This week, Brazil's stock index dipped sharply and the national currency, the real, slumped after polls showed incumbent Brazilian President Dilma Rousseff securing a lead in the run-up to Sunday's first round of voting. This reaction by capital markets reflects misgivings about the continuation of statist policies that have dried up jobs, driven up debt and led the world's seventh-largest economy into a recession.
Although Rousseff has recovered her lead over the 10 other candidates, she will likely fall short of obtaining an outright majority and will be forced into a run-off Oct. 26 against free-market maverick Marina Silva. And while most observers expect Rousseff to win re-election by challenging Silva's lack of executive experience, the campaign has exposed profound popular doubts about the president's own management of Brazil's economy.
Taking over the Socialist Party nomination after the death of governor Eduardo Campos in an August plane crash, Silva appealed to the hopes of disaffected Brazilians anxious over a slumping economy and dysfunctional political system. Silva is a fierce environmentalist - she served with Rousseff in the Workers' Party government from 2003-2008 - but she now espouses free-market policies to jumpstart growth, exports, and jobs by liberalizing the Brazilian economy. She has criticized Rousseff's stewardship of the state-run oil company, Petrobras, which has seen profits and productivity fall despite the discovery of vast oil deposits in 2007. Last month, a scandal involving alleged Petrobras kickbacks to government cronies underscored Silva's critique of "political interference, patronage, and corruption" in Brasilia.
Silva's steady rise in the polls buoyed private-sector hopes, but markets tumbled this week after a series of polls showed Silva losing her lead over the incumbent in the projected second round of voting. On Monday, Petrobras shares fell more than 11 percent - the largest one-day loss in nearly six years. Shares in the state-run Banco do Brasil fell nearly 8.5 percent, while the real lost as much as 2.5 percent of its value against the U.S. dollar.
