In the home stretch, Faria Lima already treats Bolsonaro’s turn as distant

In the home stretch of the campaign, many pro-Jair Bolsonaro (PL) equity managers are still trying to keep the flame of re-election hope alive, but, little by little, a perception is spreading that the image of Luiz Inácio Lula da Silva (PT) may have become irreversible.

The bucket of cold water came last Sunday, when Roberto Jefferson (PTB) fired gunshots and threw grenades at federal police inside Rio. On Monday (24), Ipec showed Lula with 50% and Bolsonaro with 43% of the total vote.

The most apparent symptom of this deception is the hype of state-owned stocks. Petrobras has slumped more than 10% in all three trading sessions this week. Banco do Brasil fell 12%. In common parlance: SOE shares fall because it looks like the PT’s chances of winning the election have increased and a party government tends to be heavy-handed in intervening in controlled companies by the Union.

Petrobras is losing value now, just as it soared almost 10% on the Monday following the first round, when Bolsonaro’s 51 million votes put him far above what polls predicted. DI (inter-financial deposit) interest, another risk indicator, also signaled an increase ahead of the election. The January 2024 contract closed at 12.97%; for January 2025, 11.89%, and 11.675%, for January 2027.

Now, time is running out and there is no empirical evidence (at least for now) that the campaign and the policies implemented by the government in the second round (such as an increase in the number of beneficiaries of Auxílio Brasil and recorded payments from Caixa) are enough to cover the 6.2 million votes Lula had before him. Another fear is a challenge to the election result by Bolsonaro. In recent days, the presidential campaign has reported allegations that radio stations broadcast more propaganda for Lula than for the president.

It is a common mistake to see those who work in this part of the western part of São Paulo – a rectangle of 450,000 square meters, which is one third of Ibirapuera – as one thing. If in 2018 there was massive market support for Bolsonaro, today local managers tend to be more pro-Bolsonaro re-election than those who manage to access money from foreign investors.

In this last group, it is understood that, if the PT does not promote any workhorse in the economy, Brazil is able to receive a greater flow of foreign investment, since it will get rid of the uncomfortable taint of bet on important issues for global capitalism, such as the preservation of the Amazon. It is a position shared by major investors and members of the boards of directors of companies listed on B3, who have been closing in on Lula in recent weeks, after voting for Simone Tebet (MDB) in the first round.

There are structural factors that favor the thesis of a flow of foreign capital into Brazilian assets with the likely tightening of US interest rates in the near future. From the outside, Brazil is the only major emerging market that combines both a large goods (agricultural and mining) with double-digit interest rates. In both bond and currency markets, Brazil has attracted more attention than its emerging counterparts.

The big question is that, for some of the GDP that spoke to PT interlocutors, Lula has yet to make a concrete sign of how the economy will be handled in a new term. The former president’s speech – recalling that he had a surplus during his two terms and keeping inflation under control – is seen as deliberately vague.

What exists is a gigantic exchange of speculation about who will be the next Minister of Economy, based on conversations between businessmen, bankers and Lula himself or PT emissaries like Fernando Haddad and former minister Alexandre Padilha – the latter of the names being considered stronger to respond to the formula of having a “politician” in charge of the ministry and a team of technicians just below.

As long as Lula himself doesn’t speak (because that’s how things work at the PT), the names being put around to command the economy are just foam. It remains, of course, also to agree with the Sunday voter.

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