Speaker 1: Hello, Stephanomics here the podcast that brings you the global economy.
Speaker 1: This week focused on two very important elections, one coming
Speaker 1: up and the other just happened. The one that's happened,
Speaker 1: which will probably turn out to be more important for
Speaker 1: the planet, was the Brazilian presidential election, and the winner,
Speaker 1: as you'll definitely all know by now, was lauish in
Speaker 1: Nasciodis Silva, universally known as Lula. He's already served two
Speaker 1: terms as president up until he also served prison time
Speaker 1: barely two years ago for corruption and money laundering. Investors
Speaker 1: had been frightened when this left wing populist was elected
Speaker 1: the first time around. Now they seem to be relieved.
Speaker 1: But what happens next? Maria Eloisa Carburero in Brazilia has
Speaker 1: an on the ground report in a few minutes. But
Speaker 1: first I thought we should talk about the US mid
Speaker 1: term elections on November eight, which you'd think would be
Speaker 1: heavily influenced by what's happening in the US economy, but
Speaker 1: maybe not. Let's talk it all through with Bloomberg Chief
Speaker 1: US Economists and A Wong and Bloomberg's White House reporter
Speaker 1: Nancy Cook. Now, Anna, we have every congressional seat and
Speaker 1: a third of the seats in the Senate up for
Speaker 1: grabs in this election. Before we get to how the
Speaker 1: economy has or has not changed the race in different
Speaker 1: parts of the country, I guess you should just paint
Speaker 1: a scene for US. Inflation is obviously the highest we've
Speaker 1: seen in many years in the US, but it's not
Speaker 1: a straightforward um sort of economic crisis story. Im in
Speaker 1: the US is not in recession. We're not seeing a
Speaker 1: big rising unemployment. So so how's the economy looking? Well,
Speaker 1: First of all, people feel very gloomy about the future,
Speaker 1: But if you look at the fundamentals, such as the
Speaker 1: actual spending, how much people have in the bank account,
Speaker 1: UM jobs out there, the actual labor income growth for
Speaker 1: the past twelve months, it's actually better than UM many
Speaker 1: many years, for decades, in fact, the best in a
Speaker 1: couple of decades. And the reason why people feel gloomier
Speaker 1: than the fundamentals would predict that they would feel it
Speaker 1: is because of inflation. And I know research on people's
Speaker 1: psychology is not strong suit of economists, but sociologists and
Speaker 1: other fields have shown that people just feel like they're
Speaker 1: cheated whenever inflation is high, Right, you even if your
Speaker 1: nominal income rise at the same pace as inflation. People
Speaker 1: just feel cheated when inflation is eroding their nominal income.
Speaker 1: I guess we should just clarify because there has been
Speaker 1: I mean, I know Larry Summons has talked about how
Speaker 1: most people's real wages have been going down even though
Speaker 1: the nominal is high. So for for a big chunk
Speaker 1: of the workforce, I guess it wages are not quite
Speaker 1: keeping up with inflation, or you would say if they
Speaker 1: are keeping up well, I would say for the lower
Speaker 1: income household, we see that nominal income growth at the
Speaker 1: bottom quartile of workers are actually catching up with inflation.
Speaker 1: The wage growth was at ten or eleven percent at
Speaker 1: the bottom of the workers. So for those workers, I
Speaker 1: would say their real income is catching up to you know,
Speaker 1: actually has been positive over the past twelve months. Be
Speaker 1: for the top half of the workers, I would say
Speaker 1: that the real real wage has been declining over the
Speaker 1: past twelve months. So, and Nancy, we heard from an
Speaker 1: on paper, although we have this high inflation, we do
Speaker 1: have still an extremely low unemployment rate. Incomes have either
Speaker 1: been keeping up with inflation or almost keeping up with inflation.
Speaker 1: You've paid a lot of attention to to these campaigns
Speaker 1: and how the White House has been dealing with them.
