Brazil: Rio Grande do Sul floods could impact economy and elections

Brazil

Published on Thursday 16 May 2024 Back to articles

Flooding in Rio Grande do Sul State’s capital of Porto Alegre

Disastrous floods in the southern state of Rio Grande do Sul, (RGS) which left the capital Porto Alegre under water, started in early May, causing numerous deaths, a loss of agricultural production, and severe damage to both rural and urban infrastructure. As of 13 May the authorities reported that 146 people were dead and 132 missing. According to civil defence estimates around 2.1 million people were affected by the flooding in 417 of the state’s 497 towns and cities. Nearly 100,000 homes have been damaged or wrecked and at least 620,000 people have been displaced or rendered homeless. A major search and rescue operation was launched including police and military personnel, along with volunteers. 

Around 71,000 people and 10,000 animals were rescued from the flooded areas, in what has been described as one of Brazil’s worst ever weather-related disasters. The state-level public health system struggled to cope with injured local residents with some being swept away by torrential waters overflowing from local rivers. Guaíba Lake near Porto Alegre, which receives water from five tributaries, broke its banks; and a second flood surge was feared in mid-May. In some areas there have also been spikes in crime with reports of looting and cases of sexual abuse in temporary shelters.

The full economic and political implications are still emerging. Rio Grande do Sul (RGS) is part of Brazil’s relatively wealthy southern region and represents around 6.5% of national GDP. Given its higher per capita GDP and population density compared to other parts of the country, that means that the monetary value of the economic losses is likely to be higher. On the other hand, it may also be that public and private agencies are able to mobilise resources for reconstruction more rapidly than would otherwise be the case. The state government initially estimated recovery costs at BRL18.8 billion (US$3.7 billion). However, President Luiz Inácio Lula da Silva (a.k.a. Lula) announced a much larger BRL50 billion (US$9.8 billion) recovery package which includes: direct aid; spending on infrastructure; and subsidised loans for agricultural and livestock producers. He said further help would also be forthcoming including a postponement of certain types of debt repayments. 

Some analysts believe the RGS floods could provide an ‘inflection point’ in the way that the Brazilian public thinks about climate change. The cause of the flooding has been broadly linked to global warming and, in particular, to a stronger El Niño, which is the cyclical multi-year weather pattern which originates in South America. The local electorate has previously supported climate-change denying politicians. In presidential elections in 2018 and 2022 RGS voted for the far-right Jair Bolsonaro who has opposed environmental protection. Porto Alegre’s mayor Sebastião Melo cut back spending on flood defences to zero last year, and ignored suggestions that the city should plant grasses and mangroves to absorb flood water. Governor Eduardo Leite provided only minimum funding in the state’s 2024 budget for emergency preparedness, evacuation planning, and civil defence. 

This might suggest that, in the run-up to the October 2024 municipal elections, the floods will hurt the centre-right opposition parties and benefit those on the centre left grouped around President Lula. However, the electorate remains volatile and Lula’s approval ratings remain under pressure. He, as much as the opposition, could be affected by political fall-out as a result of the floods. Flood-induced agricultural and livestock losses could trigger a spike in food prices, impacting the national inflation rate and feeding anti-Lula sentiment. Economic forecasters — using models based on hurricanes Rita (2015) and Katrina (2005) in the US — are suggesting that GDP growth could be up to 0.3 percentage points lower this year because of the floods. Mauricio Santoroa political scientist at Rio de Janeiro State University, says that the floods ‘are going to have a serious impact in terms of inflation, in terms of food prices in Brazil. It is very bad news for the Lula government.’ 

This excerpt is taken from Brazil Focus, our monthly intelligence report on Brazil. Click here to receive a free sample copy.

The May 2024 issue of Brazil Focus also includes the following:

Politics

  • Rio Grande do Sul floods could impact economy and elections
  • Indigenous groups losing patience with Lula 
  • Amid controversy, Musk offers free Starlink

Taking the Pulse

  • Focus on the municipal elections

Foreign Relations

  • Lula forms commission to boost South American integration
  • Request for Japan to unblock beef sales 
  • Deal is done on Paraguay’s electricity

Security

  • Court rules on stray bullets
  • Juscelinho Filho faces renewed corruption allegations

Economy & Business

  • Interest rate down by less, as uncertainty edges up
  • Strong labour market helps growth
  • Moody’s improves outlook to ‘positive’
  • OECD raises growth forecast for Brazil
  • Light and shade on the fiscal front
  • Lula offers tax breaks to workers, not corporates
  • Gerdau’s first quarter profits feel the squeeze
  • Cargill reports bumper year in 2023

Environment

  • Industrial action hinders work of environmental agencies

Energy Sector

  • Mubadala plans US$13.5 billion biofuels investment
  • Petrobras chief executive is sacked 
  • Oil and gas production on the rise
  • Petrobras assessing wind farm potential

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