After what was the most aggressive Presidential election in recent Brazilian history, both the winner and loser have called for unity, striking a tone of reconciliation following the close of a nail-biting campaign that resulted in a second term for the incumbent, Dilma Rousseff. The Workers’ Party leader only just kept her job, securing 51.64% of the vote in a weekend run-off vote against Aécio Neves, the candidate of the center-right Brazilian Social Democracy Party who took 48.36%.
In her victory speech on Oct. 26, Rousseff, whose party has been in power since 2003, said the election had mobilized “at times contradictory ideas and emotions, but moved by a common feeling—a search for a better future.” Neves said he had “fought a good fight” and that the main priority for Rousseff should be “to unite Brazil.”
The two made common cause after a riveting and at times vicious campaign. Only weeks ago, Rousseff was expected to face a final-round challenge from Marina Silva, the environmentalist who made a late entry into the race after the sudden death of the Socialist Party candidate Eduardo Campos. But her support ebbed away as the Workers’ Party targeted her campaign. Rousseff said Silva would abolish the government’s flagship income support scheme, while a Workers’ Party campaign advert suggested the environmentalist, who promised to grant autonomy to the country’s central bank, would deliver Brazil to greedy financiers. She came third in the first round vote.
In the second round, with Silva out of the picture, Rousseff and Neves repeatedly insulted each other with accusations over corruption and nepotism. Neves enjoyed a last-minute surge of support as he capitalized on a corruption scandal involving the state-controlled oil company Petrobras. But it wasn’t quite enough to unseat Rousseff.
No sooner had the dust on Sunday’s victory settled than attention focused on the problems Rousseff now faces, and the political capital she had shed on her way to this narrowest of victories. “She came out weaker,” says David Fleischer, professor of political science at the University of Brasília. “I am not sure how she is going to put the country back together.”
Brazil split over the vote, with poorer states in the north and northeast, plus the southeastern states of Rio de Janeiro and Minas Gerais, voting for Rousseff, while the rest of the richer states in the south and southeast chose Neves. “A very acute north-south divide,” adds Fleischer. “It is also a divide of rich and poor.”
Now Rousseff’s most pressing problem is the Brazilian economy, mired in a technical recession after two quarters of retraction, with inflation simmering above the government’s 6.5% target. A new Finance Minister will be appointed to replace the incumbent, Guido Mantega, who, like Rousseff herself, is seen as too interventionist and has been unpopular with the markets.
“I think she will nominate someone more market friendly,” says Tony Volpon, an analyst at Nomura Securities in New York. Volpon thinks Rousseff is also likely to ease off on her campaign’s anti-banker rhetoric. “There is no reason for her to keep beating on the class warfare rhetoric, against the elite, against the bankers,” he adds. “The market’s going to give her the benefit of the doubt to see if she is going to have a more market-friendly attitude.”
The danger, Volpon says, is that the Workers’ Party will see this election victory as an endorsement for its economic policies, which have kept unemployment relatively low but failed to stimulate growth. The government has blamed the international financial situation. Neves blamed the government.
Comments by Guido Mantega reported by local media on Monday confirmed this fear. “This shows that the population approves the economic policy we are doing,” Mantega said of the result.
Volpon says in the longer term market frustration will rise. “She will try and move policy in the right direction but the market will see it is not enough,” he explains. “Markets only look at profit. That clash of vision will lead to a nasty divorce.”
Rousseff’s other big problem is managing Brazil’s Congress, where she will need to unite nine unruly parties in her winning coalition. Her key ally is the Brazilian Democratic Movement Party (PMDB, in its Portuguese acronym), of which Vice President Michel Temer is a member. While Rousseff’s Workers’ Party has a slight majority in the House of Deputies, in the upper chamber, the Senate, the PMDB is bigger. “The governability is dependent on the PMDB,” says Rafael Cortez, a political analyst at the São Paulo economic, financial and political consultancy Tendencias.
In Brazil’s labyrinthine maze of seemingly contradictory political alliances, parties that are allied at the national level often face off against each other in the states. In Rio Grande do Norte state, Rouseff’s predecessor and political mentor Luiz Inácio Lula da Silva– or Lula, as he is widely known—supported Robinson Faria in his successful campaign to become governor. Faria is from another of Rousseff’s coalition members, the Social Democrat Party, and he defeated the PMDB’s candidate for state governor.
Rousseff will need to repair the damage caused by these state-level rivalries. “Her so-called partners are very discontented,” says Fleischer. “They are going to put some very heavy demands on her.” These will include more key ministerial posts, when Rousseff announces her new cabinet, expected before December.
But diplomacy is not Rousseff’s strong point, despite her conciliatory victory speech. “She does not like to do negotiation—which was the strong part of Lula’s game,” adds Fleischer. The charismatic former president was the first person Rousseff thanked in her speech and there has been speculation that he could return to fight an election in 2018. Current rules prevent Rousseff from seeking a third consecutive term.
Fleischer, however, discounted a Lula comeback. “He’s not very keen on risking his legacy, his charisma, or his prestige,” he says. Cortez, on the other hand, argues it is too early to call. “It will depend on the second mandate,” he says. “The government won, but lost political capital.”
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