Speaker 1: How how would you what's been more salient on the
Speaker 1: campaign trail, inflation, jobs, or other things entirely like the
Speaker 1: change in the abortion rules. So we've seen lately in
Speaker 1: poll after poll, voters um are really saying that the
Speaker 1: most dominant issue to them and the one that they
Speaker 1: plan to vote on is a combination of the economy
Speaker 1: and inflation. In the closing weeks of this campaign, inflation
Speaker 1: has really become the dominant issue. I would say over
Speaker 1: the summer, Democrats were very hopeful actually, and they felt
Speaker 1: like their messages on abortion rights, threats to democracy, what
Speaker 1: they saw as extremism on the part of Republicans in
Speaker 1: terms of some of their policy proposals. Democrats really felt
Speaker 1: like that would help them potentially stave off much larger
Speaker 1: losses in the midterms. So you know, historically the party
Speaker 1: in power always loses some seats in the mid terms.
Speaker 1: But I think Democrats in July and August really felt
Speaker 1: much more optimistic. You've seen a real sea change. It's
Speaker 1: altading in September, I would say, uh into October, where
Speaker 1: Democrats are starting to grow much more pessimistic. The economy
Speaker 1: has become the main issue. Gas prices have fluctuated and
Speaker 1: that has definitely hurt people's perception of the economy. And
Speaker 1: another thing that we've seen is the housing market in
Speaker 1: the US has started to cool as the FED keeps
Speaker 1: raising interest rates, and so that is also affecting people,
Speaker 1: and the White House is aware that that. You know,
Speaker 1: while some economists believe inflation has peaked, things like food
Speaker 1: prices and also the prices for you know, housing have
Speaker 1: remained high, and those are really what the majority of
Speaker 1: Americans spend their money on. And so even if you
Speaker 1: have you know, some wonky White House economist on TV saying, look,
Speaker 1: we think inflation has peaked, that doesn't necessarily mean that
Speaker 1: these key voters that the White House needs to win over,
Speaker 1: like women, suburban women, independence, that's a message that they're
Speaker 1: going to be receptive to if they're seeing high prices
Speaker 1: at the grocery store, fluctuating gas prices, and like maybe
Speaker 1: let's say their rent has gone up a lot. I
Speaker 1: do remember when various attempts earlier in the year by
Speaker 1: President Biden to talk about the putin price hike and
Speaker 1: too blame President putin for high inflation. That hasn't really stuck, right,
Speaker 1: I mean, have Republicans successfully been able to blame the
Speaker 1: Biden administration for high inflation. The Republicans are trying to
Speaker 1: make this election a report card on President Biden and
Speaker 1: his leadership of the economy. What the White House has
Speaker 1: been trying to do is make this, particularly lately into
Speaker 1: a choice between the two parties. And they're trying to say,
Speaker 1: you know, look, we understand inflation is high, but we're
Speaker 1: doing all these things. You know, We've released u of Danas,
Speaker 1: strategic released from the Strategic Petroleum Reserve. We passed this
Speaker 1: sweeping legislation in August that's meant to bring down inflation
Speaker 1: and control some prices, particularly for seniors on prescription drugs.
Speaker 1: The inflation reduction exactly many people another country sounded a
Speaker 1: bit silly, but anyway, well it was branded with the
Speaker 1: elections in mind. Um. But and what they're trying to
Speaker 1: say is like, look at the things we've done. We
Speaker 1: know that you're in pain but with the high prices,
Speaker 1: but we've tried to do all these things and we're
Speaker 1: doing everything we can. And by the way, the White
Speaker 1: House says, you know, inflation is really the purview of
Speaker 1: the Federal Reserve, And what they're trying to say is
Speaker 1: if Republicans control things again like Congress, they don't have
Speaker 1: a plan to cover inflation. Meanwhile, Republicans just keep sort
Speaker 1: of bringing up things that are happening every day, like
Speaker 1: the everyday costs, and they're really hammering the White House
Speaker 1: on this, and they have just had a great amount
Speaker 1: of success in recent weeks sort of driving the inflation
Speaker 1: economy message home, combined with a renew focus on crime.
