Rousseff Fundraising Outpaces Neves Ahead of Brazil Election

President Dilma Rousseff has raised more money to campaign than challenger Aecio Neves with just over eight weeks before an election that Brazilian voter opinion polls indicate is becoming increasingly competitive.

Rousseff pulled in 9.64 million reais ($4.2 million) through July 31, compared with 8.11 million reais for Neves, according to information posted yesterday on the website of the TSE, Brazil’s top electoral court. Former Pernambuco state Governor Eduardo Campos, who is running third, obtained 4.07 million reais. The amounts reflect direct donations from companies and individuals as well as transfers from candidates’ parties and campaign committees.

Three election polls released since the start of campaigning on July 6 have shown Rousseff with a shrinking lead over runner-up Neves. While Rousseff has pledged increased social spending and has highlighted near record-low unemployment in the lead-up to the Oct. 5 vote, low consumer confidence and inflation at a 13-month high have undermined her support. Contributions thus far affirm this election will be the most competitive in 20 years, according to Joao Augusto de Castro Neves, analyst for political consulting firm Eurasia Group.

“This reflects how people are seeing this election and how competitive it is,” Castro Neves said by phone from Washington. “Despite the negative news cycle against her over the last couple months, there’s a strong case to be made still that she remains the favorite, even if slightly so.”

Internet, Alliances

Meat packer JBS SA was one of the largest contributors with a 5 million reais donation to each of the two leading candidates, including donations via their respective financing committees. Construction companies, such as Construtora OAS Ltda and Via Engenharia SA, were also among major contributors.

Rousseff and Neves have sought to expand their financing sources beyond corporate institutions by taking aim at individual donors through the Internet. Both candidates have set up websites encouraging citizens to donate to their campaigns.

The TSE will release a second report on presidential contenders’ fundraising Sept. 5, according to the institution’s website. While the financing information is important, alliances that candidates form are also indicative of the strength of their campaigns, said Andre Cesar, director at public policy and business strategy consulting firm Prospectiva.

“This is an important indicator,” Cesar said by phone before the release the fundraising data. “It is not the only one, and it is not a definitive one.”

At the same point in the election cycle in 2010, Rousseff had raised 9.74 million reais after one month of campaigning, more than triple the 2.6 million reais raised by her nearest challenger, Jose Serra, the candidate from the same political party as Neves.

Polls, Economy

In 2014, her two nearest challengers -- Neves and Campos -- have combined to raise over 25 percent more money than Rousseff while her fundraising lead over the runner-up has narrowed to less than 20 percent.

“Clearly people are putting more money toward Aecio because they believe he has a credible shot to beat Dilma,” Pedro Tuesta, an economist at 4Cast Ltd., said by telephone from Washington. “A lot of people aren’t happy with Dilma, and that shows.”

A Datafolha poll published July 18 showed that Rousseff’s advantage over Neves in a possible Oct. 26 run-off vote falls within the margin of error, making the outcome too close to call. That result prompted Brazilian stocks to surge 2.5 percent while the real gained the most among major counterparts.

Second Round

An Ibope poll published July 22 in Estado de Sao Paulo newspaper showed Rousseff’s advantage over Neves in a second round slipped to eight percentage points from 13 percentage points in June. A Sensus poll published July 18 also showed the second round too close to call.

Rousseff’s drop in political backing has coincided with a downturn in the country’s economic outlook. Brazil’s gross domestic product expanded by 0.2 percent during the first three months of this year, as the biggest drop in investments in two years offset gains in agriculture.

Opposition’s Odds

Analysts surveyed by the central bank expect the slowdown to continue. They have cut their 2014 growth estimate for 10 straight weeks, to 0.86 percent, which would mark the slowest expansion since the recession of 2009.

Consumption has slowed with Brazil maintaining the highest borrowing costs among G-20 rate-setting nations. Brazil’s central bank lifted the Selic 375 basis points in the 12 months through April and has kept it at 11 percent since then.

Even as economic activity remains uneven, consumer prices may continue to surge above the 6.5 percent upper limit of the central bank’s target range. Annual inflation in the year through mid-July reached 6.51 percent and will reach 6.6 percent by September, according to the central bank’s own estimates.

A former governor of Brazil’s second-most populous state, Neves has promised to rein in public spending as part of a policy to slow inflation that has exceeded the official target throughout Rousseff’s tenure.

In a conference hosted by the National Industry Confederation on July 30, Neves pledged to increase investments as a percentage of gross domestic product, and said a weaker currency is essential to help companies.

In the same event, Rousseff said tax cuts are fundamental for competitiveness. She also pledges to expand a subsidized housing program without cutting welfare programs and to more than double the number of students receiving professional training.

The fundraising report “shouldn’t be read as completely bad news for her. She’s still someone who is able to get support,” said Eurasia Group’s Castro Neves. “The difference this time around is definitely that there’s a much greater chance of the opposition winning this year than they had in 2010.”

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