Understanding Brazil's 2014 Presidential Election - The Parties, Candidates and Issues That Will...

7/18/2019 Understanding Brazil's 2014 Presidential Election - The Parties, Candidates and Issues That Will Determine Brazils Future Direction

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UNDERSTANDING BRAZIL'S 2014

PRESIDENTIAL ELECTION:

The parties, candidates and issues that willdetermine Brazils future direction

Released June 2014


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INTRODUCTIONBrazil is making news for many reasons this year.

From the World Cup, to national elections or preparations for the

2016 Rio Olympic Games, each topic presents an opportunity for this

beautiful and dynamic country to break free of common stereotypes

and become an increasingly understood nation.

Whether it's news stories about delays related to World Cup

preparations, or public protests related to living standards, it's clear

the international press are reporting on Brazil through a somewhat

sensationalist lens. What such stories fail to highlight is that these

topics are in a sense elements of an even more important event that

takes place this fall for all Brazilians: The 2014 Presidential election.

The World Cup and protest movements are actually just two of nine factors we have identified that

will influence the outcome of the election, scheduled to take place on October 5, 2014.

Determining Brazils next President and evolved vision for the nation will have a long-lasting impact

on Brazilian people, the economy and the country as a marketplace for international companies inparticular.

At this moment, one thing is clear: Brazilians want change and require a government and leader

strong enough to combat corruption and professionally manage public investments.

As our MSLGROUP teams in Brazil and around the world serve as business and communications

counselors for a variety of multinational corporations and foreign governments, the upcoming

election is of significant importance. MSLGROUP does not work with the Brazilian government or

its political parties, allowing us to focus entirely on advocating in the interest of our clients.

In addition to this report, which focuses on a more fundamental understanding of Brazils 2014election, we will be releasing additional commentary, before and after the election, that will delve

deeper into topic-specific implications for the future of the country and economy.

Paulo AndreoliChairman, MSLGROUP Latin America


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With a GDP of around US$ 2.2 trillion, Brazil is

the world's seventh largest economy. On

October 5th, 2014, around 143 million Brazilians

will head to the polls to elect their new president.

The first round of presidential voting is held on the first Sunday in October. Election day

is a national holiday

If no candidate receives more than a 50% plus one vote majority, then a run-off or

second-round voting is held the last Sunday of October

Voting is compulsory between the ages of 18 and 70, resulting in high voter turnout rates

of 85% or more

More information on Brazils electoral process and history can be found here:

http://countrystudies.us/brazil/100.htm

Brazil's Federal Presidential Election Process

The first round will likely see history

repeat itself with three political forces

dividing the electorate. With shifting

alliances nationally, regionally and locally,

the outcome is hard to predict.

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The three main national parties include:

Dilma Rousseff

Workers Party (PT)

By dividing the electorate between three parties and their candidates, it is almost certain that the

presidential election will go to a second round, scheduled for October 26.

Eduardo Campos

BrazilianSocialist Party (PSB)

Acio Neves

Brazilian SocialDemocracy Party (PSDB)

The current party of President Dilma Rousseff, the Workers Party (PT) on the left

The Brazilian Social Democracy Party (PSDB) on the center left

The Brazilian Socialist Party (PSB), also on the center left.

Image Credits: Valentina Petrov / Shutterstock.com, blogdajoice.com, fotospublicas.s3.amazonaws.com


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Given the country's immense size, elections in Brazil are a significant undertaking:

27 federal units (26 States and the Federal District) and

5,570 municipal regions on a land mass covering2

8.5 million km (the fifth largest country in the world by size,2

similar to China at 9.5 million km , yet with one sixth of Chinas population).

The sheer reach of the electoral process, given the low population density in many parts ofthe country, is a logistical challenge faced by few democracies of this size.


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Brazil's voting system was fully computerized in 1996, and in October

2014 around 22 million voters will be identified using biometric

information. These systems mean results can be announced just a few

hours after polling stations close. In addition to the presidential

elections, voters will also choose 513 federal representatives and one

third of the Senate's seats (each state has three senators). Elections will

also include a vote for state governors and state representatives.

Dilma Rousseff of the Worker's Party (or PT),

Brazil's first female president, is seeking re-

election having been voted into power in 2010. Atthat time she won the second round of voting with

56.05% of all valid votes, knocking out Jos Serra,

of the PSDB, who collected 43.95% of all votes.

Back in 2010, Rousseff enjoyed the support of 10

smaller parties with varying ideologies. This

alliance will not be in place this time around,

because new parties have been created in recent

years (such as the PSD, Pros and Solidarity parties)

and some support has been lost to the Brazilian

Socialist Party (PSB) candidate.