Speaker 1: There's a lot of crime in American cities now, and
Speaker 1: I think that those are messages that are really speaking
Speaker 1: to voters doing mid terms. That you can have very
Speaker 1: different campaigns in different parts of the country for specific
Speaker 1: Senate seats or or even specific congressional seats. So are
Speaker 1: our economic geographical economic differences playing into different kinds of campaigns.
Speaker 1: They certainly are. And you see also different candidates trying
Speaker 1: to tail their tailor their message to different voting groups.
Speaker 1: So for instance, um, you know, Bloomberg Economics did this
Speaker 1: great thing called the Misery Index, which looks at where
Speaker 1: Americans are most miserable, and so what we've seen in
Speaker 1: the Midwest part of the country. Uh, you know, the
Speaker 1: combination of sort of inflation and employment is not as bad.
Speaker 1: But in other places where there are key Senate races,
Speaker 1: like Arizona and Nevada, the misery index is very high.
Speaker 1: And so, for instance, in Arizona, we've seen the Democratic
Speaker 1: candidate there, Mark Kelly, really try to tailor his message
Speaker 1: and steer clear of Biden. You know, Biden has not
Speaker 1: gone anywhere near Arizona and really try to tailor his
Speaker 1: message to the huge number of Latino voters that Democrats
Speaker 1: are trying to woo, who polsters tell me have been
Speaker 1: very concerned about inflation, and so he is trying to
Speaker 1: talk to that group specifically. We've seen in Nevada Democrats
Speaker 1: really trying to turn out to union forces. There's a
Speaker 1: you know, a bunch of the casino workers are unionized,
Speaker 1: so they're really trying to speak to those groups and
Speaker 1: and appear friendly to labor um and speak to those
Speaker 1: people about high prices. But again President Biden has steered
Speaker 1: clear of Nevada too, So so it's an interesting thing
Speaker 1: where the economy is being experienced differently in different states
Speaker 1: of the country, and each Senate race is sort of
Speaker 1: its own little microcosm of what is happening in the
Speaker 1: economy and what those themes are. Well, Anna Wong, that's
Speaker 1: a there's a good segue to you. I guess you
Speaker 1: should remind us what the misery indexes, and I think
Speaker 1: also remind us of this discussion that we've had I
Speaker 1: think in the past about how how you can it
Speaker 1: could potentially be that that higher inflation is more politically
Speaker 1: damaging than high unemployment because of the larger number of
Speaker 1: people that affects. Yeah, So misery index is the sum
Speaker 1: of unimployed i'm in rate and the inflation rate. And
Speaker 1: whereas unemployment uh as I mean, as Stephanie said, unemployment
Speaker 1: um affect only a small portion of the population. Inflation
Speaker 1: is felt by every household, and in fact, in the
Speaker 1: lower income household who spent a higher share of their
Speaker 1: budget on gasoline and food, they feel it more. And
Speaker 1: to Nancy's point about the geographic distant distribution of this
Speaker 1: misery that's being felt differently in this country, we have found,
Speaker 1: based on misery index at state level, that the Red
Speaker 1: States misery was higher and in fact worsened more under
Speaker 1: the Biden years than during the Trump years, and it
Speaker 1: is a very clear trend, and that could explain why
Speaker 1: Red states are the voters here are more passionate about
Speaker 1: UM going out to the vote. And the reason why
Speaker 1: missoury has worsened in Red state it's more so than
Speaker 1: the Blue States, was because the Red States never really
Speaker 1: locked down as hard as the Blue States. So they're there,
Speaker 1: their local economy was already growing at sort of capacity
Speaker 1: before UM everybody opened up right then after everybody opened
Speaker 1: up that and with the American Rescue Act, the inflation
Speaker 1: impulse further hit these Red states more because they were
Speaker 1: operating close to capacity even before. Hence we see that
Speaker 1: Red States has generally higher inflation than Blue states. You know,
Speaker 1: you've been that really ahead of the game, ahead of
Speaker 1: many other forecasters this year, not only in predicting where
Speaker 1: that Federal Reserve interest rate was going to go, way
Speaker 1: ahead of anyone else, expecting that to maybe get as
Speaker 1: high as five, but also expecting inflation to go higher
Speaker 1: for longer than many expected. So two years time general election,
Speaker 1: what what do your forecast say is the economy that
Speaker 1: President Biden potentially will be trying to get re election on.
