As widely expected, Dilma Rousseff of the Workers’ Party (PT) won the second round of the Presidential elections on 31 October by a convincing margin, defeating José Serra of the Social Democratic Party (PSDB) by 56% to 44%. She will be sworn in on 1 January 2011, when the incumbent Luis Inácio Lula da Silva (also of the PT) leaves office after serving the maximum two consecutive four-year terms.
Rousseff was strongly backed by Lula and has undoubtedly benefited from the outgoing President’s high popularity ratings and the widespread perception of Rousseff as the continuity candidate. She is closer than Lula to the left wing of the PT, which could cause nervousness amongst some foreign investors. However, she will be constrained by the need to manage a governing coalition that could include more than ten parties.
The centrist Party of the Brazilian Democratic Movement (PMDB) will be particularly influential, having provided Rousseff’s Vice Presidential running mate Michel Temer. It is likely to be given several portfolios in the Cabinet, possibly including the chairmanship of a major State-controlled company such as Petrobras or Banco do Brasil. The Brazilian stock market reacted favourably to the result, with the Bovespa index gaining 1.3% on Monday. This suggests that relief over likely policy continuity currently outweighs any concerns over Rousseff’s leftist background.
Balancing the competing demands of the PT and PMDB could provide an early challenge of Rousseff’s leadership skills. In a possible indicator that she intends to govern in a conciliatory style, it was agreed on 2 November that the Presidency of the lower house of Congress will for the first time be rotated on a two-year basis between the PT and PMDB. By historical convention the PT would have been expected to take control of this influential post after it overtook the PMDB as the largest party in legislative elections held on 3 October. However, this would potentially have weakened the PMDB’s de facto veto over key legislation, on which its support for the President is partly predicated.
It has yet to be decided which party will hold the post first, but with the PMDB currently holding it and elections not formally required until February next year there is ample time for negotiation. An early agreement in principle to share the role sends a strong signal that Rousseff is keen to work in harmony with the PMDB. This is likely to bolster the party’s influence over major policy decisions and will therefore provide further reassurance to investors.