1 00:00:02,120 --> 00:00:05,360 Speaker 1: It's the most important election in the country's history, and 2 00:00:05,400 --> 00:00:09,360 Speaker 1: it will have significant implications for the global economy. Are 3 00:00:09,360 --> 00:00:12,000 Speaker 1: we talking about the U s midterm elections in November? 4 00:00:12,520 --> 00:00:17,239 Speaker 1: Not yet? Coming up first is Brazil's presidential poll in October, 5 00:00:17,280 --> 00:00:20,600 Speaker 1: already a wild affair in which the front runner survived 6 00:00:20,600 --> 00:00:24,840 Speaker 1: an assassination attempt, while another leading candidate is in jail 7 00:00:25,160 --> 00:00:28,040 Speaker 1: and was just barred from running. On top of that, 8 00:00:28,440 --> 00:00:31,000 Speaker 1: each of the five or six main candidates has a 9 00:00:31,040 --> 00:00:36,000 Speaker 1: starkly different vision for Brazil's economy, which, after America's, is 10 00:00:36,040 --> 00:00:48,960 Speaker 1: the second largest in the Western Hemisphere. Welcome to Benchmark. 11 00:00:49,080 --> 00:00:52,920 Speaker 1: I'm Scott Lanman, economics editor with Bloomberg News in Washington, 12 00:00:53,360 --> 00:00:57,040 Speaker 1: and now I'm Daniel Moss, columnist at Bloomberg Opinion in 13 00:00:57,320 --> 00:01:01,920 Speaker 1: North November's election in the US is getting plenty of 14 00:01:01,960 --> 00:01:06,560 Speaker 1: attention because it all determine whether President Donald Trump can 15 00:01:06,640 --> 00:01:10,440 Speaker 1: make an even deeper impact on the nation. But for Brazil, 16 00:01:11,360 --> 00:01:14,959 Speaker 1: the change could be even more fundamental, and the race 17 00:01:15,120 --> 00:01:18,880 Speaker 1: even has a front runner who's been called you guessed 18 00:01:18,880 --> 00:01:22,280 Speaker 1: at the Trump of Brazil. For more on that and 19 00:01:22,319 --> 00:01:26,160 Speaker 1: a breakdown of Brazil's election, we're joined by our Bloomberg 20 00:01:26,240 --> 00:01:29,840 Speaker 1: News colleague Bruce Douglas. He's an editor in the nation's 21 00:01:29,880 --> 00:01:33,360 Speaker 1: capital of Brazilia for economy and government coverage, and he's 22 00:01:33,400 --> 00:01:36,040 Speaker 1: lived in the nation for the past five years. Bruce, 23 00:01:36,120 --> 00:01:40,720 Speaker 1: thanks for coming on the podcast. Pleasure. First, let's set 24 00:01:40,720 --> 00:01:44,560 Speaker 1: the backdrop here. What's the state of Brazil's economy right now? 25 00:01:45,360 --> 00:01:48,520 Speaker 1: Because economy is in a pretty terrible state. We're just 26 00:01:48,720 --> 00:01:53,600 Speaker 1: emerging sluggishly from the worst recession on record. We've seen 27 00:01:54,680 --> 00:01:57,680 Speaker 1: per capita growth over the post five years has shrunk 28 00:01:57,760 --> 00:02:02,360 Speaker 1: by one and this year we look set to have 29 00:02:02,440 --> 00:02:05,680 Speaker 1: a pretty anemic growth of about one point four percent. 30 00:02:05,800 --> 00:02:09,480 Speaker 1: That's the Central Bank's latest estimate, and next year isn't 31 00:02:09,480 --> 00:02:13,320 Speaker 1: looking too brilliant either. Two point five per cent is 32 00:02:13,320 --> 00:02:16,120 Speaker 1: is about the most to hope for. So we are 33 00:02:16,200 --> 00:02:23,200 Speaker 1: recovering slowly, but it is a seriously underwhelming recovery. Despite 34 00:02:23,200 --> 00:02:27,440 Speaker 1: a reformist government that entered power after the impeachment of 35 00:02:27,520 --> 00:02:31,440 Speaker 1: the left winger delmohus If, it's been beset by corruption 36 00:02:31,560 --> 00:02:37,400 Speaker 1: scandals and the constraints of the Brazilian economy have meant 37 00:02:37,680 --> 00:02:40,840 Speaker 1: that so far it has underdelivered on its early promise. 