Most support for the PT during the past four years

has come from the center-right BrazilianDemocratic Movement Party (PMDB),

guaranteeing attorney Michel Temer the post of

vice-president. He is considered a skilled politician

who has a good relationship with members of the

opposition. To achieve a majority from her

parliamentary base, Rousseff distributed

ministerial positions to parties from the left, center

and right of the political spectrum. This is likely to

continue this year. Additionally President Rousseff

will clearly have significant support from major

figures in her own party. Former President Lulahas promised to accompany her on the campaign

trail and to appear on TV programs leading up to

the election.

2014 will be the first presidential election since 1989in which former President Luiz Incio Lula da Silvawill not be a direct participant (although manyassume he will be operating behind the scenes).

Michel Temer (PMDB) Vice-President

President Dilma Rousseff (PT) and former President Lula da Silva

Image Credits: cratonoticias.wordpress.com, riotimesonline.com


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In spite of not being a PT member from the outset

- having joined the party only in 2000 after leaving

the Democratic Labor Party (PDT) - President

Rousseff has never had to face opposition from her

own party. This fact is mainly due to her militant

left-wing past, which began during her late teens.

She was imprisoned by the military dictatorship

from 1970 to 1972. After her release, she graduated

with a degree in Economics and began to work in

public administration for the southern state of Rio

Grande do Sul. She joined the government in 2003

as the Energy Minister in former President Lulas

first term of office and in 2005 was made Lulas

Chief of Staff, after a corruption scandal - the

Mesalo - brought down key government figures

including the then Chief of Staff, Jos Dirceu. She

is of Bulgarian heritage and has a discreet,

personal style. Up until her election she had never

been involved in corruption cases, which

contributed to her victory in 2010, along with the

backing of President Lula. President Rousseff is

divorced and has a daughter and one

granddaughter.

Image Credit: Gil C / Shutterstock.com


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The main opposition candidate is economist Acio

Neves, who is 54 and the grandson of former

president Tancredo Neves. He is a member of the

PSDB and was the governor of Minas Gerais state

from 2003 to 2010 (Brazil's second-largest

electoral college), a federal representative and

former president of the Federal Congress. He is

currently a Senator. He has solid support from his

home state and has always remained steadfastly

opposed to the PT. In 2010, he was able to help

elect his successor as governor of Minas Gerais.

However, he is not particularly popular in So

Paulo, Brazils largest electoral state. He is likely

to look to So Paulo when choosing a vice-

president in an attempt to boost his candidacy, an

approach supported by former president Fernando

Henrique Cardoso, the PSDB's strongest

supporter. Support will also come from the

Democrat Party (DEM) on the right and the

Popular Socialist Party (PPS), a moderate left

party.

Opposition

The newcomer in this 2014 campaign is Eduardo

Campos (PSB), who stood down as governor of

Pernambuco State to stand as a presidential

candidate. He is the youngest candidate at 48 and

supported the federal government, which was run

by the PT, until last year. He is the grandson of

Miguel Arraes, a radical leftist leader exiled during

the military dictatorship, but has a milder approach

to politics. Minister for Science and Technology

between 2004 and 2005 in the first Lula

administration, he was subsequently elected state

governor of Pernambuco in 2006 and then easily

re-elected with the former president's support.

Campos is a believer in development and has

always pushed for federal funding for his own

state.

Not well-known outside Pernambuco, his trump

card is his candidate for vice-president, Marina

Silva, a former PT senator and Minister of the

Environment during the Lula administration, whois well-known internationally for her sustainability

credentials.

Eduardo Campos (PSB)Acio Neves (PSDB)

Image Credit: blogdajoice.com, federasul.com.br


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Marina Silva originally planned to stand as a

presidential candidate, attempting to create a new

party named Rede (Network in Brazilian

Portuguese), to support her candidacy. She

needed 492,000 signatures from voters in order to

gain ratification for the new party from the TSE

(Superior Electoral Tribunal). However, only

442,500 signatures were accepted less than theminimum number required by law and as a result

she decided to throw her support behind Campos.

There was much controversy around her new

partys rejected registration, as tens of thousands

of signatures were invalidated at the last moment

and some claim this was an effort by the PT party

to derail Silvas political challenge.

In 2010, Marina Silva stood as a candidate for the

Green Party and obtained 19.3% of the vote in the

first round of the presidential election. This was

considered a success for a first attempt at thepresidency, but she lagged far behind in the

subsequent battle for one of two spots in the

second round.

