Americas

Home page

Americas

Brazil steps toward post-Lula era with Rousseff

01 November 2010 18:23 (UTC +04:00)

Baku â€“ APA. Brazilian President-elect Dilma Rousseff prepared on Monday to take over an economy that is booming but faces several threats including heavy government spending, an overvalued currency and creaking infrastructure, APA reports quoting â€œReutersâ€.
Rousseff, who based her campaign on extending the legacy of President Luiz Inacio Lula da Silva, won her first election on Sunday as Brazilians voted overwhelmingly for continuity. Rousseff formerly served as Lula’s chief of staff.
Financial markets reacted positively to her acceptance speech in which she pledged to rein in government spending while maintaining her predecessor’s social welfare policies that lifted millions out of poverty.
"Markets reacted well to her words, especially when she carefully spelled out the delicate issue of public expenses," said Fernando Mendes, head of fixed-income trading at Lerosa Investimentos in Sao Paulo.
The possibility for greater fiscal discipline led investors to bet on a medium-term decline in interest rates, which are among the highest in the world and one of the main causes of the currency’s constant appreciation.
Brazil’s stock index rose more than 1 percent.
Antonio Palocci, a Wall Street darling who is tipped to lead the transition team and could become Rousseff’s chief of staff, suggested that the budget could be adjusted to reduce spending growth.
"There’s no fiscal crisis in Brazil today ... but we have no problem in finding the savings that Brazil needs to keep its debt projections on a downward trend," Palocci said in an interview with Folha de S.Paulo newspaper.
That could help stem the rise of the local currency that makes Brazil’s exports, ranging from soy to iron ore, less competitive in global markets.
In further good news for investors, Lula recommended that Rousseff keep Finance Minister Guido Mantega and Central Bank President Henrique Meirelles in their posts, Folha reported, without saying how it obtained the information.
Investors see the two as crucial to the country’s strong economic performance in recent years.
But analysts worry Rousseff is not sufficiently committed to broader changes, such as an overhaul of the nation’s bloated social security system and its suffocating bureaucracy that are crucial for long-term growth.
"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.
EMERGING FROM LULA’S SHADOW
Rousseff must now emerge from Lula’s shadow and overcome the perception, still held by some Brazilians, that she is an inexperienced acolyte with little experience of her own.
The headline in Monday’s O Estado de S. Paulo newspaper was simply: "Lula’s victory."
The 62-year-old Rousseff pledged in her victory speech to extend a "new era of prosperity" that has lifted 20 million Brazilians into the middle class and turned the country into an investor favorite.
"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.
She took 56 percent of the vote. Her rival, Jose Serra of the centrist PSDB party, had 44 percent.
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 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.