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What you need to know about investing in Brazil during an election year

Posted 2022-06-24 Investing in Brazil during election years

In an election year, many foreign companies preferred to postpone investing in Brazil as a result of economic and political fluctuations. 

The movement to put a brake on investments takes place with greater force when electoral polls show paths that are still very uncertain  about who will lead the South American country in the next 4 years. 

On the one hand, current president Jair Bolsonaro works for reelection. On the other hand, former president Luiz Inácio Lula da Silva emerges as a strong opponent. We also have names on the balance, such as the former jurist Sérgio Moro and the former minister and former governor of Ceará, Ciro Gomes.

In any case, betting on investment in Brazil in 2022  is something that should occur with greater intensity only after October, the month of electoral definitions for president, governors, deputies and senators. 

Electoral scenario in Brazil in 2022 and how it impacts investments in the country

The most debated subjects from the Brazilian electoral polls  are the population’s voting intentions, the role of each candidate and, of course, the pricing of assets by investors. 

Regarding pricing, changes are expected as some reforms are implemented in the country. It is worth remembering that, in 2019, the government kept its focus on approving the Social Security Reform.

As of 2020, due to the pandemic, new reforms were on hold. 

The pandemic, in fact, transformed the political agenda and paralyzed new analyzes and votes, as the government’s focus shifted to income and emergency aid programs  for the unemployed and affected by the economic crisis.

The income transfer program, with more robust transfers to the population, is still one of the main efforts of the current government to improve people’s purchasing power. 

Inflation and unemployment in Brazil

 

Inflation and unemployment emerge as the most worrying economic and social problems today. As a way of getting around the situation, the government seeks to inject money into the economy.

At the same time, circulating money is intended to reduce the effects of unemployment  and even encourage entrepreneurship and small businesses. 

However, such a federal government strategy  comes up against certain fiscal restrictions of the Spending Limit Law. The rule was modified to meet the objective of injecting financial resources into the Brazilian economy. However, there was a great loss of fiscal credibility, impacting inflation and the exchange rate.

Is it possible to predict changes in economic management with reforms and new economic measures in the post-election period?

The expectation of experts in economics and politics is that there will be some changes in management, but in the long term. If the candidate Jair Bolsonaro wins the election, the projections are that privatization and reforms will once again enter the agenda strongly.

What is expected of candidate Luiz Inácio Lula da Silva are, in principle, actions aimed at the social, privileging the low-income population – as happened in his previous mandates. 

Third way candidates, for example, Sérgio Moro and João Doria, are well evaluated by the market in general. They are seen as figures who align themselves with renowned experts in the economic sector, such as former Central Bank president Affonso Celso Pastore and former Economy Minister Henrique Meirelles.

Is the market already eyeing the election?

 

Brazil is an important global player, operating with relevance in the oil and gas, fintechs and agribusiness sectors. 

The country is also seen with good eyes by investors in the technology sector  and by startups, having an interesting promising market for foreigners. 

While the current moment is still for evaluations, the long-term scenario points out that the green and yellow country is consolidated as a fertile land for new businesses. 

Do you want to invest in Brazil? Then count on the expertise of the Europartner team to help you successfully build your company in Brazil. Contact us!

Author's post: Europartner Accounting