Editorials

Challenges for Brazil's president

Ms. Dilma Rousseff won a convincing victory in the Oct. 31 runoff vote for Brazil’s presidency. While that win — along with being the handpicked successor of outgoing President Luiz Lula da Silva — gives her a mandate, the new president is likely to find governing a challenge. Ms. Rousseff has the technical skills to deal with the pressing economic issues that bedevil any leader these days, but that skill set may prove less useful as she navigates the shoals of Brazilian politics.

Ms. Rousseff is an unlikely technocrat. In the 1960s, she joined Marxist-Leninist militant groups fighting the military dictatorship that ran Brazil; she has denied actually taking up arms against the government. She was later imprisoned for three years during which she was repeatedly tortured. Released from prison in 1972, she went to college and took a degree in economics. She was working as the state secretary of energy in the southern state of Rio Grande do Sul when she crossed paths with Mr. da Silva, who was looking for expertise on energy issues for his new government. She became minister for energy and mines in 2003.

While Mr. da Silva plucked Ms. Rousseff out of obscurity, most observers believe she repaid the favor with interest a few years later when the president’s chief of staff was involved in a scandal that threatened to bring down the government. Ms. Rousseff stepped in as a replacement and got the government back on track. Forced to step down by term limits, Mr. da Silva selected her as his successor, making her the chief beneficiary of his staggering 83 percent approval rating.

Yet, in a hint of the difficulties that could lie ahead, even that was not enough for Ms. Rousseff to win a first-round victory in the presidential ballot. Instead, she failed to claim an outright majority, winning just under 47 percent of the votes. (Analysts blame her seemingly ambivalent position on abortion rights for depriving her of support.) By the second round, voters were focused on economic issues, which played to Ms. Rousseff’s strength. On the Oct. 31 ballot, she took a little more than 55 percent of the vote and is now set to be sworn in as Brazil’s first woman president on Jan. 1, 2011.

In office, she is expected to continue her predecessor’s market-friendly economic policies, which are forecast to yield 7.6 percent growth in 2010. But she has also indicated that she will lean to the left. Key to her program is a push for more state control of the country’s newly discovered deep-water oil fields, the revenues from which she plans to use for public education. Similar investments in the country’s future can be expected as she tries to upgrade Brazil’s infrastructure. Her technocratic background will be handy as she struggles to increase government efficiency and revise the tax code.

Those steps are key to Ms. Rousseff’s determination to balance the books. She has promised to maintain a primary budget surplus target of 3.3 percent of gross domestic product until the net debt falls to 30 percent of GDP in late 2014. It was 41 percent of GDP in September 2010. Fiscal prudence will help her avoid pension and social security reform, two other targets of economic reform. She prefers gradual reform in these matters.

In trying to balance the budget, she wants interest rates to remain high to prevent inflation and swelling of government borrowing, even though interest rates are among the highest in the world. That presents something of a dilemma as those interest rates also inflate the value of the currency, undermining the competitiveness of Brazilian exports. Ms. Rousseff has said that she will not challenge the independence of the central bank and will continue the practice of giving the central bank governor a seat in the Cabinet.

Assigning other positions will not be so easy. The governing coalition has claimed large majorities in both houses of Parliament, but it is a fractious group consisting of 10 parties. Mr. da Silva had the political skills and the charisma to hold the coalition together. There is little indication that the new president’s training has prepared her for this. Putting together a Cabinet is going to be the first test; fortunately, the outgoing president will help her with the transition.

Thus far, Ms. Rousseff has indicated that she wants to include more technocrats in her government. If she does so, that could increase tensions with the Workers Party, the main element of the coalition, which favors a more left-leaning position. Mr. da Silva’s political stature and charisma helped him fend off those pressures. It is not clear if Ms. Rousseff will be able to do the same.

Foreign policy is likely to change. Mr. da Silva enjoyed his forays into the diplomatic arena. While Ms. Rousseff backs many of his policies — more regional integration and a bigger voice for developing nations in global institutions — she has shown no inclination to match his international profile. That is probably a good thing. Ms. Rousseff will have sufficient challenges at home to keep her busy.

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