Opinion – Vinicius Torres Freire: How much would Bolsonaro’s coup cost, in the opinion of people in the market

How much would a blow by Jair Bolsonaro cost, in the account of financial market calculators, those who estimate dollar prices, shares, government bonds (interest), inflation or manage money?

The question causes nervous laughter or “Man, I can’t talk about this” reactions. But, with the promise of anonymity, something comes out.

To facilitate the conversation, this journalist called the mere attempt to disrespect the results of the polls a coup.

An economist at a large bank says that “a political consultancy we listened to” warns of “some” risk of violence in the election, also institutional, but the hypothesis “is not in our scenarios” (that is, a hypothesis that serves to calibrate economic projections ).

However, says this economist, this “perception that 2023 is very hazy, maybe even a little bit why you’re saying [golpe]already affects prices in some way, but I haven’t seen anyone who has isolated this, put it as an explicit risk”. through formal clauses, contracts”.

If you were asked to put that risk on the account, what would you do? “It’s a difficult event to even define. Is it a threat? Failed attempt? How long does it last? Is it an authoritarian regime? I think we even have few references [dados]but it’s a tragedy for everything, a dark fate”.

A Brazilian money manager says that “the answer is obvious, of course there is a shock”.

Have you ever thought about estimating the impact of this risk? “No, but see a development of this situation, the external reaction: sanctions may come, from the government or from companies, investment flight on their own. . It could be worse: what if the thing goes down to the street, demonstrations, turns into a fight, a general mess, shooting?”.

“To make it easier,” another investment manager compares the coup situation with that of more commonplace risks.

“Uncertainty about the next government, the fiscal, etc., is already partly in the price, even the Central Bank said, but I think many people, BC included, underestimate how much the situation can get worse in the campaign. [prognósticos piores para dólar, inflação, juros]. In a scenario of institutional deterioration, you know even less what will become of reforms, of the fiscal [gasto e dívida públicos]of the state-owned companies, if you can intervene in prices and in business, what will become of stability in Congress and I don’t know what the BC autonomy will become”.

So far, so bad, but the known. And blow? “So, extrapolate, multiply this problem I described. A fundamental legal uncertainty will cause a greater shock. I can’t say anything more than that. I only know that the possibility of breaking with the tax regime, without putting something credible in place, is already very bad and affects the economy since 2020, let alone worse”.

The second manager, who also works outside Brazil, also deals with the “authoritarian without a coup” hypothesis.

“Imagine a president with more power, who has pushed through the institutional limits, I won’t give a name [para o presidente], which managed to break down some resistance. If you are an authoritarian nationalist, there will be no reform, there will be no security for investors, for any citizen, everyone has seen this in other countries. And even Mercosur will retaliate. Imagine OECD, Europe. Even with a world full of problems, it’s not the 60’s [do século passado], put a pro-business dictatorship and that’s it, which incidentally goes wrong. This is total madness, the suicide of Brazil.”