Silvas personal story contributes to her political following and support. She grew up as one of eleven

children in a community of poor rubber tappers in the remote western state of Acre. Lacking any formal

education and orphaned at age 16, she moved to Rio Branco, the state capital, where she received aCatholic education and worked as a maid. She graduated from university at 26 and became increasingly

active promoting workers rights and environmental issues.

In theory, any of the 32 parties registered with the

TSE could name a presidential candidate, as in

previous elections. However, as many parties do

not have much in the way of support or

infrastructure in every state, their results are

marginal and they have little impact on the

elections. They are referred to as the "dwarf"

parties. The most powerful of these is the far leftSocialism and Liberty Party (PSOL), made up of

former members of the PT. It appeals to university

students and is likely to put forward Randolfe

Rodrigues, from Amap State, as a candidate for

Senator, although he is almost unknown to voters

nationally.

The other parties could put forward "folkloric"

candidates or candidates willing to use the free air

time on TV as a platform for future elections.

Marina Silva, Former Senator

Image Credit: development.thinkaboutit.eu/


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POLITICS IN BRAZIL

According to the latest presidential election

opinion poll of likely votors released by Ibope

Inteligencia on May 22nd, President Rousseff had

40% (up from 37% in April), Acio 20% (up from

14%), and Campos 11% (up from 6%).

Another recent survey also discovered that around

76% of voters said they want some sort of change.

This number is strikingly close to the response to a

similar question asked in 2002, when Fernando

Henrique Cardoso (president from 1995-2002)

and Luiz Incio Lula da Silva were vying for the

presidency. At that time, 72% of those interviewedalso wanted to see change, which was reflected in

the result of the election. Political scientist

Alberto Carlos Almeida, author of the booksACabea do Brasileiro(Mind of the Brazilian) andACabea do Eleitor(Mind of the Voter), says Brazil isin an atypical situation, which he refers to as

"political limbo." He also believes that the

electoral outlook is uncertain. The analyst referred

to figures from the Ibope Research Institute

released in February 2014, citing a 39% approval

rating for the president, down four percentage

points compared with December 2013. He believes

that political and economic instability may force

President Rousseffs approval rating down even

further over the coming months.

(*Vote defined as individuals who are eligible and said

they intended to vote on election day.)


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Since the end of March, Dilma's image as an

austere and responsible administrator has come

under attack after events which took place in 2006

(when she was chairman of the board at Petrobras)

recently came to light. In 2006, Petrobras acquired

an oil refinery from Astra Oil in Pasadena, Texas

USA, with authorization from Dilma.

Petrobras paid USD 360 million (USD 190 million

for 50% of the stock and USD 170 million for oil

inventories) which was significantly more than the

USD 42.5 million Astra Oil had paid the year

before for the entire refinery. This figure rose

further as the years went by. This was due to a

grave error in not noticing a Put Option clause, with

mandatory payment for the remaining 50% of the

company if the shareholders ended up in litigation,

which is what happened in 2008.

In 2012, the US courts ruled that Petrobras should

pay Astra Oil an additional USD 820.5 million,

increasing Petrobras' total cost to USD 1.18 billion.

Since the outset, President Rousseff has always

denied knowledge of the Put Option clause, but

documents revealed by Wikileaks in April this year

revealed that the President was supplied with allthe necessary information about the contract by

the White House. Disclosure of this transaction

further undermined the President's relationship

with Congress, which now has two active

investigations exploring possible criminal activities

at Petrobras.


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A critic of the PT administration, Marco Antonio

Villa is a historian and professor at the Federal

University of So Carlos and shares his thoughts

about the current climate of uncertainty.

According to the professor, the political

winds were blowing in favor ofFernando Henrique Cardoso in 1994

and 1998, particularly because of the

Real Plan to strengthen Brazils

currency.

2002 saw a sea change after a number

of problems arose during his second

term, especially after 2000.

Villa has noted that in the 2006elections, Lula managed to distance

himself from the "monthly payment

scandal," known locally as the

Mensalo, and built the Lulism

brand. The professor claims that since

then, the PT has been hostage to Lula.

2010 was a euphoric year for the Lula

camp with GDP rising 7.5% (the

previous year GDP had shrunk by

0.3%).

The situation in 2014 is entirely

different and there is a real possibility

of change.

Marco Antonio Villa believes that the election will

go to a second round between President Rousseff

and Neves. He believes that Neves is likely to

attract support from Campos, but has doubts

about Marina Silvas position on this support. If

Neves wins, Villa believes he will focus mainly on

the economy and to reduce the public deficit.