Speaker 1: So our base cases for the for a recession to
Speaker 1: begin in the third quarter of so by November four
Speaker 1: I would predict that economy would be gradually improving. But
Speaker 1: given that my forecast is also for the FED to
Speaker 1: only begin to cut rates in perhaps around you know, springtime,
Speaker 1: at the economy would only be in the nascent stage
Speaker 1: of turning around. Unemployment would be at five percent at
Speaker 1: that point. It will be pretty bad for Biden's election campaign. So, Nancy,
Speaker 1: we have now kind of been started to look into
Speaker 1: the future. So tell us what's your best guess of
Speaker 1: the election outcome, the mid term election outcome, and briefly
Speaker 1: what that might mean for US economic policy making over
Speaker 1: the next couple of years. So I've talked to a
Speaker 1: bunch of posters and Democratic strategies this week, and there
Speaker 1: is sort of a wide concert says that Democrats will
Speaker 1: lose the House. It's just a matter of by how
Speaker 1: wide of a margin. Um. A lot of people think
Speaker 1: that the Democrats it. The Senate is a little bit
Speaker 1: more unclear, um. But I think if they have divided government,
Speaker 1: even if Republicans just control the House, it means that
Speaker 1: there will be very little economic policy making within the
Speaker 1: Biden White House. There won't be any big legislative sweeping packages.
Speaker 1: And what typically happens in year three and four of
Speaker 1: a presidency if there's divided government is that the economic
Speaker 1: policy making is really relegated to just regulatory stuff, so
Speaker 1: things done out of agencies, rules being rewritten. The president
Speaker 1: will turn much more to foreign policy, and perhaps there'll
Speaker 1: be some things done on some international economic issues. Um
Speaker 1: he can continue to talk about the Chips Act. Maybe
Speaker 1: they will do something on trade, although they've been very
Speaker 1: reluctant to do anything on the Chinese tariffs. But those
Speaker 1: will really be the areas that I will be looking for.
Speaker 1: I don't think there will be much happening out of
Speaker 1: the White House and the domestic economic France. We don't
Speaker 1: know whether it will be good news for America's but
Speaker 1: it's bad news for people covering US economic policy. Nancy
Speaker 1: Cook and Anna Wong, thank you so much. Now, Even
Speaker 1: by US standards, the battle for the Brazilian presidency was brutal,
Speaker 1: almost certainly the toughest contest in Brazil's forty odd years
Speaker 1: of democracy, and the margin of victory was small, just
Speaker 1: under two percentage points, but two percent of the vote
Speaker 1: in Brazil equates to two million extra votes cast for Lula,
Speaker 1: and despite some complaints about fraud in the electoral system
Speaker 1: and demonstrations on the streets by supporters of the now
Speaker 1: outgoing president Jao Boltonaro, it looks like two million votes
Speaker 1: is going to be enough to secure a peaceful transfer
Speaker 1: of power. But what kind of economy does president elect
Speaker 1: Lula inherit? Does he have the team the resources to
Speaker 1: deliver on his promises. Here's Maria Eloisa Caporo in Brazilia
Speaker 1: M M. Louise in Ala da Silva. Lula, as Brazilians
Speaker 1: known him, is returning to the presidency after two prior
Speaker 1: terms in office. In geology two thousand's the intervening years
Speaker 1: having colorful to say the least. He spent more than
Speaker 1: a year in jail for accusations of his involvement in
Speaker 1: a corruption scheme known as car was Wash, and his
Speaker 1: presidential campaign was tighter than expected, with supporters of incumbent
Speaker 1: Jairbelsonao a majority in Congress. But Lula has promised vertier
Speaker 1: times health and his supporters are hopeful he'll deliver. Here's
Speaker 1: some of them singing one of the most famous campaign slogans.
