The march towards the presidential elections continues, with the strongest candidates starting to position themselves in the media and consequently in the polls.

According to the research institute Datafolha, which carried out its most recent research in mid-April, Lula continues in the lead with 31% of the preferences, followed by Bolsonaro with 15%, Marina Silva (10%), Joaquim Barbosa (8 %), Geraldo Alckmin (6%) and Ciro Gomes (5%).

However, this is a photograph destined to change very quickly. Lula‘s candidacy is compromised by judicial issues, and the PT has to decide whether to launch a proper candidate (Haddad? Wagner?) or whether to support Ciro Gomes, contenting himself with the vice-presidency. The decision not to desist from the candidacy of Lula, persisting in his defense to the bitter end, could have disastrous consequences, risking to cancel the presence of the entire left in the future parliament.

The so-called Center is focusing on the candidacy of Geraldo Alckmin (PSDB), defeated by Lula in the 2006 elections. Should he count on the support of the MDB (former PMDB), the party of the current President – Michel Temer -, Alckmin would count with a television propaganda minutage far superior to the other candidates and would surely strengthen his candidacy.

Joaquim Barbosa, former president of the STF (Supremo Tribunal Federal), likely candidate of the PSB, can channel part of the anti-corruption and anti-PT protest vote and remove space to Bolsonaro, considered too extremist by the more moderate electorate.

On the economic front, it should be noted the weakening of the real, which since February has depreciated by about 10% on the dollar and 7% on the euro. This phenomenon will be the subject of a specific post in the coming weeks.

Let’s see some updated data:

GDP (Value added at market prices)

2012 2013 2014 2015 2016 2017 2018
GDP – real growth (%) 1,8% 2,7% 0,1% -3,9% -3,5% 1,01% 2,75%

Still a slight decline in the forecast of GDP growth in 2018, estimated today at + 2.75%. The recovery of the economy continues, but the uncertainty of the presidential elections continues to weigh on the mood of economic operators and in particular on the propensity to invest in productive activities. As always, the agricultural sector is supporting the growth of GDP, with the forecast of record crops in 2018.


Inflation and real/dollar exchange 

2012 2013 2014 2015 2016 2017 2018
IPCA (IBGE – %) 5,80% 5,90% 6,40% 10,67% 6,29% 2,95% 3,49%

The inflation rate forecast for 2018 is still down, estimated at 3.49%. The devaluation of the real, if on the one hand stimulates exports, on the other hand will create some tension on prices in the coming weeks.

  2012 2013 2014 2015 2016 2017 2018
Exchange rate R$/US$ (end of the period) 2,04 2,34 2,66 3,90 3,25 3,25 3,35

The change has been protagonist in recent weeks. Today the dollar is quoted at 3.53 reais (highest quotation since May 2016, in the midst of the crisis caused by Dilma’s impeachment), but the economists consulted in the Focus research by Banco Central foresee that the dollar will close the year quoted at 3, 35 reais.

The euro has also been valued in recent weeks, and is now quoted at around 4.23 reais.

Interest rate

2012 2013 2014 2015 2016 2017 2018
Nominal Interest rate (end of the períod) 7,30% 10,00% 11,80% 14,87% 13,75% 7,00% 6,25%
Real interest (deflactor: IPCA) 2,50% 2,10% 4,20% 2,60% 6,91% 4,05% 2,76%

The discount rate forecasts (SELIC) at the end of 2018 are stable. Given the exchange situation, the possibility of a further 0.25% cut in the coming months is reduced.

The real discount rate (adjusted for inflation) at the end of 2018 fell further (2.76%), leading to a lower attractiveness of Brazilian bonds, a few years ago true “phenomena” of global profitability.


The Brazilian stock market (Bovespa)

The Bovespa continues to hover around 85 thousand points, but – considering the devaluation of the real – foreign investors are taking significant losses.

We will see in more depth, in a future post, the situation of those who have invested or want to invest in Brazilian equities.