Political landscape in Brazil
Major political developments in a country usually have market moving potential. Much like the WisdomTree India Earnings Fund (EPI) or the VanEck Vectors Russia ETF (RSX) react to political developments in India and Russia, respectively, the iShares MSCI Brazil Capped ETF (EWZ) is susceptible to the politics in Brazil. EWZ is invested in Brazilian firms—like the oil giant Petroleo Brasileiro SA Petrobras (PBR) and the mining firm Vale SA (VALE).
The political landscape in Brazil is interesting. Even though it endured centuries of political unrest and discrimination, Brazil now enjoys the political rule of a democratic government. Major political parties in the Brazilian Parliament include the Workers’ Party, the Brazilian Democratic Movement Party, the Brazilian Social Democracy Party, and the Democrats.
In the recent election polls, the leftist Worker’s Party—currently led by Dilma Rousseff—was challenged by Aécio Neves da Cunha—chief of Brazil’s Social Democracy Party.
Dilma Rousseff of the Worker’s Party
Rousseff is the 36th President of Brazil. She took office on January 1, 2011. She succeeded Luiz Inácio Lula da Silva—also known as Lula. Lula was the founding member of the Worker’s Party that Rousseff currently leads. Recently, she was re-elected for a second term on October 26. Lula served as the President of Brazil for two four-year terms—starting January 1, 2003. With the re-election, the Worker’s Party entered its fourth term in power.
The Worker’s Party is known to advocate high social spending and continued engagement with the Common Market of the South, or Mercosur—Mercado Común del Sur in Spanish. Its closest opponent is the Brazilian Social Democracy Party.
We’ll discuss Mercosur and how it’s relevant to Brazil later in this series.
Aécio Neves of the Brazilian Social Democracy Party
Neves is the chief of the Brazilian Social Democracy Party. He served as the governor of Minas Gerais from January 1, 2003 to March 31, 2010. Neves and his party advocate a cut in government spending. They also want to liberalize Brazil’s trade relationships outside of Mercosur.
Neves came out as the dark horse in the first round of election polls on October 5. He had 34% of the votes against Rousseff’s 42%. However, he lost in the final presidential vote. On October 26, Rousseff edged out Neves with ~51% of the votes—compared to Neves’ 48.5%. This was by far the narrowest margin in Brazil’s modern electoral history.
Income disparity dictates elections in Brazil
While much of Neves’ support came from the south and southeast portions of Brazil—the country’s economic powerhouse—the poorer voters were grateful to the ruling Workers’ Party for improved living standards and opportunities they’ve enjoyed in its 12 years in office—eight years under former President, Luiz Inácio Lula da Silva.
Considering the disparity in income levels, Rousseff’s victory was celebrated by many people in Brazil. Her re-election was shunned by some people. We’ll discuss why her re-election received mixed reactions in the next part of the series.