Speaker 1: Just after Rula was declared president with fifty point nine
Speaker 1: percent of the books. The next four years are in
Speaker 1: charge of challenges. Latin America's largest economy will face lower growth,
Speaker 1: high interest rates, and persistent inflation. Here's Unstravisia held Latin
Speaker 1: American economists at City Group. It's never good news when
Speaker 1: the fat heights rates for emerging markets. So Brazila will
Speaker 1: be facing head winds going into next year with lower
Speaker 1: commodity prices, tighter financial conditions, and as lower as lower
Speaker 1: global growth in China, in Europe and in the US.
Speaker 1: We're forecasting relatively low growth for all of Latin America,
Speaker 1: but for in particular for breast in three. This is Gabriella,
Speaker 1: a self declared Bolsonado support I talked to at a
Speaker 1: coffee shop in Brazilia prior to election j We are
Speaker 1: so eclusive e Columbia. The economy is one of the
Speaker 1: things that I think about the most when I cast
Speaker 1: my vote. I'm an independent worker and I need the
Speaker 1: economy to perform well. Only now after the pandemic, we
Speaker 1: are seeing that there's an economic bounce back, and I
Speaker 1: fear that things will change in the economy, could stall.
Speaker 1: I'm here would who was working at a clothing store
Speaker 1: in the Southwest neighborhood of Brazilia. Today prior to elections,
Speaker 1: are they going you see? Politics are an embarrassment this year. Really,
Speaker 1: I've never seen anything like this, and this impacts businesses.
Speaker 1: I'm really worried about unemployment and security. There's a lot
Speaker 1: of people going hungry and without jobs. No stray. Interest
Speaker 1: rates in Brazil at at the highest since two thousand seventeen.
Speaker 1: Central bankers were ahead of the curve and raised interest
Speaker 1: rates in the wake of the pandemic. Last September, they
Speaker 1: stopped an eighteen months long tiding cycle, which took rates
Speaker 1: to thirteen point seventy five. Inflation fell from earlier this
Speaker 1: year to forecast of five point six percent by December.
Speaker 1: But it wasn't monetary policy that helped hold price increases.
Speaker 1: It was tax cuts, temporary tax cuts that lower transportation costs,
Speaker 1: including gasoline, and most of them are set to expire
Speaker 1: by the end of the year. He's Roberto Zazamski, brazilianalysts
Speaker 1: at Vartes. So we have seen a significant decline and
Speaker 1: headline inflation. In fact, we experienced three months of deflation
Speaker 1: in Brazil between July and September, but now in October
Speaker 1: we already started to see monthly prices rising again. So
Speaker 1: when you look at what we call co inflation that
Speaker 1: basically focus on the less volatile prices in the economy,
Speaker 1: that measure continues to be quite high and it will
Speaker 1: take longer for them to improve. Brazil's economy has proven
Speaker 1: resilient to high interest rates. Many Brazilians are concerned of
Speaker 1: what comes next for the economy. Sa Samski Divarkle's analysts
Speaker 1: expects the nation's economy to grow by just one percent
Speaker 1: next year, down from two points seven percent, and the
Speaker 1: big question is how the government will respond to persist
Speaker 1: in inflation. Here's five Amendous, a doorman in the southwest
Speaker 1: neighborhood of Rassilia. Economy. May God bless whoever wins, because
Speaker 1: the economy is really weak. It's not performing as it should.
Speaker 1: I worry about prices of food, gasoline and cooking gas.
Speaker 1: We'll see what the next president does and if he
Speaker 1: manages to lower prices, because if not, we won't even
Speaker 1: have enough to eat. And then there's all the complained
Speaker 1: promises that need funding. That's Lula in an event in
Speaker 1: the city of Jewist you Porda speaking to a crowd
Speaker 1: of supporters before election day, he's promising to raise minimum
Speaker 1: wages so they match inflation. During the campaign trail, he
Speaker 1: also promised to cut taxas for those with the lowest income.
