Another four years of Dilma Rousseff represent a big risk for Brazil's economy. Unless the president, re-elected on Sunday, makes big policy changes, government bloat and meddling will bring stagnation and more inflation.
Rousseff defeated challenger Aecio Neves by a margin of 51.6 per cent to 48.4 per cent with more than 99 per cent of votes counted in the the run-off election. Yet her policy choices so far haven't brought good results. The central bank currently expects GDP growth of 0.3 per cent this year and one per cent in 2015. Both figures are lower than Brazil's rate of population growth. Meanwhile, inflation in the year to mid-October was 6.6 per cent, above the 6.5 per cent ceiling on the official target range, despite widespread price controls.
The president has also made a habit of meddling in industry. She has, for example, forced government-controlled but publicly listed oil giant Petrobras to sell fuel in Brazil at below-market prices. It's difficult to quantify the damage such interventions do to the economy. It's easier, though, to see the effects of excessive spending.
Brasilia has managed to run a primary surplus, before debt service costs, of only 0.2 per cent of GDP in the first eight months of 2014, compared with a forecast 1.9 per cent of output for the year. The budget for 2015, set in August, envisages a primary surplus of two per cent of GDP. Rousseff's difficulty is that these figures assume GDP growth runs an optimistic three per cent and inflation slackens to five per cent.
Standard & Poor's has already downgraded Brazil's credit rating to only one notch above junk. Another year of weak economic growth and missed budget targets could easily see the country's ratings cut below investment grade. With a current account deficit running at four per cent of GDP and foreign equity investment drying up, raising money from global capital markets would then become a challenge.
Luiz Inacio Lula da Silva, Brazil's president from 2003 to 2011, made an economic success of his largely socialist agenda. Bolivia and Ecuador have flourished with similar policies, but Rousseff has had less luck. So far, Brazil has avoided being tarnished with the poor financial-market reputation of its neighbours Argentina and Venezuela. But it's at risk of heading that way. More of the same from the president will be no carnival for Brazil's economy - or its people.
Rousseff defeated challenger Aecio Neves by a margin of 51.6 per cent to 48.4 per cent with more than 99 per cent of votes counted in the the run-off election. Yet her policy choices so far haven't brought good results. The central bank currently expects GDP growth of 0.3 per cent this year and one per cent in 2015. Both figures are lower than Brazil's rate of population growth. Meanwhile, inflation in the year to mid-October was 6.6 per cent, above the 6.5 per cent ceiling on the official target range, despite widespread price controls.
The president has also made a habit of meddling in industry. She has, for example, forced government-controlled but publicly listed oil giant Petrobras to sell fuel in Brazil at below-market prices. It's difficult to quantify the damage such interventions do to the economy. It's easier, though, to see the effects of excessive spending.
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Standard & Poor's has already downgraded Brazil's credit rating to only one notch above junk. Another year of weak economic growth and missed budget targets could easily see the country's ratings cut below investment grade. With a current account deficit running at four per cent of GDP and foreign equity investment drying up, raising money from global capital markets would then become a challenge.
Luiz Inacio Lula da Silva, Brazil's president from 2003 to 2011, made an economic success of his largely socialist agenda. Bolivia and Ecuador have flourished with similar policies, but Rousseff has had less luck. So far, Brazil has avoided being tarnished with the poor financial-market reputation of its neighbours Argentina and Venezuela. But it's at risk of heading that way. More of the same from the president will be no carnival for Brazil's economy - or its people.