On one side is a president questioning the integrity of the electoral system. On the other, a challenger warning he could roll back the country’s biggest privatization in decades.
But investment bankers are sanguine about the impact of Brazil‘s presidential election this year on investor appetite for upcoming deals.
They say investor attention is focused on global risks such as higher U.S. interest rates and inflation or the war in Ukraine, executives say, making a presidential contest between two familiar faces seem like a manageable concern.
“Given the global outlook, Brazil represents an attractive opportunity for investors as a global commodity provider, likely overriding any potential short term political uncertainty,” said Max Ritter, managing director at Goldman Sachs & Co responsible for Latin America.
Former President Luiz Inacio Lula da Silva has stuck to proven left-wing rhetoric while riding a healthy lead in the polls. However, bankers see his choice of centrist former Sao Paulo Governor Geraldo Alckmin as a nod toward the market-friendly policies he adopted on taking office in 2003.
Ricardo Lacerda, founder and CEO of Brazilian investment bank BR Partners, acknowledged the risk that far-right President Jair Bolsonaro and his supporters could challenge the election result, after casting doubts on Brazil‘s electronic voting system.
But he said interest in mergers and acquisitions remains strong in Brazil, even as appetite for new share offerings has waned. “Some investors are looking at Brazil again after the sharp interest rates hikes boosted the real,” Lacerda said.
The head of Latin America at Citigroup, Eduardo Cruz, said there may be a window for renewed share issues by the end of the year, although he expects mostly listed companies selling new stock rather than a new wave of initial public offerings.
Even the bankers on a deal publicly criticized by Lula say there is little sign of cold feet.
Bolsonaro’s government is racing to privatize state power company Centrais Eletricas Brasileiras SA, or Eletrobras, with a share sale diluting the government’s stake and raising more than $6 billion before the October election.
Lula has warned “serious business leaders” to steer clear of the deal, telling supporters at a rally that buyers taking part in privatizations under Bolsonaro “will have to talk to us.”
Three bankers involved in the Eletrobras deal, who requested anonymity to speak freely, said they continue to see strong interest in Eletrobras among foreign investors. They called the comments from Lula overheated campaign rhetoric.
“There are not many assets available worldwide with a strong upside potential as Eletrobras after the privatization”, one of them said.