38 00:02:41,800 --> 00:02:44,520 Speaker 1: So we're not really talking about any kind of big 39 00:02:44,639 --> 00:02:47,560 Speaker 1: upswaying either than in the US or globally. Brazil seems 40 00:02:47,560 --> 00:02:50,280 Speaker 1: to be missing out on that right now. What about 41 00:02:50,280 --> 00:02:53,360 Speaker 1: for the average citizen of Brazil, has life gotten better 42 00:02:53,440 --> 00:02:56,480 Speaker 1: or worse over the past five to ten years? Life 43 00:02:56,480 --> 00:02:59,840 Speaker 1: has definitely gotten worse over the past five years, or 44 00:03:00,440 --> 00:03:04,000 Speaker 1: not only have they seen their real incomes shrink, they've 45 00:03:04,040 --> 00:03:08,359 Speaker 1: seen unemployment rise dramatically. It's now about just over twelve 46 00:03:09,280 --> 00:03:13,440 Speaker 1: and we've seen the only kind of stability that the 47 00:03:13,440 --> 00:03:16,840 Speaker 1: temor administration that's currently empower has monst to implement, has 48 00:03:16,880 --> 00:03:20,560 Speaker 1: really been controlling inflation prices now are running below the 49 00:03:20,560 --> 00:03:25,240 Speaker 1: target range at around four percent. That's really been the 50 00:03:25,320 --> 00:03:28,720 Speaker 1: only kind of saving grace. But for most Brazilians they 51 00:03:28,720 --> 00:03:32,720 Speaker 1: will have felt the cuts of the austerity measures introduced 52 00:03:32,760 --> 00:03:37,480 Speaker 1: by this government, as well as seeing a continuing unemployment 53 00:03:37,720 --> 00:03:42,680 Speaker 1: and a continued slow growth. In the Latin American context, Bruce, 54 00:03:43,200 --> 00:03:47,560 Speaker 1: an inflation rate that low ought to be cause for celebration. 55 00:03:48,080 --> 00:03:51,880 Speaker 1: What are we all missing here? Well, one of the 56 00:03:51,920 --> 00:03:54,400 Speaker 1: reasons that the inflation rate is so low is because 57 00:03:54,480 --> 00:03:57,920 Speaker 1: growth is so anemic, So it's not necessarily that the 58 00:03:57,920 --> 00:03:59,920 Speaker 1: central bank has think is completely under control. It's just 59 00:04:00,160 --> 00:04:03,880 Speaker 1: that growth itself is so underwhelming that there's little pressure 60 00:04:03,880 --> 00:04:07,200 Speaker 1: on prices. Brazil is an economy which still very much 61 00:04:07,240 --> 00:04:12,120 Speaker 1: depends on consumer spending, and Brazilian consumers aren't really spending 62 00:04:12,360 --> 00:04:16,120 Speaker 1: because many of them don't have jobs or have have 63 00:04:16,160 --> 00:04:19,840 Speaker 1: faced cutbacks from say, salaries in the in the public sector, 64 00:04:20,400 --> 00:04:24,599 Speaker 1: and so really there's there's no huge celebration to be 65 00:04:24,640 --> 00:04:27,599 Speaker 1: found in the inflation statistics. It's more a sign of 66 00:04:27,640 --> 00:04:31,600 Speaker 1: an economy that's that's pretty slow going. All right, Well, 67 00:04:31,800 --> 00:04:34,880 Speaker 1: let's turn to the election. Now, how is this going 68 00:04:34,920 --> 00:04:37,440 Speaker 1: to work, Bruce? It's not going to be decided in 69 00:04:37,600 --> 00:04:39,920 Speaker 1: one day, right, No, that's right. So there are two 70 00:04:40,000 --> 00:04:42,039 Speaker 1: rounds to the election. There's a first round on the 71 00:04:42,040 --> 00:04:45,960 Speaker 1: seventh of October, and if no candidate wins over the vote, 72 00:04:45,960 --> 00:04:48,039 Speaker 1: there will be a second round on the twenty eighth 73 00:04:48,120 --> 00:04:51,320 Speaker 1: of October, and judging by all the opinion polls and 74 00:04:51,680 --> 00:04:56,200 Speaker 1: by Brazil's post military dictatorship history, there will be two rounds. 