Brazil: Bolsonaro Might Reject Election Results if He Loses
Bottom line: Brazilian President Jair Bolsonaro has questioned the current electronic voting system under which the October general elections will be held. We believe that he is setting the stage to allege fraud in the event he loses the election. We see it as unlikely that any judicial decision reverts the election results or that Bolsonaro attempts any coup with support of the army, but uncertainty might mount until the inauguration of the next president on Jan. 1, 2023.
President Jair Bolsonaro called a meeting with several ambassadors to present his reasons why the Brazilian electronic voting system is not reliable and why the upcoming election might be fraudulent. Curiously the same system was used in the four elections in which Bolsonaro was elected to the Chamber of Deputies and his presidential term in 2018.
Bolsonaro's case is that the electronic voting machines cannot be audited and the electronic system is vulnerable to hacker attacks, unlike paper ballots. Additionally, the president directed his attack at Supreme Court judges. According to Bolsonaro, Supreme Court justice Edson Fachin, now president of the Electoral Supreme Court, responsible for the organizations of the elections, was responsible for allowing former President Luis Inacio Lula da Silva to participate in the election, and is very interested in PT (Lula's party) coming back to power, as he was appointed by former President Dilma Rousseff, who was also from PT.
Indeed, Fachin was responsible for analyzing the appeal that revoked Lula's criminal convictions, but his decision was brought to the whole plenary of the Supreme Court, which endorsed Fachin's decision by a margin of 11-3.
The electronic voting system in Brazil works similarly to the paper ballot one, the difference being that instead of depositing a paper in a ballot box, the voters enter the digit number of the candidates they want to vote in an electronic machine, which in turn sends the votes to a central computer in the electoral court. The court has said the system is secure and not vulnerable to fraud, that the votes in each machine are publicly revealed and that some machines are audited prior to the elections.
Recently, the court invited the army to discuss the organization of the elections. Defense Minister Paulo Nogueira said he wants its personnel to be involved in the entire electoral process, from the sealing of the electoral machines to the voting counts, to guarantee the transparency of the process. Usually, the army gives logistical support to the elections, and we see this deeper involvement as a clear sign of intimidation by the army, which in part supports Bolsonaro's claims.
Bolsonaro is falling behind Lula in the electoral race and our view (here) is that he might end up losing. There is no indication that the Electoral Supreme Court will change the electoral system, even with a close watch from the army. If Lula wins, it is fairly likely that Bolsonaro will reject the results of the election as fraudulent.
His next steps are unclear. Since Brazil's redemocratization in 1989, the results of an election have always been accepted by the running candidates. In 2014, when Aecio Neves lost to Rousseff by a close margin, Neves recognized the loss and accepted the result, although his party entered two legal actions at the Supreme Court, one regarding alleged economic abuse of power by the Rousseff coalition, and another asking for an audit of the election. Both were denied in the Electoral Court.
We believe that every judicial action Bolsonaro tries to reverse the election result will be denied, and the Brazilian Congress and judiciary will endorse the results, leaving Bolsonaro with no choice but to leave office. We see it as very unlikely that Bolsonaro might attempt any kind of coup with support of the army, but he might push his supporters to undertake similar acts as the ones we saw in the U.S. Capitol on Jan. 6, 2021. This would add to uncertainty and increase volatility in the financial markets, until the transition to the next cabinet occurs on Jan. 1, 2023.