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SCENARIOS OF BRAZIL AFTER PRESIDENTIAL ELECTIONS

Fernando Alcoforado *

It is the purpose of this article to trace the scenario in Brazil after the presidential elections in the economic and social aspects considering two alternatives: 1) victory of Dilma Rousseff from PT (Worker Party); and, 2) victory of Aécio Neves from PSDB (Brazilian Social Democracy Party). With both Dilma Rousseff and with Aécio Neves, the current stagnation of the Brazilian economy which is currently will accentuate that will occur simultaneously with the rise in inflation which will result the phenomenon of stagflation. Most likely, it will grow the deficit in the balance of payments due to the fall in export revenue and the increase in remittances of profits and dividends by multinational companies that have grown dramatically in recent years, far outpacing the value of remittances of foreign debt interest.

Faced with the prospect of increasing the deficit in the balance of payments, Brazilian government, with both Rousseff and with Neves, it will raise the basic rate of the economy (Selic) to attract the inflow of dollars seeking to cover the deficit in the balance of payments. The Brazilian government's attempt to attract the inflow of dollars aimed at covering the deficit in the balance of payments can be more successful with the Aécio Neves government than with Dilma Rousseff government because the credibility of the PSDB candidate along to outside investors is greater than the PT candidate. The manifestation of the magazine The Economist contrary to the Dilma Rousseff government's economic policy and the Financial Times supporting Aécio Neves demonstrates this statement.

As far as the inflow of dollars to cover the deficit in the balance of payments, foreign direct investment, in turn, tends also to fall due to likely decline in the growth of the Brazilian economy. No external investor would invest in Brazil with a stagnant economy as it is right now. Unlike Dilma Rousseff, Aécio Neves will have greater ability to reverse this downward trend in foreign direct investment because their credibility with foreign investors is higher than that of the PT candidate. The manifestation of the magazine The Economist contrary to the Dilma Rousseff government's economic policy and the Financial Times supporting Aécio Neves demonstrates this statement.

One consequence of the increase in the Selic rate will discourage investment in productive activity aggravating further the stagnation of the Brazilian economy. The stagnation of the Brazilian economy will cause there are also falling government revenues at all levels so that there is no public resources for investment in enough to invest in economic and social infrastructure quantity as well as to maintain the social income transfer programs as the "Bolsa Familia". Rationally, to face the fall in public revenues, the federal government should dramatically reduce the operational cost of government that would imply the reduction of ministries which today totals 39 and more than 20,000 commissioned positions, rationalization of public service, beyond the unrelenting fight corruption. Hardly, Dilma Rousseff adopt such measures as would jeopardize the interests of his political allies, unlike Aécio Neves who already said that he would act this way.

The stagnation of the Brazilian economy and the increase in bank interest rates contribute to the decline in public and private investment and hence the generation of employment and income for the population of Brazil. This will cause a worsening of the

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social situation of Brazil. Unemployment rate that is currently 20.8% of the economically active population and not 4.9% as reported by Brazilian government is likely to grow in coming years. Very rarely, a future government Dilma Rousseff would be successful in reversing the trend of increasing unemployment because doesn´t have credibility to attract foreign capital to invest in Brazil and cause investors resident in Brazil to invest in the expansion of domestic production capacity. The increase in unemployment will cause increase social tensions that will rise further with increasing rates of inflation. In contrast, a government Aécio Neves would have more credibility to attract foreign capital, making private investments possible and fight against inflation with increased supply of goods and services provided by increased investment in the economy.

Governments Dilma Rousseff or Aécio Neves should maintain openness of the Brazilian economy that, since 1990, worsened the situation of the Brazilian industry that lost competitiveness due to barriers represented by “Brazil Cost” (high real interest rates, high tax burden, high costs labor, high costs of the pension system, complex and inefficient tax laws, high cost of electricity, poor infrastructure and lack of skilled labor). One solution to avoid this would be to reduce interest rates, tax burden and the tariff of energy, promote the improvement of infrastructure and better qualification the workforce that is part of the candidate Aécio Neves program. Dilma Rousseff government took four years to implement these actions and did not. A true reversal of trend towards industrialization of Brazil should consider, ultimately replacing the neoliberal model in force for national development model that neither of both candidates would dare to undertake.

Brazilian international reserves that reached US$ 370 billion in June 2013 tends to have a negative progression due to the prospect of growing deficit in the balance of payments on current account. There will be reduction of international reserves, which would then be used to cover the deficit in the balance of payments. This problem should not be neglected because Brazil has US$ 370 billion dollars in international reserves that may need to resort to them in the coming months if foreign investors lose faith in the economic growth of Brazil that features fall into recent developments and fail to invest in Brazil . Among the candidates Dilma Rousseff and Aécio Neves, the latter would have greater chances of avoiding regression of international reserves because it would have more credibility to attract foreign capital.

Has been increasing the allocation of budget resources for the payment of interest and amortization of internal public debt corresponding to 43.98% of the Brazilian government budget. Maintained the trend to allocate more resources for the payment of interest and amortization of debt, there will be fewer resources available (federal, state and local) government to invest in economic and social infrastructure. To address this situation, the Brazilian government should dramatically reduce its operational cost that would result in the reduction of ministries which now totals 39 and more than 20,000 commissioned positions, relentlessly fight corruption and renegotiate with creditors aimed at lengthening of payment of interest and amortization of internal public debt. Among the candidates Dilma Rousseff and Aécio Neves, the latter would more success likely to adopt these measures.

From the foregoing, it is evident that the economic stagnation that affects Brazil at the moment tends to worsen if Dilma Rousseff is re-elected considering she would not be able to overcome enormous economic challenges of the country within the framework

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of the neoliberal model in place. With Dilma Rousseff, the economic depression will inevitably come after the stage of stagflation in which we live. In contrast, Aécio Neves would have more conditions to minimize the effects of the current crisis due to the support of holders that have national and international financial capital unlike a government Dilma Rousseff. The only way to Dilma Rousseff overcome the current crisis would be to adopt an economic model that give preference to national interests and not those of national and international finance capital interests. This possibility does not exist because the PT has no credibility nationally to lead a break with the national and international financial capital.

* Fernando Alcoforado , member of the Bahia Academy of Education, engineer and doctor of Territorial Planning and Regional Development from the University of Barcelona, a university professor and consultant in strategic planning, business planning, regional planning and planning of energy systems, is the author of Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem Mundial (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado. Universidade de Barcelona, http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e Desenvolvimento (Editora Nobel, São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social Development-The Case of the State of Bahia (VDM Verlag Dr. Muller Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (P&A Gráfica e Editora, Salvador, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011) and Os Fatores Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012), among others.