75 00:04:56,440 --> 00:04:58,760 Speaker 1: So at the moment we have a few of them, 76 00:04:58,800 --> 00:05:02,400 Speaker 1: thirteen candidates in the race. After the seventh of October, 77 00:05:02,400 --> 00:05:05,360 Speaker 1: the hobby whittled down to two and it looks like 78 00:05:05,400 --> 00:05:09,040 Speaker 1: it's going to be an increasingly polarized race between kind 79 00:05:09,080 --> 00:05:11,800 Speaker 1: of two extremes of the left and the right. Why 80 00:05:11,800 --> 00:05:15,000 Speaker 1: don't you tell us a little bit about the person 81 00:05:15,120 --> 00:05:17,760 Speaker 1: on the rate. The front runner of JayR ball scenario, 82 00:05:18,320 --> 00:05:22,159 Speaker 1: the one that Dan mentioned has been compared to Trump. Sure, 83 00:05:22,360 --> 00:05:26,440 Speaker 1: so Jr. Borsonario is he's a former paratrooper and he's 84 00:05:26,480 --> 00:05:31,240 Speaker 1: been a congressman for seven terms. But he is pitching himself, 85 00:05:31,640 --> 00:05:35,400 Speaker 1: like Trump, as the outsider, and his stance is very 86 00:05:35,480 --> 00:05:39,240 Speaker 1: much tough on law and order. He's part of the 87 00:05:39,360 --> 00:05:43,480 Speaker 1: so called Bullet Caucus in Congress that has long advocated 88 00:05:43,560 --> 00:05:47,520 Speaker 1: for looser oversight of police, and one of his key 89 00:05:47,560 --> 00:05:51,279 Speaker 1: campaign proposals is to loosen gun control. At the moment, 90 00:05:51,800 --> 00:05:55,680 Speaker 1: buying a gun in Brazil is a very complicated, expensive 91 00:05:55,680 --> 00:05:58,960 Speaker 1: and bureaucratic process. He wants to arm so called good 92 00:05:59,040 --> 00:06:04,320 Speaker 1: citizens in order to tackle Brazil's astronomical rates of violence. 93 00:06:04,520 --> 00:06:08,640 Speaker 1: Over half a million Brazilians have been killed violently over 94 00:06:08,720 --> 00:06:11,960 Speaker 1: the past decade or so, and his response to that 95 00:06:12,120 --> 00:06:15,320 Speaker 1: is to take this very tough line on law and order. 96 00:06:15,320 --> 00:06:19,400 Speaker 1: And that's really what's seen him distinguish himself from his 97 00:06:19,600 --> 00:06:25,480 Speaker 1: rivals he has a very anti policitanally correct style. Goes 98 00:06:25,520 --> 00:06:27,960 Speaker 1: beyond that in some ways he's actually been he's actually 99 00:06:28,040 --> 00:06:32,360 Speaker 1: been tried or hate speech and for for for racism. 100 00:06:32,440 --> 00:06:35,720 Speaker 1: He hasn't been tried criminally, but he has been a 101 00:06:35,839 --> 00:06:39,120 Speaker 1: faced civil fines for that which he is appealing. Um 102 00:06:39,240 --> 00:06:42,560 Speaker 1: So he's a very kind of outspoken candidate who, as 103 00:06:42,600 --> 00:06:46,640 Speaker 1: you say, replicates in some ways Trump, but arguably and 104 00:06:46,720 --> 00:06:50,440 Speaker 1: even closer parallel might be President du Terchi in the Philippines, 105 00:06:50,800 --> 00:06:54,800 Speaker 1: who also came to power on this very hardline law 106 00:06:54,839 --> 00:06:59,120 Speaker 1: and order stance. Let's talk about his formal life as 107 00:06:59,120 --> 00:07:03,320 Speaker 1: a paratrue. You know, Bruce, for a long time I 108 00:07:03,360 --> 00:07:07,919 Speaker 1: was urging our team in Brazilia to consider whether the 109 00:07:08,040 --> 00:07:12,280 Speaker 1: military might make a comeback in Brazil given how bad 110 00:07:12,360 --> 00:07:17,840 Speaker 1: things are. That notion was pooh pooed. What we reconsider well, 111 00:07:18,000 --> 00:07:20,720 Speaker 1: I think that the key question is how much the 112 00:07:20,800 --> 00:07:24,200 Speaker 1: military wants to play a role in governing the country. 