Abroad, he is likely to change Brazil's approach to

other Mercosur countries and take a less politicaland ideological line. However, no analyst has risked

forecasting a victory for Campos, who has the least

probability, of the three candidates, to win.

Climate of Uncertainty Second Round 2014 Voting


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When President Rousseff was sworn into office,

she inherited the solid base built up by her

predecessor comprised of 10 parties PT, PMDB,

PDT, PCdoB, PSB, PR, PRB, PTN, PSC and PTC

which gave her a large majority in the House: 402

votes against just 111 for the opposition. The

Senate was in a similar situation, with a majority of

49 allied Senators out of a total 81.

In exchange for these alliances, the government

distributed a number of ministerial portfolios and

other positions to parties aligned with the PT,

regardless of their idealogy. This resulted in a

bloated structure of 24 ministries, as well as 10

secretariats and five ministerial level bodies linked

to the president's executive office. These positions

were distributed among parties ranging from the

far right to the far left, with little attention paid tothe actual political ideologies involved. The

parties in the strongest positions, the PT and the

PMDB, hold the more strategic ministries, such as

the Treasury, Justice, Executive Office, Mines and

Energy, and Social Security.

The wide range of alliances has created a more

robust and stable relationship in the legislature. It

was required to guarantee as much free air time as

possible for political broadcasts on TV and radio

TV and radio broadcasters are forced to set aside a

certain amount of time for party political

propaganda which begin on August 19 and

continue until a couple of days prior to the

election.

Parliamentary Base Alliances of Convenience

New Parties

Unlike other countries where the political party

system is more consolidated and hierarchical,

party political alliances in Brazil are based to a

much greater extent on regional political

convenience rather than pragmatic ideological

considerations. As such, the PMDB may work with

President Dilma on the federal elections while

joining up with an opposition party like the PSDB

for specific state elections. The Brazilian politicalparty system also allows politicians to switch

parties while in office, which may end up

weakening or strengthening certain groups. One

example is the conservative party Democratas

(DEM), which began the legislature with 43 federal

representatives but currently has just 26. PSDB

began 2011 with 53 representatives in Parliament

but will end 2014 with just 43.

In addition to the customary game of musical

chairs by political parties, three new parties have

been created since 2011. The most important was

the Social Democratic Party (PSD), a center-right

party set up by the former mayor of So Paulo,

Gilberto Kassab, which can be considered a perfect

example of how malleable Brazilian politics can

be. He is likely to be a candidate for the So Paulo

state governor's position (running against the PT)

while supporting Rousseffs candidacy for

President. He is currently supported by 53

Parliamentary representatives of all political hues.


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Big Block

State Elections

Solidarity (SDD) is another new party which is

chaired by union leader and federal representative

Paulo Pereira da Silva, who was previously a

member of the Democratic Labor Party (PDT), and

is represented by 22 federal representatives. The

SDD has already announced its support for Neves's

candidacy, but is not overtly opposing Rousseffs

current administration.

The final member of this trio of new parties is thecenter-right Republican Party for Social Order

(PROS), whose leaders include the governor of

Cear state, Cid Gomes, and his brother Ciro

Gomes, a former government minister and former

presidential candidate. In the House of

Representatives, the PROS lineup alongside the

PP and they jointly command a group of 59

representatives (20 from PROS and 39 from PP).

In February, based on this patchwork of alliances,

there was a "rebellion" in the House of

Representatives. This exemplifies what happens

when government allies are unhappy or feel that

their demands are not being given due

consideration. The Brazilian DemocraticMovement Party (PMDB) was the driving force

behind an informal group of dissatisfied allies,

nicknamed the "big block," who began putting up

barriers to derail bill that the federal government

was supporting, like the Civil Rights Framework for

the Internet (which was approved after lengthy

discussions and a number of concessions), and

creating a Parliamentary Commission of Inquiry to

investigate irregularities at Petrobras.

In the media, some political analysts opined that

the PMDB would support President Rousseff,

despite the current situation, because the cost ofwalking away is too high. The PMBD is likely to be a

member of the presidential election alliance but

will allow the party's state organizations to make

their own arrangements.

According to historian Marco Antonio Villa, the

situation at the state level seems easier to read in

Sao Paulo, where current governor Geraldo

Alckmin (PSDB) will probably be elected, more

because he faces weak opponents than for any

merit of his own. The same could be said of MinasGerais, with the possible election of former

Governor Antonio Anastasia, from the PSDB, who

stepped down in April to focus on Acio Neves'

campaign. In Pernambuco, Campos, the former

state governor and presidential candidate, is likely

to push through his chosen successor.

