Opinion – Vinicius Torres Freire: The country is doing badly, but the election does not have financial panics

The election campaign does not seem to have any negative effect on financial indicators, so far: exchange rate (“dollar price”), longer-term interest rates, stock exchange, for example. In the last two months, there has been a slight improvement. It seems that the average attitude of the owners of the money is: “after the fall, we won’t pass from this ground”. Until November, at least.

Longer-term interest rates, two years on, have dropped. So much so that the management of the Central Bank gave a shout out to the people in the markets, so that they would not be so excited about the prospect of an early Selic drop. Real exchange rates came out of the bottom of mid-2020. Even the Ibovespa came out of the July hole, although still far from the peak of the year, in April.

Big money traders say the election itself could be a “non-event.” Although they do not have an exciting program or, as far as finance is concerned, almost none, the main candidates, Lula da Silva (PT) and Jair Bolsonaro (PL) would have a “known” track record.

The movement in money could become more nervous when the results of the polls are defined and, even more, when there is a clear indication of what is going to be done on the obvious, chronic and crucial issues: debt, deficit, new ceiling, names of the economic team, some idea of ​​the coalition size in Congress, immediate reform plan.

For now, the biggest concern would be the fate of monetary policy (interest rates) in the United States, interest rates and energy crisis, perhaps recession, in the European Union and the size of China’s fall.

It’s not about saying that things are calm here, but about conformism and waiting with weapons at the ready. But the bulk of the damage to interest rates took place between September and October 2021, when it belatedly dawned on us that inflation could really be bad and when the Bolsonaro government lowered the spending cap for the first time.

The price of the real, in real terms and weighted by the weight of the currencies of the countries with which we trade, rises a little. It is true that the real is rising from the depths into which it plunged shortly after the beginning of the epidemic, when the Brazilian currency was the most devalued. Moreover, this improvement was not enough to provide significant help in containing inflation, nor is it compatible with positive indicators of external accounts. But it didn’t get worse with the election campaign.

Somewhat more impressive, now on the side of the “real economy”, even the investment rate resisted (in expansion of productive capacity, machines, equipment, software, residences). Bolsonaro’s embezzlement steroids do not explain this resistance.

Everything is happening as if everyone is even more resigned to the fact that there is less electoral economic debate than usual, as if any serious conversation would only begin in November, as if they did not already anticipate an even greater risk of damage from because of the election of Lula or Bolsonaro. It would all be “in the price”.

There were some surprises, in short, that mitigated or postponed the worsening of the fiscal problem. Tax revenue is staggering, high inflation has effectively slashed the relative size of debt, and GDP will grow well beyond the mark (more than two points higher than expected at the end of 2021, a stratospheric error). But the bill will go up again in 2023 and it will be very high.

This bad financial crisis situation, but now controlled or dammed, could be a bonus for the next president. A realistic program and a good team can even lift the 2023 Pibinho for free, even if the implementation of the measures takes time.