113 00:07:24,440 --> 00:07:27,920 Speaker 1: Because although there is an appetite which appears to be 114 00:07:28,040 --> 00:07:33,080 Speaker 1: rising for military intervention, and there is in this election 115 00:07:33,520 --> 00:07:37,239 Speaker 1: the highest number since the return to democracy of ex 116 00:07:37,400 --> 00:07:42,200 Speaker 1: army personnel competing for elected office, there are still a 117 00:07:42,320 --> 00:07:46,360 Speaker 1: number of sensible people in the higher ranks of the 118 00:07:46,440 --> 00:07:50,880 Speaker 1: military who are aware that perhaps it is not a 119 00:07:50,920 --> 00:07:54,600 Speaker 1: sign of a healthy democracy when the military have too 120 00:07:55,040 --> 00:07:59,280 Speaker 1: larger role in government. So, while it is definitely a concern, 121 00:08:00,040 --> 00:08:04,000 Speaker 1: and it's notable that while Ja Bosonari is a former 122 00:08:04,080 --> 00:08:07,760 Speaker 1: army captain, his voice presidential pick is a former general 123 00:08:08,000 --> 00:08:13,040 Speaker 1: who has spoken very flatteringly as Bossonaria about the period 124 00:08:13,160 --> 00:08:17,160 Speaker 1: of military rule and has even stated things quite boldly 125 00:08:17,160 --> 00:08:20,960 Speaker 1: about it's it's failure being a failure to use torture 126 00:08:21,280 --> 00:08:25,000 Speaker 1: rather than killing political opponents. So that is a very 127 00:08:25,080 --> 00:08:29,080 Speaker 1: alarming rhetoric. They often ratchet it down when under Prussia, 128 00:08:29,840 --> 00:08:33,120 Speaker 1: but there are still senior ranks in the military who 129 00:08:33,120 --> 00:08:36,439 Speaker 1: don't want anything to do with this kind of return 130 00:08:36,760 --> 00:08:40,319 Speaker 1: to the military dictatorship that ran from the mid nineteen 131 00:08:40,400 --> 00:08:44,479 Speaker 1: sixties to the mid now. Is that because the economy 132 00:08:44,559 --> 00:08:47,600 Speaker 1: is in trouble, they don't want to be CEO of 133 00:08:47,679 --> 00:08:52,520 Speaker 1: this company right now? Or is it a philosophical difference, 134 00:08:52,679 --> 00:08:56,520 Speaker 1: a generational thing. Perhaps I think it is a generational 135 00:08:56,559 --> 00:09:00,520 Speaker 1: thing more than necessarily running the economy. Although book was 136 00:09:00,559 --> 00:09:03,280 Speaker 1: recently published about the Worst Job in the World, which 137 00:09:03,360 --> 00:09:07,720 Speaker 1: described the travails of Brazil's finance ministers over the years. 138 00:09:07,760 --> 00:09:10,840 Speaker 1: It is an extremely hard economy to run, and one 139 00:09:10,880 --> 00:09:14,880 Speaker 1: which is obviously subject very much to global markets and 140 00:09:14,920 --> 00:09:17,640 Speaker 1: to what the dollar is doing and what commodity prices 141 00:09:17,679 --> 00:09:21,079 Speaker 1: are doing. And therefore there is a limit to what 142 00:09:21,200 --> 00:09:25,320 Speaker 1: any any kind of brilliant economic manager can do when 143 00:09:25,360 --> 00:09:28,520 Speaker 1: Brazil's economy is in the dulgiums. For reasons which aren't 144 00:09:28,520 --> 00:09:31,760 Speaker 1: purely domestic. But I also think that this is a 145 00:09:31,880 --> 00:09:34,360 Speaker 1: generation of military leaders, many of whom have have come 146 00:09:34,400 --> 00:09:39,400 Speaker 1: of age in the era of democracy, and really looking 147 00:09:39,559 --> 00:09:42,920 Speaker 1: around the world can see it's really not a sign 148 00:09:42,920 --> 00:09:46,520 Speaker 1: of an advanced democracy to alle too heavily on the 149 00:09:46,600 --> 00:09:50,800 Speaker 1: armed forces to implement policy. So, Bruce, we've talked about 150 00:09:51,120 --> 00:09:54,760 Speaker 1: boss and Ara's military connections. We we've mentioned that he's 151 00:09:55,440 --> 00:09:58,439 Speaker 1: right wing. Usually when we think about right when it 152 00:09:58,600 --> 00:10:01,880 Speaker 1: might be somebody who favor his free markets. Then again, 153 00:10:02,160 --> 00:10:06,040 Speaker 1: the military connection might have different implications for the economy. 