Atlantic Council ADRIENNE ARSHT LATIN AMERICA CENTER BRAZIL’S OCTOBER 27, 2014 PRESIDENTIAL : RUNOFF INSIDE • Dilma Rousseff What Does Dilma Rousseff’s Wins the Victory Mean for Brazil’s Future? Presidency: What’s Next? By Ricardo Sennes • The New Dilma Administration • Forging Consensus in Brazil’s National razil’s 2014 presidential election was the tightest race Congress since the 1989 contest between Fernando Collor de Mello and Luiz Inácio Lula da Silva. President Dilma Rousseff of • First 100 Days the Workers’ Party (PT) and Governor Aécio Neves of the Brazilian Social Democracy Party (PSDB) had polled neck- Band-neck throughout the second-round campaign. In the end, Rousseff secured a victory of 51.6 percent of the vote versus 48.4 percent for chal- lenger Aécio Neves. on January 1, 2015, three themes will dominate the agenda: the ability From now until President Rousseff takes office for her second term to govern (including overcoming corruption and impunity); economic adjustments; and social demands from the rising middle class and urban groups behind last year’s protests. The Adrienne Arsht Latin America Center’s Brazil Initiative looks at Brazil’s strategic place in global affairs, with an emphasis on its relationship with the United States and Europe. For media inquiries, please contact Natalie Alhonte, associate director of the Adrienne Arsht Latin America Center, at [email protected] or 202-864-2822. UN PHOTO/MARK GARTEN Atlantic Council BRAZIL’S ADRIENNE ARSHT LATIN AMERICA CENTER PRESIDENTIAL OCTOBER 27, 2014 RUNOFF What Does Dilma Rousseff Wins the Presidency: What’s Next? Lula, the PT and its allies, and the private Dilma Regaining the confidence and support of Rousseff’s ilma, a policy protégée of Lula, has sector will be Dilma’s main challenge. Victory Mean seen enormous strain during the Without their support, the success of the for Brazil’s elections in her relationships with next four years will be in doubt from the Future? DLula and with the PT and its coalitions. The moment of her inauguration. Dilma has By Ricardo list of those disaffected and alienated by shown signs that she intends to reopen a Sennes the president grew throughout the cam- dialogue with the social movements and PAGE 2 OF 4 paign. Dilma, with a history of relationship business leaders critical of her during problems with advisers, Congress, Lula, the the campaign. Key business leaders even business sector, and social movements, now received an invitation to participate in important ministries in the new govern- political foundation she inherited from Lula faces the difficult task of rebuilding the in 2010. This will be further complicated by In Congress, including congressional Regaining ment, though none have been confirmed yet. representatives from parties that supported the the multi-billion dollar money laundering and bribery investigation that has rocked Dilma in the second round, she will have confidence Petrobras, Brazil’s state-owned oil company, a base of about 267 deputies (52 percent) and support and threatens to implicate members of her government. such a slim majority, Dilma faces an uphill of Lula, the and fifty-three senators (58 percent). With PT and its The newly reelected Dilma faces two battle to advance her agenda: she will need to form broad coalitions to advance allies, and possible paths forward. She may try to reestablish her alignment with the Lula legislation at a time when allied parties the private circle. Alternatively, she could opt to insu- are growing increasingly rebellious. She sector will late herself within an ever-tighter group will be forced to engage in the political be Dilma’s of supporters. Given that she has already horse trading of ministerial posts and main taken some steps to shake up her cabinet, other government patronage to secure the Dilma appears more likely to follow the support of smaller parties. Another major challenge. challenge will be maintaining the support Perhaps Dilma’s most important move of the Brazilian Democratic Movement first path. so far has been her decision to replace Party (PMDB), the PT’s main ally, with party highly criticized Minister of Finance Guido members divided on their support for the Mantega, who has said he will step down in administration. December. Mantega is heavily criticized for In the economic arena, Dilma’s main - priority will be to resume economic growth fiscal mismanagement, controlling eco cover, and a controversial energy policy— check and without increasing taxes. In 2014, nomic indicators (i.e. inflation) for political while keeping inflationary pressures in three of the government’s big political Dilma was forced to raise the basic interest rate (the SELIC) to 11 percent in the midst ministry would be widely seen as a signal - weaknesses. A new direction in the finance of course correction. ary pressure and the inability to contain of the election year, given growing inflation Atlantic Council