Opinion: Professor Garcia

10/09/2014 - 08h55

The financial markets have already made their minds up about the second round of the Brazilian presidential election which will see President Dilma Rousseff (66) pitted against Senator Aecio Neves (54).

The Sao Paulo stock market (BOVESPA) reflects the same phenomenon: up when Dilma is down, and down when Dilma is up. It has been evident for some time that the "markets" wanted "anyone but Dilma." This has not changed. Investors have long complained about the "interventionist" policies of her government.

And Brazil under Dilma has had a problematic relationship with the world, poisoned by the revelations of Edward Snowden, the former National Security Agency contractor, that the US spy agency was tapping her cell phone, which led Dilma to cancel her scheduled "state" visit to Washington.

Dilma's foreign policy has been largely in the hands of her "eminence grise," Professor Marco Aurelio Garcia, who held the position of special adviser for foreign affairs in the Planalto under President Lula and was retained by President Dilma.

A radical opponent of the Brazilian military regime he lived in self-exile between 1970 and 1979, first in Allende's Chile, and afterwards in Paris. He was one of the founders of the PT, and is a longtime friend of Lula.

He coordinated Lula's campaigns (1994,1998, 2006), and was one of the Brazilian convenors of the "Sao Paulo Forum," a gathering of leftist political movements from Latin America and the Caribbean.

Dilma's government did not criticize the Russian incursion into the Ukraine and its seizure of the Crimea. The pursuit of deals with the BRICS (including the establishment of a BRICS development Bank at the meeting of the leaders of Brazil, Russia, India, China and South Africa at Fortaleza in Brazil after the ending of the World Cup), has also come at the cost of silence on critical foreign policy questions, none of which has helped Brazil's long lasting desire for a place at the top table as a permanent member of the security council of the UN.

Aecio Neves, on the other hand, is regarded as being "market friendly." His economic adviser is Arminio Fraga, expected to be economy minster if Aecio is elected. He holds a PhD in Economic from Princeton and worked in New York as a fund manager with George Soros.

A former president of the Central Bank he is credited with establishing stability by adopting a floating exchange rate and inflation targeting. He founded the Rio de Janeiro based asset management company Gavea Investments, which was acquired in 2010 by Highbridge Capital Management of New York, a subsidiary of JP Morgan Asset Management.

He made his policy prescriptions clear in an interview with the "Wall Street Journal" in August 2013. He criticized the manipulation of fuel and energy prices, advocated a return to economic orthodoxy, liberalization of investment in infrastructure, reform of public leading, a reform of Petrobras, and a scaling back of the role of government banks.

The coordinator for defence, foreign policy, and international commercial policy, is Rubens Barbosa, former Brazilian Ambassador in Washington (1999-2004) and London (1994-1999). He is expected to become foreign minister if Aecio is elected.

His views reflect those of many within the foreign policy establishment worried about the lack of criticism of Venezuela, Cuba, and Argentina. Barbosa is a senior director of SAG (Albright Stonebridge Group) as well as the director of the council of foreign commerce (COSCEX) of the Sao Paulo Confederation of Industries (FIESP).

On foreign policy the lines of division between Dilma (and Marco Aurelio Garcia) and Aecio Neves (and Arminio Fraga and Rubens Barbosa) could not be sharper. It is clear who the US and Western Europe would prefer to win. It is also clear who Russia, Venezuela, Argentina, and Cuba, would prefer.

But it is far from clear if any of this will influence Brazilian voters on November 26th. Though given past history, the more the international markets root for Aecio, the more by default Dilma will gain.