Dilma Win Fails to Stir Brazil Markets

With the markets largely having anticipated Dilma Rousseff’s victory, there was limited movement in assets following the Brazilian presidential election Sunday. Brazil’s dollar curve barely moved Monday, say traders, with the 2019 bonds up 0.25 points to 118.85-119.25. The EMBI Brazil index shed 7bp, according to a report from RBC, and the Bovespa gained 1.2%. “Solid gains in congress and among state governorships will ensure Rousseff will have a strong power-base to continue with Lula’s policies, and the expectation is that no material economic policy shift is likely,” RBC says. It expects that whoever is named finance minister will outline some sort of 2011 fiscal adjustment plan to reassure the markets. Likely candidates are Antonio Palocci and Luciano Coutinho, both seen as acceptable by the markets. Rousseff is unlikely to face as favorable external conditions as Lula enjoyed during most of his tenure, RBS notes, while she also lacks Lula’s popularity. Ironically, it says, these factors “could translate into good news, as Rousseff will need to face the challenges to guarantee sustainable growth, which requires a resumption of reforms.”