Brazil’s Far-Right Candidate Jair Bolsonaro Is Having a Bad Day

Brazil’s Far-Right Candidate Jair Bolsonaro Is Having a Bad Day

© Bloomberg. Jair Bolsonaro Photographer: Dado Galdieri/Bloomberg © Bloomberg. Jair Bolsonaro Photographer: Dado Galdieri/Bloomberg

(Bloomberg) — Brazil’s far-right presidential candidate Jair Bolsonaro is not having a good day. A key adviser is under investigation, the market is off, and a member of Pink Floyd called him a “neo-fascist”.

After more than a week of optimism over the rising prospects that Bolsonaro could win the presidency, markets have swung against the former paratrooper. The stock index fell over 2 percent and the real lost more than 1 percent, as investors re-evaluated the extent of his pro-market stance and prosecutors probed his key adviser, Paulo Guedes.

Brazilian assets had surged after Bolsonaro performed strongly in the first round vote on Sunday, but sank on Wednesday as investors chewed over an interview he gave to local media. In it he nixed the chances of getting pension reform approved this year and limited the scope of privatization in state-run oil and energy companies. In recent days there have been disjointed messages from his campaign team on the urgency of reforms, further raising investor doubts.

“Bolsonaro signaled he would not be willing to vote for a version of pension reform proposed by current President Michel Temer, a possible sign that a reform push under Bolsonaro may not be as strong as markets hope,” Wells Fargo (NYSE:) strategists Erik Nelson and Nick Bennenbroek wrote in a report

Analysts consider the pension reform crucial to manage the country’s rising levels of public debt. If the current rules remain in place, Brazil would end up spending 23 percent of its GDP on pensions by 2060, according to finance ministry data from earlier this year. Failure to approve the bill could also contribute to a further downgrade of the country’s sovereign credit rating, government officials have warned.

In the TV interview on Tuesday night, Bolsonaro also ruled out privatizing Brazilian state firms that generate electricity, and said that he wants to keep the core of Petrobras under government control. Shares in the oil company fell by as much as 4.4 percent on Wednesday, while Eletrobras fell by as much as 14.9 percent.

Guru Investigated

Much of investors’ enthusiasm for Bolsonaro is because of his economic adviser Guedes, a University of Chicago-trained economist. The front-runner in the presidential race has repeatedly admitted his ignorance on economics and stated he plans to outsource decision-making in that area to Guedes.

So the news that the public prosecutor’s office in Brasilia was investigating him over alleged links to pension fund fraud added to investor nervousness.

“It is not good news,” said Tania Escobedo, a strategist at RBC Capital Markets in New York. “But I don’t see it having a sustained impact unless it escalates quickly.”

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Source : Bloomberg Link

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