The 66-year-old Rousseff, who was a Marxist guerrilla in her
youth, overcame growing dissatisfaction with the economy, poor
public services and corruption to narrowly clinch a second term for
herself and the fourth in a row for her Workers' Party.
After a bitter, unpredictable campaign that pitted poorer Brazilians
grateful for government anti-poverty programs against those
exasperated with a stalled economy, Rousseff must now seek to
continue flagship social services even as she tweaks economic
policies to restore growth.
Most investors are skeptical that Rousseff can turn around the
slumping economy after four years of ineffective industrial
policies. Futures contracts for Brazil's Bovespa stock index
expiring in December <INDZ4> fell more than 6 percent on Monday
before the Sao Paulo stock exchange opened, while Brazil's currency
<BRBY> slipped 3 percent to a nearly six-year low.
Still, Rousseff and aides consistently shrug off market pessimism as
little more than tantrums by speculators. As her camp celebrated
victory late on Sunday, longtime foreign policy advisor Marco
Aurelio Garcia told reporters that investors should relax and "take
Speaking to a relieved crowd of supporters in Brasilia, the capital,
Rousseff acknowledged the close race and the call for change
expressed by many voters.
"I know that I am being sent back to the presidency to make the big
changes that Brazilian society demands," she said after winning the
runoff election with 51.6 percent support.
Her slim, three-point margin over centrist candidate Aecio Neves
came largely thanks to gains against inequality and poverty since
the Workers' Party first came to power in 2003.
Using the fruits of a commodity-fueled economic boom in the last
decade, Brazil's government expanded welfare programs that helped
lift more than 40 million people from poverty despite the current
The "Brazilian model" has been adopted by center-left parties across
Latin America and Rousseff's victory, however narrow, is a blow for
conservatives in the region.
It also means there will be no dramatic improvement in ties with the
United States, hit in recent years by trade disputes and U.S.
government spying programs that infuriated Rousseff.
About 40 percent of Brazil's 200 million people live in households
earning less than $700 a month, and it was their overwhelming
support that gave Rousseff victory on Sunday.
Now, she pledges to deepen social benefits while working to revive
an economy that fell into recession in the first half of this year.
She has already promised to replace her finance minister, part of a
pledge to rethink economic policies that she has so far been known
to all but manage herself.
"Such a tight result reduces her capacity to radicalize policies,"
said Alberto Bernal, a Miami-based economist with Bulltick Capital
Markets. "Pretty much half of the country is against what she has
Rousseff's victory came just a year after massive street protests
swept Brazil because many advances of the past decade had stalled.
The slowing economy, rising prices and anger over a lack of
investment in public services prompted many to ask whether the
Workers' Party had exhausted its ability to improve the lives of
people in a country still plagued by vast gaps between rich and
FEAR OF THE UNKNOWN
But Neves, a senator and former state governor who enjoys support
among the upper-middle and wealthy classes, failed to convince a
majority of Brazilians that he had enough new ideas to pull Rousseff
[to top of second column]
It didn't help that many poor Brazilians associate his centrist
Brazilian Social Democracy Party with a less inclusive past, a
perception that the Rousseff camp deftly exploited.
things are getting worse, many voters prefer to stick with what they
know than take a risk on the unknown," said Fernando Abrucio, a
political science professor at the Getulio Vargas Foundation, a
business school in Sao Paulo.
A second Rousseff term will not be easy, especially as a slowing
economy strains a government model accustomed to high tax revenues
to finance social programs and subsidized credit for companies and
Brazil's economy, after growing by as much as 7.5 percent the year
before she took office, is on track to grow less than 1 percent this
year. Prior efforts to gun growth, largely through tax breaks and
other subsidies for select industries, have largely fallen flat.
Meanwhile, inflation, long a problem in a country with a history of
runaway price increases, is now hovering above the government's
tolerance ceiling of 6.5 percent.
And while unemployment is near record lows, economists don't expect
it to remain so for long as plunging investment, slower growth and
further uncertainty prompt employers to cut back.
To correct the course, economists say Rousseff must pursue
long-pending tax and labor reforms in order to increase productivity
and engage further with the global marketplace.
"Without improving efficiency and making Brazil a more productive
part of the global economy, the country will just keep muddling
along," said Marcio Garcia, an economist at the Pontifical Catholic
University in Rio de Janeiro.
Rousseff will also face gridlock in a Congress increasingly weary of
the ruling party, which lost seats in this election along with its
most important ally. Leading lawmakers promise to make hay over a
snowballing corruption scandal at the state-run oil company known as
Brazilian media in recent weeks have been abuzz with leaked
testimony by a former company executive relating alleged kickbacks
by contractors to Workers' Party coffers.
One news magazine reported that another key suspect told prosecutors
that Rousseff was aware of the scheme, an accusation that she has
"She will face resistance on a number of fronts," said Carlos Melo,
a political scientist at Insper, a Sao Paulo business school. "This
is a victory in spite of all the problems - not an affirmation of a
job well done."
(Additional reporting by Anthony Boadle, Jeferson Ribeiro and Walter
Brandimarte; Editing by Todd Benson, Kieran Murray and W Simon)
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