Brazil’s strongman closes in on presidency after round-one rout

Bloomberg

Jair Bolsonaro, the divisive, far-right former Army captain, stormed to a huge lead in the first round of Brazil’s presidential elections as voters enraged by years of recession, corruption scandals and soaring crime rallied around his strongman message.
The result puts the seven-time congressman on track for victory in the decisive, second-round vote on October 28, when he will face his closest challenger, the Workers’ Party candidate Fernando Haddad.
Bolsonaro’s domination on Sunday was so overwhelming that it briefly appeared that he might capture enough votes to forgo the need for a runoff round—something that hasn’t happened for 20 years. In the end, he wound up with 46.2 percent, just short of the majority needed to win outright, to Haddad’s 29.1 percent, electoral officials said. In a live broadcast on Facebook after the results came through, Bolsonaro appeared to question the legitimacy of the results but indicated he was preparing for the second round. He said that Brazilians now had to choose between the values he represents—”family, God and justice”—or becoming Venezuela.
The odds of Bolsonaro being elected president rose to 75 percent “not only because he started stronger than expected,” said Eurasia Group executive director for Americas Christopher Garman, but also the “strong anti-establishment sentiment.”
The next three weeks promise to be intense. For while Bolsonaro’s lead appears almost insurmountable, the millions of Brazilians who vehemently oppose his populist candidacy—and its undertones of misogyny, homophobia and dictatorship denial—will make a furious, last-ditch effort to halt his march to the presidency. But they will be fighting against powerful forces not entirely dissimilar to those that helped put Donald Trump in office in the US and Andres Manuel Lopez Obrador in Mexico and gave the UK its Brexit shock.
“It’ll be three weeks of a dangerous and highly polarized scenario,” said Mauricio Santoro, a political scientist at the State University of Rio de Janeiro. “The level of conflict will be very high,” he said, adding that both have to overcome very high rejection rates to win.
Financial markets have see-sawed, tracking the ups-and-downs of the two candidates. Investors rallied behind Bolsonaro not so much because they trust he will be able to implement the best economic policies but because he is the most viable candidate to prevent the return of Haddad’s Workers’ Party and its interventionist economic policies.
The Xtrackers MSCI Brazil UCITS ETF climbed 4.6 percent at 1:28 pm Singapore time on Monday, while the yield on Petroleo Brasileiro pound-denominated debt fell 2 basis points at the open to 6.48 percent. While trading in Brazil’s real is restricted to local hours, the currency would probably draw support from the first-round results, Krung Thai Bank strategist Jitipol Puksamatanan said in an interview.
Allies of the ex-Army captain performed strongly in the congressional races, and two of his sons won election. The right-winger’s better-than-expected results mean that Brazilian assets are likely to rally on Monday, according to James Gulbrandsen, from NCH Capital in Rio de Janeiro. “The odds of a Congress that will pass reforms just skyrocketed,” he said. “This is the principal concern of the market.”
Whoever takes the helm of the $2 trillion economy faces the daunting prospect of find-ing jobs for the country’s 13 million unemployed, bringing down Brazil’s staggering levels of crime and plugging a fiscal deficit worth more than 7 percent of GDP.