Major parties lose ground in Brazil's Congress after election

BRASILIA (Reuters) - Brazil’s major parties lost ground to a dozen smaller groups in Congress in Sunday’s election, making it harder for the next president to form a stable coalition needed to undertake economic reforms and control government spending.

The number of political parties represented in the lower house has increased to 28 from 22, according to preliminary results released by Brazil’s election authority.

No party will have more than 70 of the lower house’s 513 seats, not even the two battling for Brazil’s presidency: the leftist Workers’ Party of incumbent Dilma Rousseff and the centrist Brazilian Social Democracy Party (PSDB) of her challenger Aecio Neves.

That means whoever wins the Oct. 26 runoff vote will lack a clear majority in Congress and will be obliged to undertake complex negotiations with dozens of parties to ensure their support, a process that has long made lawmaking in Brazil prone to political horse-trading and scandals.

“It is impossible to have a single-party majority in either of the two houses,” said Carlos Caicedo, an analyst with consultancy firm IHS in London. “You have to offer positions, cabinet posts, exchange favors.”

Rousseff’s Workers’ Party lost 18 seats and elected just 70 deputies, the lowest for the party since it took power in 2003. The Brazilian Democratic Movement Party (PMDB), a large party of disparate loyalties that backs Rousseff, came in second with 66 congressmen, five less than its current representation.

A centrist party with no firm ideology that has been rattled by high-profile corruption scandals, the PMDB was one of the main targets of massive street protests last year as millions of people rallied for an end to politics as usual.

The pro-business PSDB gained 10 seats, boosted by Neves’ surprising late surge in the presidential race, and will have 54 deputies. It takes at least 308 votes to amend Brazil’s Constitution, which sets many tax and labor rules.

“The fact that Congress has become even more fragmented as a result of these elections means that the practical barriers to implement any kind of reforms after the election are going to become even more difficult,” said Neil Shearing, chief emerging markets economic at Capital Economics.

“The lesson from Mexico in this regard is very interesting. We’ve seen big reforms there over the past 18 months, but that has only been made possible because we have the president and the Congress working side by side in partnership.”


Neves has vowed to send Congress a bill in his first days in office to simplify the onerous tax code, which economists say is badly needed to breathe new life into Brazil’s stagnant economy.

Tax reform has been at the top of the agenda for more than a decade, and yet political leaders have only been able to push through piecemeal changes. Not even the hugely popular Luiz Inacio Lula da Silva, who governed between 2003 and 2010, managed to overhaul the tax code.

The next president may also seek to change the social security system, which has dragged on public finances, and try to make the country’s rigid labor legislation more flexible.

Frequent gridlock between the government and Congress has made political reform a hot topic too, especially after last year’s protests. The Workers’ Party wants to change campaign finance rules and reduce the number of parties, but its bid to hold a referendum last year was swiftly rebuffed in Congress.

“The current system was created for historical reasons that have already been overcome. It is necessary to rethink it,” José Antonio Dias Toffoli, the head of Brazil’s election authority, told Reuters before Sunday’s vote.

Among the smaller parties that gained ground, the Party of the Republic (PR) won 34 seats. Its representatives include a professional clown, who was re-elected with a million votes despite not having made a single speech on the chamber’s floor over the last four years.

Others included the center-left Brazilian Socialist Party (PSB) and the leftist Socialism and Liberty Party (PSol).

“Unlike previous elections, small parties grew not only on the center-right but also on the left,” Credit Suisse analyst Daniel Lavarda said on a conference call.

The composition of the Senate was little changed as only a third of the 81 seats were up for election. The PMDB, the Workers’ Party and the PSDB remained the largest parties in the Senate, with former PSDB presidential candidate Jose Serra winning a seat for Sao Paulo state.

Additional reporting by Jeferson Ribeiro and Anthony Boadle; Editing by Todd Benson and Cynthia Osterman