Jair Bolsonaro speaks during an event. (Photographer: Andre Coelho/Bloomberg)

Brazil's Strongman Closes In on Presidency After Round-One Rout

(Bloomberg) -- Jair Bolsonaro, the divisive, far-right former Army captain, stormed to a huge lead in the first round of Brazil’s presidential elections Sunday as voters enraged by years of recession, corruption scandals and soaring crime rallied around his strongman message.

The result puts the seven-time congressman on track for victory in the decisive, second-round vote on Oct. 28, when he will face his closest challenger, the Workers’ Party candidate Fernando Haddad.

Brazil's Strongman Closes In on Presidency After Round-One Rout

Bolsonaro’s domination Sunday was so overwhelming that it briefly appeared that he might capture enough votes to forgo the need for a runoff round -- something that hasn’t happened for 20 years. In the end, he wound up with 46 percent, just short of the majority needed to win outright, to Haddad’s 29.3 percent, electoral officials said.

Brazilian markets surged in early morning trading on Monday as investors digested greater chances of a Bolsonaro win. The real gained more than 3 percent, benchmark stock exchange futures jumped over 5 percent and investor risk perception as measured by credit default swaps plunged.

In a live broadcast on Facebook after the results came through, Bolsonaro appeared to question the legitimacy of the results but indicated he was preparing for the second round. He said that Brazilians now had to choose between the values he represents -- "family, God and justice" -- or becoming Venezuela.

The odds of Bolsonaro being elected president rose to 75 percent “not only because he started stronger than expected,” said Eurasia Group executive director for Americas Christopher Garman, but also the “strong anti-establishment sentiment.”

Brazil's Strongman Closes In on Presidency After Round-One Rout

The next three weeks promise to be intense. For while Bolsonaro’s lead appears almost insurmountable, the millions of Brazilians who vehemently oppose his populist candidacy -- and its undertones of misogyny, homophobia and dictatorship denial -- will make a furious, last-ditch effort to halt his march to the presidency. But they will be fighting against powerful forces not entirely dissimilar to those that helped put Donald Trump in office in the U.S. and Andres Manuel Lopez Obrador in Mexico and gave the U.K. its Brexit shock.

“It’ll be three weeks of a dangerous and highly polarized scenario,” said Mauricio Santoro, a political scientist at the State University of Rio de Janeiro. “The level of conflict will be very high,” he said, adding that both have to overcome very high rejection rates to win.

Brazil's Strongman Closes In on Presidency After Round-One Rout

Whoever takes the helm of the $2 trillion economy faces the daunting prospect of finding jobs for the country’s 13 million unemployed, bringing down Brazil’s staggering levels of crime and plugging a fiscal deficit worth more than 7 percent of GDP. To do that, the president will need the cooperation of a highly fragmented legislature and a society that has become increasingly divided since the impeachment of President Dilma Rousseff.

Heading to the Runoff

In the second round, both men will have equal television time, meaning they will be far more exposed to the electorate than during the first round, when 13 candidates were vying for the presidency.

For Haddad, the key question is whether he can emerge from the shadow of former president Luiz Inacio Lula da Silva, who is now in jail for corruption and money-laundering. The former education minister’s meteoric rise in the polls ahead of Sunday’s vote was almost entirely due to the Workers’ Party building its campaign on the slogan “Haddad is Lula.”

Ciro Gomes, the third-placed candidate with 12.5 percent, has already indicated he will support Haddad in the second round, but combined their votes still fall significantly short of Bolsonaro’s total.

“Haddad will try to bring a conciliatory message to win over the undecided," said Thiago de Aragao, partner at Arko Advice, a Brasilia-based political-risk consultancy.

Bolsonaro, who spent much of the past several weeks recovering from a stabbing attack he suffered while on the campaign trail, has begun toning down some of his incendiary rhetoric in hopes of reaching more moderate voters.

Brazil's Strongman Closes In on Presidency After Round-One Rout

“The most efficient way to win would be to be as discreet as possible,” said Aragao. “I don’t know if he’ll do that but every time he enters into an oral debate he risks giving Haddad ammunition.”

The results prompted celebrations among the crowd of supporters gathered outside Bolsonaro’s house in Rio de Janeiro, with fireworks, music and dancing.

"I’m feeling internal peace," said Luciano Cerqueira, 43, a marine. "Brazil will be freed. It will again have respect abroad with Bolsonaro’s victory."

©2018 Bloomberg L.P.