WEBVTT - Why Brazil's Lula May Tack Toward the Center 0:00:04.200 --> 0:00:07.480 Hello, Stephanomics here the podcast that brings you the global economy. 0:00:07.760 --> 0:00:11.600 This week focused on two very important elections, one coming 0:00:11.720 --> 0:00:14.720 up and the other just happened. The one that's happened, 0:00:15.320 --> 0:00:17.480 which will probably turn out to be more important for 0:00:17.520 --> 0:00:21.200 the planet, was the Brazilian presidential election, and the winner, 0:00:21.440 --> 0:00:24.119 as you'll definitely all know by now, was lauish in 0:00:24.200 --> 0:00:28.720 Nasciodis Silva, universally known as Lula. He's already served two 0:00:28.800 --> 0:00:33.280 terms as president up until he also served prison time 0:00:33.360 --> 0:00:37.880 barely two years ago for corruption and money laundering. Investors 0:00:38.120 --> 0:00:41.440 had been frightened when this left wing populist was elected 0:00:41.479 --> 0:00:45.160 the first time around. Now they seem to be relieved. 0:00:45.760 --> 0:00:50.400 But what happens next? Maria Eloisa Carburero in Brazilia has 0:00:50.440 --> 0:00:53.320 an on the ground report in a few minutes. But 0:00:53.440 --> 0:00:55.440 first I thought we should talk about the US mid 0:00:55.560 --> 0:00:59.000 term elections on November eight, which you'd think would be 0:00:59.040 --> 0:01:02.280 heavily influenced by what's happening in the US economy, but 0:01:02.480 --> 0:01:06.600 maybe not. Let's talk it all through with Bloomberg Chief 0:01:06.720 --> 0:01:10.319 US Economists and A Wong and Bloomberg's White House reporter 0:01:10.680 --> 0:01:15.200 Nancy Cook. Now, Anna, we have every congressional seat and 0:01:15.240 --> 0:01:16.920 a third of the seats in the Senate up for 0:01:16.959 --> 0:01:19.640 grabs in this election. Before we get to how the 0:01:19.680 --> 0:01:23.119 economy has or has not changed the race in different 0:01:23.120 --> 0:01:25.720 parts of the country, I guess you should just paint 0:01:25.760 --> 0:01:29.280 a scene for US. Inflation is obviously the highest we've 0:01:29.319 --> 0:01:31.920 seen in many years in the US, but it's not 0:01:32.000 --> 0:01:36.160 a straightforward um sort of economic crisis story. Im in 0:01:36.200 --> 0:01:38.200 the US is not in recession. We're not seeing a 0:01:38.240 --> 0:01:42.920 big rising unemployment. So so how's the economy looking? Well, 0:01:42.959 --> 0:01:47.040 First of all, people feel very gloomy about the future, 0:01:47.280 --> 0:01:50.560 But if you look at the fundamentals, such as the 0:01:50.640 --> 0:01:54.440 actual spending, how much people have in the bank account, 0:01:55.160 --> 0:02:00.120 UM jobs out there, the actual labor income growth for 0:02:00.240 --> 0:02:04.800 the past twelve months, it's actually better than UM many 0:02:04.840 --> 0:02:07.680 many years, for decades, in fact, the best in a 0:02:07.760 --> 0:02:12.079 couple of decades. And the reason why people feel gloomier 0:02:12.120 --> 0:02:16.000 than the fundamentals would predict that they would feel it 0:02:16.080 --> 0:02:20.720 is because of inflation. And I know research on people's 0:02:20.720 --> 0:02:25.760 psychology is not strong suit of economists, but sociologists and 0:02:25.800 --> 0:02:29.440 other fields have shown that people just feel like they're 0:02:29.560 --> 0:02:33.560 cheated whenever inflation is high, Right, you even if your 0:02:33.680 --> 0:02:38.760 nominal income rise at the same pace as inflation. People 0:02:38.880 --> 0:02:43.400 just feel cheated when inflation is eroding their nominal income. 0:02:44.160 --> 0:02:46.080 I guess we should just clarify because there has been 0:02:46.120 --> 0:02:47.880 I mean, I know Larry Summons has talked about how 0:02:47.919 --> 0:02:50.480 most people's real wages have been going down even though 0:02:50.480 --> 0:02:52.600 the nominal is high. So for for a big chunk 0:02:52.639 --> 0:02:54.840 of the workforce, I guess it wages are not quite 0:02:54.960 --> 0:02:57.359 keeping up with inflation, or you would say if they 0:02:57.360 --> 0:03:01.440 are keeping up well, I would say for the lower 0:03:01.480 --> 0:03:05.399 income household, we see that nominal income growth at the 0:03:05.440 --> 0:03:09.920 bottom quartile of workers are actually catching up with inflation. 