1. Brazilian
AGENDA AND POLITICAL ANALYSIS FOR THE WEEK EXCLUSIVELY FOR ARKO CLIENTS
Year XVII, nº 1310 - Brasília - DF By Murillo de Aragão, Cristiano Noronha and Carlos Eduardo Bellini
Sunday, Oct. 24 – Topics of the week
Dilma extends advantage o neve of election * p. 2
State elections: reelection rate should be of 60% * p. 5
POLITICAL ATMOSPHERE
This is the last week of campaign for president and governor in nine states. Dilma
Rousseff and Jose Serra face off in two debates: one on Monday (TV Record) and
another on Friday (TV Globo). The free electoral advertising ends on 10/29 and the
election takes place next Sunday (10/31). Five presidential polls will be released this
week. In the economy, highlight for the minutes of the Monetary Policy Committee and
the National Monetary Council meeting.
Debates
This week will be held two debates between the candidates for the presidency. The
first will be on TV Record, Monday, at 11:00 pm. On Friday, the debate is held by TV
Globo, at 10:15 pm.
Presidential polls
In last week of the election, five new president polls will have their results published.
Vox Populi (data collected on 23 and 24 of October) should be announced today.
Tomorrow Datafolha and Sensus could also have their results published. Ibope poll
can be published on Wednesday or Thursday, and Datafolha on Friday.
Second round
The runoff election for president and governor in nine states (Rondônia, Roraima,
Pará, Amapá, Piaui, Paraiba, Alagoas, Goiás and Distrito Federal) takes place on
Sunday (10/31) On Friday is the last day for free electoral advertising on radio and
television.
Copom
On Thursday, the Central Bank publishes the minutes of the meeting of the Monetary
Policy Committee held last week, when the college decided to keep the benchmark
interest rate at 10.75% per annum. The last meeting of the Monetary Policy Committee
this year is scheduled for 7 and 8 of December.
National Monetary Council
The Central Bank has sent proposal for regulation of the sector credit cards for the
assessing the National Monetary Council, which may manifest itself on the matter on
Thursday. The expectation is that the CMN publishes until early November a set of
rules to standardize and bring transparency to the tariffs charged by operators of credit
cards.
AVALIAÇÃO DO GOVERNO
Managerial Performance - Audit
made by the Court of Audit
assigned a "failure" made by the
Civil House the responsible for the
collision of two public policies of
the Lula government. In the last
two years, BNDES has invested
billions in beef processing
companies, contributing to the
advance of cattle in the Amazon,
contrary to the policy to combat
deforestation. 
Fiscal Performance - Revenue hit
a record in September and closed
the month with R$ 63.41 billion.
Real growth of 17.68% over the
same period last year. Although
the government is earning more,
the primary surplus is shrinking.
Federal debt reached R$ 1.626
trillion. 
Political Performance - According
to Datafolha, Lula's approval
breaks new record: 82%. 
Economic Performance - The
economy remained steady for the
fifth consecutive month, according
to the Central Bank. The news
surprised economists, who
expected increase. Flood of
imported and adjustments in
inventory are pointed out as
causes. 
Social Performance -
Unemployment falls to lowest level
in eight years. Occupancy went up
0.7% in September unemployment
rate reaches 6.2%. 
ARKO ADVICE
Political Analysis & Public Policy
Politics
Enviado exclusivamente para Thiago Aragão (Arko Advice)

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Dilma increases lead over Serra on the
eve of decisive week of the election
With the confirmation of the second round, the PT was
prostrate (in the words of party president, José Eduardo
Dutra) and the PSDB very motivated. Shortly after the
publication of the first surveys after the first round,
antagonistic feelings have taken over the two
candidates. The PT was surprised and apprehensive
and toucans believed in the possibility of an upset.
At the end of the second week of the campaign in
October and the beginning of the third, three main
institutes (Vox Populi, Ibope and Datafolha) showed that
Dilma had extended her lead over Serra to somewhere
between 11 and 12 percentage points. Sensus showed
only a very narrow advantage (5.6 points).
This new framework has helped reverse the feelings of
the two campaigns. The PSDB was clearly shaken by
the poll results and the PT started to breathe easier.
Dilma’s increased advantage can be credited to a
combination of factors. 1. Reduction of the president’s
criticism of the press 2. Lula’s greater involvement in
Dilma’s electoral propaganda 3. Lula's participation
alongside Dilma in rallies in states 4. Letter addressed to
the religious, where Dilma is against abortion 5. Growth
among voters of Marina Silva.