However, everything is in play in Rio de Janeiro,

because the former state governor Sergio Cabral

(PMDB) has had quite a turbulent time, and the

same can be said for Bahia, the state currently run

by Jaques Wagner (PT). The current governor ofRo Grande do Sul, Tarso Genro (PT) has a real

chance of taking the elections into the second

round.

Image Credit: development.thinkaboutit.eu/


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A LOOK BACK AT PAST ELECTIONS

After a 25-year gap during the military dictatorship

and Jos Sarney's transitional civil government,

Brazil held its first direct presidential elections in

1989, with a second-round victory for Fernando

Collor de Mello over Lula. This concluded a

transition that began in 1982 with elections for

state governments, which also encompassed

elections for mayors of Brazil's state capitals in

1985. After Collor took office, Brazil found itselfnavigating through stormy waters due to the

overall lack of economic control. Brazilians saw

their savings accounts confiscated and corruption

scandals cropped up, leading to major

demonstrations in Brazil's biggest cities. These

demonstrations were peaceful and no major

incidents were recorded. Impeachment

proceedings were initiated and President Collor

was forced to step down from office, resigning on

the eve of his trial, at which point vice-president

Itamar Franco took office.

Real Plan

With just two years left in office, President Franco

focused his efforts on containing the very high

level of inflation and in 1994, he announced the

Real Plan, adopting a new currency with a return to

parity with the dollar.

As the economy stabilized, the then Minister of the

Treasury, Fernando Henrique Cardoso, saw anopportunity to run for the presidency alongside

conservative vice presidential candidate Marco

Maciel (DEM). The PSDB/DEM alliance won the

1994 presidential election against Lula in the first

round. The PT made a strategic error by not

supporting the Real Plan, which was supported by

a majority of Brazilians.


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Political Maneuvering

Based on the electoral legislation in place at the

time, Cardoso would have served as president for

five years. However, in a controversial

Congressional maneuver, including accusations of

"vote buying," President Cardoso changed the

rules and created the possibility of re-election for

an additional four-year term.

President Cardosos first administration is

remembered for stabilizing the economy and the

currency, reducing inflation, initiating privatization

and reopening the door to foreign investment,

based on a fictitious foreign-exchange parity. In

1998, President Cardoso faced Lula once again,

and won in the first round.

The following years saw some of the initial

platforms on which the Real Plan was based (like

forced foreign-exchange parity between the Real

and the US dollar) start to deteriorate and

President Cardoso begin to lose popularity.

It was at this point that the PT took advantage of

the situation to become more pragmatic and

amenable to alliances with parties which, up until

then, it had viewed as "enemies." PT leaders

offered the vice-presidency to businessman Jos

Alencar, a member of the center-right Liberal Party

(PL). After three attempts, Lula managed to win

the election against his opponent, Jose Serra

(PSDB). After taking power, he expanded hispolitical alliances, bringing on board the Brazilian

Workers Party (PTB).

The government lost control of part of theeconomy following a speculative attack on theReal in 1999, which significantly devalued thecurrency. Interest rates rose to historically highlevels and inflation jumped from

1.78% 1998

8.94% 1999,

12.53% 2002,

in to

in hitting

in the election year.

Jos Serra ( PSDB)

Fernando Henrique Cardoso (PSDB)

Image Credits: wikipedia, pt.wikipedia.org/


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The Monthly Payment Scandal: "Mensalo"

In 2005, the biggest corruption scandal in Lula's

administration exploded. Known as the "monthly

payment scheme," it brought down some of the

main leaders of the PT and its allied parties. Thescandal involved buying votes from Congressmen

and misappropriating public funds as part of a

scheme that included a number of banks and

advertising agencies. Those dragged into the

scandal include people like Jos Dirceu, the head

of the President's executive office and a possible

successor to Lula; former PT chairman Jos

Genoino; congressmen Roberto Jefferson (PTB)

and Valdemar da Costa Neto (PR), both

government allies. Lula's popularity plummeted

during the initial months of the scandal, but

started to recover in the following year as the

government implemented a number of populist

policies, like Family Benefit, which distributes

income to people living in extreme poverty. As a

result, President Lula managed to win re-election

against Geraldo Alckmin (PSDB), who enjoyed

significant support in So Paulo, but was

completely unknown in the north and northeast

states of the country, which is the PT's main

electoral base.