0:03:10.000 --> 0:03:14.639 The wage growth was at ten or eleven percent at 0:03:14.639 --> 0:03:19.480 the bottom of the workers. So for those workers, I 0:03:19.480 --> 0:03:23.320 would say their real income is catching up to you know, 0:03:23.360 --> 0:03:26.799 actually has been positive over the past twelve months. Be 0:03:26.919 --> 0:03:31.880 for the top half of the workers, I would say 0:03:31.919 --> 0:03:35.480 that the real real wage has been declining over the 0:03:35.760 --> 0:03:39.040 past twelve months. So, and Nancy, we heard from an 0:03:39.480 --> 0:03:43.480 on paper, although we have this high inflation, we do 0:03:43.600 --> 0:03:48.360 have still an extremely low unemployment rate. Incomes have either 0:03:48.480 --> 0:03:52.600 been keeping up with inflation or almost keeping up with inflation. 0:03:52.760 --> 0:03:55.920 You've paid a lot of attention to to these campaigns 0:03:55.920 --> 0:03:58.120 and how the White House has been dealing with them. 0:03:58.960 --> 0:04:01.440 How how would you what's been more salient on the 0:04:01.480 --> 0:04:05.840 campaign trail, inflation, jobs, or other things entirely like the 0:04:06.200 --> 0:04:11.320 change in the abortion rules. So we've seen lately in 0:04:11.440 --> 0:04:14.640 poll after poll, voters um are really saying that the 0:04:14.680 --> 0:04:16.680 most dominant issue to them and the one that they 0:04:16.720 --> 0:04:20.040 plan to vote on is a combination of the economy 0:04:20.160 --> 0:04:24.280 and inflation. In the closing weeks of this campaign, inflation 0:04:24.560 --> 0:04:27.680 has really become the dominant issue. I would say over 0:04:27.720 --> 0:04:31.080 the summer, Democrats were very hopeful actually, and they felt 0:04:31.120 --> 0:04:36.960 like their messages on abortion rights, threats to democracy, what 0:04:37.120 --> 0:04:39.960 they saw as extremism on the part of Republicans in 0:04:40.040 --> 0:04:43.279 terms of some of their policy proposals. Democrats really felt 0:04:43.320 --> 0:04:47.360 like that would help them potentially stave off much larger 0:04:47.440 --> 0:04:50.320 losses in the midterms. So you know, historically the party 0:04:50.320 --> 0:04:52.400 in power always loses some seats in the mid terms. 0:04:52.480 --> 0:04:55.320 But I think Democrats in July and August really felt 0:04:55.400 --> 0:04:59.880 much more optimistic. You've seen a real sea change. It's 0:05:00.000 --> 0:05:03.360 altading in September, I would say, uh into October, where 0:05:03.360 --> 0:05:06.440 Democrats are starting to grow much more pessimistic. The economy 0:05:06.560 --> 0:05:10.720 has become the main issue. Gas prices have fluctuated and 0:05:10.760 --> 0:05:14.040 that has definitely hurt people's perception of the economy. And 0:05:14.120 --> 0:05:16.320 another thing that we've seen is the housing market in 0:05:16.360 --> 0:05:18.880 the US has started to cool as the FED keeps 0:05:18.920 --> 0:05:22.240 raising interest rates, and so that is also affecting people, 0:05:22.640 --> 0:05:25.040 and the White House is aware that that. You know, 0:05:25.160 --> 0:05:29.880 while some economists believe inflation has peaked, things like food 0:05:29.920 --> 0:05:34.400 prices and also the prices for you know, housing have 0:05:34.880 --> 0:05:37.560 remained high, and those are really what the majority of 0:05:37.560 --> 0:05:40.359 Americans spend their money on. And so even if you 0:05:40.440 --> 0:05:43.880 have you know, some wonky White House economist on TV saying, look, 0:05:43.920 --> 0:05:47.680 we think inflation has peaked, that doesn't necessarily mean that 0:05:47.720 --> 0:05:50.240 these key voters that the White House needs to win over, 0:05:50.760 --> 0:05:54.920 like women, suburban women, independence, that's a message that they're 0:05:54.960 --> 0:05:57.279 going to be receptive to if they're seeing high prices 0:05:57.320 --> 0:06:00.520 at the grocery store, fluctuating gas prices, and like maybe 0:06:00.600 --> 0:06:02.599 let's say their rent has gone up a lot. I 0:06:02.640 --> 0:06:07.080 do remember when various attempts earlier in the year by 0:06:07.160 --> 0:06:10.280 President Biden to