Europe, China and Africa. A fine diplomat, he knew how to sell Brazil and its wealth. However, under Bolsonaro, the image of the country has taken a hit, isolating it on the international scene.

"Lula could restore the image of our country on the international markets," maintained Calixtre. In recent weeks, many former presidents of Brazil's central bank have publicly announced their support for the leftist former president. For some economists at the IPEA, the federal government's Institute for Applied Economic Research, who are not allowed to speak on the record during an election period, Lula could benefit from his environmental policy because protecting the Amazon and the economy are a good bet. By announcing he will increase the budget for organisations protecting the Amazon, which were torpedoed by Bolsonaro, they believe Lula will attract "green" investment funds for carbon offsetting and remuneration for conserving the rainforest.