154 00:10:06,040 --> 00:10:10,720 Speaker 1: Where does this guy come down on how he can 155 00:10:10,800 --> 00:10:14,839 Speaker 1: potentially fix Brazil's economy. Yeah, well, this is one of 156 00:10:14,880 --> 00:10:18,960 Speaker 1: the key questions of this campaign, and the markets appear 157 00:10:19,080 --> 00:10:22,680 Speaker 1: to be warming to him. He appointed to Paul Guards 158 00:10:23,200 --> 00:10:27,840 Speaker 1: University of Chicago trained economist as his as his economic advisor, 159 00:10:28,280 --> 00:10:33,200 Speaker 1: and he is increasingly sounding the tune of free markets. 160 00:10:33,240 --> 00:10:37,439 Speaker 1: He's talked about a willingness to privatize many of Brazil's 161 00:10:37,720 --> 00:10:40,120 Speaker 1: state companies. He's talked about the need to get the 162 00:10:40,160 --> 00:10:43,000 Speaker 1: fiscal deficit under control in the next couple of years. 163 00:10:43,400 --> 00:10:46,920 Speaker 1: He's talked about the need to tackle arguably the biggest 164 00:10:47,120 --> 00:10:51,040 Speaker 1: fiscal problem that Brazil has, which is its pension deficit. 165 00:10:51,800 --> 00:10:56,040 Speaker 1: But at the same time, we don't know how reliable 166 00:10:56,200 --> 00:10:59,560 Speaker 1: these words are because in his long history in Congress, 167 00:10:59,720 --> 00:11:03,880 Speaker 1: is Can assistently voted in favor of more status policies, 168 00:11:04,400 --> 00:11:07,360 Speaker 1: and going back a few decades, he was even a 169 00:11:07,480 --> 00:11:11,880 Speaker 1: cheerleader when Chaves first came to power, So his voting 170 00:11:11,920 --> 00:11:14,760 Speaker 1: records suggests someone who would actually be in favor of 171 00:11:14,760 --> 00:11:20,520 Speaker 1: of a strong state. His recent conversion to the benefits 172 00:11:20,520 --> 00:11:24,720 Speaker 1: of the free market, we don't know how sincere that is, 173 00:11:24,960 --> 00:11:28,960 Speaker 1: or how much that is a ploy to win support 174 00:11:29,080 --> 00:11:33,720 Speaker 1: and stake out a different position from the left. As 175 00:11:33,760 --> 00:11:39,640 Speaker 1: Brazil's political class has imploded over the last couple of years, Bruce, 176 00:11:40,480 --> 00:11:44,199 Speaker 1: there's been one adult in the room, and that's Central 177 00:11:44,280 --> 00:11:52,680 Speaker 1: Bank governor Elan Goldfan. What has Bolsonaro said about his tenure. 178 00:11:52,760 --> 00:11:54,800 Speaker 1: Does he think he's doing a good job? Will he 179 00:11:54,920 --> 00:11:59,920 Speaker 1: replace him? So Boslo would like to keep that gold Final, 180 00:12:00,160 --> 00:12:03,439 Speaker 1: He's spoken favorably about him in the past, but he's 181 00:12:03,440 --> 00:12:06,080 Speaker 1: also cotched that in terms that he would leave that 182 00:12:06,360 --> 00:12:10,560 Speaker 1: to Paolo ged Is, his main economic advisor. Bosonara has 183 00:12:10,559 --> 00:12:13,840 Speaker 1: repeatedly said that he knows nothing about economics and that 184 00:12:13,920 --> 00:12:17,599 Speaker 1: he's basically going to outsource all major economic decisions to 185 00:12:18,200 --> 00:12:20,679 Speaker 1: Paolo ged Is. Now. The problem with this is that 186 00:12:20,840 --> 00:12:24,679 Speaker 1: clearly there is likely to be some tensions between say, 187 00:12:24,840 --> 00:12:28,240 Speaker 1: the Finance Ministry and other ministries, which Bosonario will have 188 00:12:28,320 --> 00:12:32,480 Speaker 1: to intervene in as president. And the other issue is 189 00:12:32,559 --> 00:12:38,080 Speaker 1: that Paolo Gedges