BRAZIL’S ADRIENNE ARSHT LATIN AMERICA CENTER PRESIDENTIAL OCTOBER 27, 2014 RUNOFF What Does public spending. Despite this measure, Jacques Wagner, or Vice President Michel Dilma Temer of the PMDB. Berzoini and Wagner— Rousseff’s government—6.5 percent annually—and is experienced politicians and close allies of inflation has reached the ceiling set by the Victory Mean showing few signs of slowing down. the PT and Lula—will lead the charge to for Brazil’s Working in Dilma’s favor is the poten- bridge Dilma’s tattered political coalition Future? tial for a strong expansion in infrastruc- both within Congress and with outside By Ricardo ture spending. The current government’s power groups. Sennes project portfolio and strong signals of Dilma has stated throughout the cam- PAGE 3 OF 4 private sector appetite for investment have paign that her government program for the created a new investment cycle estimated next four years will be based on the same between $60 and $70 billion annually in fundamentals and priorities as the current the coming years. New projects will likely government. While there will likely be some focus on urban mobility, railroads, ports, policy adjustments, no major changes are An energy, and oil and gas. Though the current expected. An important indicator of a new important government was slow to implement an direction will be her choice for the next effective model for private sector participa- indicator tion, Dilma managed to begin this process minister of finance. It is unlikely that Dilma of a new at the end of 2013 and throughout 2014. If substantially change course. Instead, the will name a minister of finance who will direction will she continues down this course, a growth new minister’s ability to calm and persuade be Dilma’s in investments can be expected with impor- the market of the government’s economic choice for tant multiplier effects in other industries. management will determine whether Brazil’s economy rebounds during Dilma’s the next The New Dilma Administration second term. minister of ilma will not be able to count on The indications so far point to Dilma finance. the political acumen of former naming a moderate heterodox to the job, or, Lula strategists such as former in the words of a close economic adviser to DMinister of Finance Antonio Palocci, Lula’s Dilma, “a heterodox with strong concern former Chief of Staff José Dirceu, former for price stability.” One of the most talked- PT President José Genoíno, former Lula about candidates right now is Nelson Adviser Gilberto Carvalho, and others to Barbosa, who is well-known for his ability revive her agenda. Some of these individu- to rebuild bridges. Barbosa is the most als are in jail or on trial for allegations of prominent economist from the PT. He has a corruption, and others have become politi- strong track record with the private sector, cal opponents. the media, and certain factions of Congress, In the current political environment, and carries a reputation for being more the administration may need to bring moderate than his predecessor. A potentially more uncertain scenario Berzoini, in addition to giving more ground will unfold if the president taps members back figures such as Congressman Ricardo to Minister Aloízio Mercadante (Dilma’s from her personal circle—such as former chief of staff), former Governor of Bahia Minister of Institutional Relations Ideli Atlantic Council BRAZIL’S ADRIENNE ARSHT LATIN AMERICA CENTER PRESIDENTIAL OCTOBER 27, 2014 RUNOFF What Does Salvati, Petrobras President Graça Foster, or 2015 with 10 percent of the seats in the Dilma Minister of the Treasury Arno Agustin—to Chamber and 12 percent in the Senate. Rousseff’s Such a mix of parties and interests will Victory Mean - yield an increase in political contention. fill key government roles. Although they for Brazil’s stantial political experience and have been For example, an increase in career public have Dilma’s confidence, they lack sub Future? discredited in the public. Selecting these By Ricardo individuals would lead to political paralysis such as Evangelicals, military police, and servants and unusual suspects taking office Sennes and diminish the administration’s capacity farmers will result in the formation of PAGE 4 OF 4 to govern effectively. new caucuses and complicate the already diverse agendas in Congress. Forging Consensus in Brazil’s The ability of political parties to be effec- National Congress tive diminishes as political representation lthough securing a politically becomes more fragmented. In this context, Dilma must adept cabinet will be one of the traditional challenge of structuring and either adjust Dilma’s immediate challenges, maintaining majorities capable of execut- Amost of the administration’s short- and policies and long-term battles will be fought in Brazil’s programs becomes even more critical. This ing coherent and efficient government the decision- National Congress.