Brazil’s President Dilma Rousseff blows kisses to supporters as she celebrates her victory at a hotel in Brasilia, Brazil, Sunday, Oct. 26, 2014. Official results showed Sunday that Rousseff defeated opposition candidate Aecio Neves of the Brazilian Social Democracy Party, and was re-elected Brazil’s president. (AP Photo/Eraldo Peres)

There are many reasons to consider the Brazilian 2014 presidential election the most unpredictable poll since re-democratization. In the course of the campaign, a candidate died in a plane crash, and all three major candidates (including his replacement) were, at some point, at the top of vote intentions. The runner-up – senator Aécio Neves – persisted as the frontrunner until 90 percent of the votes had been counted in the runoff elections, and ended up losing by a 3 percent margin to Dilma Rousseff, the incumbent seeking reelection.

Despite this apparent unpredictability, in a paper released in February, my co-author and I anticipated that Dilma (as Rousseff is often called) should obtain 40-45 percent approval by the first round of the vote. Based on the rates of translation between approval and vote share in previous Brazilian elections, we expected her to receive the same share of the first round vote, and to be reelected, probably in the second round.  Even though this outlook was highly disputed as Marina Silva, and later Aécio Neves, led in the polls, it ended up proving quite consistent with reality.

Our expectations were based in a model developed in the paper “Merit, Chance, and the International Determinants of Presidential Success,” which captures the extent to which international economic conditions, or what we call “luck,” explain presidential success in Latin America. We start from the well-established regularity that economic performance, in the low-savings-commodity-exporting countries of the region, is highly determined by fluctuations of commodity prices and of international interest rates. Economies boom when commodity prices are high and international interest rates are low. Crises are more likely to happen when the opposite occurs.

The fact that exogenous factors influence economic performance poses no problem for democracies as long as voters can discount “luck” when evaluating governments’ competence. When they do so, and incumbents learn that their success is based on effort, incentives are for producing the best possible economic performance. The problem happens when voters do not make the distinction between luck and merit.

Yet this is exactly what we find in our research: voters in Latin America punish and reward presidents based on domestic economic performance, but are not aware (or act as if they are not aware) that most of this performance is determined by factors that are beyond presidents’ control. The implication is that these factors, which are unquestionably exogenous to policymaking, also determine presidential success in the region.

We show that presidents’ prospects of reelection (or of electing their successors) as well as their popularity can be explained, to a large extent, by a variable that combines commodity prices and U.S. interest rates – our “good economic times” (GET) index (see the figure below).  In the particular case of Brazil, the GET index explains about 65 percent of the monthly variation of presidents’ popularity between 1987 and 2013. A model based solely on the domestic variables usually included in economic voting analyses – GDP growth, employment, inflation and exchange rate – adds very little to this explanatory capacity. This suggests that Latin American voters actually evaluate their governments largely based on luck, rather than on merit.


The “Good Economic Times” Index
Figure: Daniela Campello/The Monkey Cage. Data Source: Aggregate commodity price index (UNCTAD) and US 10-year Treasury rate (FRED, Fed St. Louis)

Unfortunately, the same conditions used to predict Dilma’s victory indicate that she will face difficult times in her second term, especially compared to the scenario that prevailed in the eight years of the previously “lucky” presidency. Between 2003 and 2010, while U.S. interest rates dropped from 4.1 percent to 3.3 percent, commodity prices tripled. These were good times with no precedent in Brazilian recent history, but that soured already during Dilma’s first term (see figure above).

Between 2011 and 2014, even though U.S. interest rates remained in a decreasing trend, rather than increasing, commodity prices fell around 25 percent. For the next four years, the scenario looks even gloomier. U.S. interest rates are expected to increase from the current 2.3 percent to 3.0 percent, and no recovery of commodity prices is anticipated. Put simply, Dilma was less “lucky” than Lula da Silva in her first term, and will be even less so in her second term as president. According to our model, as international conditions deteriorate, so will economic performance and popular support for the government.

In addition to lowering growth prospects, unfavorable international conditions will also limit Dilma’s capacity to pursue the leftist agenda that characterized her first term. The good times under which Lula governed allowed him to please voters and markets alike, by allying a conservative macroeconomic policy with the expansion of social expenditures and increased state intervention in the economy. Dilma won’t likely have the same luck.

On one hand, the president is committed with the deepening of social inclusion, which she and her allies perceive as the agenda that won her a second term. On the other, the need to attract dollars – without which Rousseff’s capacity to further income redistribution is necessarily limited – will leave her far more vulnerable to market sentiment. Historically, as I show in my book “The Politics of Market Discipline in Latin America: Globalization and Democracy,” it is in periods of dollar scarcity that leftist governments in Latin America renounce their agenda in favor of a more conservative economic program. Whether Dilma will be another example of that trend remains to be seen, but the first decisions announced after the election already seem to point in this direction.

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Daniela Campello is assistant professor of politics and international affairs at Fundação Getúlio Vargas in Brazil and author of the book, “The Politics of Market Discipline in Latin America: Globalization and Democracy,” to be published by Cambridge University Press in 2015.