The echoes and reactions of last Sunday’s election in Brazil are still resounding and are far from fading away. The victory by the minimum of Luiz Inacio ‘Lula’ da Silva (50.9% of votes versus 49.1%, a kind of technical draw) in the second round of the elections against current President Jair Bolsonaro shows an absolutely polarized society, and this is not good news for the economy, the relationship between the parties and the future of the gambling industry.
All the eyes are turned on the formation of Parliament, after the great electoral performance of the Liberal Party, which expanded its composition in both Chambers. In 2023, the Liberal Party will have a bench in the Chamber of Deputies with 99 of the 513 seats (23 more than today). Along with the Popular Party and the Republicans, both supporting Bolsonaro, they would total almost 190 deputies. Bolsonaro’s influence will also be felt in the Senate, where, from 81 seats, the LP increased by six, reaching 13 seats. Thus, in total, the ‘right wing’ parties will control 53% of the Deputy Chamber. Internally, then, Lula will have to sit down to negotiate with the opposition, but also with the 10-party coalition that brought him to presidency, which ranges from ‘leftists’ to ‘rightists.’ Negotiations will not be easy because Bolsonarism will have greater power in Congress.
OTHER INTERNAL AND EXTERNAL PRIORITIES
Reality says that Brazil’s socioeconomic situation is far from being positive. After the huge impact of the pandemic, Lula’s priority goals will be to reduce hunger, poverty and unemployment, with tens of millions of inhabitants outside the system and in precarious living conditions. Today, Brazil has more than 11 million unemployed, and 47% of the population is working informally. To make matters worse, society is deeply fragmented. Although the WP leader announced his desire to “take government decisions to include the 215 million Brazilians”, many of them are suspicious of his honesty and transparency, and consider that he should have stayed in jail, as happened between April 2018 and November 2019, accused of corruption and money laundering, with scandals such as “Mensalao” and “Operação Lava-Jato” that his political opponents cannot forget.
In the international context, Lula is known to support dictatorial governments such as Xi Jinping’s China and Vladimir Putin’s Russia. Besides, in his first statements after the elections, he insisted on his desire to strengthen a weakened Mercosur and create a continental block to impose conditions on Europe, which is dealing with energy and military crises. In the background, it is his conception of predominantly favoring the Brazilian primary sector, generating harshness in the country’s industrial segment. This controversial point of view, as well as the aforementioned global crisis, makes it difficult for foreign investors to bet on this market, something that will undoubtedly affect the expected legalization of gambling. Complexities of future international scenario will force Lula to innovate in the relationship with the world’s political and economic powers.
GAMBLING DILEMMAS IN BRAZIL
Deep down, the WP head was never in favor of gambling. He believes it increases poverty and favors money laundering. During his first presidency, in 2004, he locked down the bingo halls. Lula never had the real intention of legalizing the activity. Not even in this last campaign did he express any opinion about the debate over regulation in Congress. It is not an issue on his immediate agenda.
For his part, although Bolsonaro has also not encouraged the activity, it was during his government that legalization projects advanced. Current President said that he would accept the regulation of sports betting (he wants the Ministry of Justice to be responsible instead of the Ministry of Economy), but not the other verticals of the sector, as he believes that the country “is not yet mature for these possibilities.”
In February 2022, the Chamber of Deputies gave preliminary approval to a gambling legalization draft bill. Now, it is the Senate’s turn to give the green light to the project. If the Parliament does not approve PL 442/91 this year, Lula’s victory and the change in the composition of the Chambers could make it difficult to achieve this goal. It is estimated that if gambling was actually approved before 2023 by the Senate, Lula would not veto this decision. Of course, these are mere speculations. In addition, some bookmakers imagine a Lula government more favorable to state projects than to encouraging private investment. It is clear, then, that the lobby that supports gambling legalization inside and outside Congress will have to make a big effort to succeed. We are referring to deputies who were part of the Working Group that analyzed the new Gambling Regulatory Framework, such as Felipe Carreras, João Bacelar and Eduardo Bismark, and senators such as Davi Alcolumbre. Everyone will have to contribute for the initiative to be supported in the Senate. We have to add a legalization promoter like Arthur Lira, president of the Lower Chamber, who has been conciliatory and welcoming Lula, emphasizing dialogue and transparency will be fundamental. Meanwhile, the president of the Upper Chamber, Rodrigo Pacheco, announced that the Regulatory Framework for Gaming will integrate the debates as soon as the sessions resume after the elections.
It is known that a lot of money will be lost for not having regulated the activity before the Qatar 2022 World Cup. If regulated, sports betting would generate between R$ 7 and 10 billion (USD 1.37 to 1.97 billion) a year, with significant tax collection for the Brazilian treasury. Likewise, it is estimated that the Brazilian market has the potential to produce R$ 74 billion (USD 15 billion) in gross revenue and R$ 22 billion (USD 4.3 billion) in tax revenue each year, creating around 650,000 direct jobs. Without a doubt, it is an opportunity too good to pass up.