talk about the putin price hike and 0:06:10.400 --> 0:06:15.880 too blame President putin for high inflation. That hasn't really stuck, right, 0:06:15.920 --> 0:06:20.880 I mean, have Republicans successfully been able to blame the 0:06:20.960 --> 0:06:24.839 Biden administration for high inflation. The Republicans are trying to 0:06:24.880 --> 0:06:28.680 make this election a report card on President Biden and 0:06:28.760 --> 0:06:31.520 his leadership of the economy. What the White House has 0:06:31.560 --> 0:06:34.240 been trying to do is make this, particularly lately into 0:06:34.279 --> 0:06:37.560 a choice between the two parties. And they're trying to say, 0:06:38.000 --> 0:06:40.400 you know, look, we understand inflation is high, but we're 0:06:40.440 --> 0:06:43.960 doing all these things. You know, We've released u of Danas, 0:06:43.960 --> 0:06:48.000 strategic released from the Strategic Petroleum Reserve. We passed this 0:06:48.080 --> 0:06:52.880 sweeping legislation in August that's meant to bring down inflation 0:06:52.960 --> 0:06:56.640 and control some prices, particularly for seniors on prescription drugs. 0:06:56.800 --> 0:07:01.200 The inflation reduction exactly many people another country sounded a 0:07:01.200 --> 0:07:04.760 bit silly, but anyway, well it was branded with the 0:07:04.800 --> 0:07:08.240 elections in mind. Um. But and what they're trying to 0:07:08.240 --> 0:07:09.840 say is like, look at the things we've done. We 0:07:09.880 --> 0:07:12.640 know that you're in pain but with the high prices, 0:07:12.720 --> 0:07:14.640 but we've tried to do all these things and we're 0:07:14.640 --> 0:07:17.160 doing everything we can. And by the way, the White 0:07:17.160 --> 0:07:19.360 House says, you know, inflation is really the purview of 0:07:19.360 --> 0:07:22.120 the Federal Reserve, And what they're trying to say is 0:07:22.320 --> 0:07:26.600 if Republicans control things again like Congress, they don't have 0:07:26.640 --> 0:07:30.400 a plan to cover inflation. Meanwhile, Republicans just keep sort 0:07:30.400 --> 0:07:33.720 of bringing up things that are happening every day, like 0:07:33.760 --> 0:07:36.320 the everyday costs, and they're really hammering the White House 0:07:36.360 --> 0:07:38.840 on this, and they have just had a great amount 0:07:38.880 --> 0:07:41.840 of success in recent weeks sort of driving the inflation 0:07:41.920 --> 0:07:45.240 economy message home, combined with a renew focus on crime. 0:07:45.400 --> 0:07:48.480 There's a lot of crime in American cities now, and 0:07:48.520 --> 0:07:50.920 I think that those are messages that are really speaking 0:07:50.920 --> 0:07:54.760 to voters doing mid terms. That you can have very 0:07:54.840 --> 0:07:59.000 different campaigns in different parts of the country for specific 0:07:59.080 --> 0:08:02.640 Senate seats or or even specific congressional seats. So are 0:08:02.840 --> 0:08:09.120 our economic geographical economic differences playing into different kinds of campaigns. 0:08:09.360 --> 0:08:12.640 They certainly are. And you see also different candidates trying 0:08:12.680 --> 0:08:15.920 to tail their tailor their message to different voting groups. 0:08:16.000 --> 0:08:19.160 So for instance, um, you know, Bloomberg Economics did this 0:08:19.240 --> 0:08:22.679 great thing called the Misery Index, which looks at where 0:08:22.760 --> 0:08:25.960 Americans are most miserable, and so what we've seen in 0:08:26.000 --> 0:08:28.960 the Midwest part of the country. Uh, you know, the 0:08:29.120 --> 0:08:32.480 combination of sort of inflation and employment is not as bad. 0:08:32.760 --> 0:08:35.240 But in other places where there are key Senate races, 0:08:35.320 --> 0:08:38.600 like Arizona and Nevada, the misery index is very high. 0:08:38.960 --> 0:08:41.920 And so, for instance, in Arizona, we've seen the Democratic 0:08:41.920 --> 0:08:45.800 candidate there, Mark Kelly, really try to tailor his message 0:08:45.800 --> 0:08:48.040 and steer clear of Biden. You know, Biden has not 0:08:48.120 --> 0:08:51.200 gone anywhere near Arizona and really try to tailor his 0:08:51.240 --> 0:08:54.239 message to the huge number of Latino voters that Democrats 0:08:54.280 --> 0:08:57.120 are trying to