As President Lula's popularity rose, he faced a few

political difficulties during his second term and

recommended that Dilma Rousseff, previously

Minister of Mines and Energy and the President'sExecutive Office, be nominated as his successor.

While the "PT monthly payments" trial progressed,

the opposition also found itself embroiled in

corruption scandals in the Federal District. This

had a massive impact on the political ambitions of

Governor Jos Roberto Arruda (DEM), who had

been a potential presidential candidate in 2010. At

the same time, it was reported that the "PT

monthly payments" scandal had originated at the

end of the 1990s, and involved former governor

Eduardo Azeredo (PSDB) and the same people

who stood accused of running the more recent

operations.

Although not personally connected with any of the

people involved in the monthly payment scandal,

Rousseff was criticized by those of a more

conservative ideology because of her clandestine

militancy during the dictatorship. However, as both

economic and social issues started to turn in their

favor, Rousseff and vice-presidential candidate

Michel Temer easily won the election in the second

round, beating Jos Serra, whose popularity was

shrinking.

Jos Dirceu (PT) Jos Genoino (PT)

Image Credits: wikipedia.com, ww w.forte.jor.br


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9 ELECTION ISSUES TOUNDERSTAND AND MONITORAs in any election, there are issues which may have a greater or lesser effect when voters go to the

polls. James Carville, the US political operative, created one of the most universal phrases on what

decides an election when he said, "It's the economy, stupid." He was right, but little did he know that

in Brazil, with all of its characteristic quirks, certain issues run even deeper.

Economic performance does not have the impact

one would expect on Brazilian elections. It is very

different from mature economies, like the USA,

where negative stock market figures, investment

banking insurer bankruptcies, high real estate

prices, lower growth and falling incomes have a

direct effect on how citizens vote. Here, a slowing

GDP (2.3% in 2013 and a forecast of 1.5% in 2014)is more likely to affect the election if it is linked to

other events, such as a possible electricity crisis

(with blackouts), water shortages (because of the

drought and lack of investment) and rising

unemployment. The first two issues mentioned

above are on the government's emergency agenda.

Economist Ricardo Amorim, a partner at Ricam

Consultoria, says the results of the elections are

much more uncertain than opinion polls suggest,

especially if we look at specific domestic issues.

The likelihood of further protests during the WorldCup, which is being held just three months prior to

the elections, could cause the government serious

1. The Economy :HIGH IMPACTdiscomfort if the protests become violent. Theincreasing risk of energy rationing which played

in part in the downfall of then President Fernando

Henrique Cardoso in 2002 and water rationing

will affect voters. Amorim concludes that possible

problems on the job market would also be a

contributing factor.

President Rousseff is considered an

interventionist, who deliberately gets involved in

running structural sectors of the economy oil,

energy and finance. Her approach has had a

number of repercussions for state-ownedcompanies in all three areas, one of which was a

spectacular drop in corporate profits at the end of

last year. Capital markets have reacted badly, with

heady speculation on the stock market. The best

example of this came on March 19 and 20, on the

eve of Ibope's most recent opinion poll. There

were rumors that President Rousseff was losing

popularity that were not confirmed until after the

Datafolha survey results were announced in April,

but suspicion was high enough to see the stock of

three major state-owned companies rise

significantly for the first time in 2014: Petrobraswas up 7.8%, Eletrobrs rose 10% and Banco do

Brasil gained 10%, in just two days. Shares in state-

owned companies are expected to be quite volatile

from now until the elections.


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This is a federal government welfare program

which distributes between 70 BRL (USD 30) and

200 BRL (USD 90) per month (depending on the

number of children) to families living in extremepoverty. Launched in 2003, it has so far benefited

around 36 million people, principally in the north

and northeast regions of the country. Although

criticized by the opposition, not a single candidate

proposed ending the program in either the 2006 or

2010 elections because of its widespread

popularity. According to political analysts, this is

the PT's trump card. Campos and Neves are

expected to face difficulties reaching out to poorer

voters. Historian Marco Antonio Villa said that if

there is any likelihood that Neves and President

Rousseff are to face off in a second round of

voting, there may be rumors during the campaign

that the family benefit program will be eliminated,

which will consequently have repercussions among

poorer voters.

Brazil is expected to practically come to a

standstill during the World Cup and many host

cities are considering if they should declare public

holidays on the days that Brazil plays matches.Nobody is sure how the World Cup will impact the

elections. In 2002, Brazil won the competition for

the fifth time, but this did not help boost the PSDB

presidential candidate's popularity. In 2006, Brazil

was eliminated before the semifinals, but

frustration with the loss was not reflected in the

polls.

