If stock markets and currencies are in order, the Brazilian economy would at first appear as one of the best bets for investors.
While global markets have seen a sharp slump since September, Brazil's stock market is up 1
Market analysts say that this is only the beginning of the "Bullsonaro Wave", the bullish trend of Brazilian equities spurred on by the election of right-wing presidential candidate Jair Bolsonaro. 19659007] On January 1, Mr. Bolsonaro will be sworn in as President of Latin America's largest economy, but will he be able to maintain that sentiment in the economy?
Defeating the Left
Sharing the opinion of Jair Bolsonaro is a bit of an understatement. His views on women, race, religion, arms control and LGBT rights have caused outrage during the campaign.
But among market participants, the 63-year-old former army captain is far less contentious. The vast majority of the world's business and financial world wanted to see him beaten in the election against Fernando Haddad, his leftist rival.
The Labor Party ruled Brazil for 13 years and was in power in a time of great prosperity. But there is a broad consensus in the business community that the party was almost single-handedly responsible for the worst recession in history.
The sharpest criticism is against former President Dilma Rousseff and her wasteful policies that turn Brazil's budget surplus into a bloated deficit that paralyzes growth and job creation.
The business leaders stood on the side of the market economy party PSDB, which performed poorly this year. When Jair Bolsonaro emerged as the strongest anti-workers party candidate, the companies enthusiastically applauded his campaign.
Can he do that?
Now that Mr. Bolsonaro has been elected, the market optimism has given way to skepticism. 19659022] Media playback is not supported on your device
Bolsonaro, who says he does not know much about economics, has chosen Paulo Guedes, a successful banker with a long history in the financial markets, to lead the economy.
Mr Guedes has promised a series of market reforms – formal independence of the central bank, privatization, tax breaks for industry, tax breaks and pension reforms.
However, it will require tedious work to reform Brazil's economy.
Brazil remains one of the most closed economies in the world, and many of the sectors that have supported Bolsonaro's rise are likely to resist reforms that would reduce government subsidies, increase international competition, or boost tax hikes.
Mr. Bolsonaro and Mr. Guedes also promise a new comprehensive reform of the pension system, a system that contributes greatly to Brazil's fiscal problem.
The Brazilian Congress has in the past resisted any profound change in pension regulations, even in times when the current President, Michel Temer, in return for his votes, was able to wave the promise of patronage and other favors to members of Congress [MrBolsonaroislikelytofaceatoughfightagainsthisreformsNotonlydoeshehavetosubmitanewpensionplanhemustalsobringhimthroughacongressinwhichhelacksthemajorityAndhehaspromisedtodosobyintroducinganewapproachtothenegotiationswithlawmakersandeliminatingtheoldwaysofpig-barrelpolicy
To make matters worse, there were disputes within his camp even before his victory in Sunday's election.
During the campaign, several of his allies suggested that Bolsonaro adopt policies such as introducing new taxes or ending payroll bonuses at the end of the year.
Mr. Bolsonaro had to come out and reject his allies, but he also failed to pursue a particular policy.
Shortly after the elections, Paulo Guedes talked to the press about his plans to privatize businesses and bring the Brazilian budget from the current $ 37 billion (£ 29 billion) to zero spending cuts. Again, there were no special features.
"We were given an overview, but we did not get any details," says Zeina Latif, an economist with XP Investimentos.
International market analysts take notice. "The uncertainty about the pace and depth of reforms at a time when deficit and debt pressures are high," wrote rating agency Fitch on Monday.
"How effectively is the new government able to use and prioritize the honeymoon? Its economic agenda remains uncertain."
"The capacity of the elected president to establish an effective coalition for the adoption of key economic accounts at the beginning of his term of office will be an important early indicator of general engagement …
"The precise details of how his administration aims to achieve these goals are limited," Fitch concluded.
Moody's Vice President Samar Maziad has also secured his bets: "Although we expect broad political continuity, the ability to build support in Congress for adopting a tax reform remains unchecked."
Brazil's economy is in big economic difficulties. GDP has shrunk by almost 8% in the recent recession and the recovery is still very modest.
More than 12 million people are unemployed and informality is growing in the labor market.
It will take a lot of hard work on the "bullsonaro wave" on the financial markets to generate waves in the real economy.