is not necessarily one committed to the 190 00:12:38,080 --> 00:12:41,560 Speaker 1: Bosonario project. He's given some rather strange interviews recently in 191 00:12:41,600 --> 00:12:44,520 Speaker 1: which he said that if he's not able to implement 192 00:12:45,000 --> 00:12:48,760 Speaker 1: his plans for a downsized state, then he'll see no 193 00:12:48,880 --> 00:12:53,400 Speaker 1: problem walking out on a future president Bosonaro. So they 194 00:12:53,440 --> 00:12:56,280 Speaker 1: certainly don't seem to be as tightly wedded as perhaps 195 00:12:56,280 --> 00:13:34,200 Speaker 1: the market might hope. Now, we spent a lot of 196 00:13:34,200 --> 00:13:37,960 Speaker 1: time talking about Balconaro, But even though he's the front runner, 197 00:13:38,000 --> 00:13:40,520 Speaker 1: he still doesn't seem to be very close to a 198 00:13:40,640 --> 00:13:44,040 Speaker 1: majority in the polling, which means that a runoff would 199 00:13:44,080 --> 00:13:47,360 Speaker 1: be very likely and it's far from assured that he 200 00:13:47,440 --> 00:13:50,640 Speaker 1: would win. Let's talk about somebody who is one of 201 00:13:50,679 --> 00:13:53,959 Speaker 1: the other top candidates. The front rudder could have been 202 00:13:54,040 --> 00:13:57,760 Speaker 1: the former president Louis and Nascio Lula to Silva, better 203 00:13:57,800 --> 00:14:00,960 Speaker 1: known just as Lula, but it's not because he's the 204 00:14:01,000 --> 00:14:05,880 Speaker 1: one in chail. Who is his replacement on the ballot? 205 00:14:05,880 --> 00:14:08,720 Speaker 1: Tell us a little bit about him. So his replacement 206 00:14:08,880 --> 00:14:12,120 Speaker 1: is a man called Fernando Adagi, and he was the 207 00:14:12,160 --> 00:14:16,439 Speaker 1: former mayor of sal Paolo, the largest city in South America, 208 00:14:16,640 --> 00:14:19,880 Speaker 1: and he is traditionally seen as one of the more 209 00:14:20,480 --> 00:14:24,680 Speaker 1: moderate voices within the Workers Party. Um he has masked 210 00:14:24,720 --> 00:14:29,640 Speaker 1: his economics and a doctorate in Marxism and the Soviet Union, 211 00:14:29,960 --> 00:14:33,200 Speaker 1: but when he led sal Paolo, he was a pretty 212 00:14:33,240 --> 00:14:37,920 Speaker 1: physically responsible mayor, although he was kicked out after one term, 213 00:14:38,000 --> 00:14:40,680 Speaker 1: mainly because he failed to deliver on his promises to 214 00:14:40,760 --> 00:14:44,720 Speaker 1: some of the Workers Parties core voters, the poor living 215 00:14:44,960 --> 00:14:49,600 Speaker 1: on the periphery of the city. He has attempted to 216 00:14:50,360 --> 00:14:55,680 Speaker 1: steer a course in which he maintains Lula's image as 217 00:14:55,720 --> 00:14:59,840 Speaker 1: a champion of the poor, while also speaking softly to 218 00:15:00,080 --> 00:15:04,000 Speaker 1: investors and market and trying to assure them that he 219 00:15:04,080 --> 00:15:07,880 Speaker 1: won't be a kind of radical socialist. And in some 220 00:15:07,920 --> 00:15:10,600 Speaker 1: ways he has he has some history on his side 221 00:15:10,680 --> 00:15:13,560 Speaker 1: his side with this, because in two thousand two, when 222 00:15:13,640 --> 00:15:18,000 Speaker 1: Lula was elected president, the markets were were thoroughly scared. 