However, the 2014 World Cup brings with it a

number of specific issues. First, it is being held in

Brazil and many people are upset about the high

cost of hosting the event, which has divertedinvestment away from essential sectors such as

education, health, transport and infrastructure.

Political scientist Alberto Carlos Almeida said that

if Brazil exits the tournament early, this could have

an impact on the elections, potentially leaving

behind the sensation that Brazil organized the

party, but everyone else had all the fun.

Brazil is also preparing for the 2016 Rio Olympic

Games, which is also frequently in the news for

schedule delays and cost overruns.

2. Family Benefit :

HIGH IMPACT

3. World Cup :

MID-LEVEL IMPACT

Image Credit: SPOT_MuralEventoDaPompeia


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In 2010, Lula presented Rousseff to the country

and was directly responsible for her being elected.

Two years later, he nominated Education Minister

Fernando Haddad as a candidate for the mayor of

So Paulo, and was also successful. At the end of

2011, he was diagnosed with cancer of the larynx

and was forced to cut back on his political

activities.

Although he is still popular, Lula is likely to have

less influence than in 2010. However, it is widely

acknowledged now that he still has a relatively

strong following in the electorate. According to

Datafolha's most recent survey, 37% of

interviewees said they would vote for a candidate

supported by the former president, compared with

35% who would not vote for any candidate he

supports. Despite these figures, Alberto Almeida

believes that people will vote for Rousseff in 2014

more for her personal qualities rather than any

direct association with the former president.

In June of last year, Brazil's major cities saw a

number of demonstrations directed at politicians

who were vigorously criticized, causing alarm and

debate across the country. The demonstrations

were fueled by a wide range of concerns, with

people protesting against the lack of healthcare,

transportation, education and against political

corruption. The protests took place at the same

time as FIFAs Confederations Cup. There were

clashes with the police around the stadiums of the

six host cities, however none of the matches were

disrupted. President Rousseff was booed during

the opening game and decided to not attend the

final. The federal and state governments

reinforced policing to ensure public order and

prevent more serious consequences. There were

no serious injuries or deaths during the

demonstrations.

There is some expectation that further

demonstrations will be held during the World Cup

and they will have a greater or lesser impact onvoters depending on how widespread and popular

they are. There is a consensus that the three

months between the World Cup and the

presidential elections will be a chance to cool off

and any demonstrations that do occur are unlikely

to have a decisive impact on the vote. Additionally,

some believe that any demonstrations held during

the World Cup will not be as big as those which

occurred in June. Furthermore, there is no

"surprise factor" because the government's

intelligence services have been forewarned.

4. Lula Factor :

MEDIUM IMPACT

5. Public Demonstrations :

MEDIUM TO HIGH IMPACT

Image Credit: Will Rodrigues / Shutterstock.com


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All candidates are allowed unpaid airtime on TV

and radio for political party purposes. The amount

of exposure each party receives depends on the

number of representatives it has in Congress. Thisincreases the importance of political party

coalitions. In other words, the larger the coalition,

the more free airtime it will have on TV and radio

for political campaign broadcasting. This does not

necessarily guarantee a good result. In 1989, the

then PMDB candidate Ulysses Guimares had the

most free airtime, but finished the election in sixth

place. Today, the most important factor affecting

political broadcasts is how creative can marketing

managers be in finding new ways to directly

interact with voters.

According to a recent Ibope survey, 76% of

Brazilians prefer political broadcasts on TV,

making political campaigns sophisticated

marketing tools that are now being further

reinforced by the Internet and social media. The

free broadcasts will run from August 19 until

October 2. Political analysts see these broadcasts

as the cornerstone of electoral advertising.

The arrest and incarceration of well-known people

accused of running the "monthly payments

scandal" is unlikely to have an impact, according to

political scientists. If the presidential elections had

been held in 2012, when the Mensalo trial began,

it would probably have had a different result. The

sentences handed out to the more significant of

those accused had huge repercussions in thenational media, as well as overseas. However, there

were no real effects on the municipal elections

held that year. The PT s candidate, the ex-

education minister, Fernando Haddad, became

mayor of So Paulo, Brazils largest and most

populous city, after to claim the beating Jos Serra,

who Rousseff also beat the presidency in 2010.

After appeals were made and lost by those

condemned in the trial, prison sentences have

been in force since November 2013. Political

scientist Alberto Almeida said that as far as

Brazilians are concerned, the fact that thoseinvolved were sent to prison belongs in the past. In

general, Brazilians think "all politicians are

thieves."

