Brazil markets cold on Rousseff as voters warm to her

Brazil's market-movers hope President Dilma Rousseff's time is up, but there are signs that voters are moving back towards her as next month's election nears.
Rousseff's main challenger, environmentalist Marina Silva had been on course for victory, but the latest polls suggest the incumbent may have halted her momentum and closed the gap.
If stock prices are a guide, the business elite wants to see Rousseff go, blaming her for the low growth and high inflation that have combined to tip the economy into recession.
But some analysts say voters would prefer to give Rousseff a chance to turn the ship around rather than plump for the relatively untried Silva on October 26.
Brazil's financial world blames Rousseff for running the economy aground.
She took over as president from charismatic former union leader Luiz Inacio Lula da Silva in 2010, when GDP was racing ahead by a spectacular 7.5 percent per year.
Growth for this year is forecast at just 0.3 percent and, having suffered two quarters of negative growth, the economy is officially in recession.
Rousseff, who has promised to revamp her finance ministry team if re-elected, has blamed the slowdown on the global economic crisis.
And, when economists say her domestic policies are off beam, she points to strong consumer spending, near full employment and rising wages.
- Poor policy combination -
"Rousseff chose a bad combination of policies," says Pedro Tuesta, US-based chief economist with 4Cast consultancy.
"She changed her inflation model" to one of higher tolerance as the rate rose beyond the government ceiling.
"She thought the economy was going to rise on the back of demand, but that only happens in the short term. She was unable to change direction when it was evident that that was not working."
After taking office in early 2011, Rousseff tried to stop end the central bank's autonomy for setting interest rates, bringing rates down to cheapen credit and stimulate consumer spending.
That fueled price rises and 12-monthly inflation is now running at the 6.5 percent official ceiling. The inflationary pressures unleashed saw the central bank lift interest rates to try to keep them in check.
The government also sought to encourage growth across several sectors, including automobiles and white goods, by cutting taxes but analysts say that can only be a limited, short-term response.
They have also attacked what they deem to be too much government intervention in state oil giant Petrobras and on energy prices, which were cut following a severe drought.
Marcelo Latini, a partner with the Rio-based Latini-Bertoletti real estate firm, sees an uncertain outlook.
"The real estate sector needs low rates, low inflation and more confidence and stability for the future of the economy," Latini told AFP.
"We don't have this at present."
Alexandre Schwartsman, a former central bank director, told AFP the financial market is "allergic" to Rousseff.
"The possibility of a new government changing tack on such policies has seen the market react with euphoria to polls unfavorable to Rousseff," he said.
- Cautious electorate -
Despite the poor growth outlook, joblessness has remained low at 4.9 percent on the most recent April data.
Wages have been rising and domestic demand is moderately buoyant, with the government's welfare programs having lifted 40 million people out of poverty over the past decade.
"During this government's tenure the lower class has become an emerging one," said Aquiles Meneses, a businessman in the construction industry who says he will stick with Rousseff.
"Before, only the elite built a house. Now, there are more opportunities," the 32-year-old said.
Andre Cesar of consultants Prospective says a cautious electorate may agree, explaining: "It's hard to swap what you know for what you don't. They have a job, a TV, a car..."