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Successful World Cup Gives Rousseff Breathing Room Ahead of Election

With Brazil’s World Cup being hailed as the best in recent memory, Dilma Rousseff’s presidency has been handed a lifeline.

The verdict is already in: Brazil’s 2014 World Cup, the “Copa das Copas,” or “Cup of Cups,” has been the most exciting tournament in recent memory. Before the first game of the quarterfinals, set to kick off today at noon in Rio de Janeiro between France and Germany, 154 goals have been scored already, surpassing the 145 during the entire 2010 World Cup and placing the 1998 tournament’s all-time record of 171 in serious jeopardy. For the host side, there has been much to cheer, with Neymar leading the Seleção, as the Brazil squad is known in its home country, to a string of stirring victories with a golden-fringed energy that has made the nation genuinely excited about soccer again after the difficult lead-up to the tournament. Neymar, Brazilian soccer’s pin-up du jour, may also in the process have helped stabilize the troubled government of President Dilma Rousseff.

Off the field, things have proceeded surprisingly smoothly, with few if any of the transportation problems, traffic chaos, airport meltdowns and massive, choking protests that many were expecting. “It’s true that many were fearing the worst,” says Ricardo Camargo Mendes, a managing partner at Prospectiva, a São Paulo–based political consulting firm. “But Brazilians have been pleasantly surprised by the way the tournament has been run.”

The gloom that sat over the nation as the World Cup got underway appears to have lifted; the only real strikes of significance have been those of Neymar in front of the goal.

Even the protesters have, to a large degree, stayed silent — something I have discovered for myself while traveling through Brazil. On three occasions, in three different cities, I tried to make contact through Facebook with the Black Bloc, the most militant wing of the protest movement that sprung up around the Confederations Cup football tournament in June last year. On each occasion I received a reply and arrangements were made to meet; on each occasion I arrived at the appointed place and nobody from the Black Bloc turned up. This is one protest movement that seems peculiarly reluctant to get its message to a broader audience.

Analysts, however, remain skeptical of the suggestion that the World Cup will provide the Rousseff government with any sustained lift ahead of the national elections this October. Markets have remained relatively neutral since the start of the tournament, with the Brazilian real strengthening modestly and the benchmark local Ibovespa equities index easing into a slight decline over the past three weeks after spiking in the days following the opening match on June 12. The government’s poll numbers reflect the slightly stagnant state of the markets. Rousseff’s approval rating rose to 35 percent in the July 2 poll conducted by political polling firm Datafolha, from 33 percent in June. But despite the moderate World Cup lift, that July figure is only a slight improvement on Rousseff’s all-time low of 30 percent, recorded at the height of the protests one year ago, and still comfortably below February’s recent high of 41 percent. According to Mendes, the successful execution of the World Cup may have helped stanch the decline in Rousseff’s poll numbers.

“We don’t expect her to fall much further from here,” he says. In that sense, the World Cup has been “a stabilizing event” for Rousseff. “If it had gone badly it would have been bad for her popularity but it’s gone well, so voters are less negative about her government,” he adds.

Dilma’s challengers for the presidency appear to be narrowing the gap. In its candidate Aécio Neves, the centrist Brazilian Social Democracy Party has high hopes for an upset in the October elections. Neves is the popular former governor of Minas Gerais, Brazil’s second-most populous state and home to World Cup host city Belo Horizonte, the third-largest metropolitan area in the country. Datafolha, along with most political analysts, still has Rousseff getting over the line and winning a second term, but support for Neves is rising: The July 2 poll put support for Rousseff in a second round run-off at 46 percent, with Neves at 39 percent, reflecting a 1 percentage point narrowing in the gap since the last poll in early June.

Neves built his reputation as a fiscal hawk who saved from bankruptcy Minas Gerais, which he governed from 2002 to 2010, and turned it into the most business-friendly state in Brazil — giving him obvious appeal in a country fighting to tame a deepening fiscal deficit and rising inflation. “The gap is narrowing, but it’s hard to see it narrowing much further,” says Mendes of Neves’s uphill battle. The base of popular support for Rousseff’s Workers’ Party (PT), especially in rural and poor urban areas, is simply too sticky. Demographics and the polls still favor Rousseff — for now.

There’s also evidence of an increasing pragmatism in the way that Rousseff is handling the task of pre-election campaigning, especially in the increasing reliance on her fellow PT member, former president Luiz Inácio Lula da Silva, who had been kept largely out of the picture for the first few years of her first term. Lula is helping forge consensus among the party on election policy, which may make the PT more appealing to swing voters who had been turned off by the ideological rigidity of Rousseff’s first term.

“We see Lula above all as a pragmatist,” says Fernando Honorato, chief economist at Bradesco Asset Management, a São Paulo–based firm with $130 billion in assets under management. “There’s less of an emphasis on ideology” in the way the PT is handling the lead-in to the election, raising hopes that Rousseff, should she win in October, will not shy from the cuts that will be necessary to rein in the deficit and bring the nation’s finances back into balance.

Early rumors suggest that either Alexandre Tombini, the governor of the central bank, or Nelson Barbosa, a former deputy Finance minister who left Rousseff’s government midway through her first term, is in line to replace Guido Mantega as Finance minister in the event of a PT victory. Both are relative moderates and rumors of their involvement in the PT’s plans could help influence the narrative that Rousseff, having taken a deeply interventionist turn in her first term, is in the throes of a belated embrace of economic pragmatism and will be more willing to press ahead with structural adjustment.

But if inflation continues to rise and unemployment — another looming problem — does too, the next few months could swing the polls decisively in favor of the opposition, argues Mendes. In the meantime, the carnival of football will roll on modestly but not decisively, supportive of the government’s fortunes in the bigger political match to come.

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Follow Aaron Timms on Twitter at @aarontimms.

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