6. Free Party Political

Broadcasts : HIGH IMPACT

7. Monthly Payments

Scandal : LOW IMPACT

Image Credit: SPOT_MuralEventoDaPompeia


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Elections in many countries hinge on debates -

where political candidates buckle under the

pressure and make a mistake. During the mayoral

elections for Sao Paulo in 1985, the then candidate

Fernando Henrique Cardoso was asked if he

believed in God. He He botched the answer,

projecting an image of himself as an atheist. His

adversaries took advantage of this to alienate themore conservative voters.

Based on data from past elections, voters do not

appear to prioritize the makeup of party coalitions.

The two main reasons are the ideological

weaknesses of the parties, more concerned about

creating arrangements that will provide them with

certain advantages, and voters' ignorance of

political rules, which means that they are more

often influenced by the candidates themselvesrather than their parties. Only the more

ideological voters are likely to complain about an

unsuitable alliance and they are too few in number

to change the result of an election.

8. Debates :

MID-LEVEL IMPACT

9. Party Alliances :

NO IMPACT

A few political journalists who moderate debates

debates have criticized the current model used for

presidential debates, which significantly restricts

the candidates. During the first round of elections,

the debates are not particularly relevant because

much weaker candidates, with little chance of

winning, are present. The very strict debating rulesmake it difficult for candidates to debate their

ideas with one another. The debates may become

more important if there is a second round of

elections, however the candidates' advisors tell

them to minimize risk.

However, the debates are an excellent opportunity

to offer voters more insight into what each

candidate represents. A chronic problem for

debates is the time they are broadcast, always after

10 PM, which means that working-class people,

who are generally low-income, do not get to watch

them.


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IN SUMMARY

The political situation in Brazil is unpredictable.

It's difficult to forecast a possible winner for the

presidential election. However, there is a

consensus that regardless of who wins, there willbe no drastic changes in Brazil's international

relations.

Brazil's relationship with some South American

countries might be affected, according to a recent

article featuring Neves. These proposed changes,

which are common in the run-up to elections, are

critical of Brazil's current attitude towards

diplomacy, which is considered excessively

benevolent to governments in more left-leaning

countries. Last year, President Rousseff was

criticized by the opposition for partnering withPresident Raul Castro to build a port in Cuba. Their

criticism was based more on ideological issues

than the practicality or feasibility of the

construction project itself. Despite Brazil's current

position, the country is not expected to follow the

path of Bolivia, Ecuador and Venezuela.

Political analysts do not believe there will be any

major changes, especially given the track record of

the three main candidates, who are not risk-takers.

A potential Neves administration is expected to

focus more on rebuilding support for the markets

and in the business community. Campos is

expected to do the same, but to a lesser degree. As

does President Rousseff, who is under criticism by

the Brazilian business community and will have to

rebuild her relationship with domestic and

international investors.

The air of uncertainty makes it difficult to predict

the results of the election at present, and however

the situation evolves by October, both the current

administration and the opposition will have a

chance to win.

This situation is reminiscent of a phrase from

Magalhes Pinto (1909-1996), a politician and

banker who ran against Tancredo Neves (Acio's

grandfather) in Minas Gerais, when he was asked to

describe politics: "Politics is like the clouds. You

look at them and they look like one thing. Lookagain and they have already changed."


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MSLGROUP Latin America contact:

Josh Shapiro

[email protected]

About MSLGROUP

MSLGROUP in Latin America

MSLGROUP Brazil

MSLGROUP is Publicis Groupes strategic communications and engagement group, advisors in all aspects ofcommunications: from consumer PR to financial communications, public affairs, reputation management, crisis

communications, experiential marketing and events. We have more than 3,500 communications consultants across more

than 100 offices worldwide. In 2013, The Holmes Report recognized MSLGROUP as the Best Corporate Consultancy in

the World.

MSLGROUP has been active in Latin America for more than 25 years and has developed into a network of both

MSLGROUP owned operations and long-term affiliate partnerships. Today our Latin America team includes more than

150 MSLGROUP staff across four offices, plus partner offices in 20 additional countries across Central America, South

America and the Caribbean. From our regional hub based in So Paulo, Brazil, MSLGROUP Latin America supports a

variety of clients on global, regional and local communications programs.

Founded more than 20 years ago, MSLGROUPs Brazil team has supported both national and international companies asthey entered into and developed across Brazil. Today, MSLGROUP Brazil includes three agencies that operate as distinct

businesses, while collaborating in certain areas like tools and training: MSLGROUP Andreoli, MSLGROUP Espalhe and

MSLGROUP Publicis Consultants.

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