Presidential elections are underway in Brazil that could fundamentally change the political and economic outlook for Latin America’s largest country. Should Russia be concerned?
Brazil's presidential candidates Aecio Neves (right) of Brazilian Social Democratic Party and Dilma Rousseff of Workers' Party. Photo: Reuters
In the second round of Brazilian presidential elections on Oct. 26, the current resident of the presidential palace, Dilma Rousseff, will face Aecio Neves, a candidate from the business community holding a right-center position. Potentially at stake is the future economic direction of this influential BRICS nation – including the relative importance that Brazil places on its growing trade relationship with Russia.
In the current Brazilian campaign, there have been many unexpected twists, making the outcome of the presidential election too close to call. One of Rousseff’s main rivals was supposed to be Socialist Party member Eduardo Campos. However, on Aug. 13 of this year, his airplane crashed and the presidential candidate was killed.
After his death, the leadership of the party proposed that Marina Silva, Brazil's famous "green" leader, participate in the elections. Marina burst into the campaign like a whirlwind and began gaining points rapidly. By the end of August, her advantage over Rousseff was being measured in double-digit numbers.
However, Silva's ratings have plummeted as fast as they have soared. Voters have seen that she often contradicts herself and her recipes for "happiness for all" do not seem very convincing. In the first round she came in third after Rousseff, who received nearly 42 percent of the vote and Aecio Neves, who took 34 percent. Now, though, much depends on the votes given to Silva – not so many, but then again, not so few – nearly 22 million in all. She herself has encouraged supporting Neves in the elections.
After the elections entered the final stretch, the main campaign issue became whether or not Brazil’s government would continue its social orientation and paternalistic policies. The country is now debating a greater shift to free market policies and greater integration into the global economy.
The current left-center Workers' Party has been in power for 12 years. It considers its greatest achievement to be enabling 30 million Brazilians to escape from poverty and join the ranks of the middle class. Brazil has been talked about around the world as the "country of the future." In 2010 TIME referred to Brazil as a country entering the ranks of First World countries.
Brazil has reason to be proud of its accomplishments. It is the world's fifth largest state in terms of territory, the world’s seventh largest economy, and its fourth largest food exporter. It is the global leader in the supply of such products as sugar cane, coffee and beef. The country has begun to produce or export nearly everything needed by world markets, from minerals to water, electricity, and steel.
Nevertheless, Brazil has not been able to live up to the confidence placed in it. From 2011 to 2013, its economic growth was only 2.1 percent (during the "zeros" decade, growth reached as high as 7 percent a year). In the first half of 2014, the country was generally mired in a technical recession. In 2011, after Rousseff came to power, the Brazilian real fell against the dollar by 33 percent. The level of consumer confidence was at its lowest in a decade.
This new reality has placed difficult questions before the candidates for presidency in the current elections. Voters will choose the candidate they feel is the most capable of pulling Brazil out of its economic doldrums and enabling the country to take its rightful place in the modern world.
According to the most recent opinion polls, Neves is two percentage points ahead of Rousseff. He is a well-known politician in the country. For two terms, Neves was the governor of the second largest state Minas Gerais (as measured by population) in the country. During the election campaign, Neves has advocated drastically cutting state expenditures (while still maintaining the main social programs instituted by his predecessors), granting new initiatives to the private sector, and starting direct trade talks with the United States. At the same time, he has sharply criticized the current leaders for their outdated ideological stance and potentially corrupt deals related to the activities of the Petrobras energy company.
As Shannon O'Neil, an analyst at the Council on Foreign Relations, points out the opportunity that Neves could exploit, "The country has yet to complete its decade–long negotiations with the EU, even as other Latin American nations have signed some thirty free trade agreements since Rousseff entered office in January of 2011.”
Brazilian business actively welcomed the fortifying of Neves's position. After he made it into the second round, the stock market index rose sharply and the Brazilian real strengthened its position in relation to the dollar noticeably. The increase in the share price of the oil giant Petrobras by 17 percent was indicative of the market’s buoyant mood.
What awaits the world if the right-centrist Neves wins? As Julia E. Sweig, the Nelson and David Rockefeller Senior Fellow for Latin America Studies and Director for Latin America Studies at the Council on Foreign Relations, says: “Wall Street made its preferences known well before the first round: The markets wanted change. Anything but Dilma…”
If Aecio Neves, boosted by his position as a liberal reformist guided by the spirit of the free market, is victorious, it can be expected that Brazil will enter into a new, sturdier relationship with the U.S., which will in turn activate the Washington bureaucracy that had lost interest in Brazil’s leftist government. At the very least, it is hardly likely Neves will refuse to meet Obama or cancel any visits to the U.S. because of any sense of outrage over American intelligence services listening in on foreign leaders, as Rousseff has done.
A change in the balance within the BRICS can be expected, but not a drastic one. If Neves wins, this union of "emerging economies" will probably continue to pose itself as a counterweight to the G7 and claim a special role in the world but to a lesser extent.
Significant changes should not be expected regarding the relationship between Brazil and Russia although it seems doubtful that the Brazilian authorities will allow Russia Today to broadcast within the country as does Cristina Kirchner's government in Argentina.
However, it is possible that mutually beneficial trade contracts between the two countries will be maintained. Petr Yakovlev, the head of the Center for Iberian Studies of the Institute of Latin America (Russian Academy of Sciences), points out the growing role of trade in the Russian-Brazilian relationship, "In the first decade of the 21st century, relations between Russia and Brazil gained additional momentum and were diversified significantly. This resulted in a dramatic increase in trade turnover (from $994 million in 2000 to $5.7 billion in 2013)."
However, if Neves gains power, the country's new government will likely lend greater heed to the recommendations of Washington, which has imposed sanctions on a number of Russia's leading companies and banks, thereby depriving them of the possibility of raising capital in the U.S.
This may, first and foremost, affect military cooperation between Russia and Brazil. Currently the Brazilian Air Force has Mi-35M multi-purpose helicopters in its arsenal that were supplied by Rosoboronexport. However, the sanctions imposed by the U.S. on this Russian company could even affect military contracts with Brazil.
Any change in the economic relationship between Russia and Brazil brought about by Western sanctions will impede the transition awaited in Russia from a simple trade in goods between the two countries to a more complex economic partnership that includes investment and diversification into new industries.