Brazil steps toward post-Lula era with Rousseff

Brazil’s president-elect Dilma Rousseff vowed to step up the fight against poverty without forfeiting economic stability in Latin America’s largest nation when she takes over from her charismatic former boss on January 1.

Rousseff, who based her campaign on extending the legacy of outgoing President Luiz Inácio Lula da Silva, convincingly won her first election on Sunday as Brazilians put aside doubts over her character and voted for continued economic success.

The career civil servant must now form her transition team and Cabinet as she emerges from the long shadow of Lula and prepares to govern the South American powerhouse as it faces challenges to its prosperity, including a painfully strong currency that is punishing exporters.

In a sign of the changing of the guard, Lula laid low after Rousseff’s victory on Sunday, leaving her to bask in the moment she became the first woman elected to lead Brazil.

Rousseff (62) paid homage to Lula in her victory speech, pledging to extend what she dubbed a “new era of prosperity.” She also set out twin goals for her rule — eradicating poverty while maintaining Brazil’s hard-won economic stability.

“We cannot rest while there are Brazilians who are hungry, while there are families living on the street, while poor children are abandoned to their fate,” the former leftist militant told cheering supporters in the capital Brasilia.

Rousseff, who will be sworn in on January 1, handily won Sunday’s run-off election with 56% of the vote. Her rival, Jose Serra of the centrist PSDB party, took 44%.

Rousseff has yet to win the affection that Brazilians have for former metalworker Lula. But she ran a solid campaign in which she trumpeted Lula’s achievements and faced down corruption allegations and questions over her religious faith.

“It’s historic. Brazil elected a factory worker and now a woman. Dilma will be a mother for the Brazilian people,” said Ivoni Klock, a government worker who celebrated in Brasilia.

Barriers to success
Despite pledging not to cut social or infrastructure spending, Rousseff went out of her way in her victory speech to stress her commitment to responsible economic policies and promised Brazil’s government would not live beyond its means.

She was flanked by Wall Street darling Antonio Palocci, a former finance minister under Lula who is expected to be handed a top post by Rousseff and who may be put in charge of managing her transition team.

Financial markets have taken Rousseff’s rise to the presidency in stride and are likely to react calmly on Monday. In the long term, though, investors worry that Brazil could suffer from Rousseff’s insistence that the economy does not need major reforms to keep growing at a robust pace.

“We expect a continuation of the decent economic policies carried out by Lula, but unfortunately there seems to be no room for the structural reforms that Brazil needs to optimize public spending,” said Alberto Bernal, head of research at Bulltick Capital Markets.

Rousseff will inherit an economy that is among the world’s hottest emerging markets but which may struggle to maintain such lofty growth rates as it runs up against barriers such as its poor infrastructure and suffocating bureaucracy.

Politically-difficult reforms such as tackling the bloated social security system appear to be off Rousseff’s agenda, even though her coalition will enjoy expanded majorities in Congress. Instead, she is expected to focus on easing specific bottlenecks in the economy, such as its sclerotic tax system.

Rousseff will continue to push Lula’s flagship initiatives, including reforms to give the state a greater role in developing vast new oil wealth and ambitious infrastructure plans as Brazil prepares to host the 2014 World Cup and the Olympics two years later.

The first clues on her priorities will come in the weeks ahead as she picks her Cabinet, likely to have a familiar look to Lula’s. The inevitable horse-trading will also provide an early test of whether she has the clout and charisma to manage an often unruly coalition.

For Brazil’s centrist opposition, the defeat is also likely to mark the end of an era as its de-facto leadership passes from the 68-year-old Serra to fresh-faced 50-year-old senator Aecio Neves, widely seen as a future presidential contender.

“For those who think we are defeated I want to say to you that we are now only starting the real battle,” a defiant Serra said in his concession speech on Sunday night. – Reuters

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