Speaker 1: He promised object reform that will increase taxes on the
Speaker 1: regist and he promised paytricks to the poor of six
Speaker 1: hundred eyes, which is about a hundred and sixteen U
Speaker 1: S dollars. But the now elected president hasn't said how
Speaker 1: all of that will be financed. Resist public that has
Speaker 1: risen through most of the past decade and is now
Speaker 1: the highest among the major emerging markets, what investors need
Speaker 1: from the government is some sort of reassurance, that is,
Speaker 1: that will be paid back at some point. Here's Adriana Upita,
Speaker 1: Brazil economist at Bloomberg Economics. The big problem for Brazil
Speaker 1: right now is that none of its fixical rules is credible.
Speaker 1: Governments from the right and the left political spectrum have
Speaker 1: circumvented each of these rules. So the first question for
Speaker 1: the new presidential mandate it's to propose a new, credible,
Speaker 1: enforceable and feasible fiscal group. The second second question is
Speaker 1: to make sure that the counter can fund the many
Speaker 1: promises made on the campaign trail, especially on social aid
Speaker 1: and incomplex cuts. Latin America has seen a wave of
Speaker 1: products erupt as governments have failed to deliver the promises
Speaker 1: of helping easy the pain of high inflation and low growth.
Speaker 1: So it's not just the market but Brazilians themselves who
Speaker 1: will be looking at how Lunar navigates the challenge of
Speaker 1: increasing social aid while keeping Brazil's death levels stable. And
Speaker 1: they are likely to keep tabs on their new president,
Speaker 1: who could come under pressure if he doesn't fulfill all
Speaker 1: those promises he made on the campaign trail. For Bloomber News,
Speaker 1: this is my yellow so I'm delighted to talk a
Speaker 1: bit more about the prospects for Brazil with Richard Back,
Speaker 1: who's head of political analysis and strategy at XP Investimentos
Speaker 1: in Brazil. Um, but I should say he's joining me
Speaker 1: from a mountaintop in what is a public holiday in Brazil.
Speaker 1: So thank you very much for having this having this
Speaker 1: conversation with me on your on your day off, Richard.
Speaker 1: It's been a busy week, I know, and we've had
Speaker 1: quite a lot of uncertainty at various times over whether
Speaker 1: the current president, John Bersnaro had actually admitted defeat. So
Speaker 1: I guess could you just give us an update on
Speaker 1: where things stand. Sure, yeah, good afternoon. It is a
Speaker 1: pleasure to talk to you today. Um, you know, Lulas
Speaker 1: is getting some kind of short vacations from today until Sunday,
Speaker 1: So I'm really happy with this. So I could come
Speaker 1: to this hunting and take a breath for a couple
Speaker 1: of days and then we'll be back. He's on he's
Speaker 1: on the beach. Yes, that's this very nice place I recommend.
Speaker 1: And but yeah, we we are living these days after
Speaker 1: the elections that Bosonaro half recognized the result of the election.
Speaker 1: But we're seeing this role being blocked by boson narvistic
Speaker 1: truck drivers and militants from his cause. And um, yeah,
Speaker 1: I think it works in a coordinated way because Bosonaro
Speaker 1: was delaying to talk to to make a first speech
Speaker 1: after the elections because he was hoping that people will
Speaker 1: go to the streets and make protests in favor of
Speaker 1: him and then he could be politically stronger than he
Speaker 1: is right now. But the other side of this, this
Speaker 1: coin is if people doesn't go and they are not
Speaker 1: going in this multitude that he was hoping. Um, he
Speaker 1: will be in a weak situation and very isolated by
Speaker 1: the establishment in Brazil, media, political establishment, judiciary establishments. They
Speaker 1: are just leaving Boston, Nario. So, um, this I don't
Speaker 1: think this is will work in a good way for him,
Speaker 1: But I think it's done. What I'm saying to our
Speaker 1: clients since uh, the last month, I think think seems
Speaker 1: since September is I think we are forecasting this. You know,
Speaker 1: truck drivers, people in the streets, protesting, but we never
Speaker 1: we never took this as a real threat to democracy
Speaker 1: in Brazil. So this is the thing that democracy can support.
