Faria Lima balances between Lula and Bolsonaro

If in the 2018 elections, then-candidate Jair Bolsonaro (PL) had the massive support of the financial market in the dispute against Fernando Haddad (PT), for the upcoming election in 2022, the story seems to be different.

The preference for Bolsonaro among market agents, previously supported by the figure of Paulo “Posto Ipiranga” Guedes, is far from the same as it was four years ago.

Populist and interventionist measures by the government in an attempt to increase popularity, most recently with the change in command of Petrobras, have led to growing questions among investors about the best option for the country’s economy from the perspective of the financial market. .

Fund managers and economists interviewed by the sheet say they are still waiting for the next moves on the political board to have greater clarity on what to expect from each candidacy in the economic area.

But they also state that, between former president Luiz Inácio Lula da Silva (PT) and the current president, they do not currently have a clear preference for one name or another.

Until mid-2021, in informal conversations, it was more common for managers to lift more restrictions on the PT candidacy. The wave seems to have begun to change, less out of more confidence in a future Lula policy and more out of distrust of a second Bolsonaro term.

They also recognize that the possibility of a third way going into gear is seen with less and less enthusiasm in the Faria Lima region, São Paulo’s financial center, given the poor results of candidates claiming this label in polls.

Former judge Sérgio Moro announced this Thursday (31) that he would withdraw from running for the presidency “at that moment”, while the governor of São Paulo, João Doria, caused an uproar within the PSDB by signaling that he could give up the race for the Plateau – movement from which he has already withdrawn, confirming his bid for the presidency.

“There is a belief in the market, right or wrong, that if the elected is Bolsonaro or Lula, there will not be a very large fiscal destabilization”, says Luiz Fernando Figueiredo, CEO of Mauá Capital and former director of the BC (Central Bank) .

“We have a Congress of the center. Proposals far to the left will simply not pass”, says Figueiredo.

After approaching 90% of GDP (Gross Domestic Product) in 2020, the government’s gross debt dropped to 80% in 2021, influenced by the recovery of economic activity last year.

He adds that discussions on the government’s proposals for the economy have not yet really started. It will be from them, and with the announcement of the economic teams, that the market will be able to have a better assessment of electoral preferences, points out the CEO of Mauá Capital.

“Investors do not have a preference for a candidate, they have a preference for government programs”, says Figueiredo. “As it’s not clear what the program will be for either of them, everyone is on hold.”

Founding partner and investment director at RPS Capital, Paolo di Sora says he perceives a certain “neutrality” in the exchanges with market peers.

“The truth is that the economic policy of the two is not very different. Bolsonaro walked towards a right more to the center in the economy and Lula is not the radical politician that some want to paint”, says Di Sora, remembering the rapprochement between the former -president and former governor Geraldo Alckmin.

The expectation of the manager of RPS Capital, however, is that there will still be important changes in the political and electoral scenario until the end of the year.

In addition to not considering the third way to be a completely out-of-the-box card, he believes that the former president must face a phase of attacks, referring to cases of corruption in the PT administration and the economic crisis in the mandate of former president Dilma Rousseff, when At the same time Bolsonaro has announced economic measures that may favor his candidacy.

“Lula is at his best moment in the dispute, while Bolsonaro is at his worst moment. And even then, the distance [de intenção de votos] is not that big”, says the manager of RPS Capital.

A survey released at the end of March by Datafolha shows former president Lula with 43% of voting intentions, which puts him in the lead in the dispute for the Presidency of the Republic at this moment. Jair Bolsonaro appears with 26% of voting intentions. In December 2021, Lula fluctuated between 47% and 48%, and Bolsonaro, between 21% and 22%.

“My impression is that today, unlike the elections in the last 20 years, there is no clear preference of the market in relation to candidates”, says Alexandre Bassoli, chief economist at the manager Apex Capital.

In line with his peers, Bassoli also assesses that there are still many uncertainties on the radar in the event of a victory for both Lula and Bolsonaro.

The effort that will have to be made by investors will be in the sense of trying to understand the main economic guidelines of each one of them, says the manager’s chief economist.

“Investors are pragmatic and focus less on personal preferences and more on issues that are relevant from a market perspective,” says Bassoli.

Manager of Versa Fundos de Investimento, Luiz Fernando Alves says that the possibility of a third way still gaining ground in voting intentions seems to be quite weakened at this point in the championship.

“I think almost no one on the market still works with the scenario of a third way, although it may be a little early for that”, says Alves.

He states that, in his view, the market has been relatively complacent with former President Lula, even with statements that go against a liberal economic agenda.

“The prevailing view in the market seems to be that Lula will not be a reissue of Dilma’s government, which was one of the great risks in the minds of investors”, says the manager of Versa.

He claims to see an eventual PT victory as a more favorable environment for consumer and retail companies on the Stock Exchange, in the wake of measures that can bring financial breath to the lower-income population.

Manager at Studio Investimentos, Guilherme Motta says he sees a series of inconsistencies in the speeches of both candidates ahead of the polls.

“People understood that Bolsonaro’s inconsistencies also generate uncertainty and volatility, as do those on the left,” says Motta, adding that the doubts that hover over the two candidates do not seem enough to make the third way emerge with real chances of winning the elections.

A more central name could gain ground in a scenario in which President Bolsonaro would lose ground among voters, which does not seem to be the case based on recent polls, says the manager of Studio.

In any case, he also says that the elections are not yet “making a price” in the market. The recent improvement, with the rise of the Stock Exchange and the appreciation of the real, is more due to external factors, such as commodities and the war in Ukraine, he says.

Chief economist at Necton, André Perfeito, also understands that the main doubt in the minds of market agents seems to be about the fiscal dynamics from 2023 onwards.

In this sense, the majority perception of the market, in the economist’s assessment, still seems to lean more in favor of Bolsonaro.

“The market recognizes that some economic measures announced in recent weeks are necessary, but it also sees in them an attempt to garner more votes. For this reason, I believe that the discomfort in relation to President Bolsonaro will continue”, says Perfect.

However, he understands that the prospect that Minister Paulo Guedes may remain in government also leads to expectations on the part of the market regarding greater fiscal discipline compared to the PT.

In the case of PT’s candidacy, Perfect understands that the positive history for the pockets of investors when he was the president of the Palácio do Planalto, in addition to his recognized capacity for dialogue between different actors in society, may weigh in favor of the former president.

“There are many people in the market who think that, despite the more left-wing electoral rhetoric, if Lula takes over the presidency, he will try to dialogue with everyone, including the market”, says the economist.

He also states that, whoever wins the dispute, the president from 2023 should face a more favorable macroeconomic environment than the current one for the performance of assets in the market.

The economists’ projections in the Focus report point to a drop in inflation and the basic interest rate for next year, which may open space for the appreciation of the local stock market. “The next president, no matter who he is, will have the possibility to start 2023 in a slightly calmer situation”, says Perfect.