223 00:15:18,120 --> 00:15:21,640 Speaker 1: The heyl sank, as did the stock market here. But 224 00:15:21,720 --> 00:15:24,920 Speaker 1: Lula wrote a letter to the Brazilian people which promised 225 00:15:25,000 --> 00:15:31,240 Speaker 1: a degree of fiscal rectitude, and from his inauguration we 226 00:15:31,320 --> 00:15:35,120 Speaker 1: saw a huge boom period for the Brazilian economy, mainly 227 00:15:35,160 --> 00:15:39,400 Speaker 1: fueled by global rises in commodity prices, but also through 228 00:15:39,960 --> 00:15:43,920 Speaker 1: a moderate governing stance in which all ships rose with 229 00:15:43,960 --> 00:15:47,040 Speaker 1: the tired. So it wasn't just the poor that saw 230 00:15:47,080 --> 00:15:50,880 Speaker 1: their lives improve under President Lula, but also the middle 231 00:15:50,920 --> 00:15:55,600 Speaker 1: classes and the wealthy. So a daddy has that to 232 00:15:55,600 --> 00:15:57,960 Speaker 1: to fall back on as proof that the Workers Party 233 00:15:58,520 --> 00:16:03,440 Speaker 1: is not equivalent to say, the regime in Venezuela. But 234 00:16:03,600 --> 00:16:07,720 Speaker 1: he also keeps a number of people up late at night, 235 00:16:07,760 --> 00:16:10,720 Speaker 1: chel I say, with talks about his efforts to rebalance 236 00:16:10,760 --> 00:16:13,480 Speaker 1: the tax system to make the rich pay more, his 237 00:16:13,960 --> 00:16:18,000 Speaker 1: desire to boost state banks so that they offer more 238 00:16:18,120 --> 00:16:22,240 Speaker 1: cheap credit arguably one of the reasons that Brazil is 239 00:16:22,240 --> 00:16:25,040 Speaker 1: in the mess. It's it's in at the moment. And 240 00:16:25,080 --> 00:16:28,440 Speaker 1: he's even talked about the possibility of currency controls to 241 00:16:28,520 --> 00:16:33,120 Speaker 1: limit fluctuations in the exchange rates. So these are some 242 00:16:33,160 --> 00:16:36,720 Speaker 1: of the things which which worry investors, and we're waiting 243 00:16:36,760 --> 00:16:41,040 Speaker 1: to see which adage emerges. It's likely that in the 244 00:16:41,120 --> 00:16:46,120 Speaker 1: second round both candidates, both Jaya Bosona and Fernando Adagi, 245 00:16:46,400 --> 00:16:50,000 Speaker 1: will pivot towards the center, but at the moment they're 246 00:16:50,120 --> 00:16:53,320 Speaker 1: staking out more extreme positions to to shore up that 247 00:16:53,320 --> 00:16:56,880 Speaker 1: first round support. So we've talked about how they might 248 00:16:56,960 --> 00:17:01,200 Speaker 1: tack to the center, but how investors are so potentially 249 00:17:01,440 --> 00:17:08,080 Speaker 1: skittish about a dodgy's agenda. So could markets be making 250 00:17:08,280 --> 00:17:11,520 Speaker 1: the same kind of mistake that they did in two 251 00:17:11,560 --> 00:17:13,439 Speaker 1: thousand two when there was a lot of fear that 252 00:17:13,960 --> 00:17:19,000 Speaker 1: Lula was going to, you know, really turn the economy 253 00:17:19,040 --> 00:17:23,000 Speaker 1: more over to the state. Uh is that a legitimate 254 00:17:23,240 --> 00:17:28,040 Speaker 1: fear now or is that really not possible in in 255 00:17:28,119 --> 00:17:33,520 Speaker 1: today's globalized economy? Where Brazil just has to really open 256 00:17:33,600 --> 00:17:37,640 Speaker 1: up in order to regain some wealth. I think that 257 00:17:38,640 --> 00:17:41,360 Speaker 1: we were in a very different scenario from two thousand 258 00:17:41,359 --> 00:17:45,400 Speaker 1: and two and a much more alarming situation here. There 259 00:17:45,560 --> 00:17:49,240 Speaker 1: is a strong possibility that Adage will govern from a 260 00:17:49,280 --> 00:17:53,800 Speaker 1: more centrist position, but he will still face pressure from 261 00:17:54,000 --> 00:17:57,080 Speaker 1: the left. There are many prominent voices to the left 262 00:17:57,240 --> 00:18:00,960 Speaker 1: of him who will be agitating for a more radical agenda, 263 00:18:01,040 --> 00:18:03,359 Speaker 1: and the question is whether he can strike the right 264 00:18:03,400 --> 00:18:06,520 Speaker 1: balance and who he will be able to work with 265 00:18:06,720 --> 00:18:10,320 Speaker 1: in Congress. What's happened in Brazil at the moment is 266 00:18:10,720 --> 00:18:14,560 Speaker 1: that their political establishment