TALKING POINTS – Brazil, BRL, IBOVESPA, Bolsonaro
- Jair Bolsonaro won the presidential election in a landslide victory
- Brazilian Real and local equity markets rejoiced from the outcome
- Optimism may be short lived – Bolsonaro faces potential resistance
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The Brazilian Real and benchmark IBOVESPA equity index – as forecasted[2] – soared when Brazil’s most controversial election[3] since 1985 finally produced a victor: Jair Bolsonaro of the Social Liberal Party (PSL). Bolsonaro officially takes office on January 1, 2019.
Brazilian Real Rising on Bolsonaro’s Popularity
He cruised to victory garnering 55.54% of the vote, a 10-point lead over his counterpart Fernando Haddad of the Worker’s Party, who came in at 44.46%. In the Senate, the PSL gained four seats – up from zero – and in the Chamber of Deputies, Bolsonaro’s party holds 52 seats, up from 44.
However, the National Congress of Brazil – the federal government’s legislative branch – is fractured due to a plethora of small parties. This will likely make policy formation difficult for Bolsonaro, and may therefore be concerning for investors.
The new President’s popularity in the business community comes from his pledge to trim the deficit, lower debt and reduce the size of government. He has also stressed the importance of central bank independence.
Many of these policies come from his economic advisor Paulo Guedes who was trained at the University of Chicago and is a known advocate of free-market policies. He will likely head the future “super ministry”, an administrative overhaul that will
