Regional News In Brief
Brazil’s 2018 Presidential Elections
Despite political and economic uncertainty, investors can, at least, count on a robust anticorruption framework
Brazil’s general elections will take place on 7 October 2018, when ballots will be cast for a new president, 54 senators and 513 federal deputies. Local elections for state deputies and governors across 26 states plus the Federal District will also take place.
The upcoming presidential election is arguably the most unpredictable in Brazil’s recent history, with a 21 August opinion poll indicating that 30 percent of registered voters are undecided and that the leading presidential candidates have not individually garnered enough popularity to avoid a run-off on 28 October. A significantly polarised electorate, disenchanted with the political establishment, has opened the door to non-mainstream candidates who are serious contenders for the presidency, sowing considerable uncertainty into the local business environment and among investors.
Over the past two years, major political turmoil at the federal level has deepened the ideological divide among Brazilian voters. In 2016, Brazilian president Dilma Rousseff – a left-leaning technocrat who was the protégé and successor of the immensely popular president Luiz Inácio Lula da Silva (“Lula”) – was impeached and removed from office on grounds of fraudulent accounting. These proceedings were largely the result of her inherent political weakness and inability to garner congressional support for her administration’s agenda which, ultimately, hindered her ability to govern. However, Rousseff’s impeachment has been deeply controversial and a major factor in the political polarisation of the Brazilian electorate.
Lula, on the other hand, was sentenced to 12 years imprisonment in April for corruption and related crimes uncovered by the Car Wash Operation, a public prosecutor-led anticorruption task force that has led to the imprisonment of previously untouchable businessmen and elected officials across the political spectrum. Car Wash has been the driving force behind the current wave of popular intolerance toward corruption in the public and private sectors, with 84 percent of the population supporting the operation according to a recent poll. Yet, the Car Wash task force has been accused of political bias and, with the arrest of Lula, has deepened the political divide.
Main Campaign Issues
Public Security. For the first time, public security will be front and centre of the presidential race, as all national security indicators have worsened in recent years. According to the Fórum Brasileiro de Segurança Pública (“FBSP”), a Brazilian think tank, 63,880 murders were registered in 2017, a record high since the initial publication of this data set, in 2007. Although public security is generally under the remit of state governments, the federal government also holds some responsibility. Since February 2018, for example, the Brazilian army has had formal command of Rio de Janeiro State’s security forces.
Economy. Brazil has been experiencing a slow recovery since the 2016 economic recession, with 12.4 percent unemployment, rising inflation and sluggish economic growth prospects. Given this scenario, candidates are dedicating a large portion of their campaigning to economic strategy, with a focus on economic growth and job creation. Proposals vary from frontrunner Jair Bolsonaro’s support for market-friendly labour reform, free trade and liberal economic policies, to Ciro Gomes’s defence of greater state control over the economy and higher public spending.
Corruption. According to Transparency International’s (“TI”) 2017 Corruption Perceptions Index, between 2016 and 2017 Brazil’s rank has dropped from 79 to 96 out of 180 countries, with 180 being the most corrupt. The worsening of Brazil’s position has been closely associated with the extensive media coverage and public support for the Car Wash operation and several other anti-corruption investigations.
A strong and stable anticorruption framework
Despite the uncertain political and economic outlook for Brazil, the implementation of recent anti-corruption reforms and the continued success of Car Wash has significantly improved the local compliance environment, levelling the playing field for investors who abide by international anti-corruption standards such as the UK Bribery Act and the US Foreign Corrupt Practices Act.
Following the wave of anticorruption demonstrations that took place across the country in 2013, the Congress passed the Anticorruption Act, which was based on the UK Bribery Act and the US Foreign Corrupt Practices Act. Since then, there has been a growing trend in compliance-related developments, which are gaining greater importance in the public and private spheres. For example, in 2016, Brazilian congress passed the State-Owned Companies Act, which requires state-owned companies to develop and keep track of integrity and compliance programs, inclusive of third-party risks.
The above measures are essential to provide a degree of stability for international investors, considering the fraught economic and political context over which the 2018 election will occur. While it is too early to tell who will become the next president of Brazil, he or she will have to contend with intense public and legal scrutiny over the real or perceived ethical conduct of the presidency, cabinet, and political supporters.
According to the polls, while Bolsonaro and Lula are currently the front runners, they also have the highest rejection rates (37% and 30%, respectively) among the electorate.
Mayors, Governors and the President are elected for a four-year term by absolute majority vote with a two-round system. In case no candidate obtains over 50 percent of the votes in the first round – scheduled for October 7 – the top two candidates will compete in a second round on October 28.
Due to Brazil`s electronic voting, adopted since 1996, results are published after the closing of the polls on election day.