has lost almost all of its 267 00:18:14,560 --> 00:18:18,400 Speaker 1: credibility and the so called centrist block this slightly kind 268 00:18:18,400 --> 00:18:22,600 Speaker 1: of amorphous grouping of political parties that tend to to 269 00:18:22,680 --> 00:18:26,240 Speaker 1: blow with the wind and tend to coalesce around whoever's 270 00:18:26,400 --> 00:18:30,160 Speaker 1: empower somewhat regardless of ideology. The question is whether they 271 00:18:30,200 --> 00:18:34,679 Speaker 1: will shift to support Adagy and therefore perhaps tilting more 272 00:18:34,720 --> 00:18:37,000 Speaker 1: to the center, or whether they will pay a more 273 00:18:37,160 --> 00:18:42,520 Speaker 1: obstructionist role. There's also the genuine question about whether the 274 00:18:42,560 --> 00:18:47,199 Speaker 1: election result will be fully accepted. Jaya Borsonaro has for 275 00:18:47,240 --> 00:18:51,520 Speaker 1: a long time questioned Brazil's system of electronic voting and 276 00:18:51,600 --> 00:18:54,720 Speaker 1: insists that the Workers Party are gearing up to commit 277 00:18:54,840 --> 00:18:59,359 Speaker 1: fraud on voting day, and so if there is enough 278 00:18:59,400 --> 00:19:01,680 Speaker 1: of his support, orders, if there are enough Boson Narrow 279 00:19:01,720 --> 00:19:07,200 Speaker 1: supporters who question this, or there is serious dissatisfaction that 280 00:19:07,400 --> 00:19:10,240 Speaker 1: rises amongst a members of the armed forces who don't 281 00:19:10,320 --> 00:19:14,400 Speaker 1: want to see the Workers Party back in power, there 282 00:19:14,520 --> 00:19:18,399 Speaker 1: is the possibility of a very complicated post election scenario. 283 00:19:19,200 --> 00:19:24,400 Speaker 1: Hopefully some form of democratic renewal will after two years 284 00:19:24,480 --> 00:19:29,560 Speaker 1: of somewhat disdain for Brazil's political class. Hopefully some form 285 00:19:29,600 --> 00:19:33,440 Speaker 1: of democratic renewal will reanimate to a certain extent the 286 00:19:33,480 --> 00:19:37,320 Speaker 1: animal spirits in the Brazilian economy. But it's equally possible 287 00:19:37,359 --> 00:19:40,280 Speaker 1: that we may be in for a messy post election 288 00:19:40,440 --> 00:19:44,920 Speaker 1: period where the result doesn't truly settle the very deep 289 00:19:44,920 --> 00:19:48,960 Speaker 1: polarization in Brazilian society at the moment. Sounds like a 290 00:19:49,000 --> 00:19:53,760 Speaker 1: way to describe the US economy and upcoming election as well. 291 00:19:54,160 --> 00:19:56,600 Speaker 1: Bruce Douglas, thank you so much for taking the time 292 00:19:56,640 --> 00:19:59,800 Speaker 1: to talk about Brazil's election with us today. Thank you 293 00:19:59,840 --> 00:20:06,880 Speaker 1: very jobbing. Benchmark will be back next week. Until then, 294 00:20:06,920 --> 00:20:09,320 Speaker 1: you can find us on the Bloomberg Terminal, Bloomberg dot 295 00:20:09,400 --> 00:20:13,000 Speaker 1: Com or Bloomberg App, as well as podcast destinations such 296 00:20:13,040 --> 00:20:17,040 Speaker 1: as Apple Podcasts, Spotify or wherever you listen. We'd love 297 00:20:17,080 --> 00:20:19,280 Speaker 1: it if you took the time to rate and review 298 00:20:19,359 --> 00:20:22,399 Speaker 1: the show so more listeners can find us. And you 299 00:20:22,400 --> 00:20:26,000 Speaker 1: can find us on Twitter. Follow me at Scott Anman, 300 00:20:26,480 --> 00:20:31,879 Speaker 1: Dan You're at Moss Underscore Echo, and our guest Bruce 301 00:20:31,920 --> 00:20:37,920 Speaker 1: Douglas is at bruce ecub. Benchmark is produced by topor Foreheads. 302 00:20:38,160 --> 00:20:42,000 Speaker 1: The head of Bloomberg Podcasts is Francesco Levy. Thanks for listening, 303 00:20:42,040 --> 00:20:42,840 Speaker 1: See you next time.