Financial markets in the developed world do not seem to care. For the most part, they have shrugged off chaos in the Middle East, Russian incursions into Ukraine and democracy protests in Hong Kong. In the emerging world, however, political events can still move markets big time. This year the Indian and Indonesian stock markets have risen more than 20 per cent thanks to the electoral victory of more market-friendly governments. A similar pattern is taking shape in Brazil, only in reverse. Over the summer local markets soared on hopes the opposition would unseat Dilma Rousseff of the governing Workers party at the presidential election, which kicks off on Sunday. But this week opinion polls showed President Rousseff widening her lead, dashing hopes of an end to another four years of her interventionist policies. Investor gloom is now such that Brazil’s currency fell more last month than Russia’s rouble.
Luiz Inácio Lula da Silva, Brazil’s charismatic former president, has come out swinging against the markets and in favour of Ms Rousseff, his protégé and successor. “Well, I won in 2002, and I never asked for the market’s vote,” he said this week in a nod towards how financial markets plunged when he was first elected – but then enjoyed an eight-year bull run.
The difference, though, is that Mr Lula da Silva, a former trade unionist, was an unknown quantity 12 years ago. Ms Rousseff, by contrast, has been in power for four years. Today Brazil’s economy is in recession, the budget deficit at its widest in 13 years, inflation targets have been breached and sovereign debt ratings are close to junk. Such challenges jeopardise the social gains Ms Rousseff takes credit for.
Full Article: Brazil election swings between hope and fear – FT.com.