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Brazilian election results

30 October 2018 Carlos Caicedo

The 55% vote garnered by far-right presidential candidate Jair Bolsonaro gives him a relatively strong mandate and scope to form a working majority in Congress.

  • President-elect Jair Bolsonaro has promised to reduce the size of the state and promote fiscal reforms, but specific details are still to be outlined.
  • Political polarisation in Brazil is likely to continue, but Bolsonaro appears well placed to secure a working majority in Congress.
  • Bolsonaro's cabinet is still to be announced and his economic programme also requires detail; this indicates significant policy uncertainty over the next few months.

Far-right candidate Jair Bolsonaro was elected president of Brazil on 28 October 2018 with 55.2% of valid votes, against 44.8% for his left-wing rival Fernando Haddad of the Worker's Party (Partido dos Trabalhadores: PT). Representing the Social Liberal Party (Partido Social Liberal: PSL), a party he joined just a few months ago, former Army captain Bolsonaro ran a successful campaign focused on combating crime and corruption. He combined this with a socially conservative message and support for a liberal economic agenda. He overcame his limited political infrastructure and modest campaign funding with sophisticated use of social media.

In his first post-victory speech, Bolsonaro toned down some of his previous controversial statements regarding law and order by saying that his government would respect the constitution, freedom, and democracy. He also said the new administration would seek to reduce the size of the state, and pledged to deliver necessary fiscal reforms, but without giving any specific detail. However, he did not attempt to reach out to his opponents to try to mitigate Brazil's growing political polarisation. His opponent Haddad did not call Bolsonaro to congratulate him on his victory, and vowed to lead the opposition against him, which increases the risk of increased political polarisation and political violence.

Potential Congress majority

Bolsonaro has the opportunity to assemble a working majority in Congress. His party is now the second-largest in the Lower House. His position is further boosted by the victory in the largest states of governors sympathetic to him, together with the willingness of several centre-right parties to work with him. However, it is still unclear whether he has the willingness and political dexterity to achieve a broader base of support. In particular, Bolsonaro has said repeatedly he will not undertake political bargaining and "horse-trading". Originally, he had hoped to gain a sufficiently strong popular mandate to impose his political agenda in Congress. Despite the considerable progress he has made, this remains likely to clash with the realities of Brazilian politics and its fragmented party landscape. However, he appears to be mindful of such constraints; media reports said his advisers are already talking with different political parties in parliament to secure their support.

The new Congress will be Brazil's most fragmented in history, with 30 different parties in the Lower House and 21 in the Senate. Nonetheless, several factors work in Bolsonaro's favour. Firstly, the new Congress is the most conservative in decades, with strong representation of the conservative groups representing security, protestant churches, and agribusiness, known as the BBB caucus (Bullet, Bible, Beef); these sectors are likely to align with Bolsonaro. Secondly, Brazilian centrist parties tend to support the government of the day in exchange for specific posts and budget allocation for the constituencies they represent. Meanwhile, Brazil's industrial and financial sectors are highly supportive of Bolsonaro's announced economically liberal agenda.

Federal Deputy Onyx Lorenzoni, who will be Bolsonaro's chief of staff, anticipates counting on the support of approximately 300 deputies. In the 513-member Lower House a simple majority of 257 is needed to pass an ordinary law; however, for constitutional amendments such as the pension reform, support of 308 deputies and 49 senators is needed. If these claims are accurate, they would place Bolsonaro's government in a strong position to secure command of the Lower House and potentially the Senate, although this will be subject to his willingness and flexibility to negotiate with other parties.

Cabinet negotiations

Potential future support will be indicated by the outcome of negotiations over cabinet formation. The president-elect has already named three ministers: his economic adviser and former banker Paulo Guedes for finance minister, retired general Augusto Heleno for defence minister, and Lorenzoni as chief of staff. Together with his sons, Senator-elect Flávio Bolsonaro and Federal Deputy Eduardo Bolsonaro, these ministers will constitute the government's inner circle.

Three factions will vie for influence in the Bolsonaro government: liberal-minded politicians and economists, the military, and Congress backbenchers. The Brazilian press reported several disagreements between these groups during the campaign. Bolsonaro has indicated that the position of agriculture minister will go to a representative of the agribusiness caucus. The minister for trade and industry is likely to be someone with an industrial-sector background. Additionally, some centrist parties will demand important positions in return for guaranteeing Bolsonaro the necessary parliamentary voting support. The military will probably be given control of the Ministry of infrastructure and even the Ministry of Education.

The reality of political negotiations has already forced Bolsonaro to abandon plans to merge ministries and reduce their number from 29 to 15. He had promised to merge the Ministries of Agriculture and Environment, but relented after agribusiness leaders warned him that this could bring sanctions on Brazilian food and grain exports. For similar reasons, he also backtracked on pledges to abandon the Paris Climate Change Treaty. Industrialists also met Bolsonaro recently and lobbied for the Ministry of Trade and Industry to continue to exist - the president-elect had promised to merge it with the Ministry of Finance and Planning, creating a "super Economy" Ministry.

Outlook and implications

Bolsonaro is now expected to move his approach from that of political campaigner to become more of a statesman. To achieve this, and provide necessary clarity to financial markets and the industrial sector, he will need to clarify his stance on crucial issues such as privatisation and pension reform, on which he has been very ambivalent. The president-elect has the scope to guarantee governability, enjoying strong popular support and a favourable background to assemble a working majority in Congress. Announcements of backing from other parties would be a positive indicator, easing market concerns about governability and policy direction. To consolidate initial goodwill, he will need to send clear signals over fiscal adjustment, particularly on the critically important pension reform. His prior statements on the latter have been vague, but it is very likely that he will give clearer indications of his policy plans before being sworn in on 1 January 2019. A further governability indicator will be the success of negotiations with potential allies to appoint the heads of the Lower House and Senate.

Posted 30 October 2018 by Carlos Caicedo, Senior Principal Analyst, Country Risk – Americas, IHS Markit


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