Summary of a meeting with Lourdes Sola, University of S. Paulo and Riordan Roett, Johns Hopkins - SAIS

For the first time in Brazilian history, the effects of a presidential election have been felt in the international financial sector. Brazil's credit rating was recently downgraded on forecasts of economic turbulence that many consider related to the strong poll performance of Luis Inácio da Silva (Lula), presidential candidate for the leftist Workers Party (PT).

Lourdes Sola from the University of São Paulo discussed the identification and weighting of factors for reliable predictions (the relevance of polling and market instability), the relative importance of the incumbent party candidate José Serra's electoral strategies, and the challenges that a government under Lula would face.
She emphasized that although Lula is ahead by a considerable margin in the polls, the electoral scene is still characterized by a high degree of uncertainty. This ambiguity is due to the fact that the legally mandated period of television exposure is about to begin, which has always had a tremendous influence on previous elections.

Nevertheless, Dr. Sola believes that the polls still have limited predictive value. Although Lula was able to overcome his traditional preference threshold (35%), his votes cannot be considered consolidated and still could be transferred to other candidates. In addition, the party conventions, which represent the official launch of candidacies and coalitions, are being held this month. Finally, it should be noted that this presidential race has two clear stages: the current preliminary stage is winding down and the second, which will be underway by the end of the July, promises to be more competitive than in the elections of 1994 and 1998. There is no unifying issue such as the Real Plan and focus on economic concerns will make this a more technical race.

Dr. Sola believes that Serra will soon be in a better position to face Lula. The designation of Rita Camata as the candidate for Vice-President on Serra's ticket brought extraordinary leverage to Serra's campaign as it consolidates the alliance between the Partido Social Democratica Brasileiro (PSDB) and the Partido do Movimento Democratica Brasileiro (PMDB). Lula's candidacy is facing additional difficulties as the target of hostility and concern from the international community. In contrast Serra is perceived to be better equipped to handle the domestic and international challenges of the office.

Riordan Roett, of Johns Hopkins/SAIS, emphasized the importance of the Brazilian electoral process, which given it's transparency, should be considered representative of the consolidation of democratic institutions in Brazil. He underlined the significance of this election as it will influence Brazil's foreign policy on sensitive hemispheric issues such as bilateral relations with the U.S., the FTAA, Mercosul, the Doha Round and the Argentine crisis.

Dr. Roett also acknowledged the economic turbulence but expressed doubts about the longevity of such concerns. Serra recently invited current Central Bank President Arminio Fraga to remain on if he were to be elected, but Lula has yet to announce anything regarding his intended economic policy or team. Dr. Roett believes it would be in the interest of both candidates to offer clear indications of their economic intentions and respective plans for government not only to improve their positions in the polls, but also to reduce overall uncertainty. Indeed despite current efforts to stabilize the economy he emphasized the importance of managing expectations until October.

by Alex Parlini