woo, who polsters tell me have been 0:08:57.240 --> 0:08:59.920 very concerned about inflation, and so he is trying to 0:09:00.040 --> 0:09:03.559 talk to that group specifically. We've seen in Nevada Democrats 0:09:03.640 --> 0:09:07.760 really trying to turn out to union forces. There's a 0:09:07.840 --> 0:09:09.880 you know, a bunch of the casino workers are unionized, 0:09:09.880 --> 0:09:12.640 so they're really trying to speak to those groups and 0:09:12.640 --> 0:09:16.200 and appear friendly to labor um and speak to those 0:09:16.240 --> 0:09:19.400 people about high prices. But again President Biden has steered 0:09:19.440 --> 0:09:22.360 clear of Nevada too, So so it's an interesting thing 0:09:22.360 --> 0:09:25.720 where the economy is being experienced differently in different states 0:09:25.720 --> 0:09:28.640 of the country, and each Senate race is sort of 0:09:29.040 --> 0:09:32.360 its own little microcosm of what is happening in the 0:09:32.360 --> 0:09:35.880 economy and what those themes are. Well, Anna Wong, that's 0:09:35.920 --> 0:09:37.439 a there's a good segue to you. I guess you 0:09:37.440 --> 0:09:39.760 should remind us what the misery indexes, and I think 0:09:39.800 --> 0:09:43.600 also remind us of this discussion that we've had I 0:09:43.600 --> 0:09:47.240 think in the past about how how you can it 0:09:47.280 --> 0:09:50.760 could potentially be that that higher inflation is more politically 0:09:50.840 --> 0:09:54.520 damaging than high unemployment because of the larger number of 0:09:54.520 --> 0:09:59.079 people that affects. Yeah, So misery index is the sum 0:09:59.280 --> 0:10:03.040 of unimployed i'm in rate and the inflation rate. And 0:10:03.400 --> 0:10:07.760 whereas unemployment uh as I mean, as Stephanie said, unemployment 0:10:08.240 --> 0:10:13.319 um affect only a small portion of the population. Inflation 0:10:13.520 --> 0:10:16.520 is felt by every household, and in fact, in the 0:10:16.600 --> 0:10:19.719 lower income household who spent a higher share of their 0:10:20.200 --> 0:10:24.240 budget on gasoline and food, they feel it more. And 0:10:24.280 --> 0:10:29.200 to Nancy's point about the geographic distant distribution of this 0:10:29.400 --> 0:10:33.520 misery that's being felt differently in this country, we have found, 0:10:34.040 --> 0:10:37.839 based on misery index at state level, that the Red 0:10:37.960 --> 0:10:42.520 States misery was higher and in fact worsened more under 0:10:42.559 --> 0:10:45.840 the Biden years than during the Trump years, and it 0:10:45.960 --> 0:10:49.640 is a very clear trend, and that could explain why 0:10:49.800 --> 0:10:53.959 Red states are the voters here are more passionate about 0:10:54.240 --> 0:10:57.120 UM going out to the vote. And the reason why 0:10:57.240 --> 0:11:00.920 missoury has worsened in Red state it's more so than 0:11:01.000 --> 0:11:04.520 the Blue States, was because the Red States never really 0:11:04.600 --> 0:11:09.560 locked down as hard as the Blue States. So they're there, 0:11:09.600 --> 0:11:13.199 their local economy was already growing at sort of capacity 0:11:13.400 --> 0:11:18.520 before UM everybody opened up right then after everybody opened 0:11:18.600 --> 0:11:22.640 up that and with the American Rescue Act, the inflation 0:11:22.760 --> 0:11:25.520 impulse further hit these Red states more because they were 0:11:25.520 --> 0:11:29.560 operating close to capacity even before. Hence we see that 0:11:29.640 --> 0:11:35.040 Red States has generally higher inflation than Blue states. You know, 0:11:35.120 --> 0:11:37.760 you've been that really ahead of the game, ahead of 0:11:37.800 --> 0:11:41.800 many other forecasters this year, not only in predicting where 0:11:41.840 --> 0:11:45.040 that Federal Reserve interest rate was going to go, way 0:11:45.040 --> 0:11:47.400 ahead of anyone else, expecting that to maybe get as 0:11:47.440 --> 0:11:51.679 high as five, but also expecting inflation to go higher 0:11:51.720 --> 0:11:55.680 for longer than many expected. So two years time general election, 0:11:56.800 --> 0:11:59.840 what what do your forecast say is the economy that 0:12:00.120 --> 0:12:03.080 President Biden potentially will be trying to get re election on. 0:12:04.080 --> 0:12:07.080 So our base cases for the for a recession to 0:12:07.160 --> 0:12:12.720 begin in the third quarter of so by November four 0:12:14.080 --> 0:12:18.320 I would predict that economy would be gradually improving. But 0:12:18.440 --> 0:12:21.240 given that my forecast is also for the FED to 0:12:21.320 --> 0:12:28.080 only begin to cut rates in perhaps around you know, springtime, 0:12:28.080 --> 0:12:32.480 at the economy would only be in the nascent stage 0:12:32.520 --> 0:12:36.600 of turning around. Unemployment would be at five percent at 0:12:36.640 --> 0:12:41.880 that point. It will be pretty bad for Biden's election campaign. So, Nancy, 0:12:41.920 --> 0:12:43.840 we have now kind of been started to look into 0:12:43.880 --> 0:12:46.400 the future. So tell us what's your best guess of 0:12:46.440 --> 0:12:50.000 the election outcome, the mid term election outcome, and briefly 0:12:50.160 --> 0:12:53.199 what that might mean for US economic policy making over 0:12:53.240 --> 0:12:55.160 the next couple of years. So I've talked to a 0:12:55.240 --> 0:12:58.600 bunch of posters and Democratic strategies this week, and there 0:12:58.720 --> 0:13:01.760 is sort of a wide concert says that Democrats will 0:13:01.800 --> 0:13:04.360 lose the House. It's just a matter of by how 0:13:04.360 --> 0:13:07.400 wide of a margin. Um. A lot of people think 0:13:07.440 --> 0:13:09.760 that the Democrats it. The Senate is a little bit 0:13:09.800 --> 0:13:13.400 more unclear, um. But I think if they have divided government, 0:13:13.440 --> 0:13:16.600 even if Republicans just control the House, it means that 0:13:16.640 --> 0:13:20.480 there will be very little economic policy making within the 0:13:20.520 --> 0:13:24.319 Biden White House. There won't be any big legislative sweeping packages. 0:13:24.800 --> 0:13:27.520 And what typically happens in year three and four of 0:13:27.520 --> 0:13:30.880 a presidency if there's divided government is that the economic 0:13:30.920 --> 0:13:35.040 policy making is really relegated to just regulatory stuff, so 0:13:35.120 --> 0:13:38.920 things done out of agencies, rules being rewritten. The president 0:13:39.600 --> 0:13:42.560 will turn much more to foreign policy, and perhaps there'll 0:13:42.559 --> 0:13:46.240 be some things done on some international economic issues. Um 0:13:46.280 --> 0:13:49.200 he can continue to talk about the Chips Act. Maybe 0:13:49.240 --> 0:13:52.240 they will do something on trade, although they've been very 0:13:52.280 --> 0:13:55.679 reluctant to do anything on the Chinese tariffs. But those 0:13:55.720 --> 0:13:57.800 will really be the areas that I will be looking for. 0:13:57.880 --> 0:14:00.679 I don't think there will be much happening out of 0:14:00.720 --> 0:14:03.320 the White House and the domestic economic France. We don't 0:14:03.320 --> 0:14:04.880 know whether it will be good news for America's but 0:14:04.880 --> 0:14:08.520 it's bad news for people covering US economic policy. Nancy 0:14:08.559 --> 0:14:14.320 Cook and Anna Wong, thank you so much. Now, Even 0:14:14.400 --> 0:14:18.120 by US standards, the battle for the Brazilian presidency was brutal, 0:14:18.520 --> 0:14:22.200 almost certainly the toughest contest in Brazil's forty odd years 0:14:22.200 --> 0:14:25.560 of democracy, and the margin of victory was small, just 0:14:25.760 --> 0:14:28.960 under two percentage points, but two percent of the vote 0:14:29.040 --> 0:14:33.600 in Brazil equates to two million extra votes cast for Lula, 0:14:34.200 --> 0:14:38.200 and despite some complaints about fraud in the electoral system 0:14:38.280 --> 0:14:41.400 and demonstrations on the streets by supporters of the now 0:14:41.560 --> 0:14:46.040 outgoing president Jao Boltonaro, it looks like two million votes 0:14:46.200 --> 0:14:49.000 is going to be enough to secure a peaceful transfer 0:14:49.040 --> 0:14:52.520 of power. But what kind of economy does president elect 0:14:52.560 --> 0:14:56.640 Lula inherit? Does he have the team the resources to 0:14:56.760 --> 0:15:01.560 deliver on his promises. Here's Maria Eloisa Caporo in Brazilia 0:15:05.920 --> 0:15:17.520 M M. Louise in Ala da Silva. Lula, as Brazilians 0:15:17.560 --> 0:15:24.480 known him, is