It was the Workers' Party of superstar president Luiz Inacio Lula da Silva that brought the FIFA World Cup to Brazil this year. And it will be the FIFA World Cup that takes the Workers' Party out of the presidency three months later.
Caveat: this is not my opinion. This is the opinion of the head of Nomura's fixed income for the Americas, Tony Volpon. But after talking to a number of fed up middle class Brazilians, people are ready to give Workers Party's president Dilma Rousseff her walking papers. Although polls indicate she is still a favorite, her popularity is eroding. She continues to be booed at Brazil's FIFA World Cup matches. And while she started off the year as the clear winner, she is now seen heading into a run off election against Social Democrat Aecio Neves of Minas Gerais state.
Volpon thinks Neves is going to win. He doesn't just blame Dilma's topsy-turvey economic policies. He blames a very sour national mood following Brazil's stunning and humiliating defeat by the German soccer team on Tuesday by a score of 7 to 1.
Brazil footballer David Luiz gets emotional after a stunning loss to Germany on Tuesday. The... [+]
Brazil's historic loss in the World Cup to Germany was nothing short of a national humiliation.
For a country that defines so much of its national character around its footballing prowess, taking such a beating at home will have major repercussions beyond the acts of violence on the beaches of Rio seen after the defeat.
There has been much speculation about how the World Cup would affect the October elections. Brazil’s solid performance until the semi-final and the general good feeling around the event gave Dilma a slight boost in the latest polls. Volpon this this will now quite likely be reversed.
"Before the World Cup began we put the opposition at a 60% probability of victory, based on the continued deterioration of the economic situation," he said. "However, this type of loss – so unexpected and so heavy in its nature – may have breached the threshold of what is normal and could prove to have a more lasting impact, much like Brazil's loss to Uruguay in 1950. The opposition is likely to win."
Since Brazil lost, the market is up. The
"We are underweighting the country for now," Alexander Muromcew, a fund manager for TIAA-CREF, wrote in a recent white paper about emerging markets. He cites market volatility because of the elections and a growth deceleration as his reason for staying on the sidelines for now.
"The middle class has become disenchanted with President Dilma and investors have begun to worry about the country’s budget deficit and persistent inflation. It is now common to hear frustration from both investors and middle-class Brazilians over the country's low productivity, poor infrastructure, bloated public sector, and entrenched bureaucracy," Muromcew wrote.
