Investors don’t see a ‘radical’ candidate winning Brazil election: Meirelles

Brazil’s risk perception has improved as investors in financial markets are betting that a moderate, market-friendly candidate will win presidential elections in October, Finance Minister Henrique Meirelles said.

“A lasting improvement in risk perception and investment will depend on the election result but currently the view is that a radical candidate, on the left or on the right, who is anti-market and is in favor of interventionist policies will not win,’’ Meirelles told LatinFinance during the World Economic Forum on Latin America in São Paulo on Wednesday.

Brazil’s Bovespa stock index has increased more than 12 percent so far this year as confidence improved among investors amid a modest economic recovery over the past few months. The outlook for lower interest rates in Brazil is also making stocks more attractive as growth is expected to pick up steam through the end of the year.

Meirelles also said that investors have priced in the disappointment over the government’s failure to have Congress approve the pension reform before the elections in October. Still, the minister said the government hopes to announce changes to the PIS and Cofins social security taxes “soon.”

“We are planning to send our proposal to Congress by the end of the month,” he said.

Earlier at the WEF conference, Meirelles said Brazil may join other steel exporters and go as a group to the World Trade Organization to fight tariffs imposed by the United States. He said direct retaliation isn’t the best way to handle the trade dispute, and that the Brazilian government doesn’t want to engage in a trade war.  

U.S. President Donald Trump imposed tariffs of 25 percent on imported steel and 10 percent on aluminum, allowing for temporary exemptions on imports from Canada and Mexico. Trump said he would negotiate with other countries if they can show that their products don’t threaten the American industry.  

Brazilian President Michel Temer, at a panel during the WEF conference, said Brazil will join forces with other nations affected by the tariffs and take the matter to the WTO if a “quick and friendly solution’’ isn’t achieved through negotiations.