returning to the presidency after two prior 0:15:24.600 --> 0:15:29.520 terms in office. In geology two thousand's the intervening years 0:15:29.920 --> 0:15:34.200 having colorful to say the least. He spent more than 0:15:34.240 --> 0:15:38.160 a year in jail for accusations of his involvement in 0:15:38.200 --> 0:15:42.320 a corruption scheme known as car was Wash, and his 0:15:42.440 --> 0:15:47.920 presidential campaign was tighter than expected, with supporters of incumbent 0:15:48.480 --> 0:15:54.800 Jairbelsonao a majority in Congress. But Lula has promised vertier 0:15:54.920 --> 0:16:00.440 times health and his supporters are hopeful he'll deliver. Here's 0:16:00.440 --> 0:16:05.160 some of them singing one of the most famous campaign slogans. 0:16:05.240 --> 0:16:09.680 Just after Rula was declared president with fifty point nine 0:16:09.680 --> 0:16:19.560 percent of the books. The next four years are in 0:16:19.760 --> 0:16:26.320 charge of challenges. Latin America's largest economy will face lower growth, 0:16:26.880 --> 0:16:33.280 high interest rates, and persistent inflation. Here's Unstravisia held Latin 0:16:33.320 --> 0:16:37.480 American economists at City Group. It's never good news when 0:16:37.480 --> 0:16:41.160 the fat heights rates for emerging markets. So Brazila will 0:16:41.200 --> 0:16:44.640 be facing head winds going into next year with lower 0:16:44.680 --> 0:16:49.400 commodity prices, tighter financial conditions, and as lower as lower 0:16:49.480 --> 0:16:53.160 global growth in China, in Europe and in the US. 0:16:54.480 --> 0:16:58.120 We're forecasting relatively low growth for all of Latin America, 0:16:58.280 --> 0:17:05.920 but for in particular for breast in three. This is Gabriella, 0:17:06.320 --> 0:17:10.280 a self declared Bolsonado support I talked to at a 0:17:10.320 --> 0:17:16.359 coffee shop in Brazilia prior to election j We are 0:17:16.400 --> 0:17:19.520 so eclusive e Columbia. The economy is one of the 0:17:19.600 --> 0:17:21.640 things that I think about the most when I cast 0:17:21.680 --> 0:17:25.119 my vote. I'm an independent worker and I need the 0:17:25.160 --> 0:17:29.040 economy to perform well. Only now after the pandemic, we 0:17:29.080 --> 0:17:31.639 are seeing that there's an economic bounce back, and I 0:17:31.720 --> 0:17:34.800 fear that things will change in the economy, could stall. 0:17:36.680 --> 0:17:40.800 I'm here would who was working at a clothing store 0:17:41.160 --> 0:17:45.800 in the Southwest neighborhood of Brazilia. Today prior to elections, 0:17:47.040 --> 0:17:51.399 are they going you see? Politics are an embarrassment this year. Really, 0:17:51.600 --> 0:17:55.480 I've never seen anything like this, and this impacts businesses. 0:17:56.119 --> 0:17:59.879 I'm really worried about unemployment and security. There's a lot 0:18:00.000 --> 0:18:04.960 of people going hungry and without jobs. No stray. Interest 0:18:05.040 --> 0:18:09.720 rates in Brazil at at the highest since two thousand seventeen. 0:18:10.400 --> 0:18:14.360 Central bankers were ahead of the curve and raised interest 0:18:14.440 --> 0:18:19.240 rates in the wake of the pandemic. Last September, they 0:18:19.280 --> 0:18:24.160 stopped an eighteen months long tiding cycle, which took rates 0:18:24.280 --> 0:18:32.600 to thirteen point seventy five. Inflation fell from earlier this 0:18:32.720 --> 0:18:38.640 year to forecast of five point six percent by December. 0:18:39.119 --> 0:18:43.600 But it wasn't monetary policy that helped hold price increases. 0:18:44.560 --> 0:18:50.719 It was tax cuts, temporary tax cuts that lower transportation costs, 0:18:51.080 --> 0:18:55.919 including gasoline, and most of them are set to expire 0:18:56.440 --> 0:19:01.359 by the end of the year. He's Roberto Zazamski, brazilianalysts 0:19:01.440 --> 0:19:05.440 at Vartes. So we have seen a significant decline and 0:19:05.480 --> 0:19:10.280 headline inflation. In fact, we experienced three months of deflation 0:19:10.359 --> 0:19:13.440 in Brazil between July and September, but now in October 0:19:13.520 --> 0:19:17.320 we already started to see monthly prices rising again. So 0:19:18.080 --> 0:19:21.399 when you look at what we call co inflation that 0:19:21.520 --> 