by Thomas Wash

The populist wave has officially made its way to Brazil. In a blow to the establishment, Brazilian voters have elected former military officer Jair Bolsonaro as president. As Brazil continues to struggle with its recovery from the country’s worst recession in its history, the public has turned its back on the mainstream political parties. A recent poll showed that 60% of Brazilians wanted a political outsider as president. Growing resentment for the traditional parties is likely due to corruption scandals, a historically high unemployment rate and a rising murder rate which set back-to-back records in 2017 and 2018.

To the chagrin of the establishment, Bolsonaro was able to wield his brash and antagonistic rhetoric as an asset, gaining popularity for his blatant disregard for political correctness. For example, he has been quoted as saying the following: the military’s only mistake was that it did not kill enough people; residents of Quilombo shouldn’t be allowed to procreate; and he would shut down the government the same day he is elected president.[1]^{, [2]} Bolsonaro’s victory is seen by some as a threat to Brazil’s democracy. As a result, we would expect anti-Bolsonaro protests throughout Brazil. That being said, while some people found his victory frightening, investors seemed relieved as the markets still preferred Bolsonaro to any member of the Workers’ Party (PT). The chart below shows the Brazilian real strengthening against the dollar.

In Part II of this report, we will discuss Jair Bolsonaro’s background and ideology, along with why markets find him appealing. As usual, we will conclude with potential market ramifications.

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[1] https://www.bbc.com/news/world-latin-america-45965925

[2]https://www.express.co.uk/news/world/1037819/brazil-election-2018-president-jair-bolsonaro-far-right-full-dictatorship