Speaker 1: I'm not saying they should support, but can support. And um,
Speaker 1: it is happening. But I think that the end is
Speaker 1: one week, two weeks we were free from this thing. Yes,
Speaker 1: so you can have demonstrations on the street, but that
Speaker 1: doesn't necessarily mean a real challenge to the rule of
Speaker 1: law or to the police. Full transfer of power. And
Speaker 1: just to remind us, when would that transfer of power happen?
Speaker 1: When would when would president elect I guess Lula become
Speaker 1: president again? Yeah again the third time. Um, this is
Speaker 1: these two moments, one moment in December, maybe December tenth.
Speaker 1: It is a date that supermanatural court defines in December
Speaker 1: when they give him a kind of certificate that he
Speaker 1: won the elections. So and then this first moment official
Speaker 1: and the second moment is generally the one when you
Speaker 1: have officially the new president it is constitutional, you have
Speaker 1: officially the new president becoming president, working in the office officially,
Speaker 1: and the Congress in Brazil one month after that is
Speaker 1: generally is February the one. What kind of constraints do
Speaker 1: you see on him? And of course there's a lot
Speaker 1: of people hoping that he can achieve great things and
Speaker 1: be focusing on the poorest in society and other things
Speaker 1: that he's been sort of known for. Is he going
Speaker 1: to be very constru train and what he can do? Yes,
Speaker 1: he will. I think he will have the same constraints
Speaker 1: that also Naro faced in the last four years UH
Speaker 1: in this this more ideological agenda in terms of behavior
Speaker 1: especially Butsonar you couldn't approve a lot of things in
Speaker 1: the right wing side and Lula would not approve a
Speaker 1: lot of things from the left wing side. Agenda. I
Speaker 1: think he will have a majority in Congress, UH, like
Speaker 1: two hundred seventy congressmen in the House, like a forty
Speaker 1: congressman UH, senators in in Senate. It is very, very
Speaker 1: very easy to see the numbers in favor of Lula UH.
Speaker 1: Not a big majority, but majority in both houses. But
Speaker 1: it doesn't mean he will do anything he wants. He
Speaker 1: cannot be his own party administration. He knows that he
Speaker 1: will have to bring more people and will have to
Speaker 1: deal with the Congress and the judiciary, because this is
Speaker 1: a mess, the situation that judiciary is in Brazil today.
Speaker 1: So he's saying this is positive that he knows that
Speaker 1: he cannot be a radical or revengeful against the institutions
Speaker 1: because he can be removed from from the presidency as
Speaker 1: Tuma was in the past. He nominated Arguming, his vice
Speaker 1: president of very conservative men Um, for the coordination of
Speaker 1: the process of transition, which is a very good sign
Speaker 1: because he could nominate someone from his own party. So
Speaker 1: he is opening this thing a little bit because it
Speaker 1: doesn't mean much, but he knows and he reads Lula
Speaker 1: very well. Does kind of signals that he has to
Speaker 1: give to the society. So he's doing that from a distance.
Speaker 1: It looks surprising, you know, when Lula was first elected
Speaker 1: and here's this left wing firebrand, former trade unionist and
Speaker 1: metal worker. Um I seem to remember, investors and the
Speaker 1: financial markets were pretty worried. And yet this result, uh
Speaker 1: of his his winning the presidency seems to have gone
Speaker 1: down reasonably well. So so briefly, how would you how
Speaker 1: would you describe the reaction of kind of international investors
Speaker 1: to this result and what is it that that investors
Speaker 1: are thinking when they look at Lula. It was interesting
Speaker 1: because since the last year, um, after the opening, the
Speaker 1: general opening, and uh, finally we could travel to the
Speaker 1: US and the UK and make contact with the personally
Speaker 1: with our clients and investors in Brazil, and they were
Speaker 1: more more comfortable with Lula winning the elections before the Brazilians.
