October 3, 2006


Investors see win-win in Brazil (ALAN CLENDENNING, 10/03/06, ASSOCIATED PRESS)

Brazil's stunning first-round election outcome gave investors the best of both worlds yesterday: a runoff pitting a leftist incumbent who governs as a fiscal conservative against the business-friendly former governor of the nation's richest state.

In a country where political surprises typically cause financial upheaval, markets cheered after President Luiz Inacio Lula da Silva failed to win re-election in a first round of voting Sunday with an unexpectedly strong showing by the centre-right Geraldo Alckmin.

The benchmark Bovespa index gained 1.7 per cent to 37,057.75. Brazil's currency, the real, rose 0.5 per cent against the U.S. dollar and emerging market stocks trading in New York also moved higher amid the enthusiasm generated by the election result. Driving confidence was a rare situation in Latin America: a strong chance that no matter who wins, economic policy will remain more or less the same.

"I doubt an Alckmin presidency would differ significantly from a second-term Lula government," said Michael Shifter, an analyst at the Inter-American Dialogue think-tank in Washington.

It's an excellent sign for Brazil's future that, like India, its Left governs to the Right.

Posted by Orrin Judd at October 3, 2006 8:20 AM
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