Incumbency is still King: Brazil’s Dilma is still the favorite in 2014, even after the protests.

The Brazilian presidential election is more than a year away. But already pundits and the odds-makers are assessing President Dilma’s chances of being reelected.  For many, dark clouds are on her horizon.  Why?

Some cite a very lethargic economy with inflation and unemployment ticking up.  Others stress the recent widespread protests as a general sign of the public’s discontent with Dilma and the PT.  Still others argue that the rise of the middle class has shifted voter priorities from the economy and jobs to quality of life issues like healthcare, crime, transportation, and education, with the Dilma government being ill-prepared to meet these new demands.

There are also signals that Dilma, indeed, is no longer the odds-on favorite.  The most often cited evidence of this demise are the polls.  Indeed, a number of horse-race polls have shown a sharp drop in voting intention for Dilma with a general increase in opposition candidates, especially Marina Silva (see graph below).  This is evidence for most that things will get ugly for the government.

chart1bSource: Datafolha

These prognostications, in my view, are premature and actually misguided.  First and foremost, horse race polls, so far out from Election Day, are garbage because they are often very volatile—more noise than substance.  What sane person is really thinking about politics 14 months out from the election?

As such, horse race polls, at this stage, jump around producing “false positives”.  Case in point is the 2010 Brazilian presidential election.  In January of that year, Serra was up by 20 points over Dilma, and hailed as the odds-on-favorite.  Yes, silly in retrospect.

To avoid such analytical missteps, I instead like to analyze other metrics which I like to call “election fundamental variables”.

What are they? Let me explain.

At Ipsos we have built a database of over 200 national elections around the world, and have learned two important things.  First, incumbents are much more likely to win a general election than their successors—almost a three-fold advantage.  Take McCain in 2008; Serra in 2002; or Bush I in 1992.

Second, voter electoral calculus is very simple: do they want change or continuity.  If voters are relatively optimistic, they typically vote for the government candidate. But when they are pessimistic, voters instead will opt for the opposition.  When voters are lukewarm—somewhere in the middle—other factors like incumbency, campaign efficiency, and  the political machinery will play a more important role.

chart3

We typically gauge whether an election is change or continuity by how optimistic people are—in practice, I typically use approval rating as my proxy for optimism.  The better the approval numbers the more likely the government candidate will win.

So where does this put Dilma and her re-election bid?

Well, in a pretty good place.

First, she is an incumbent which, by that very fact, gives her a leg up.  Incumbents, as mentioned above, have a 2.64 times greater chance of winning an election than successors.

Second, Dilma’s approval numbers have taken a hit over the last few months as a result of the protests: specifically dropping from 73% to 45% (source: Ibope).  That said, even a 45% approval rating is good for Dilma.  Such an approval rating suggests that the election will be a middling election—this typically favors an incumbent.  As a simple rule, continuity elections typically correspond to approval rating of 50 or above; Change elections to approval numbers of 39 or below; and middling elections to numbers between 40 and 50.

Third, if we put all this into our forecasting model, Dilma’s chances of victory are high at 81%.  She is, in other words, is THE favorite (see table below).

chart2

Interestingly enough, Dilma’s chances are about the same whether at her present approval rating (43 percent) or her astronomically high pre-protest numbers (73%)—83% versus 99%.  In contrast, if Dilma’s successor were to run, he or she would most likely not win (likelihood of victory 22%).

So bottom line, incumbency is king.

I believe one caveat is in order.  Approval  ratings, of course, are dependent on a variety of factors including  the economy and socio-political events like the protests.  Here analysts should watch for what I call the ’40-point tipping rule’—the approval rating level at which an incumbent’s probability of victory reaches 50 percent.  If Dilma falls below this, then the race is really up for grabs