Brazil’s high-stakes election

This is an audio transcript of the FT News Briefing podcast episode: Brazil’s high-stakes election

Sonja Hutson
Good morning from the Financial Times. Today is Thursday, September 29th, and this is your FT News Briefing.

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The UK market turmoil has morphed into a political mess. Brazil is days away from an epic presidential election.

Michael Pooler
So this election has been described as the most consequential since the return of democracy to Brazil.

Sonja Hutson
And buckle up because Porsche is listing on the stock market today. I’m Sonja Hutson, in for Marc Filippino, and here’s the news you need to start your day.

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The Bank of England is in crisis mode. Last week, Chancellor Kwasi Kwarteng announced a tax cut and borrowing plan. Financial markets totally lost it. The pound plummeted and there was a sell-off in the UK government bond market. So yesterday the central bank launched an emergency bond-buying programme to stabilise the government debt markets and pensions. The Bank of England is planning to spend £5bn a day for the next few weeks buying long-dated bonds. The move boosted bond prices and yields dropped, but the political damage is done. The FT’s George Parker says there’s even a backlash among Conservative party members.

George Parker
Tweets from one conservative MP from Ms Truss’ own party saying this inept madness cannot go on. So this is one Conservative MP completely laying into his own government and there’s just a general sense of disbelief.

Sonja Hutson
What does this mean for the Chancellor Kwasi Kwarteng? I mean, he’s the guy behind this plan that sparked the whole mess.

George Parker
There are a number of Conservative MPs privately who think that this episode has finished him off. Maybe not this week or next week, but at some point in the future that your credibility as Chancellor of the Exchequer can never recover from this kind of complete chaos. So yes, it might be expedient at some point for Liz Truss to throw Kwasi Kwarteng overboard, but it’ll be a very risky strategy. It’d be a total admission of defeat. They both worked together on this package of measures that the embodiment of everything they believed in. This whole idea of cutting taxes, cutting regulation, letting free enterprise. This is all part of the credo, not just of Kwasi Kwarteng but particularly of Liz Truss, his boss.

Sonja Hutson
All right. So we may be sticking with Liz Truss and Kwasi Kwarteng for the time being.

George Parker
For the time being, yes. Although of course it’s only three weeks since Liz Truss became prime minister. So it’s strange that we find ourselves here even discussing the possibility that the chancellor and the prime minister might have their job on the line. And certainly, I mean, this is a very serious existential threat to the government if you lose control of your economy. People wonder what on earth you’re doing. And look, I mean, these are early days. Markets go up and down. Opinion polls go up and down. Kwasi Kwarteng, Liz Truss are sticking to the policy. They’re hoping that the markets are stabilised and over the coming weeks things will calm down. They’ll be able to roll out some more supply side reforms in areas like Digital City of London reform, childcare, to try to convince the markets and the British public that they have a plan to revitalise the British economy and hope to move on.

Sonja Hutson
George Parker is the FT’s political editor.

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The European Union is trying to inflict more pain on Russia for invading Ukraine. In its latest package of sanctions, its eighth so far, the EU will cap the price it pays for Russian oil. It will also ban more Russian exports. The new sanctions are estimated to reduce Russia’s revenues by €7bn each year. Brussels is also banning Europeans from serving on the boards of Russian state-owned enterprises.

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Voters in Brazil head to the polls this Sunday for an epic presidential election. President Jair Bolsonaro is running for re-election in order to keep leading Latin America’s largest economy.

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Sonja Hutson
That’s Bolsonaro at a recent rally. He’s actually trailing his challenger, Luis Inacio Lula da Silva, the leftwing former president that’s known just as Lula. There’s already some suggestions that Bolsonaro may not accept election results if he loses. To find out more, I’m joined now by our Brazil correspondent, Michael Pooler. Hey, Michael.

Michael Pooler
Hi there. How’s it going?

Sonja Hutson
It’s going well, thanks. Michael, can you remind us why this election is so important?

Michael Pooler
So this election has been described as the most consequential since the return of democracy to Brazil during the 1980s, following its 21-year military dictatorship. You have these two political nemeses who present very different visions of the future for Latin America’s most populous country, which is one of the world’s largest economies. But a big question is whether they have the adequate tool kits and ambition to address Brazil’s big economic challenges. Over the past decade, the economy’s barely grown. There’s been a drop in living standards in Brazil, which was once an emerging markets darling, has really disappointed.

Sonja Hutson
So what are candidates saying they’re going to do to improve living standards and the economy? What’s their pitch to voters?

Michael Pooler
So there’s been precious little detail really on economic policy during the campaign. So from Bolsonaro, we can expect a continuation of the pro-business and market-friendly policies. And the government has managed some reforms in the economy. They’ve granted independents, the central bank, they’ve undertaken a pensions overhaul, and they’ve had some privatisations as well. But they were frustrated in some of the more ambitious reforms, such as overhauling the tax system, which is notoriously complex. Now Lula, true to his leftwing credentials, he wants greater public investments in infrastructure. He plans to put a firmer hand on the state-controlled oil company Petrobras, and he wants Brazil to play a greater role in the clean energy transition.

Sonja Hutson
Well, there’s also concern that Bolsonaro may not accept the results if he loses. How big of a deal is this?

Michael Pooler
So this really is the big question in the run-up to the Brazilian elections. What will Bolsonaro do if he doesn’t win? He’s repeatedly alleged that Brazil’s electronic voting machines are vulnerable to fraud, although he’s never provided any evidence to back these claims. And it’s quite similar to the narrative woven by Donald Trump in the build-up to the last US election. So the worry among Bolsonaro’s opponents is that he’s laying the groundwork to reject possible defeats and these concerns have been fuelled by comments he’s made. Last year, for example, he said that’s a big, it’s a big demonstration. I only have three possible fates: arrest, death or victory. And I’ll never be arrested. Now, most experts don’t believe that there’ll be any kind of military coup. Rather, the concern is about disorder on the streets. We’ve seen sporadic incidents of political violence and even a handful of killings in the run-up to this ballot, which has really put people on edge.

Sonja Hutson
Michael, you mentioned the comparison to the run-up to the US election two years ago. I’m curious, are Brazilian voters and politicians as polarised as they are in the US?

Michael Pooler
Now, without doubt these two leading candidates are very polarising characters who are loved and loathed. Bolsonaro supporters regard him as a beacon of traditional Christian values and a warrior in the fight against corruption. He was already known for bigoted remarks towards gays, women and indigenous before he was elected. But during his mandate, he really has alienated many Brazilians, notably with his uncaring attitude towards Covid-19 and talking down the importance of vaccines. Now for Lula, he served for two terms as president previously between 2003 and 2010, and he was feted internationally for reducing poverty. He had a lot of spending on social programmes, which was to a large extent funded by commodities boom in the early years of this century. However, he had a huge fall from grace after he was ensnared in a big corruption scandal. Lula was even jailed, and although his convictions were overturned last year by the Supreme Court, many Brazilians do not view him as innocent.

Sonja Hutson
Michael Pooler is the FT’s Brazil correspondent. Thanks, Michael.

Michael Pooler
Thank you.

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Sonja Hutson
Before we go, Porsche is hitting the gas on its IPO today. Its parent company, Volkswagen, is listing the sports car brand on the Frankfurt stock market and it’s selling 911mn shares. That’s the same number as Porsche’s flagship model. The listing is expected to be one of Europe’s biggest initial public offerings of the year. Shares are expected to start listing around €82.

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You can read more on all these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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