Brazil election: Real soars after Jair Bolsonaro wins first round

A
woman sells T-shirts and flags with the image of presidential
frontrunner Jair Bolsonaro of the Social Liberal Party, in front
of the headquarters of the national congress, in Brasilia,
Brazil, Sunday, Oct. 7, 2018. Bolsonaro, a far-right former army
captain who expresses nostalgia for Brazil’s military
dictatorship took a strong lead in its presidential election,
rallying voters to his promises to rid Latin America’s largest
nation of rampant corruption, crime and moral rot. With 79
percent of returns in, congressman Jair Bolsonaro is leading
polls with 48 percent of the votes.
AP
Photo / Eraldo Peres

• Far-right fringe candidate Jair Bolsonaro nearly won
  Brazil’s presidential election this weekend.
• He will face leftist Workers Party candidate Fernando
  Haddad in a runoff later this month.
• Brazil’s currency, the real, rallied in early trading
  Monday.
• 
  
  Watch the Brazilian real trade in real time here.
  

Brazil’s
currency jumped Monday following presidential elections over
the weekend, where far-right fringe candidate Jair Bolsonaro
easily secured a spot in a runoff scheduled for later this
month. 

The real was up as much as 4% to 3.75 per US dollar in early
trading, hours after final election results came in. Just missing
the half-vote threshold needed to win altogether, Bolsonaro
secured 46% while his closest rival Fernando Haddad, of the
leftist Workers Party, had 29%. The two will vie for the
presidency October 28. 

Having praised Brazil’s military dictatorship in the past, some
fear Bolsonaro poses threats to democracy in the
country. But the populist has found some support through
promises to aggressively address crime rates and the still-ailing
economy.

“While very conservative in certain issues, he is expected to be
pro-business,” Citigroup analysts wrote in a recent research
note.

Bolsonaro has said he would consider privatizing institutions in
the country, backed pension reform, and advocated for an
independent central bank. Meanwhile, Haddad supports scrapping a
government spending cap and strengthening public banks
and companies. 

With highly-fragmented legislative bodies, however, he could face
an uphill battle putting those reforms in motion. William
Jackson, chief emerging markets economist at Capital Economics,
said the Bolsonaro boost may start to falter once these obstacles
become more apparent.

“It’s not clear that the support Bolsonaro is building extends to
painful measures to cut spending,” Jackson said. “And some of the
more difficult changes, such as to pension provision, will
require a highly unstable coalition of at least 11 parties to
change the constitution.”

Read more about what the presidential race could mean for
Brazil’s economy.

MI