By Lise Alves, Senior Contributing Reporter
RIO DE JANEIRO, BRAZIL- Despite the overall optimism shown by investors and the financial systems with the victory of Jair Bolsonaro to Brazil’s presidency, the country’s currency registered a drop at the close of the first trading session after Sunday’s election.
The dollar appreciated against the real by 1.51 percent at R$3.7068/US$1, while Brazil’s major stock index, Ibovespa closed down by 2.24 percent to 83,796 points.
Carlos Caicedo, Latin America Country Risk Associate Director at the economic consultancy group IHS Markit, says that although Brazil’s industrial and financial sectors are highly supportive of Bolsonaro’s announced economic agenda, there is still a lot of doubt as to the actions that will be taken by Brazil’s next leader.
“Markets have reacted positively to Bolsonaro’s presidency, but it reflects more relief that left-wing Haddad failed to get elected than total certainty over Bolsonaro’s full commitment to a pro-business agenda. He has been sending mixed signals; he has committed to austerity but failed thus far to come up with a credible plan for the critically important pension reform,” says Caicedo.
While Brazil’s business class clamors to the necessity of structural reforms to resume economic growth and the need for Brazil to expand its participation in the world economy, Paulo Guedes, said to be the country’s next Finance Minister, told foreign journalists on Monday that the Mercosur, South America’s trade bloc, is not among the priorities in the future Bolsonaro administration.
Guedes called the economic trade bloc ‘very restrictive’, and that Brazil has been a ‘prisoner of ideological alliances and this is bad for the economy’. “Mercosur is not a priority,” said Guedes to a journalist from Argentina’s daily El Clarin.
Such statements made by some of Bolsonaro’s closest aides make the markets weary and as Caicedo states the new president will have to quickly ‘clarify his stance on crucial issues on which he has been very ambivalent’ if he hopes to guarantee his administration’s credibility with investors and financial markets.