WASHINGTON — Incumbent Dilma Rousseff won a very close re-election battle, but potential investors and the markets themselves disagreed with the outcome. Rousseff won with only 51.6% of the vote, which was a run-off vote.
Reuters reported investors and the business community doubt her ability to revive the economy that has regressed under her watch. The financial markets fells because of this sentiment, where Rousseff appealed to the poor by promising to continue welfare-state policies that drag down the country’s economy.
Inflation has risen, and could be unsustainable sooner rather than later, and Brazil’s budget is facing a substantial deficit.
Reuters, predictably, called it a win because her party had made:
“…gains against inequality and poverty since the Workers’ Party first came to power in 2003.
“Using the fruits of a commodity-fueled economic boom in the last decade, Brazil’s government expanded welfare programs that helped lift more than 40 million people from poverty despite the current economic woes.
“The “Brazilian model” has been adopted by center-left parties across Latin America and Rousseff’s victory, however narrow, is a blow for conservatives in the region.”
It will be hard for Rousseff to balance the country’s budget while expanding and maintaining the substantial welfare state, and the lack of confidence by the markets exposed that sentiment.
Also, Fitch Ratings said it could downgrade Brazil’s credit ratings due to Rousseff’s policies due to decreasing demand and other domestic policies put into place by Rousseff.
So much for a monumental win for Brazilians.