0:19:26.280 basically focus on the less volatile prices in the economy, 0:19:27.000 --> 0:19:30.960 that measure continues to be quite high and it will 0:19:31.040 --> 0:19:36.800 take longer for them to improve. Brazil's economy has proven 0:19:36.880 --> 0:19:42.680 resilient to high interest rates. Many Brazilians are concerned of 0:19:42.720 --> 0:19:48.280 what comes next for the economy. Sa Samski Divarkle's analysts 0:19:48.680 --> 0:19:52.439 expects the nation's economy to grow by just one percent 0:19:52.640 --> 0:19:57.520 next year, down from two points seven percent, and the 0:19:57.680 --> 0:20:02.520 big question is how the government will respond to persist 0:20:02.600 --> 0:20:07.960 in inflation. Here's five Amendous, a doorman in the southwest 0:20:08.040 --> 0:20:15.840 neighborhood of Rassilia. Economy. May God bless whoever wins, because 0:20:15.920 --> 0:20:19.280 the economy is really weak. It's not performing as it should. 0:20:19.800 --> 0:20:23.160 I worry about prices of food, gasoline and cooking gas. 0:20:23.760 --> 0:20:25.960 We'll see what the next president does and if he 0:20:26.040 --> 0:20:29.200 manages to lower prices, because if not, we won't even 0:20:29.280 --> 0:20:33.400 have enough to eat. And then there's all the complained 0:20:33.480 --> 0:20:43.720 promises that need funding. That's Lula in an event in 0:20:43.800 --> 0:20:47.240 the city of Jewist you Porda speaking to a crowd 0:20:47.359 --> 0:20:52.200 of supporters before election day, he's promising to raise minimum 0:20:52.280 --> 0:20:57.240 wages so they match inflation. During the campaign trail, he 0:20:57.400 --> 0:21:01.720 also promised to cut taxas for those with the lowest income. 0:21:02.600 --> 0:21:06.840 He promised object reform that will increase taxes on the 0:21:07.000 --> 0:21:11.720 regist and he promised paytricks to the poor of six 0:21:11.880 --> 0:21:15.960 hundred eyes, which is about a hundred and sixteen U 0:21:16.119 --> 0:21:21.800 S dollars. But the now elected president hasn't said how 0:21:22.600 --> 0:21:28.360 all of that will be financed. Resist public that has 0:21:28.520 --> 0:21:30.840 risen through most of the past decade and is now 0:21:30.920 --> 0:21:34.479 the highest among the major emerging markets, what investors need 0:21:34.560 --> 0:21:37.600 from the government is some sort of reassurance, that is, 0:21:37.680 --> 0:21:41.680 that will be paid back at some point. Here's Adriana Upita, 0:21:41.960 --> 0:21:46.520 Brazil economist at Bloomberg Economics. The big problem for Brazil 0:21:46.720 --> 0:21:49.960 right now is that none of its fixical rules is credible. 0:21:50.520 --> 0:21:54.399 Governments from the right and the left political spectrum have 0:21:54.640 --> 0:21:58.440 circumvented each of these rules. So the first question for 0:21:58.560 --> 0:22:01.960 the new presidential mandate it's to propose a new, credible, 0:22:02.240 --> 0:22:06.440 enforceable and feasible fiscal group. The second second question is 0:22:06.560 --> 0:22:09.080 to make sure that the counter can fund the many 0:22:09.200 --> 0:22:12.800 promises made on the campaign trail, especially on social aid 0:22:12.920 --> 0:22:18.040 and incomplex cuts. Latin America has seen a wave of 0:22:18.240 --> 0:22:23.480 products erupt as governments have failed to deliver the promises 0:22:23.600 --> 0:22:27.960 of helping easy the pain of high inflation and low growth. 0:22:29.160 --> 0:22:34.040 So it's not just the market but Brazilians themselves who 0:22:34.119 --> 0:22:38.040 will be looking at how Lunar navigates the challenge of 0:22:38.200 --> 0:22:44.639 increasing social aid while keeping Brazil's death levels stable. And 0:22:44.760 --> 0:22:47.640 they are likely to keep tabs on their new president, 0:22:48.440 --> 0:22:52.840 who could come under pressure if he doesn't fulfill all 0:22:52.920 --> 0:22:58.480 those promises he made on the campaign trail. For Bloomber News, 0:22:59.000 --> 0:23:08.280 this is my yellow so I'm delighted to talk a 0:23:08.320 --> 0:23:11.920 bit more about the prospects for Brazil with Richard Back, 0:23:12.080 --> 0:23:16.480 who's head of political analysis and strategy at XP Investimentos 0:23:16.600 --> 0:23:19.200 in Brazil. Um, but I should say he's joining me 0:23:19.320 --> 0:23:24.040 from a mountaintop in what is a public holiday in Brazil. 