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Alternative Market Briefing

Other Voices: The Brazil election - Implications of Dilma Rousseff’s victory

Wednesday, November 03, 2010

The following is a research note from Zurich-based asset management firm Arsago, looking at the implications of Dilma Rousseff’s victory in the Brazilian Presidential election.

Summary: We said in the lead-up to the final round of the elections that we did not feel, from the investor’s perspective, there would be an enormous difference between the two candidates – at least over the next couple of years, if at all. Now that the results are concrete, it is worth just investigating some of the concerns and implications a little more closely.

The most commonly aired concerns that we have heard can be listed as follows:

1) Rousseff’s history as a militant leftist guerrilla suggests that she will be less business friendly 2) Related to the above concern are fears that she will be slower to lower taxes and to rein in current expenditure by the government 3) The PT party’s reputation with respect to corruption will continue to hinder the business environment as well as the effectiveness of government, especially with regard to the implementation of necessary reforms 4) The PT party’s acknowledged ambition for a greater role for government, including control of the press, is likely to lead to problems further down the line

Briefly, our own view on the above is that the first three concerns are not only wide of the mark but likely to provide for pleasant surprises. As for......................

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