For Serra, the second week of the campaign was bad.
First, the Jornal Nacional news program has covered
allegations surrounding Paulo Preto and the diversion of
resources to the Serra campaign. Then there was the
complaint - published in Folha de São Paulo that Serra’s
wife had an abortion; then the production of leaflets in
São Paulo by people linked to the PSDB addressing
religious issues against Dilma. Not even the greater
involvement of Aécio Neves in Minas Gerais and
Geraldo Alckmin in São Paulo, has resulted in
increased votes for Serra in the Southeast.
Dilma enters the final week of campaigning with
momentum in the polls. Serra, in turn, enters a
downward spiral.
As often happens in presidential elections in Brazil,
whoever wins the first round tends to win in the second.
Whoever leads the beginning of the campaign tends to
win the race. All indications are that these trends will
prevail once again.
Thus, Dilma preserves her status as favorite. For the
election to turn in favor of the opposition, there must be
a combination of negative factors for the PT candidate,
for example, the emergence of a serious new suit
involving the government, high abstention in the North
and Northeast, and/or a terrible performance in the last
debate scheduled for TV Globo on 29/10.
Balance of negative news should not
benefit Dilma nor Serra
In the last week of campaigning, the major weekly
magazines mostly addressed negative aspects of Dilma
Rousseff (PT) and José Serra (PSDB).
Veja published a cover story denouncing Gilberto
Carvalho, chief of staff to President Lula and Dilma
Rousseff for allegedly trying to use the Justice
Department to produce dossiers. The article gives
suggestions, but is weak in proving the veracity of the
claims.
IstoÉ, in its main story, criticized the campaign of José
Serra, accusing it of "appealing to religious prejudice
and defamation." The magazine also addressed
allegations involving Paulo Preto, who raised at least R$
4 million for the election campaigns of 2010, but the
money did not reach Serra’s committee.
Carta Capital gave prominence to a story on the case of
journalist Amaury Ribeiro Junior, charged with ordering
the breach of confidentiality of toucans in favor of Aécio
Neves.
Unlike these three magazines, Época chose to highlight
a comparison of the proposals of Dilma and Serra.
Conjuncture Analysis

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It is likely that the negative stories against the PSDB and
the PT did not produce significant changes in voting
intentions expressed by voters in recent polls.
As the negative press in the print media was balanced
(Veja addresses the negative aspects of the Lula
government and Dilma, but Istoé and Carta Capital do
the same for Serra), one can consider that the
government's candidate has not suffered in recent days
of the campaign.
Abstention is higher in states where
there will be no second round
Abstention is a concern of Dilma Rousseff (PT) and José
Serra (PSDB) for the second round of presidential
elections.
Dilma wants to prevent voters from the North and
Northeast regions where she is stronger, from not
voting. This is a phenomenon that can occur mainly in
the states of these two regions where the gubernatorial
election was decided in the first round, creating a natural
demobilization.
Serra, in turn, is concerned with the abstention in South
and Southeast. Although it is smaller than in the North
and Northeast, the PSDB fears, especially in São Paulo
and Minas Gerais states where toucans seek to balance
the advantage that Dilma gains in the Northeast,
increased abstention due to possible trips that the
middle class can take to enjoy the weekend of the
November 2 holiday.
According to research conducted by Arko Advice based
on the elections of 2002 and 2006, the abstention is
higher in states where the election for governor is
defined in the first round. In 2002, 13 states set their
governors in the first round. In all, there was an increase
of 26.03% mean abstention from first to second round.
In 2006, 17 states elected their governors in the first
round. In all, the abstention also increased (average of
21.78%).
Elections decided in the first round
Year States States
where
abstention
grew
Average
increase
2002 13 13 26.03%
2006 17 17 21.78%
In the North, in 2002, abstention increased from 21.11%
to 30.76% from first to second round. In the Northeast,
from 21.50% to 27.45% in the Midwest from 19.63% to
25.34% in the Southeast, 15.88% to 18.23% and
16.18% to 18.53% in the South.
In 2006, the abstention from first to second round in the
North rose from 17.40% to 24.55%, in the Northeast,
17.45% to 21.05%, in the Midwest from 17.94% to
20.43%, in Southeast, 16.64% to 18.42% and in the
South, 14.65% to 16.07%.
In states where there was a second round, abstention
also increased from first to second round. However, in
percentage terms, it was lower than that recorded in the
states where the election was decided in the first round.
