The 2022 presidential election was the most monotonous election. That was the case until yesterday, Sunday, when the result of the first round showed a narrow victory for former President Lula over Bolsonaro, who won the vote at the weekend.
The result (48.43% x 43.20%) is the narrowest since redemocratization and indicates that the next four weeks will make up for the stupor of the first round. Bolsonaro comes strengthened by the victories of governors and even his former ministers who secured seats in the Senate.
Faria Lima is already dosing the speech saying that a tight second round is a positive. On the one hand, Congress is again quite conservative, and the current president has important allies in the Senate. This would be positive for the supposedly liberal reform agenda. It sounds funny, since Bolsonaro’s government was responsible for dismantling the spending ceiling and the electoral law that prohibited the creation of aid during the election period.
On the other hand, a victory for Lulu would come at the expense of more pragmatism on the part of the former president, who would need to garner more support for the center and would still be under strong control of Congress. This statement also ignores that Bolsonaro ended his term by handing over control of the budget to parliament, through a secret budget scheme, revealed by Estadão.
It’s going to be a tough four weeks for politics – but Faria Lima thinks the stock market will rise. The glass is half full, dear reader.
Meanwhile, abroad, the UK scrapped the tax cut for the richest, announced a week ago. The measure was considered explosive by the market because it would raise the public debt and stimulate consumption in a period of high inflation. The pound melted, creating chaos in the markets and the threat of bankruptcies in pension funds.
The withdrawal was a major defeat for Conservative Liz Truss, who took over as prime minister less than a month ago.
Speaking of bankruptcy, the financial market is in a panic with Credit Suisse. Stocks are down 55% for the year, and CDS (investments that act as insurance against bankruptcy) have had a standard Brazilian spike. The origin of the crisis lies in two bombastic cases of wrong decisions combined with convictions for failure to prevent financial crime and money laundering. In the two most famous cases, the damage amounted to 10.5 billion dollars.
The bank was trying to calm the financial market by trying to prove that it was not in danger of bankruptcy.
A chaotic combination for the last quarter of the year. Nice work.
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European index (EuroStoxx 50): -0.89%
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Frankfurt Stock Exchange (Dax): Holiday
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