Will Rousseff’s Reelection Move Brazil Forward?

Dilma_Rousseff

On October 26, Brazil re-elected President Dilma Rousseff, the 66-year old leader of the Workers’Party, whose first term began in 2011. In one of the most dramatic elections in the history of the world’s fourth-largest democracy, Rousseff gained a very narrow victory, securing 51.6% of the votes compared with 48.4% for her opponent, the 54-year old economist Aecio Neves, candidate of the Social Democracy Party.

This is the closest and most bitterly fought election in Brazil’s history Twitter , so this is a very special election,” Felipe Monteiro, a senior fellow at Wharton’s Mack Institute, told the Knowledge@Wharton show on Wharton Business Radio on SiriusXM Channel 111. (Listen to the podcast at the top of this page.) Monteiro, who is also a professor of strategy at INSEAD, spoke about the factors that drove her reelection and the most significant challenges facing Rousseff during her second term.

According to Monteiro, the biggest challenge for Rousseff is to “reunite the country.” During her re-election campaign, he noted, “the country was really divided. You could see this everywhere.” A major source of anxiety has been the country’s rising rate of inflation. Until about 15 years ago, “Brazil suffered from hyper-inflation, which everyone was scared of. So managing to keep down inflation” in subsequent years was considered one of the country’s“biggest achievements.”

However, over the past year or two, “The Brazilian economy started to stagnate, and inflation is up again. This generated a lot of uncertainty,” Monteiro added. In September 2014, Brazil’s inflation rate reached 6.75%, the highest rate since October 2011 and more than two points above its target. As for slowing growth, after expanding by as much as 7.5% in 2010, Brazil’s GDP rose only 2.3% in 2013. In 2014, Brazil is on track to expand by just 1.8%, according to the OECD Economic Outlook, published last May.

A Focus on the Poor

While Rousseff won a landslide in the states of the north and northeast — the poorest region — Neves captured the southern states, which are wealthier and more attractive to foreign investors. A key factor, said Monteiro, is “all the social programs” carried out by her administration. “A lot of Brazilians don’t have a job; people could really relate to her and say, ‘This government is working and focusing on the poorest regions of the country.’”A second factor was that “Neves was much less known in the northeast. His campaign was really well known in the regions of the south,” where he managed to establish a dialogue with the business community, but he never extended his appeal to the rest of the country, added Monteiro.

“This is the closest and most bitterly fought election in Brazil’s history.”

How can President Rousseff rebuild confidence in the Brazilian economy, once widely lauded as a key member of the bloc of emerging “BRIC” nations? Looking forward, Monteiro suggested that it is “most important” for Rousseff to show that her government is taking a more pro-business attitude, in order to gain support from multinational corporations. “The immediate reaction [to her victory] was negative in the stock exchange” and in foreign exchange markets, because her opponent was “much more pro-business in his campaign.” However, Monteiro said he hopes that “she will somehow appoint a finance minister” who will be able to build bridges to the business community “and take Brazil forward.”

In the months ahead, added Monteiro, Brazil-watchers should be looking at “who she will be surrounded by.” Who will be the new finance minister and the governor of the central bank? “When we think about the economy and markets, that’s what we should be looking at.”

At the same time, Monteiro stressed that Rousseff’s social welfare and educational initiatives are “also very important” and enjoy widespread support. “These are areas where there is less controversy, and people recognize the good job that she has done.” While maintaining those programs, Rousseff nevertheless needs to tackle the challenges of slowing growth and rising inflation if she wants to gain the support of many voters who chose her opponent, Neves. To achieve that goal, she needs to start by appointing senior officials “who can establish a dialogue with the business community.”

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"Will Rousseff’s Reelection Move Brazil Forward?." Knowledge@Wharton. The Wharton School, University of Pennsylvania, 29 October, 2014. Web. 28 September, 2016 <http://knowledge.wharton.upenn.edu/article/kw_radio_montero_brazil_election/>

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Will Rousseff’s Reelection Move Brazil Forward?. Knowledge@Wharton (2014, October 29). Retrieved from http://knowledge.wharton.upenn.edu/article/kw_radio_montero_brazil_election/

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"Will Rousseff’s Reelection Move Brazil Forward?" Knowledge@Wharton, October 29, 2014,
accessed September 28, 2016. http://knowledge.wharton.upenn.edu/article/kw_radio_montero_brazil_election/


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