Five days before the first round of the presidential elections, the markets are sending signals of relative tranquility, despite the polls that foresee an increasingly probable run-off between Bolsonaro (PSL) and Haddad (PT).
The dollar has returned to around the listing of R$ 4.00, while the Ibovespa index has returned to the range 78-80 thousand points. An apparent calm, it is easy to think, given that the electoral dynamics shows a scenario with the possible election of the candidate of the PT, opposed by the market operators.
The latest Datafolha research, carried out on September 28, sees the following voting intentions: Bolsonaro 28%, Haddad 22%, Ciro Gomes 11%, Alckmin 10%, Marina Silva 5%, Amoedo 3%, Alvaro Dias 2%, Meirelles 2% and others with 1% or less. The low number of undecided (5%) suggests that there should not be major changes in the few days left before the elections. In the event of a Bolsonaro-Haddad ballot, the polls give Haddad winner with 46% of the votes against 39% of Bolsonaro.
On the economic front, worthy of mention is the success of the fifth and last auction for the sale of “pre-sal” oil extraction areas. The Shell-Chevron consortium won the “Saturno” area (Santos basin); the Exxon-QPI consortium won the “Titã” area. Thanks to royalties and production quotas, revenues of 235 billion reais are expected in 35 years for the Brazilian State.
In the graph below the results of the 5 auctions:
The last column indicates the percentage of crude oil production destined for the Brazilian State (the consortium that offered the highest percentage won the auction).
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% | 1,35% |
The forecast for growth of the 2018 GDP is still down, from + 1.55% at the beginning of July to + 1.44% a month ago and to + 1.35% today. Recall that at the beginning of the year the forecasts indicated a growth of 2.69% for the 2018 GDP: frustrated expectation for various reasons, among which weighs the lack of approval of the main reforms (in particular pensions and tax). We are already starting to look at the GDP of 2019, which is expected to grow by 2.5%, but on the reliability of the forecast weigh the strong unknowns about who will manage Brazil and its economic policy next year.
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% | 4,30% |
The forecast for inflation in 2018 is still growing slightly, estimated at 4.30%. Despite the slowdown in household consumption and the low percentage of capacity utilization of companies, the currency devaluation makes its effects felt on the prices of imported products, from raw materials to semi-finished and finished products.
| 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 | 3,80 |
After the strong stress of a month ago, when the price was 4.20 reais, the dollar returned to around 4 reais. The economists consulted in Banco Central’s Focus research predict that the dollar will close the year listed at 3.89 reais.
The euro, after reaching 4.90 reais, slightly devalued and today is quoted at 4.65 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% | 6,50% |
| Real interest (deflactor: IPCA) | 2,50% | 2,10% | 4,20% | 2,60% | 6,91% | 4,05% | 2,20% |
The discount rate (SELIC) at the end of 2018 is still stable at 6.50%. As inflation is rising but still within the planned fluctuation limits, Banco Central prefers to keep SELIC at record lows so as not to further depress 2018 GDP growth.
The Brazilian stock market (Bovespa)
As reported at the beginning of the post, the Bovespa index has risen compared to a month ago, but could fluctuate considerably in the coming weeks, depending on the election results. For further information, refer to my post:
Update Brazil 