In 2002, there was a second round in 14 states. In 13 of
them abstaining average rose 19.65%. In 2006, there
were 10 states in the second round with an average
increase of 18.80%.
Elections defined in the second round
Year States States
where
abstention
increased
Average
increase
2002 14 13 19.65%
2006 10 10 18.80%
Can more abstention in the north and northeast
compared to the south and southeast could help Jose
Serra? Yes, however this will only cause impact on the
election board if the advantage of Dilma Rousseff is
narrow (about 4%).
On the one hand, Dilma must contain the abstention in
the North and Northeast, and on the other Serra has the
challenge of reducing abstention in São Paulo, Minas
Gerais, Paraná and Santa Catarina, states where the
opposition candidate hopes to have a good advantage
over his opponent.
In these states, the average abstention in the first round
of 2002 was 15.68%. In the second round, 17.36%. In
2006, the average increase in the first round was
15.80% and in the second, 17.18%.
Another important issue is that although the total
abstention in the first round of 1998 (21.5%) compared
with 2002 (17.7%) and 2006 (16.7%) fell, it grew again in
2010 (18,12 %).

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As traditionally there is more abstention in the second
round, it is possible that the percentage on the 31st will
reach a new record high.
The scenario of the second round
disputes
Next Sunday (31), governors will be elected or re-
elected in nine states: Alagoas (AL), Amapá (AP)
Federal District (DF), Goiás (GO), Pará (PA), Paraíba
(PB), Piauí (PI ), Rondônia (RO), Roraima (RR). In these
precincts, based on the latest research available, the
scenario is as follows:
AL: According to Ibope (17 to 19.10), the governor and
candidate for reelection, Teotonio Vilela Filho (PSDB)
has 48% against 40% of Ronaldo Lessa (PDT). In the
first round, Vilela got 39.6% of valid votes and Lessa got
29.2%. The opposition candidate supports José Serra
(PSDB) and Lessa is with Dilma Rousseff (PT). Teotonio
Vilela has slight favoritism.
AP: According to Ibope (15 to 17.10), Camilo Capiberibe
(PSB) has 53% and Lucas Barreto (PTB) appears with
46%. In the first round, Lucas had 28.9% of valid votes
and Capiberibe got 28.7%. Both candidates support
Dilma. The candidate of the PSB is the favorite. This
election is unique in that the second round might be a
turning point.
DF: According to Datafolha (20 to 21:10), Agnelo
Queiroz (PT) has 53% and Weslian Roriz (CSF) appears
with 31%. In the first round, Agnelo got 48.4% of the
votes and Roriz had 31.5%. Candidates support,
respectively, Dilma and Serra. Agnelo Queiroz is the
favorite and should best his opponent with ease.
GO: According to Datafolha (20 to 21:10), Marconi
Perillo (PSDB) has 48% and Iris Rezende (PMDB)
appears at 44%. In the first round, Marconi received
46.3% of the votes and Iris got 36.4%. The PSDB
candidate supports José Serra, while the PMDB
candidate is with Dilma Rousseff. Slight favoritism for
Perillo.
PA: According to Ibope (13 to 15.10), Simão Jatene
(PSDB) has 53% to 36% of the governor and candidate
for reelection, Ana Julia Carepa (PT). In the first round,
Jatene got 48.9% of valid votes and Ana Julia had
36.1%. The PSDB candidate supports Serra and the PT
candidate supports Dilma. Simão Jatene is the favorite.
PB: According to Ibope (12 to 14.10), Ricardo Coutinho
(PSB) has 57% to 43% of the governor and candidate
for reelection, José Maranhão (PMDB). In the first round,
Coutinho got 49.7% of the votes and 49.3% went to
Maranhão. Both candidates support Dilma. The
representative of the PSB is the favorite.
PI: According to Data AZ (14 to 17.10), the governor and
candidate for reelection, Wilson Martins (PSB), has 55%
against 45% for Silvio Mendes (PSDB). In the first
round, Martins had 46.7% of the votes and Mendes got
30.1%. The socialist supports Dilma and the toucan is
with Serra. Wilson Martins is the favorite.
RO: According to Ibope (15 to 17.10), Confucio Moura
(PMDB) has 58% against 42% of the governor and
candidate for reelection, João Cahulla (PPS). In the first
round, Confucio won 44% of the votes against 37.1% of
Cahulla. Both candidates support Dilma Rousseff.
