Domingo 24 de Septiembre 2023
In In
BAD NEWS FOR INVESTORS Brazilian President Dilma Rousseff on Sunday won re-election for another four years. (Photo: Roberto Stuckert Filho Jr/Brazil Government)
Monday, October 27, 2014

Rousseff Wins, Brazil Loses

Brazil can expect four more years of Rousseff’s failed policies.


Brazilian President Dilma Rousseff won re-election on Sunday by a small margin. However, the result is a significant loss for Brazil.

Rousseff assumed office nearly four years ago amidst high hopes among local and foreign investors that she would be even more market-friendly than her predecessor, Luiz Inácio Lula da Silva.  Lula had positively surprised markets after becoming president in 2003 and following largely business-friendly policies despite his past leftist rhetoric.

Rousseff, however, disappointed big time by implementing the type of leftist policies the market had feared Lula would implement.

In addition to constant meddling in state oil producer Petrobras and forcing the resignation of Roger Agnelli  -- the widely-respected CEO of mining company Vale in 2011 -- Rousseff and her finance minister Guido Mantega mismanaged macro-economic policy, resulting in ever higher inflation and slower GDP growth.

Brazil is expected to have Latin America’s third-worst macro-economic environment this year after basket cases Argentina and Venezuela, according to a Latinvex analyses of GDP and inflation projections.

In fact, the estimated 0.3 percent GDP growth this year will be Brazil’s worst performance since the 2009 crisis.

And when it comes to inflation, Rousseffnomics will lead to Latin America’s third-highest inflation the next five years, according to Latinvex projections. Only Venezuela and Argentina (world champions of inflation) will be worse.

Mantega has announced that he will leave before Rousseff’s second term starts in January, but investors are not very upbeat on any policy changes as long as the president remains the same.

While opposition candidate Aecio Neves had promised a significant course-correction on Petrobras, oil policy and macro-economic policies, Rousseff is expected to continue with the same failed policies of her first period.

While Rousseff did allow private airport concessions – a move that clearly improved the air transport sector – she failed on other infrastructure reforms. (Brazil ranks as Latin America's fourth-worst when it comes to transport infrastructure). She also failed on urgent tax reforms and reducing red tape and protectionism – key parts of the so called Custo Brasil.  If past behavior is any indication, those obstacles will continue the next four years as well.

Brazil will remain a key recipient of foreign direct investment – it’s simply too large of a market to ignore – but clearly Rousseff’s re-election robbed any hope of a resurgence in the country’s economy.

Instead, investors will continue looking at countries such as Mexico, Colombia and to a certain extent Peru as the boom markets the next few years.

© Copyright Latinvex 

  Other articles in : Commentary
Back to Commentary