0:23:24.119 --> 0:23:27.600 So thank you very much for having this having this 0:23:27.720 --> 0:23:30.160 conversation with me on your on your day off, Richard. 0:23:31.000 --> 0:23:33.679 It's been a busy week, I know, and we've had 0:23:33.760 --> 0:23:36.720 quite a lot of uncertainty at various times over whether 0:23:36.960 --> 0:23:41.600 the current president, John Bersnaro had actually admitted defeat. So 0:23:41.720 --> 0:23:43.600 I guess could you just give us an update on 0:23:43.680 --> 0:23:47.840 where things stand. Sure, yeah, good afternoon. It is a 0:23:47.880 --> 0:23:51.360 pleasure to talk to you today. Um, you know, Lulas 0:23:51.520 --> 0:23:56.560 is getting some kind of short vacations from today until Sunday, 0:23:56.680 --> 0:23:59.360 So I'm really happy with this. So I could come 0:23:59.440 --> 0:24:02.240 to this hunting and take a breath for a couple 0:24:02.240 --> 0:24:04.800 of days and then we'll be back. He's on he's 0:24:04.840 --> 0:24:09.200 on the beach. Yes, that's this very nice place I recommend. 0:24:09.560 --> 0:24:12.200 And but yeah, we we are living these days after 0:24:12.320 --> 0:24:16.720 the elections that Bosonaro half recognized the result of the election. 0:24:17.320 --> 0:24:21.920 But we're seeing this role being blocked by boson narvistic 0:24:21.960 --> 0:24:26.560 truck drivers and militants from his cause. And um, yeah, 0:24:26.640 --> 0:24:31.280 I think it works in a coordinated way because Bosonaro 0:24:31.400 --> 0:24:34.719 was delaying to talk to to make a first speech 0:24:34.840 --> 0:24:37.840 after the elections because he was hoping that people will 0:24:37.920 --> 0:24:40.639 go to the streets and make protests in favor of 0:24:40.800 --> 0:24:44.720 him and then he could be politically stronger than he 0:24:44.920 --> 0:24:47.399 is right now. But the other side of this, this 0:24:47.600 --> 0:24:50.159 coin is if people doesn't go and they are not 0:24:50.320 --> 0:24:54.240 going in this multitude that he was hoping. Um, he 0:24:54.320 --> 0:24:57.080 will be in a weak situation and very isolated by 0:24:57.200 --> 0:25:02.879 the establishment in Brazil, media, political establishment, judiciary establishments. They 0:25:02.920 --> 0:25:07.400 are just leaving Boston, Nario. So, um, this I don't 0:25:07.400 --> 0:25:10.800 think this is will work in a good way for him, 0:25:10.960 --> 0:25:13.680 But I think it's done. What I'm saying to our 0:25:13.800 --> 0:25:17.600 clients since uh, the last month, I think think seems 0:25:17.760 --> 0:25:22.080 since September is I think we are forecasting this. You know, 0:25:22.280 --> 0:25:25.880 truck drivers, people in the streets, protesting, but we never 0:25:26.000 --> 0:25:29.119 we never took this as a real threat to democracy 0:25:29.160 --> 0:25:32.920 in Brazil. So this is the thing that democracy can support. 0:25:34.119 --> 0:25:37.280 I'm not saying they should support, but can support. And um, 0:25:38.119 --> 0:25:40.119 it is happening. But I think that the end is 0:25:40.240 --> 0:25:43.480 one week, two weeks we were free from this thing. Yes, 0:25:43.560 --> 0:25:45.480 so you can have demonstrations on the street, but that 0:25:45.600 --> 0:25:48.920 doesn't necessarily mean a real challenge to the rule of 0:25:49.040 --> 0:25:51.399 law or to the police. Full transfer of power. And 0:25:51.560 --> 0:25:55.919 just to remind us, when would that transfer of power happen? 0:25:56.040 --> 0:25:59.920 When would when would president elect I guess Lula become 0:26:00.000 --> 0:26:05.879 president again? Yeah again the third time. Um, this is 0:26:06.040 --> 0:26:10.280 these two moments, one moment in December, maybe December tenth. 0:26:10.760 --> 0:26:14.680 It is a date that supermanatural court defines in December 0:26:15.240 --> 0:26:18.680 when they give him a kind of certificate that he 0:26:18.800 --> 0:26:22.480 won the elections. So and then this first moment official 0:26:23.000 --> 0:26:25.879 and the second moment is generally the one when you 0:26:26.080 --> 0:26:30.600 have officially the new president it is constitutional, you have 0:26:30.720 --> 0:26:35.680