Confucio Moura is the favorite.
RR: According to Ibope (15 to 17.10), Neudo Campos
(PP) has 55% against 45% of the current governor and
candidate for reelection, Anchieta Júnior (PSDB). In the
first round Neudo got 47.6% of valid votes and Anchieta
got 45%. Candidates support, respectively, Dilma and
Serra. Neudo Campos is the favorite.
PSDB, PMDB and PSB will vie for the
largest number of governors
This was revealed by research from Arko Advice. In the
first round, the PMDB won in four states as well as the
PSDB. The PSB emerged victorious in three. In the
second round, the PMDB is a favorite in Rondonia, but
also has competitive candidates in Goiás and Paraíba.
The toucans are leading Alagoas, Pará and Goiás, while
in Piaui, they have a chance. If they win them all, the
PSDB can reach seven governors. The PSB can elect
six if it wins in Amapa, Paraiba and Piaui.

5. Brazilian Politics
Year XVII, nº 1310 Exclusively for Arko Clients Pg. 5
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Party Number of
current
governors
Elected
in 1st
round
After 2nd round
(prediction)
Minimum Maximum
PMDB 9 4 5 6
PSDB 6 4 6 7
DEM 0 2 2 2
PT 4 4 5 5
PSB 4 3 6 6
PP 2 0 1 1
PMN 1 1 1 1
PPS 1 0 0 0
Total 27 18 - -
State elections: reelection rate should be
60%
In this second round, six governors vie for re-election:
Teotonio Vilela Filho (PSDB), Alagoas, Ana Julia Carepa
(PT), Pará, João Cahulla (PPS) in Rondonia, José
Maranhão (PMDB), Paraiba, Anchieta Júnior (PSDB),
Roraima, and Wilson Martins (PSB), Piauí.
According to a survey conducted by Arko Advice based
on the available research, Vilela and Martins should be
reelected. The index of re-election in the second round
should be 33.33% (in the first round it was 50%).
Taking into account that 10 governors were reelected in
the first round and two more should emerge victorious in
the second, the rate of re-election this year could be
60%.
1998 2002 2006 2010
Reelection 19 15 19 20
Reelected 12 10 13 12*
% 63.15% 66.66% 72.22% 60%
*Projection takes into account the 10 governors that have been
reelected in the first round and the good chances that Teotônio
Vilela Filho (PSDB) and Wilson Martins (PSB) will be reelected.
It is noteworthy that despite the favorable scenario for
continuity, the rate of re-election in 2010 (60%), although
high, should be the lowest in the last 12 years.

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Political Agenda for the Week
MONDAY (10/25)
TV Record holds debate between the presidential candidates contesting in the second round.
 Planned announcement of Vox Populi poll on presidential succession.
The Secretary of Foreign Trade of the Ministry of Development, Industry and Foreign Trade (MDIC), Welber Barral,
announces revision of export target for 2010. The current goal is US$ 180 billion.
Central Bank announces Foreign Direct Investment in September.
Henrique Meirelles gives a speech during lunch with the American Society and the Council of the Americas, in New
York. On the same day has meetings with investors in the city.
TUESDAY (10/26)
Datafolha begins presidential poll. Results may be released late on Tuesday or Wednesday.
Expected release of CNT / Sensus poll on presidential succession.
WEDNESDAY (10/27)
The Federal Supreme Court rules appeal by Federal Congressman Jader Barbalho (PMDB-PA), against the decision
of the Supreme Electoral Tribunal (TSE) that denied his application for registration to the Senate based on the Law of
Clean Record.
IBGE releases Business Demography Study in 2008.
THURSDAY (10/28)
TV Globo holds debate among candidates running for state government in the second round.
Ibope poll on presidential succession can be announced.
Treasury publishes the result of central government in September.
Central Bank publishes the minutes of the last meeting of the Monetary Policy Committee of the Central Bank.
Meeting of the National Monetary Council (CMN) can discuss regulations for the sector of credit cards.
 Disclosure of the IGP-M in October.
FRIDAY (10/29)
TV Globo holds debate between the presidential candidates contesting in the second round.
Datafolha poll on presidential succession can be announced.
Last day of election advertising on radio and TV.
The Central Bank announces results for the consolidated public sector in September.
IBGE releases Technological Innovation Research related to 2008.
The Department of Commerce releases GDP (annualized) in the 3rd quarter of the year.
SUNDAY (10/31)
Second round of the election for president and governor in nine states.