Speaker 1: So the foreigners, they were more comfortable with this this thing. Yeah,
Speaker 1: we know Lula. He will make distortions, but he's not
Speaker 1: a guy that will blow everything and make a very
Speaker 1: red government, red administration, left wing orientated. During the campaign,
Speaker 1: we haven't this this volatility that many people were expecting
Speaker 1: during the elections, you know in the markets in Brazil,
Speaker 1: because you know, you know, the investors in Brazil they
Speaker 1: used to say, we know already know the good part
Speaker 1: and the best part of both of these guys, Lula
Speaker 1: and Bosonardo. So we've have seen the wars from Lula
Speaker 1: and the best from Lula, the wars from Bosonaro, the
Speaker 1: good part of Bossonaro. So not that surprising situation, right,
Speaker 1: that's interesting. And finally, I mean for the region and
Speaker 1: for the sort of broader economy, do you think it's
Speaker 1: good news to have Lula reelected? And we are in
Speaker 1: a very difficult situation for the global economy, lots of
Speaker 1: emerging market economies dealing with a stronger dollar, which traditionally
Speaker 1: is quite a bad thing, and also rising interest rates
Speaker 1: by the Federal Reserve. We've been talking earlier in the
Speaker 1: show about the the US interest rates that's in the
Speaker 1: past often been a recipe for for crises in places
Speaker 1: like Brazil. Um. But we also have some possible pluses
Speaker 1: and advantages coming to South America from the fact that
Speaker 1: the US is sort of distancing itself and potentially decoupling
Speaker 1: from from it some of its trade relationships with China.
Speaker 1: So just a Lula presidency make it more likely that
Speaker 1: Brazil will come through this in relatively good health and
Speaker 1: maybe to see some opportunities from the current state of affairs.
Speaker 1: I think so um, they diagnosis that his party and
Speaker 1: people and his inner circle is getting more matured, because
Speaker 1: he was scaring me personally because six months ago when
Speaker 1: you asked them about the foreign situation, they fed all
Speaker 1: that stuff. He wasn't in their political or economical calculations,
Speaker 1: you know, and he was kind of surprised for them.
Speaker 1: So you at this point, I was looking at a Wow,
Speaker 1: this is this is weird. You know, they should be
Speaker 1: aware about that. But they are increasing this understanding that
Speaker 1: the foreign situation Asian can be not good for Brazio.
Speaker 1: So but but Lula, he he's already doing better in
Speaker 1: this foreign relationship, uh than Bosonaro because Bossonaro he's not
Speaker 1: very fond of this international negotiations and Bluela he loves
Speaker 1: that thing, you know, he loves to be loved. So
Speaker 1: he uh and Macron they have a very good relationship.
Speaker 1: I'm pretty sure that he will meet with Mr Joe
Speaker 1: Biden before even being the office. In terms of negotiations,
Speaker 1: I think Lula has advantage in terms of reading the scenario,
Speaker 1: acting according to the scenario. I think Bossonaro has a
Speaker 1: better team than Lula can nominate. That's interesting. So right
Speaker 1: now the sort of economic expertise would would still favor
Speaker 1: the current the current president. But if what you're standing
Speaker 1: in the international community means anything at all, President Lula
Speaker 1: is going to be better off as not least because
Speaker 1: he's he's going to go off and be the hero
Speaker 1: at the cop meetings I see in in Egypt. So
Speaker 1: many concerns globally about what was going to happen to
Speaker 1: the Brazilian the rainforest if if President Boltonaro stayed in power.
Speaker 1: Richard Bach, and thank you so much for doing this
Speaker 1: on your day off. We really appreciate you coming on.
Speaker 1: Thank you very much. Thank you for the dpication. That's
Speaker 1: it for Stephonomics. I have no idea what we're going
Speaker 1: to talk about next week, but check out the Bloomberg
Speaker 1: News website for more economic news and views on the
Speaker 1: global economy, and follow at economics on Twitter. This episode
Speaker 1: was produced by Sammer, Sadi Young Young and Magnus Hendrickson,
Speaker 1: with special thanks to Eloisa, Maria, Richard Bach, Nancy Cook,
Speaker 1: and Anna wat. Mike Sasso is the executive producer of
Speaker 1: Stephonomics four