Storm clouds on the Brazilian horizon? President Dilma’s poll numbers and her reelection chances

In 2010, Dilma Rouseff, Lula’s handpicked successor, won easily in the second round run-off election against Jose Serra, the opposition candidate (Dilma 56% of vote versus 44% Serra).  At the time, many analysts thought Dilma would stumble—lacking both the charisma and political skills of her predecessor Lula and, as a result, would lean heavily on Lula’s skills and credibility.  Contrary to this popular belief , Dilma has established herself as a strong leader, with little tolerance for corruption, and a strong streak of independence.

Her approval numbers, in turn, bear this out: over the last two years they have actually risen from 53% to 62% (see graph below).  In part, the numbers have been buoyed by the continual rise of the lower classes—her political base—through increased access to credit.  But they also result from her unique leadership style.  She has a ‘pulso forte’ (strong pulse) as Brazilians would put it.  And they like that in her.

Dilma’s Approval Ratings from February 2011 to March 2012 

Brazil Graph #1

All, though, is not rosy in Brazil right now.  A fairly favorable economic scenario a few years ago has turned sour.  Indeed, 2012 saw no real economic growth (.9%), and 2013, while slightly better, is suffering from both a weaker Brazilian Real and higher inflation—a double-whammy which directly impacts voters’ pocket books.  Perhaps most worrisome for Dilma, the personal credit-driven growth and social mobility, seems to have plateaued for now.  Indeed, for most of the last year, the lower Classes (C, D, and E) have been financially in the red, with negative disposable income (see chart below).

Trends in Disposable Income by Social Class

Brazil Graph #2


That said, Dilma’s polling numbers have been extremely stable hovering in the mid to low 60’s—very strong indeed.  However, some cracks are appearing.  Indeed,  a recent Datafolha poll shows Dilma falling to 57 percent from her historical level of 65% . No cause for panic, but a negative sign nonetheless.

In recognition of this, Dilma’s government has re-doubled its efforts on the economy.  It also understands that external direct investment and improvement in the real economy will have to replace personal-credit expansion as the driver of Brazilian economic optimism in the near-term and thus is adjusting its policy accordingly.

How have these negative signals affected Dilma’s reelection chances in 2014?

To answer this question, I draw upon an Ipsos database of over 300 elections around the world in order to construct some reasonable scenarios about Dilma’s relative chances. What do we find?

First and foremost, based on our own analysis of this electoral database, we know that an incumbent, like Dilma, has an almost 3-fold advantage over non-incumbents (2.56).  At first blush, Dilma seems to be in a good place at least for now.

Second, if we take, in turn, the fact that Dilma is an incumbent with a 57% approval rating (Datafolha’s latest numbers) and estimate using a statistical forecasting model, her chances of reelection is really quite good.  Indeed, Dilma under this scenario has a 98% percent chance of winning in 2014.

Probability of government candidate winning by approval rating 

Brazil Graph #3

Some might argue that if things get worse on the economic front then her chances might decline considerably.  This is true, but the bottom would have to drop out. Indeed, at a 50-point approval rating, Dilma still has a 93% chance of winning.

Incumbents have a sizable advantage.  For instance, only at about a 40-point approval scenario do the odds actually become about even for an incumbent.  I often call this the 40-point tipping rule: the inflection point where incumbents lose their advantage .  So, all in all, Dilma is still in a good place and seems to be the odds on favorite.

What might change this scenario?  Approval ratings tend to change at the result of two factors (1) political and (2) economic.  In particular, on the political front, I would look for any political or corruption scandals.  These could ultimately affect approval ratings but I believe that this highly unlikely as Brazilian voters put little weight on such things.  Instead, I would focus on economics as a leading indicator of possible problems: specifically, if things get worse, especially inflation or unemployment in the double digits, Dilma’s approval ratings will get worse.  In contrast, if the economic numbers hold or get better, then Dilma is in for safer seas.  Remember, even at a 50 point approval rating, Dilma is in good shape in the electoral sense.