Latest Polling and Pension Paralyzation in Brazil

One continued theme of my analysis of the Brazilian Presidential election has been the parallels between the insurgency of Trump in the United States, and the continued rise of Bolsonaro in Brazil. In both cases, the candidates have been able to leverage their status as outsiders to the political system, general dissatisfaction with the status quo within the electorate, and a general weakness / unlikeability among mainstream candidates to their advantage. Both candidates have been doubted for their ability to win over female and minorities voters based on unhinged campaign comments, and for their inability to competently govern if/once elected.

The main difference between the two candidates is their likelihood of being elected – while Trump was seen as a long shot even on election night, Bolsonaro has managed to capture the vacuum from Lula’s ineligibility and fracturing among the left to take the lead in the polls, and is now seen as a near-certainty to make it past the October 7th first round and into the second round of the Presidential election.

Late last week, the Folha de Sao Paulo released its latest polling data from its research apparatus, Datafolha and another data company, IBOPE, the first credible polls released since Bolsonaro’s stabbing in early September (covered last week).

For the first time (that I’ve seen), the data is broken out to provide a clear picture of the Brazilian electorate and their preferences by sex, age, race, region, education level, and wealth. The data provides an surprising picture of Bolsonaro supporters, and some similarities and other breaks from the parallels seen between Trump and Bolsonaro and their assumption to the Presidency.

Per exit polling that has since become canonized by op-ed reporters, analysts, and aspiring bestselling authors since, Trump was able to take the White House on a coalition of voters that leaned male, older, and white. Indicators along education and wealth followed one’s race – both poorer and less educated and richer and college-educated whites leaned Trump, while poorer, richer, educated, and uneducated non-Whites alike overwhelmingly voted for Hillary. Trump dominated among catholics and evangelicals / protestants, while Hilary was even stronger among Jews, Muslims, and atheists / non-practicing individuals. The data demonstrates that US partisanship and division is as strong as ever, and drawn along very clear-cut lines: age, race and religion.

Surprisingly, the polling data seems to indicate the Bolsonaro has managed to create a wider and more diverse coalition than the left/right divide in the United States:

• Sex: Bolsonaro dominates among men (35%), but also boast a much smaller %, but still leading % of female voters (18%)
• Race: While Bolsonaro dominates among ‘white’ Brazilian voters, growing to upwards of 35% of the vote in the past week, Bolsonaro also leads among ‘black’/’brown’ voters (22%) and ‘others’ (20%), widening his lead in each category over the past week.
• Age: Interestingly, Bolsonaro has managed to capture the imagination of voters across all age groups, from as young as 16-24 (28% of the vote) to voters 55 and over (26%)
• Education level: Bolsonaro has a slight advantage among less educated voters (19%), but a surprisingly large lead (29%) among the electorate with a ‘superior’ level of education, referring to college educated voters
• Income: Bolsonaro narrowly leads among a crowded group for poorer voters, while his support grows as income levels grow – reaching 35% for individuals making 5x the minimum monthly salary
• Region: With the exception of the Northeast, long seen as a stronghold for the Workers’ Party and Lula (though interestingly Ciro Gomes, not Lula’s handpicked successor, Fernando Haddad, leads), Bolsonaro carries the other regions of the country, with as much as 37% of the vote in the generally whiter, more religious, and more conservative South region of the country
• Religion: Among evangelicals, catholics, and ‘others,’ Bolsonaro leads. While Trump managed to attract Evangelicals for lack of a better option, it is interesting that Bolsonaro leads ahead of Marina Silva, an outspoken Evangelical herself.

As expected, the stabbing seemed to underline the message that has continued to resonate among Bolsonaro voters – the need to reign in public safety and security ahead of all other considerations in the country — the economy, education, etc.

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One interesting wrinkle that helps explain some of this data was covered in detail this weekend as part of the Financial Times’ ‘Big Read’ section: ‘Robin Hood in reverse’: the crisis in the Brazilian state.

As the article explains, Brazil is an incredibly unique country for the stark contrast between its  tax levying apparatus and tax rates that rival developed countries like the United States and United Kingdom, and government services, investment spending, and economic / social indicators comparable to poorer countries across the development world. At the core of this juxtaposition is its incredibly bloated, inefficient and unfair pension system, consuming 23% of GDP.

As deftly recounted in Michael Reid’s book Brazil: The Troubled Rise of a Global Power (reviewed here), Brazil has long mismanaged its investment spending, concentrating its focus on public universities (free for attendees), military spending, and lofty infrastructure projects (most famously the World Cup and Olympics), while ignoring more fundamental education, healthcare, and infrastructure investments. In the process, Brazilian public-sector, civil, and military servants have created an increasingly bloated and unstable pension system, making any course correction or investment reallocation extremely difficult.

Even Michel Temer, whose unpopularity gave him a mandate to shore up some of Brazil’s most intractable and democratically difficult competitiveness issues, was unable to push through any changes to the pension system, which understandably continues to be the most politically toxic issue in Brazil.

While the US and UK concentrate its income transfers to the poorer classes through systems such as welfare and social security (92% to the poorest 10% in the UK, versus 2% for the richest 10%), just 31% of all income transfers go to the poorest 10% in Brazil, while a comparatively ridiculous 23% go to the richest 10%. Even more egrigiously, in state pension systems 53% of income transfers go to the richest 20%, with an embarrassing 2.5% going to the poorest 20%.

As a NYTimes investigation back in 2015 explains, the average retirement age in Brazil is 54, and many early retirees manage to collect full pensions for the remainder of their lives. Through commonly-known loopholes and Brazilian laws, oftentimes spouses and families of former civil servants and military servicepeople are able to collect pension benefits even after the receipt has passed away. Politicians and judges have long been seen as the most lucrative recipients of the pension system estimated to earn $4,000 – $6,000 per month on average by the FT.

As the FT article explains further, crony capitalism limits tax receipts to government-affiliated companies and others through a series of well-intentioned (but unrealistic) legislation initiatives, incentives and loopholes, has placed an undue tax burden on relatively poorer individuals, who do not benefit from the incentives given to small- and medium-sized businesses. Brasilia-based special interest groups serve to perpetuate these benefits and loopholes, deploying their electorate and pocketbook power to protest any changes to the existing system.

In the process, Brazil has seemingly copied the US income-based taxation system and the Chinese example of state-led encouragement of industrialization through tax benefits and incentives, and combined it with a Scandinavian approach to labor laws and a Greek pension system. The result is a system that “already consumes more than 90 per cent of the federal budget and, if nothing changes, will reach 120 per cent in the next decade.”

Bolsonaro, as a former member of the military and neither an economist nor a(n) (experienced) politician, has demonstrated little will to change the lucrative pension system nor any of the other existing loopholes, likely winning him significant support among Brazil’s vast civil service and aging electorate, akin to Trump and Clinton’s (and every US Presidential hopeful in recent memory) insistence that they will not touch the faltering and unsustainable US social security system.

Rozane Siqueira, a professor of economics at the Federal University of Pernambuco, has coined this system “Robin Hood in reverse,” whereby the rich are inordinately rewarded relative to the poor.

When Siqueira was asked why are the poor not out in the streets in protest of these gross inequities, she responded: “That’s a question I ask myself. It’s shocking.”