Investors move to protect assets after Neves loses momentum ahead of Sunday’s vote
SAO PAULO/RIO DE JANEIRO — Brazil’s stocks and currency dropped for a second straight session yesterday after opinion polls showed a that President Dilma Rousseff had taken a lead over market-favourite candidate Aécio Neves ahead of Sunday’s presidential elections.
Neves, who has promised to implement business-friendly policies to boost Brazil’s flagging economy, lost a slight edge over the incumbent yesterday, less than a week before Sunday’s runoff vote, two opinion polls showed on Monday.
Though conservative Neves is statistically tied in the polls, investor concern is deepening that he may be entering a downward trend, losing momentum. The polls showed a climb in his rejection ratings, indicating it may be difficult to regain the support he is losing.
To that end, the Bovespa stock index fell the most of any global stock benchmarks. In dollar terms, the index erased all of the gains it had made this year.
Many investors blame Rousseff for policies that have halted the growth of Latin America’s biggest economy and they are hoping for a Neves comeback over the next five days.
Since the beginning of the year, foreign investors are believed to have poured nearly US$8.1 billion into Brazilian stocks on hopes that the president may lose her re-election campaign. Bets on a Neves victory had bolstered the markets in recent weeks.
The Bovespa slumped as much as 4.4 percent during the day, adding to Monday’s 2.55 percent drop. Shares of state-run oil company Petrobras, which investors say have been hurt by Rousseff’s policies, were among the biggest decliners as they slid as much as 8.5 percent. By the early afternoon, the Bovespa pared losses to 2.4 percent on the day,contrasting with gains of about one percent posted by benchmark stock indexes in Mexico and Chile.
“The market was spooked by the polls and is now pricing in a larger probability that Dilma will win,” said Joaquim Kokudai, a fund manager with Effectus Investimentos in Brazil. “The perception is that we’ll have more of the same, with high inflation and low growth.”
“Investors are trying to protect their assets as the surveys show increasing support for Rousseff,” Sandro Fernandes, a trader at brokerage firm Geraldo Correa, said in an interview. “Next year will be a hard year no matter who wins.”
The Brazilian real weakened as much as 1.6 percent to 2.50 per US dollar in the first minutes of trading. It last traded at 2.4671, still 0.2 percent weaker for the day even as other Latin American currencies such as the Mexican peso and the Chilean gained at least 0.4 percent.
Some investors remain sceptical over the president’s lead however — her slim four-percent gap over Neves is still within the pollster’s margin of error.
Electoral body suspends more campaign ads
With the campaign now in its final stretch, both Neves and Rousseff’s tactics have become increasingly more aggressive and personal, with many analysts taken aback at the tone of their advertisements.
Brazil’s Electoral Court yesterday suspended another series of ads from the Aécio Neves campaign in which president Dilma Rousseff praised the opposition candidate’s management of the state of Minas Gerais back in 2009, when he was state governor.
The ads, which ran on television and radio, replayed audio from an interview that Rousseff gave to radio Itatiaia in 2009, when she was former president Luiz Inácio Lula da Silva’s Interior minister. In it, she referred to Neves “as one of the best governors in the country” and declared that his “way of doing politics is exemplary.”
In explaining its decision, the Brazilian Electoral Court said yesterday the minutes assigned to each candidate on TV and radio should be used to make proposals and that the Neves campaign ads were violating that rule.
“The air time (granted to candidates) is paid by taxpayers and is not free at all — except for candidates. It shouldn’t be used to attack or offend but to publicize and discuss ideas, based on public interest,” it said.
On October 16, the Electoral Court announced it would apply stricter criteria when it came to electoral propaganda. Fourteen ads were banned over the following four days.
Yesterday, the Court also suspended an ad by the opposition PSDB that said “Aécio is Brazil without fear of the PT.”
One of its ministers considered that “besides being drafted as a joke, the ad is empty of propositional content.”
Another Neves ad, in which the narrator insinuated that former Lula minister José Dirceu — imprisoned for his involvement in the mensalão corruption scandal — would be part of Rousseff’s new team, was also banned.
Herald with AP, Bloomberg, Reuters