Home >news >world >Dilma Rousseff re-elected on call to save Brazil’s social gains

Brasilia: Brazil’s president Dilma Rousseff won re-election and stretched her Workers’ Party’s rule to a record 16 years by convincing voters her opponent threatened social gains she pledged to expand in her second term.

Rousseff, who has maintained record-low unemployment even as the economy posted the slowest growth under any Brazilian president in more than two decades, had 52% of the vote with 99.99% of ballots counted by the electoral court in Brasilia. Senator Aecio Neves, a former governor of Minas Gerais state, had 48%. The result was the closest presidential election since the return of democracy in 1985.

In a campaign that featured “change" as the buzzword for both sides, the incumbent argued that Neves’s economic proposals would produce recession and erase gains for 36 million Brazilians who have risen from extreme poverty under her party’s rule. Rousseff in her victory speech pledged to engage in dialog as she vows to stimulate economic growth, contain inflation and fight corruption.

“Some times in history, narrow results produced much stronger and faster changes than very wide victories," she said in Brasilia. “From now on in Brazil we will have a debate of ideas, clash of positions that may produce areas of consensus capable of moving our society along the paths of change that we so badly need. My first words are a call for peace and unity."

Neves said in his concession speech that he phoned Rousseff to congratulate her on the victory, calling on the president to unite the country.

‘New ideas’

In the runup to the election, more than two-thirds of Brazilians polled by Ibope said they’re looking for change. Last year, 1 million took part in street protests, as the growing middle class expressed demands for better education, health services, and public transport.

Rousseff, 66, channelled the call for change by promising a “new government" with “new ideas," announcing in September that finance minister Guido Mantega would not return in her second term. She also cast doubt on what sort of shift Neves would represent, saying he would boost interest rates to shock inflation down to target, triple the jobless rate, and curtail social programmes.

Rousseff will need to reach out to the opposition to bolster the economy and rebuild relationships hurt during the campaign, Andre Cesar, a political analyst, said by phone from Brasilia following the vote. She needs to pick a finance minister from outside her party, he said.

‘Rapid signal’

“She has to give a clear and rapid signal to the financial market," he said. “She needs something fast. There’s not much time."

Throughout the campaign, Brazil’s stock market and currency weakened when polls indicated Rousseff might win, including a 6.8% drop in the Ibovespa (IBOV) index during the final week as polls showed her support rising.

The real has weakened 33% since Rousseff took office, more than all but one of the 16 major currencies tracked by Bloomberg. The Ibovespa has lost 25%.

“We expect Brazil markets to see a negative knee-jerk selloff Monday, though this result was mostly priced in," Brown Brothers Harriman and Co. strategists, including Marc Chandler, global head of currency strategy, wrote in an e-mailed note. “The first 100 days will be very important in setting the table for the next four years. But for now, brace yourselves."

Weaker real

The real could depreciate to 2.6 per dollar this week on news of the election after closing on 24 October at 2.4739, Bianca Taylor, a Boston-based senior sovereign analyst and strategist at Loomis Sayles and Co., which oversees $223.2 billion in global assets, including Brazilian sovereign and corporate bonds, said by phone.

Rousseff defended her economic performance by saying she preserved jobs in the face of the global economic crisis. While the economy entered recession in the first half of this year, September’s 4.9% unemployment rate was a record low for the month. Real average income has risen 10% during Rousseff’s tenure and 33% in the past decade.

The Workers’ Party has built support through programmes such as Bolsa Familia, which transfers cash to 14 million poor families, and a public housing drive will have 2.75 million homes contracted by year-end, with 3 million more planned. Her Mais Medicos, or More Doctors in English, program sent 14,000 Brazilian and foreign doctors into underserved areas.

‘Economic standards’

The government has also funded post-high school technical education for families that benefit from welfare programmes, while Rousseff and her predecessor Luiz Inacio Lula da Silva provided 20 billion reais ($8.1 billion) in subsidized loans to about 1.6 million students and scholarships for 1.4 million Brazilians.

“Voters have gone through a rapid rise in their economic standards and conditions, and that benefits the incumbent," Christopher Garman, head of emerging markets research at political risk consulting firm Eurasia Group, said by phone from Washington. “When the incumbent says if you vote for the opposition you run the risk of losing what you have, that resonates."

The swelling of the middle class places a greater burden on Rousseff to deliver economic growth, said Paulo Sotero, director of the Brazil Institute at the Woodrow Wilson International Center for Scholars. She says finance minister Mantega won’t stay on in her second term, which indicates she has heard the market’s call for renewal and will bring in “new blood," he said.

‘Actual measures’

“People want to see actual measures, actual policy that responds to some of their concerns of excessive taxation, excessive bureaucracy, excessive government interventionism, and a completely clogged regulatory system—those are the real issues," Sotero said by phone.

Business confidence as measured by the National Industry Confederation is at its lowest level in more than a decade. Investment in 2013 amounted to 18% of gross domestic product (GDP), lowest of all nations in the so-called Brics group and less than half China’s rate, according to the World Bank. It hit 16.5% of GDP in the second quarter, the least in seven-and-a-half years.

Restoring confidence

While restoring confidence to boost investment will be important, Rousseff’s greatest challenge is slowing inflation to the 4.5% target and re-anchoring expectations, according to Alberto Ramos, chief Latin America economist for Goldman Sachs Inc. (GS) Annual price increases exceeded that level her entire term and reached 6.75% in September, above the 6.5% ceiling of the target range. In her second term she will do an “even better" job of containing price increases than in the past, she said on 5 October.

Moody’s Investors Service raised the possibility that it could cut Brazil’s credit rating to junk when it lowered the outlook to negative on 9 September. The move came six months after Standard and Poor’s lowered Brazil’s rating for the first time in more than a decade to one level above junk, citing weak growth and worsening fiscal accounts. A string of monthly primary deficits suggest this will be the second straight year the government fails to meet its budget surplus target.

Rousseff and Mantega have said Brazil’s first technical recession in five years is the result of headwinds from the global slowdown. The world economy will grow about eight times faster than Brazil in 2014, according to economists surveyed by Bloomberg, who expect Latin America’s largest nation to grow 0.3% this year and 1.3% in 2015.

The state of the economy did not deter Rousseff’s supporters, especially in the poorer regions of the country such as the northeast, who have benefited under the Workers’ Party, according to Eurasia’s Garman.

“This is an electorate that wants change, but they have something to lose," he said. Bloomberg

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